Strategic Management Analysis: Trader Joe's & US Supermarket Sector

This case study provides a strategic analysis of Trader Joe's within the US supermarket industry, evaluating its competitive advantages and the attractiveness of the industry for traditional competitors like Kroger and Safeway. It examines the challenges in the supermarket business, including write-downs, increased shopper choice, changing shopping habits, and intense competition. The analysis incorporates frameworks such as multinational strategy, Nash equilibrium, allocentric thinking, and corporate strategy to assess Trader Joe's unique approach to product acquisition, customer targeting, and marketing. The study highlights Trader Joe's success in achieving growth through a focus on unique products, affordable pricing, and a distinctive store experience. The case concludes by discussing the imitability of Trader Joe's strategy for new entrants and its overall impact on the US supermarket landscape.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student:
Name of the University:
Author Note:

1STRATEGIC MANAGEMENT
To:
From:
Subject: Strategic management of Trader Joe’s
Date:

2STRATEGIC MANAGEMENT
1. Challenges to earn money in the supermarket business- write-down on the values of
the supermarkets- the supermarket have technically lost a major part of their revenue because the
impairment charges booked by these supermarket entities has led to the spending of billions of
dollars. These can be considered as the non-cash charges and represent the changes in the value
of the assets rather than the revenue that is actually lost by the company. More choice for the
shoppers- Previously, a small town would have been able to buy products only from a single
source or may be from 2 other supermarkets. whereas the recent developments in the property
development have led to the build-up of the other supermarket brands and it increases the choice
of the consumers as well as market competition. Emerging players like Aldi have provided the
consumers with an alternative from the traditional supermarket players. Change in the shopping
habits- The presence of the extra choice along with the market recession has led to the change in
the shopping habits. The change in the taste of the consumers has led to the increase of the
market competition and preference of a single over the other has led to the loss of revenue by the
other supermarket brands. Too many supermarkets- The big four supermarket chains continued
to invest on the spread of the branches and outlets in different areas. whereas, it forgot to make
necessary changes in increasing the convenience of the shopping stores. This has led to the
reduction in the revenue earning and damaging the amount of the sales.
The US supermarket sector has entered an arena of heightened competition with the
competition from brands like Supervalu Inc. The company even announced that it wants to make
additional investments in the supermarket sector. The company announced when the market was
already experiencing weak operating results and the willingness of the company has shown its
desire to improve the price competitiveness. In the longer term, the investments do not result in
increased volumes because the entire supermarket industry remains fiercely competitive. The
presence of the larger players like Safeway and Kroger has emphasized in the investment of
price reductions. The Safeway and the Kroger along with the other regional supermarkets that
are competing against the Supervalu act in a way to reciprocate to the Supervalu’s lower market
prices. Safeway has more market overlap with the Supervalu than in comparison to the Kroger
and Safeway is competing with Supervalu in Las Vegas, Baltimore, Washington D.C., Southern
California, Chicago. While Kroger competes with Supervalu in the Las Vegas, Southern
California.
Considering the financial data, it can be clearly seen that Walmart, Kroger, Safeway and
Supervalu are the four high earning supermarkets in the USA. Considering the square feet of the
selling area, the more the selling area the more there is a scope of the having increased amount of
sales. Walmart clearly has the highest number of the selling area (195.5 million square area) and
also the grocery sales is highest at 118.7 billion dollars. Kroger comes the next with 104 million
square areas and the sales amount to is 61.1 billion. Likewise, the Safeway and the Supervalu has
the has the grocery sales of 35.5 billion and 28.2 billion respectively. The revenue earned,
however, is high for the Kroger in comparison to all other supermarket brands. The revenue of
Whole Food is around 90 million dollars, while that of the Whole Food, Safeway and Supervalu
are 10 million dollars, 43 million dollars and 36 million dollars respectively (appendix).
The various supermarkets compete among themselves following certain strategies and
tools like multinational strategy, Allocentric thinking, Nash equilibrium, corporate strategy. The
multinational strategy especially emphasizes the integration of the value chain activities globally.
The strategy also incorporates the creation of the processes and products that are responsive to
the local market needs. The local responsiveness can be increased by the adjustments of the

3STRATEGIC MANAGEMENT
services/products to heterogeneous demands that exist across the regions; the adjustment of the
local regulations, policies, norms, culture, and local taste; Using the local talent; local responsive
can be brought about through the introduction of the cultural products, clothes, beverages and
food. The Nash equilibrium is the second strategic outcome that defines each player chooses a
strategy that is optimal for that specific player and given the strategy of all other players; the
equilibrium concept also speaks that if a player changes its strategy then the proposed strategy is
not a part of the Nash equilibrium. The Nash equilibrium guides the strategic choices with
respect to a particular player’s competitor, stakeholders and complementors change. Allocentric
management is another management tool or strategy that helps to make choices that anticipate
how others will behave and how they react to the strategic choices. Allocentric thinking is a part
of allocentric management that helps to understand the motive of the other player's motives; it
also helps in assessing the capacities, experiences or knowledge; understand the options which
includes the perception of the market rivals; understands what the market rivals believe in the
environment; anticipate the actions of that the market rivals and tactics that they use and the
optimal way to act as well as react. The last tool is the corporate strategy that helps to achieve
growth by increasing the scale and the scope of a company's operations. To identify and exploit
the businesses/ opportunities that enable a company to extend its competitive advantage over the
others. The corporate strategy also involves the development of the structure, systems and
processes in order to manage the mix of business effectively.
2. Trader Joe’s by the year 2013, Hs expanded to around 400 locations and over 37 states
and also in the district of Columbia. Of all the 414 stores, that are currently open, around 172 are
located in California. Illinois ranked second which had around 20 locations. The main fact is the
top 5 states had the 60 percent of the company stores (appendix). It was estimated that the Trader
Joe's revenue earning will be around 10 billion dollars. The company did not reveal any data and
at that time, however, it was found that the returns were much higher in comparison to the other
supermarkets in the area. Experts have found that the Whole Food market had the highest sales
per square foot in comparison to the other supermarket brands. The interesting fact is that the
Trader Joe’s has the most doubled the sales in comparison to the Whole Food.
The store operations played a key role in increasing the sales. A typical Trader Joe's store
had 40 to 50 thousand square feet and as a result, did not have enough space to operate and
function the way other companies operate. In order to tackle the cramped, quirky layout of the
stores through a Chevron pattern of the Trader Joe’s stores. The aisles are canting left along with
the offbeat floor management that works to complement the unregimented persona of Trader
Joe’s. there exists a retail trick, in which the angled passageway reveals the store contents and
the profile of the arriving customers or shoppers. The Rows squared along with the walls that
cleverly conceal their contents from the customers. Also, the pricing strategy framed by keeps
the customer visiting their stores regularly. Another important strategy is that Trader Joe's
maintained is the experience of the new products. One cannot find coca cola beverages or
cheerios cereals, however, new and interesting products are found in the stores of Trader Joe's.
Trader Joe's tried not to follow the trend and instead went with the flow of the products that a
customer previously did not have experienced before. Trader Joe's strategically featured products
for a short period of time and this led to the increase in revenue earning because a large number
of the customer bought products in large quantities and at low prices. This enabled Trader Joe to
purchase products directly from the manufacturers instead of working through the wholesaler

4STRATEGIC MANAGEMENT
and retailers. In order to slot their products, Trader Joe’s did not change the supplier instead they
paid the suppliers promptly.
Value chain and strategic choices- product acquisition-The Trader Joe's and its vendors
maintain a status of secrecy with its retailers. Trader Joe's do not want its market rivals to know
about their how they sourced the privately labelled goods and products. This help in maintaining
secrecy and at the same time Trader Joe’s can sell products at a much cheaper compared to the
other supermarket stores. Customers- Trader Joe’s described its customers as inquisitive,
educated and intelligent individuals, and it focussed on the individuals that are trying out new
things, enjoy travel and are health conscious. Marketing- Trader Joe’s was found to market its
products on the Fearless Flyer and also through the radio ads occasionally, however, restrained
from promoting its products through the radio ads. Trader Joe’s also do not hire an advertising
agency in order to advertise its products. In addition, it was found that one or more employees in
every store are employed as artists that produce handwritten signage. At the same time Trader,
Joe's do not employ any public relations agency. Whereas, in comparison to the other sellers,
Trader Joe’s simply restrained itself from having a loyalty-card program and do not accept or
offer coupons. The Fearless Flyer provide information about their products, however, it does not
provide any information regarding the weekly sales. The company even restrained itself from
having a Facebook profile, however, boasts of having a large number fan-created pages.
Tools and the frameworks- Considering the case of Trader Joe’s it is important to note
that there is one strategy called corporate strategy and Nash equilibrium that can be used both as
a tool and a framework to evaluate the strategy of Trader Joe’s. The first strategy is called the
corporate strategy. Trader Joe’s in order to achieve growth in the US supermarket increased the
scope and the scale of the company's operations. It identified and exploited the opportunities that
will enable the company to extend its competitive advantage over its competitors. The company
developed structures, systems and the processes in order to manage the mix of business
effectively. The company favoured the unrelated horizontal direction of business expansion. The
unrelated horizontal expansion refers to the enlargement of the scope by entering the markets and
the scope that has little in common with the existing business. Next in line is the Nash
equilibrium which describes that Trader Joe’s chose a strategy that is optimal for its growth and
made it different from the other existing players in the supermarket sector.
Trader Joe’s uses a strategy that both provide the scope for its customers to pay more due
to the willingness to buy and at the same time also promote the lower costs of the products.
Trader Joe’s especially sells products in comparison to the Kroger or Safeway, from the brands
that are not known, however, these products are available only for a short period of time. This
provokes the customers to buy more products in a single go even if the price of the product is
high. The next strategy of Trader Joe’s is to provide products to its customers at an affordable
price. One blogger in the Los Angeles area mentioned in his blog that he loves Trader Joe’s for
their price and for their simmering sauces. Trader Joe’s maintains a dynamic mix of its products
and the stores provide 10 to 15 new products per week. The stock limited varieties of the
products which the buyers purchased in large quantities.
3. For a new entrant in the US supermarket, it would be rather easy for a company to
imitate the strategy of Trader Joe’s. Initially, it was a risky and the other retailers were hesitant
of selling products that are different from the conventional. Now, that it is known that a company
can actually earn revenue from selling products that are not much known to the general buyers, it

5STRATEGIC MANAGEMENT
will easy for any company to imitate the same act. The vendors that provide the products secretly
to Trader Joe’s at lower prices can also make negotiations with the other sellers. Thus, there is a
probable chance of imitation in the future. Through the assessment, it has been found that the
biggest threats to the Trader Joe’s competitive advantage are the vendors that provide its
products at a cheaper price to Trader Joe’s. If a rival company imitates the business strategy of
Trader Joe’s then Trader Joe’s might face a tough competition from the other retailers. Trader
Joe’s biggest vulnerability is the lack of its connection with any social media. In order to
increase its customers, Trader Joe’s can easily promote its products through the social media.
This will truly help the company to have more buyers and, in turn, can promote the products of
Trader Joe’s. The lack of any social media connectivity has made it strategically to a
disadvantageous and vulnerable position.
4. Trader Joe’s entry into online retailing- Considering the popularity of Trader Joe’s
among its buyers, it is important to note that Trader Joe’s has gained its name only through the
selling of the limited edition exclusive products that are unconventional and new to its
customers. Thus, incorporating the online retailing into the business of Trader Joe’s can greatly
help the retailer company to increase its base of the buyers. People instead of coming to the
physical stores can easily buy products from their home. There is, however, a big issue with the
incorporation of the online retailing. The physical stores might lose the volume of the buyers that
it previously used to serve. Considering previous value chain of Trader Joe’s like the design of
the stores, affordable pricing of the products, acquisition of the products, lack of integration of
technology in the physical stores can effectively help Trader Joe’s to earn more revenue and
sales. Considering the area of the sales, the online presence can add to its advantage, the buyers
can have the same feeling of buying products that they previously used to have during each store
visit. Also one of the issues was the cramped up parking space in front of the physical stores.
This can be effectively negated when the more customers will pile in through the online channel.
Introduction of the new products and the sale of the new products can be affected by the vendors
itself. The vendors can also deliver the products depending upon the availability of the stocks.
Offers and coupons can be introduced to allure the customers to buy more products during a
flash sale.

6STRATEGIC MANAGEMENT
Appendix
Figure 1: Top 12 supermarkets in the United States
Figure 2: Annual reports of each firm

7STRATEGIC MANAGEMENT
Figure 3: Trader Joe’s store locations