XYZ, Inc. is a publicly owned regional supermarket chain which operates 27 stores located in suburban
areas surrounding the Dallas/Fort Worth metropolitan area. In the same market there are two other chains
that compete with XYZ. The three chains each possesses approximately 1/3 of the existing market
generating gross sales that have continually grown, but constant price competition has driven profit margins
for all three stores to the lowest levels in 12 years.
XYZ is located in highly visible, high trafficked areas. Their customers are generally in the upper quadrant in
terms of income. Again, the same is true for the competitors, although XYZ does in fact control the most
visible locations. For example, of the three competitors, the five stores which have the highest average
automobile traffic each day, all are owned by XYZ. Three of these locations exist adjacent to large office
parks housing high-tech companies. In all three cases, over 65 per cent of the employees in these
companies are professionals with incomes averaging $85,000 per year.
Unlike their competitors, however, XYZ’s physical plant is aging. 19 of the present stores were originally
constructed 30 years ago, long before “just on time” deliveries became a norm. The average size of each
market is 39,000 square feet. (There is less than 3 percent variance in the square footage among all XYZ
locations.) Of that footprint, 15,000 square feet are devoted to storage of inventory. Given present supply
chain abilities, the stores only need 5,000 square feet of space for inventory.
The two competitors both entered the market at least 15 years after XYZ. They were in a position to
anticipate a smaller inventory space requirement, so their stores are about 29,000 square feet, but have the
same selling area in square footage as XYZ. As a consequence, their sales per square foot are higher than
XYZ.
XYZ has maintained its profit margins by reducing the number of staff. For example, the company
eliminated the use of baggers at the checkout counters in all but the peak sales times. The result of this
decision has resulted in customer complaints, and most recently to a loss of sales to competitors.
Presently the Board of Directors and CEO are planning a timetable for store renovation. Their initial plan is
to begin renovation of the 5 stores which boast the highest trafficked locations. During the planning for the
renovation the CEO asked the Board to step back and consider a new strategy that would create a
sustainable competitive advantage over its competitors. The Board agreed to the following.
The Company will position itself as the only “one-stop shopping” grocery chain in the region. In addition to
the full array of grocery and pharmaceutical items, XYZ wants to rent office suites to a variety of personal
service companies providing such services as insurance, law, investment, banking, health, and daycare.
Shoppers and clients will enter the grocery store to access various businesses.
The goal will be to create myriad “destinations” beyond grocery shopping. For example, a service such as
the daycare center would cause users to be physically present in the store more frequently, making grocery
shopping at that location a more efficient use of their time.
Discuss at least one concept from each of the readings in Lesson 11 that will be important in implementing
the Board’s strategy. In each case:
Describe the nature of the concept discussed in each of the readings; and,
Explain to the Board the reason why each concept would be important in developing an implementation
plan designed to put this strategy into place.
Sample Solution
