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Trader Joe's case Analysis

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Added on  2021-04-24

Trader Joe's case Analysis

   Added on 2021-04-24

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1Trader Joe's case analysisRunning head: TRADER JOE'S CASE ANALYSISTrader Joe's case analysisName:Course:
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Trader Joe's case analysis2First: Detailed assessment of the Trader Joe’s environment P.E.S.T. analysis and the five forcesanalysisPEST AnalysisAll types of organizations need to analyze their external environment through the identification of the external factors that affect their operations. The PEST analysis is used as a popular tool to clarify the Political, Economic, Social and Technological issues[ CITATION FME18 \l 1033 ]. According to Martrous (2016), the PEST analysis of the food retailing industry in the USA could be discussed as follows:The political issues: The USA has issued the Organic Food Production Act in 1990 that stated the national standards for the products grown organically in the United States. The actwas based mainly on the consumer interest in the organic food.The economic issues: The American consumer is able to afford the purchasing cost of the organic foods which means a positive market outlook.Social issues: The increase in senior population is likely to cause an increase in consumption of the organic food as it is widely accepted among the population and more people are willing to spend on healthy food.Technological issues: The advancement in technology has positively affected the foods market and improved the end to end shopping experience. Many ways of digital food consumption were developed, including, the online shopping, shopping applications and shopping through the social media channels The Five Forces of competition Porters' five forces of competitive analysis could be applied to Trader Joe's as follows:
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Trader Joe's case analysis3The bargaining power of buyers: About 80% of the customers are highly educated. The company describes its target market as intelligent and enjoy shopping at Joe's [CITATION Age13 \l 1033 ].Bargaining power of suppliers: Trader Joe's deals directly with suppliers without middlemen.It takes the goods at 25% to 40% lower prices than the wholesale prices and it asks the merchants to keep the prices as secret. About 20-25% of its suppliers are overseas [ CITATION Cor06 \l 1033 ].Threat of new entrants: The potential entrants are low as it is difficult to enter the grocery market. The small and medium-size grocery stores account for about 70% of the industry. The local suppliers make entry restrictions to the market. The product freshness accounts for higher costs for small and medium business size [ CITATION Mar163 \l 1033 ].Threat of substitute products: The threat of substitute product is high in the USA market as the prices of organic foods are generally higher compared to the regular grocery items[ CITATION Mar163 \l 1033 ]. Trader Joe’s does not offer a deduct strategy, but it offers lower prices organic food and it is the cheapest place in the USA to buy vitamins with 50 different types [ CITATION Cor06 \l 1033 ].Intensity of rivalry: The grocery industry is characterized as a competitive environment. There are four dominating companies; Walmart, Kroger, Safeway and Supervalu that accounts for 30% of the industry revenues and the rest goes to the small and medium-sized companies. The market concentration is low and the wholesale companies provide groceries with 25% lower prices compared to the organic food [ CITATION Mar163 \l 1033 ]. Trader Joe’s offers a big range of ethnic cuisines for the food savvy customers. These
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