Essay on Trader Joe's Case Analysis

1830 Words May 4th, 2014 8 Pages
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UGBA 115:
Competitive Strategy Trader Joe’s Midterm Case Analysis

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Jean Carlo Hoyos

The Industry
The grocery industry in the United States is currently an attractive industry (a.k.a. profitable). This attractiveness derives from the relative low threat of new entrants, low supplier and buyer powers, and low threat of substitutes. The main factors driving these results are the low concentration of suppliers and buyers, the significant barriers to entry due to high up-front investment costs (for infrastructure and distribution channels) and scale economies, low availability of substitutes, and the threat of retaliation from
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In the sociocultural environment, a more educated population is increasingly becoming more health-conscious which is raising the demand for “organic” food. This increase in demand for organic products caused the USDA to start regulating every product before the label “organic” can be stamped on it. Refer to Exhibit 2 for a more the full PEST analysis.
Within the industry, firms are grouped by their emphasis on service quality compared to their product variety or SKUs (Exhibit 4). The mobility barriers within these groups are high in the big-footprint group (high SKUs / low to medium service quality) and low within the small-footprint group (low SKUs / high service quality). For example, there is extensive evidence of big retail stores entering the small-footprint market, such a Walmart with its profitable Walmart-Express stores, but there is no evidence of small-footprint stores expanding into the big-footprint arena.
Trader Joe’s
Trader Joe’s strategy is to provide unique products for highly educated customers at reasonable prices and excellent customer service. The efficient and effective way in which TJ has achieved this strategy has turned it into its competitive advantage. This competitive advantage has its roots on TJ’s core competency of Culture and Brand Management (Exhibit 7) which is the result of the combined effects of Infrastructure, Human Resources, Inbound Logistics and Service from the value chain (Exhibit 6).
However, TJ is lacking in

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