The global food retail industry - Free Essay Example

The Global Food Retail Industry Introduction Food retail business is growing fast these days; it is one of the businesses that bringing companies greater profits. All the modern business had fast growth in related industry over the time. Businesses are having global expansion these days and now companies are coming out of their national boundaries. Asian markets are now emerging economic centres of business activates. China and India are worlds potential economic powers. For example McDonalds and Wal-Mart are growing fast in the global markets. Similarly TESCO is also expanding over the new markets in Europe and Asia. Carrefour is one of other food business related to the food industry that is expanding its outreach. Many food businesses are in problems even some medium level businesses have to sell their assets to cover their payments and to run their business. Common local stores and local brands are also hit by these kinds of trends some time from bigger retailers like TESCO and Wal-Mart. Similarly in competition major companies have to redesign their trading methods and customer services to remain at top in their related market. In the U.S.A. food industry is under huge pressures as small business and many generic stores are making complaints about some policies of Wal-Mart and other food retailers like Costco. From m echanized to supply everything related to technology have made important impacts on this industry as the freshness of food is major element in this industry and technology have vital role in it. . Current age computerization and electronic changes have contributed on many aspects of food industry. On other hand there are concerns over the health issues which are coming to public attention through media on daily bases. Global warming is another issue that is indirectly related to food production from farming to factories production many activities are contributing to the global warming. The food demand is on increase as UNO have predicted about the rise of food demand in future times as the world population have touched 7 billion. As there is global warming that will decrease the water supply for farming and there will be more demand in future. Scientists are worried how to bridge the gap by 2050. Main feature of Food industry There is visible decline in consumer spending on food items now days especially after global recession that is not ending very soon and stretching more over the years. The public spending on some food items has increased but overall spending is decreasing day by day that is natter of concern for the companies which are into food business. There are different forms of food in the market which are following:- Basic or traditional food commodities like wheat, rice, and con; Horticultural food products like vegetables and fruits; Semi processed food items like oils and flour; Processed food items like precooked foods. Changing trend in food intake has changed global food market over the years since 2000. All over globe food merchants are trying to meet the food needs by reaching distances like Africa and Asia and Australia to keep the supply chain active and on flow. Many multinationals are expanding their business to new markets in Asia and Africa. Many major food industry companies have invested all over the world in the production and supply of food items to different markets. Following data can easily explain the market trends in food industry over the years. Four-firm concentration (CR4), by region and product category, 2007 Product category Region Soup Breakfast cereal Baby food Pet food Confectionery Cheese Percent share of total product sales of the top four firms Africa, Middle East 71.5 55.9 55.7 60.4 38.3 28.2 Asia Pacific 42.9 61.9 43.3 29.9 26.0 43.1 Australasia 91.1 87.8 91.5 59.0 74.1 70.1 Eastern Europe 66.5 40.0 55.2 58.2 36.6 17.5 Latin America 75.0 75.0 84.1 51.3 42.3 15.0 North America 68.3 82.3 88.0 48.6 56.8 43.2 Western Europe 55.6 61.3 73.9 45.5 37.8 21.5 World 50.4 62.3 60.0 45.8 32.9 20.2 1/ Four-firm concentration (CR4) is the sum of the sales shares of the leading four suppliers in each market. Source: Euromonitor, 2009. The food market with its sector shown at current prices ( £bn at RSP*), 2004-2008. (Source: Key Note) 2004 2005 2006 2007 2008 Meat and meat products 224 234 247 267 285 Fish and fish products 64 69 75 83 89 Fruit and vegetables 205 211 218 227 236 Dairy products, eggs, oils, and fats 240 252 265 280 294 Bread, cakes, biscuits, and cereals 197 203 212 224 233 Other foods 36 38 40 43 45 Total 996 1,007 1,057 1,124 1,182 % change year-on-year 3.6 4.2 5.0 6.3 5.1 Further detail is shown in annexure one World Top FiveFood Companies Wal-Mart Stores, Inc. Carrefour S.A. Metro AG Tesco Plc The Kroger Co. Answer One Globalization and Food industry Globalisation can be taken as result or trend that was created with the advancement in technology that brought revolution in transportation and communications. It has made world a global village where travel and communication is as easy as it was in villages centuries back for our forefathers. Speed in most of the human life has turned this world into a smaller place by Jets and internet. There is also advancement in travelling over waters in the sea. That has increased the capacity of transportation of goods dramatically from previous decades. Global access and reach is now a possible thing in modern business world. All concepts of farming, food production and its supply to the markets are now changed one and having more possibilities than ever. Food industry is also affected by these global advancements in science and technology. Food was earliest item that made humans on track of trade and commerce centuries back in early human civilisation. Food is one of major item that is bei ng traded in the markets globally in huge quantities. This phenomenon of globalisation brought emergence of companies like Wal-Mart, Carrefour and TESCO and it is also helping these companies to grow fast to reach throughout the world in future times to gain more profits on their sales. Benefits of globalisation are many first things is availability of food around the year is possible unlike past times when it was seasonal for most of the food items. Second thing is availability of food in greater quantity that was also not possible in past times. Third is rise of dairy and nutritional foods availability. All countries are now benefitted at same levels from neighbouring countries with their products and supply. More choices for consumers are available now throughout the world. Global businesses such as like Wal-mart and TESCO or McDonalds are gaining maximum from the global markets and globalisation of transport and communication. Before greater trend of globalisation trade wa s a seasonal activity and its outreach was narrow to national boundaries for food items.   But now this trade is expanded and also continues all the year. This thing carries a lot of drawbacks for human life like health issue caused by the use of modified crops and preserved foods. Many major companies including WAl-mart, Carrefour and TESCO are facing problem with this trend as they have to compromise on the prices and profits due to these global trends.   The Some national food businesses now have redesigned their outlook and strategy and gaining acceptance rapidly inside national boundaries all over the world. This is also creating new challenge for the global businesses. I can say here that globalisation in this industry have brought diversity of strategic approach in this business here are some strategic ways adopted by some companies in past 18 months or more to sustain in the current global recession. Problems and Strategies to cope with GlobalRecession 1: New Entry Threats: All the major firm in food industry are feeling threat from entry of new rivals as many companies like TESCO, Wal-mart and Carrefour are expanding their business in USA and Europe and they are entering into each others market to gain maximum profits from their methodology. 2: Consumer Bargain Power: In these global crises the buyers importance has increased as companies are trying to keep flow of cash into their businesses and thus public purchase power has decline with rise in inflation, unemployment and economic conditions in the world. So, consumers are now trying to use tier bargain power effectively and they are getting more bargains over their purchase than ever before. For example all major retailers in UK have to adjust their price strategy to cope with the price strategy of ASDA and TESCO in last couple of years before that these retailers were targeting niche market segments but now under the burden of recession they made a shift in their strategi es and start compromise on prices to attract wide range of customers. 3: Alliances: There different strategies adopted by these food retailers to cope with problems of globalisation and growing economic recession. One of strategy is formation of alliances like â€Å"British Retail Consortium† that include all major retailer in UK likeArgos, ASDA, TESCO, Wilkinson, T.K.Max and others. The purpose of this alliance is to control many problems faced by these retailers and also having a platform that can help them in presenting their point of views to government and different sectors. 4: Mergers and Acquisitions: Globalization made some companies to adopt different measure to sustain their position in time of recession. One of the examples about going into mergers and acquisitions. For example ASDA and Wal-mart went into a business acquisition of ASDA by Wal-mart over the years. In year 2009 Wal-mart sold its assets of ASDA to its own subsidiary company Corinth. Similarly th ere is also example about the alliance between Plascon Packaging and DC Norris. Similarly in year 2008 TESCO taken over stores from one of South Koreas major superstore market name E-Land with its one billion pound investment. TESCO runs its business in Korea as Homeplus , hypermarkets and Homeplus Express stores that is ventured with famous electronic company Samsung. Question Two: TESCO Strategy in current Global Market All these food businesses in recent years times are facing problem due to recessions and governmental policies over the time. For example TESCO is going with a different strategy to deal with this situation created by global recession. It is expanding its business over the globe and trying to capture new markets where it can get more sales and profits. Here are some strategies adopted by TESCO to deal with this entire situation. Expansion policy TESCO unlike other firms have adopted a different strategy to deal with menace of global recession. It is opening its stores to new markets and new lands. This policy of global outreach and expansion is working positive for TESCO as it is gaining sales margins over its rivals. It is penetrating new markets like India and China which are really huge potential markets for any company dealing with food and non food items. This is helping TESCO without compromise on its profits and ginning someth ing that is working now and will be working more in futures as there will end of global recession. Further its expansion to Asian nations and into European markets is creating profit seeking opportunity for TESCO. Market Position: TESCO is trying to keep its position in the market by avoiding its competition to its rivals as it is focusing on different earning variables other than its rivals like Wal-Mart and others. It is having different level of product quality and prices. Risks: With its effective expansion strategy it is going with less risks but it also making its stakeholder aware with its activities fully so they can keep trust on it and can help it when it is in trouble by providing enough resources for any situation to deal with. At the end of this global recession it is predicted that TESCO will gain more from its strategy. Maximum Product line: As a well-known supermarket TESCO is getting its profits due to availability of range if products and services at its s tores. It has successfully provided its customers with the range of choices in Varity of food items. TESCO is keeping hold on UK market and is utilising its learning there on foreign lands that providing maximum profits for its sales. Direct Marketing TESCO is reaching to its customers by direct marketing this is store based and online marketing that helping TESCO to maximise its customer range. Its online business has got popularity and that is paying back to TESCO from all segments of customers. It is adding daily to its club card holders that are regular customers to TESCO. These club card holder or members are benefited on every single purchase they make on TESCO. Online Business Online business is another feature of TESCOs policy that serving it by subsequent reasons:- tangible sales of products Advertising and promotion. consumer service Market trends research Wide Range of Services and Products TESCO is provided that variety of goods plus food product and services on its online and other stores. There is availability of long range of products and services. Its club members are also making its promotion and bringing more customers who are becoming club members and are purchasing most the things on its stores as they can get maximum benefits from maximum shopping on TESCO. Margins of profits All Supermarkets try to gain maximum profits from their products and services by the use of different techniques. TESCO is doing many things also like having a strategy of economy of scales for production and purchase from other producers that is giving it maximum profits over its products and services. It has winning trend over the prices with its rivals. It is famous for its price cuts but all this not done on the cost of its business instead it is expanding its business over the continents as it is gaining from sales. If we see the strategies adopted by the TESCO we can find that TESCO remained successful in getting benefits from all its strategies over the time. Especially in last one or two years TESCO expanded its business to new markets and it was successful in making profits for its business. Similarly it also gone through the strategy of lowering prices and looking for new markets to grab initial profits. TESCO have different strategies that are helping its business to grow. It is also started holding markets in India and China. TESCO is now household brand name worldwide and especially in UK , TESCO Performance Chart for Last five years: Here is performance chart of TESCO showing its performance in last five years in the market. Source: Interactive investor website This chart indicates that TESCO has gained a rise in its market position in last five years though it was unable to keep its share position as it was in year 2007 and 2008. Yet it was able to recover from crises of economy as it was in 2009. This shows the growth rate in the TESCO plc over last five years. It is also indication that strategy adopted by the TESCO is working in its favour and proven effective in the time of recession. Question Three: MichaelT.Duke is President and Chief Executive Officer; of Wal-Mart Stores, Inc, he is holding this position since February 2009. He remained on different position with Walmart over the time. He has great experience as Voice president of Walmart international. He also served as member of board of directors for The Consumer Goods Forum, the executive committee of the Business Roundtable, and the executive board of Conservation International Centre for Environmental Leadership in Business. He is member of board of advisors to University of Arkansas and also member with advisory board to Tsinghua University School of Economics and Management in Beijing, China. He has decades knowledge within retail sector. He have a dynamic personality and brought good times to Walmart even in the times of recession. As CEO, he brought growth to the company and holds command over the management He believe in the Walmarts mission that says â€Å"saving people money so they can live better† so he always looking for implementation of that strategy in practical. He wants walmart grow further in to new markets as he is focusing on china these days. He wants Company to keep a sustainable development over the times. He is having good experience for administration, logistics and distribution with Walmart U.S.A. He is being considered as a dynamic and active chairman, for the walmart. His wise leadership made Walmart on track of development and growth over the years. He brought company towards growth in time of global recession. He also put Walmart on track of global expansion in its business. Mike is taking Wal-mart on a higher profit way that is created by the maximum sales. He is looking for more markets for its company over the times and is aiming higher for his team and company. His experience can make walmart world number one business which has global outreach to all corners of the world. If we see the approach of Mr Mike is risk taker in his approach towards busine ss corporate strategy. He always believes in doing things and getting success. He is prospector in his nature dealing with his business; he enjoys making new experiments and taking bold decisions. Under his supervision Wal-mart is expanding carefully. Mr mike is looking forward in 2015 as he believe that coming years are good for the retail food sector. He is one who wants to see Wal-mart serving more than current outreach. As he is targeting for his team maximum outcome.Mr Mike is well educated person who have good knowledge related to retail market thus he is helping his joiners more consciously to get maximum desired results. Mike having diverse personality?   Some time it is observed that good leadership takes companies on growth and more on to the track of development and profits. There are certain issues related to food industry that required efficient participation in the main activities. Mike is one of business leaders who can shift in hire or her facially expressi on for safety. Mike over the years on different designations served Wal-mart in a good professional manner. Now he himself wants his team capable of learning and starting any required task while doing their work at Wal-Mart. His leadership can be categorising as Situational Leadership for Wal-mart as he takes decisions depending on situation requirement. Secondly he is kind of Strategic team leader which plans effectively and leads team from front. Over the year Mike is trying to expand Wal-mat business into China and India and many other Asian countries. He takes it as challenge as other retailers like TESCO is also trying with same strategy. If he keeps this trend it is possibility that Wal-mart can generate some extra income that can be helpful in sustaining Wal-Mart position in troubling business environment. Mike have potential to lead his team towards greater success in coming times. Conclusion Global recession has put negative impacts on the growth and sustainability of the businesses. All industry is facing new challenges in this recession time. Every company is adapting its diverse approach to cope with this recession time. Food industry is also having bad time in this recession unfortunately it is also failed to get maximum support from governments in their bailout plans. Yet most of the major companies are surviving in this situation as these companies are compromising on their profits and focusing on their sales to cover that profit gap. There is unbalance between demand and supply and interesting thing is there is also a negative relation between demand and profits in this industry. With recent global depression and distress over modified food, this industry is experiencing many issues that are putting negative impact on this industry to keep its pace with global business. With opening of markets like china and India this business have chance to grow and get some e nergy in this recession time. These problems and decreasing profit margins are main outcome in this global recession for food industry which is one of the main issues related to every TESCOs business and strategic planning for future. Pressures are increasing for retailers like Wal-Mart and TESCO which are trying to compromise on the prices and cutting to their profits to keep them in the position that makes them secure in the market. The increase in the demand for food is good sign and also the expansion of business but some other issues like consumers reduction of purchase power and governmental policies over the world are some issues that are making concerns for these companies. Hence these retailers are going with safe and secure strategies to deal with all kind of situations. There is also need to adjust some basic problems like food wastage and exploring new markets rapidly to keep the profit ratio at reasonable level for company. TESCO and Wal-mar t together or separate ar e trying to cope with the current recession time and both are adopting similar strategies and methodologies.