Case 7,8

Discussion Question—pg. 549-551 Case 7 Ahold: The Biggest Supermarket Retailer You Have Never Heard Of 1. What are the advantages and disadvantages of the growth strategies pursued by Ahold, Carrefour, and Wal-Mart? Ahold Global Expansion (1970’s—Spain, Portugal, United States; 1990’s—Central Europe, Latin America, Asia) Pro: High penetration in U. S. market. Con: Low penetration in its mother continent. The profit margin for Ahold’s U. S. division is 5. 7 percent, while the profit margin for the European division is only 3. 9 percent of sales.

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Pro: High international experience. 34 years since the first acquisition in the United Sates, Bi Lo. Pro: “No other European retailer has been as successful in entering the U. S. market as Ahold. ” Pro: E-commerce. Peapod—one of the first Internet grocers. Pro: Product expansion. (Grocery store in 1887 to liquor and cosmetic store in 1970’s) Cons:Culture adjustment. Acquired many consumer brands. 1977—formerly owned Bi Lo, a South Carolina— based grocery store chain operating about 450 stores, Stop & Shop with 320 stores; 1999—U. S.

Foodservices, America’s second-largest supplier of ready-made meals, prepared foods, and ingredients to restaurants, hotels, and other institutions; 2000—acquired majority stake in Peapod Pro: Continuous Growth. Con: Holds too many brand names. Leads to customer confusion (Stop & Shop; Giant-Landover; Giant-Carlisle; Martin’s; Peapod; etc. ) Wal-Mart & Carrefour Pros: • Global Branding. ? Only use one brand name. Avoids confusion. Creates loyalty. • Large discount department store. Attracts more patrons. Cons: • Low penetration in E. U. 2. Should Ahold use its name on all of its stores like Wal-Mart and Carrefour?

Why or why not? Yes, Ahold should use its own name in all its stores. • It improves brand awareness of customers. ? Brand recall ? Brand recognition • It creates corporate identity. • Evoke loyalty. • Increase market share. • It helps in developing own private label brand. • It helps in penetrating a market. • Establish corporate consistency. 3. What are the advantages and disadvantages of Wal-Mart’s and Carrefour’s more centralized decision making compared with Ahold’s decentralized decision making? Ahold’s Decentralized Decision Making |Advantages Disadvantages | |Allows organizations to take advantage of division of labor by |Lower-level managers may have objectives that are different | |sharing decision-making across the organization. |from the objectives of the entire organization. For example, | |Empowers employees and allows them to improve their performance by|some managers may be more interested in increasing the sizes | |being able to act to improve deficient or inefficient areas |of their departments than in increasing the profits of the | |immediately without approval from the top of the organization. company. | |Allows the managers of business areas to actually use their first |There may be a lack of coordination among autonomous | |hand knowledge and experience to improve their areas. |managers. | |Top management is relieved of much day-to-day problem solving and |It may be more difficult to effectively spread innovative | |is left free to concentrate on strategy, on higher level decision |ideas. Someone in one part of the organization may have a | |making, and coordinating activities. traffic idea that would benefit other parts of the | | |organizations, but without strong central direction the idea | | |may not be shared with, and adopted by other parts of the | | |organization. | Wal-Mart & Carrefour’s Centralized Decision Making |Advantages |Disadvantages | |Top-down Control. Risk is great if the top of the organization becomes | |Uniformity of activities. Obviously when centralized, the |incapable of leading the organization. | |activities will be either in the hand of one individual or a few |Employees also will feel less motivated to perform for the | |one but under his (one) direct, control. This will result into |organization as they will not have an avenue for sharing | |uniformity of activities and thereby ensuring uniform decision and|their ideas on how to improve the organization. | |uniform process. |Lack of secrecy.

Secrecy in a centralized set up cannot be | |Quick decision making. |maintained as the orders and decisions flow from one place | |Effective control. Uniformity in activities, specialization and |and conveyed to all. Moreover, all work at a place, under one| |standardization facilitates greater degree or supervision, |roof, one control and one office department. Thus secrecy | |effective co-ordination, self and departmental integration and |even if tried cannot be maintained as effectively as might be| |thus ensure effective control. |required. | |Low communication cost. |Distinctive to Subordinate.

A mechanical working always | |High ability to resolve conflicts. |creates mental reservation. The subordinate does not take | | |imitative nor is he allowed to do so. Thus there remains no | | |charm in either the work or the organization as he knows | | |fully well that no upper ladder is there for him as he is not| | |allowed to take any initiative. Case 8 Competitive Environment In the Teen/College Apparel Market 1. What, if any, are the differences in A&F’s and AF’s retail strategy? |Abercrombie and Fitch |American Eagle | |Same Target Market |Mostly teenagers | |Offer similar merchandise | |Casual wear for men, woman, kids | |Accessories, outwear, footwear and sweaters | |Dorm Wear and intimate apparel |“a little cheaper” | |More expensive |Have more stores compared to A&F | |Targets higher class teenagers | | |Hollister Co. that compete with AE’s lower prices | | 2. What are the brand images of A&F and AE? What words and phrases are associated with each retailer’s brand name? Abercrombie and Fitch |American Eagle | |Trendy and Sexy | |Emphasizes higher class teens and young adult |cheaper compare to its competitor the image of such brand is less | |More effective emotional appraisal |attractive | | |“A little cheaper” | 3. List other specialty apparel retailers that target the same customers as A&E and AE. How do these brands differentiate themselves in the competitive retail environment? Construct a product positioning map to illustrate. Gap ? Level of Prices • Bases: ? Discount ? Middle Price ? High Price ? Targets a great group of customer • Old Navy (low price) • Gap (middle price) • Banana Republic (high-end price) 4. Which retailer(s) has (have) the stronger competitive position? Why?

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