Moonum Group

8/11/2019 Moonum Group

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Strategic Management & Business PolicyAnalysis of MCC

PRESENTED TO: MR. UMER NOOR

PRESENTED BY: MOONUM, SIDRA, UMER, SAID


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Introduction

With over 700 stores in 29 countries, METRO Cash &Carry is the international leading self-servicewholesale operator with sales of around 31

billion in 2011. In 2007, METRO Cash & Carry opened its first

wholesale store in Lahore.

Thereafter, it expanded to 5 wholesale centers ina short span of 18 months in Pakistan.

Each wholesale center, on an average has aninvestment of Rs. 2.0 billion and directly employsover 320 persons and 150 for auxiliary services.


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ORGANIZATIONAL PURPOSES


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ORGANIZATIONAL

PURPOSES A simple and efficient business concept

Defined through its customer base

Only professional customers are allowed topurchase at METRO Cash & Carry, all of them dulyregistered and provided with a customer card.

In the context of Pakistan, The concept has a littledifference that they also keep an eye on end

consumer and serves them as well.


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MISSION

METRO is a Cash & Carry Wholesaler for businessesand professionals. METRO provides quality

products and business solutions at the lowest

possible prices.


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VISION

METRO will dominate the Cash & Carry wholesalesegment globally, through our unique businessformula which improves the competitiveness of

our customers all over the world.


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VALUES

Innovative in all we do.

Open communication.

Our employees are our main asset.


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OBJECTIVES

Acknowledged first choice Cash & CarryWholesaler.

To continuously focus on customer needs and

satisfaction.

Commitment to ethical and environmentalvalues.

Win-win partnership with our suppliers.


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THE-ENVIRONMENT/MACRO-ENVIRONMENT


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The PEST framework

POLITICAL ENVIRONMENT

Low foreign investment in Pakistan due to thePolitical instability.

The threat of change of Government.

Government Policies.

The uncertainty of the political conditions.

an unanticipated employee shortage, anytime,

due to insecure conditions of country.


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The PEST framework

ECONOMICAL ENVIRONMENT

Per capita income of Pakistan is $3,876

Citizens purchasing power tends to be low andthey do not purchase grocery monthly for lowermiddle income group.

The countrys population is growing at under 3%,while the rate of migration to urban centers is evenhigher.

The market size growth


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The PEST framework

SOCIO-CULTURAL ENVIRONMENT

The self-service cash and carry concept has yet tobecome established nation-wide.

This concept has been evolving in urban areas.

The trading industry is still heavily influenced bytradition, dominated by small stores and streetmarkets. However, the demand for quality, high-class products is growing.

Therefore, this socio-cultural change supports theexpansion in cash and carry stores network inPakistan.


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The PEST framework

TECHNOLOGICAL ENVIRONMENT

The technology advancement has less impact inthis industrial sector, reason being a service

providers rather than manufacturing sector.

The up gradation of information system may haseffect.


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PORTER'S FIVE FORCES MODEL

COMPETITIVE FORCESTHE FIVE FORCES

FRAMEWORK

CompetitiveRivalry

PotentialEntrants

Buyers

Substitute

Suppliers


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PORTER'S FIVE FORCES

MODEL Threat of Entrants:

Low Capital requirement for foreign investors likeWal-Mart and TESCO

High capital requirementfor local entrants

Low product differentiation

Low switching cost

Low access to distribution channels


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MODEL Bargaining Power of buyers

High concentration of buyer, but low buyingvolumes

Products are standard or undifferentiatedLowproduct differentiation.

Low switching costs

No or low threat of backward integration

Relatively price sensitivedependent on most

grocery products

Customers are highly knowledgeable aboutproduct

Thus, the bargaining power of the buyers is high


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MODEL Bargaining Power of buyers

High concentration of buyer, but low buyingvolumes

Products are standard or undifferentiatedLowproduct differentiation.

Low switching costs

No or low threat of backward integration

Relatively price sensitivedependent on most

grocery products

Customers are highly knowledgeable aboutproduct

Thus, the bargaining power of the buyers is high


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MODEL Bargaining power of suppliers

The industry is an important customer of the supplier(especially for farm producers)

The suppliers products are an important input tothe buyers business


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MODEL Threat of substitutes

The threat of substitutes tends to be high due toexistence of countless street shops, corner shops,

utility stores and giant market players like Makro,Imtiaz Super market etc.


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MODEL RIVALRY AMONG EXISTING COMPETITORS

The intensity of competitive rivalry in the wholesaleand retail industry is high.

Competitors are of roughly equal size there is thedanger of intense competition as one competitorattempts to gain dominance over others such asHyperstar, Naheed superstore, Imtaiz superstore etc.


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Pakistan has growing industry of supermarket,wholesale and retail industry as 55 to 60% of totalmarket is underserved.

In a wholesale market, where products or services arepoorly differentiated, rivalry is increased becausethere is little to stop customers switching betweencompetitors and the only way to compete is on price.


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The barrier to exit is high; Entry from this market is not aseasy as it will take too much time to windup the wholebusiness. However, to go for merger and acquisition iseasy. The most recent example is MCCs acquisition of

Makro.


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THE DYNAMICS OF INDUSTRY

STRUCTURE - INDUSTRY LIFECYCLE


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Industry Life Cycle

Buyers

Numbers of buyers are increasing as the middle class are now preferto buy monthly grocery from supermarkets instead of grocery shop atbecause supermarkets are providing quality products at low price.

Produ

ct

Quality of products and customer services are increasing and beingbetter to capture more customers

Comp Many entrants are coming in the industry as industry is growing

Margin

Margins are fairs as large number of customer are served

Profits Highest profits are enjoying by the existing organization


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COMPETITORS AND

MARKETS


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Hyper market in Pakistan

Neighborhood stores in Pakistan are accountedfor 95% of retail business and have estimatedannual turnover of $3 billion.

These stores are located in all parts of the countrywith an average floor area of 3,000 to 6,000square feet.

In contrast, MCC has been introduced to Pakistanin the past several years and has elicited a

positive customer response. These Hyper stores make up 5% of all Pakistans

retail food stores.


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Consumer behavior of

Pakistan

The average Pakistani consumer spends 42% of hisincome on food.

Consumption of imported processed and ready-to-eat food is greater in urban areas because ofhigher disposable incomes and access to modernstyle of food.


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HYPERMARKETS, SUPERMARKETS,SUPERSTORES, CONVENIENCE STORES

Name of

Retailer

Type of retailers Ownership No. of

outlets

Location Purchasing

Agents

Utility store

corporation

Manufacturer

/Retailers/

Distributors

Governmen

t of

Pakistan

(GOP)

5700 Nationwide Directly from

local

manufacturers

and suppliers

Canteen storesdepartment Manufacturer/Retailers

/Distributors

PakistanMilitary 103

Nationwide

Directly fromlocal

manufacturers

and suppliers

K &Ns Manufacturer

/Retailers

/Distributors

/ Frozen and

Ready to Eat

poultry

Pakistani 100 Nationwide Own farms and

locally

Metro cash &

carry

Manufacturer/R

etailers

/Distributors

/hypermarkets

German

/Pakistani

7 Karachi/Lahor

e/Islamabad/F

aisalabad

Mainly local

manufacturers

and importer

Harold super Retailers Pakistani 6 Islamabad Distributor /local


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MARKET SEGMENTS

SCO

HORECA

End Users


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UNDERSTANDING WHAT CUSTOMERS VALUECRITICAL SUCCESS FACTORS

Trust, credibility and transparency

MCCS customers expect them to provide safeproducts, supply chain traceability and compliance

with social and environmental standards. MCC convincing not only in the marketplace of

products, but also in the marketplace of opinion.

MCC knows what This means that MCC mustprecisely know what relevant stake- holder groups

expect from company. MCC conducts regular dialogue to get to know the

diverse needs of these people and to be able tobetter fulfill them.


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Opportunities and Threats

Opportunities

Threats

State of the art favorable

environment for shopping.

Suppliers bargaining power is quite

high. MCC is somehow under

pressure from the suppliers. For

example, Late delivery my cause

the processes to get stuck. The

customers will suffer ultimately that

may affect the companys

reputation.

Increasing Population growth

specially middle class

Foreign investors can enter easily

into the industry due tocomparatively low investment

requirements.

About 55% to 60% of the total ofalready existing market is stillunderserved.

Security threats due to customers

hesitate to go out.


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INTERNAL CONFIGURATION

OF THE ORGANISATION


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RESOURCED BASED VIEW

(RBV) INIMITABILITY

First MoverAdvantage

Physical Uniqueness

Path Dependence

Casual Ambiguity

DURABILITY

Exists

SUBSTITUTABILITY

Can be copied?

APPROPRIATABILITY

Who capturesthe value


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THE POSITIONING SCHOOL

VALUE CHAIN ANALYSIS


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INBOUND LOGISTICS

MCC has GRD (Goods receiving department) forreceiving the Goods.

The department has set certain standard for goodsacceptability in terms of Quality and quantity both.

GRD department is responsible to meet and ensurethe predefined standard for commodities.


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OPERATIONS

The merchandising department of MCC isresponsible for the product display and shelving

through Plano-gram.


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OPERATIONS

According to Mr. Ali Ahmed (Department Managerof MCC), Overall items are purchased as 27% by

end-users, 45% by SCO and remaining by Traders.


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OUTBOUND LOGISTICS

The outbound logistics is not as such applicable incase of MCC. As it is a supermarket not a

manufacturing organization. However, in the distribution, we can state the

delivery solution of MCC that is being provided to itswholesale clients for example Hardees and UnitedKings. This DS is a well defined and structured systemfor its valuable customers that give an added valueto its distribution process.


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MARKETING AND SALES

At MCC, The sales and marketing segment isconsidered the most essential and powerful tool to

attract the customers. MCC continuously keeps aneye on its sales processes and patterns. The salesmanagers have set of planned goals for the sales.The accurate check & balance; back up plans andstructured tactics and campaigns are key point ofits robust sales.


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SERVICE

Delivery solution is a part of sales department thesupplement. to the company's classic self-service

business model has been popular among customersand instrumental in boosting the companysturnover.


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PROCUREMENT

MCC has a separate Supplier relationshipmanagement function for procurement. The SRM

represents the supply chain management processthat provides the structure for how the relationshipwith the suppliers are developed and maintained.


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TECHNOLOGY DEVELOPMENT

MCC is using up to date and modern technologiesto support its whole business process.

MIS (Management Information System),

GMS (goods management system),

CRM (Customer Relationship Management)


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HUMAN RESOURCE MANAGEMENT

Considering HRM a significant tool for businessdevelopment and value addition for the customers

and business both, MCC provides continuoustraining to its employees that lead to thedevelopment of the organisational processes. MCCemployees play a key role in our wholesaleoperations.


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STRENGTHS & WEAKNESSES

Strengths Weakness

Well equipped with technology. MCCs overall concept is to serve

hypermarket customers. In Pakistan, its

strategy is quite change and vague.

They target customers from

hypermarket and supermarket both atthe same time. This strategy is making

difficult for MCC to be focused about

its customers.

Provide its wholesale customers DS

(Delivery Solution) facilitates its strong

customer relationships.

Less number of stores as compare to

other key players.

Metro in both food and non food item

has quality assurance department

which measures quality and finally

provided best quality to its customers.

Too much internal documentation is

required for approval to serve different

customers on different price levels.


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STRENGTHS & WEAKNESSESStrengths Weakness

More than 20,000 articles available at

MCC (food and non food categories)

that enlarge the customers options

and chances of purchases.

Lenient HR policies are creating internal

problems for example staff without

uniform and proper attire, Card system

is not being used properly etc

Metro post magazine is one of the bestmarketing strategy of MCC

Still confusion between Makro andmetro for example, The MCC store at

Saddar Karachi is still has name

Makro even after the acquisition.

That is making customers dubious.

Multinational company that enjoys

huge experience and knowledge of

multiple cultures.


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BUSINESS LEVEL-STRATEGY


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They have mention in their mission statement,METRO provides quality products and business solutions at the lowest

possible prices.

They seek to achieve the lower price than competitors whilst maintainingsimilar perceived product or service benefits to those offered bycompetitors


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Only 40-45% of total market has been catered till 2011.The business growth chances are quite high in long run.Till now, Metro cash & carry has 25% of shares in supermarket industry of Pakistan.In Pakistan, MCC aims to open 30 stores in the next 3 years for the population of1,000,000 people. Also, company plans to invest in Karachi Stock Exchange.


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STRATEGIC CHOICES


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STRATEGIC PRIORITIES &

METHOD OF DEVELOPMENT

Priority 1

Review the procedureof approval

Priority 2

Implementation of HRpolicies

Priority 3

Expansion


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STRATEGY OPTIONSReview the procedure of approval

PRIORITY 1OPTION A, METHOD 1

To short down the approval procedure time, we firstsuggest developing a strategic price plan for each

product. For example,

Then put this price ranges into the Informationsystem via IT department.

Customer type

Quantity range

Product price

HORECA

200-250 carton

Rs. 200 each

carton

Retail

5 Carton

Rs. 250 each

carton


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STRATEGY OPTIONSReview the procedure of approval

PRIORITY 1OPTION B, METHOD 2

For solving this issue temporary authority can beassigned to department managers.

That will help making the price settings and situationhandling easy and fast.

Then at the end of the day (after closing) thesummary sheet and system report can be crosschecked by ALC (Admin logistic department).


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STRATEGY OPTIONSImplementation of HR policies

PRIORITY 2OPTION C, METHOD 3

The policies should be restricted in overallorganization.

MCC need to give counseling to the employees likewhy its important to be casual yet formal with thecustomers.

They have to ensure the rules implementations byrewards and penalty system.

A separate monitoring team should be made withinthe organizations that continuously cross checkwhether the rules are being implemented or not.


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STRATEGY OPTIONSImplementation of HR policies

PRIORITY 2OPTION D, METHOD 4

The responsibility should be given to thedepartment mangers to ensure that their

departments employees come in a proper dresscode assigned by MCC.

In case any employee deny the code of conductwill ultimately suffer in his performance appraisaland department manager will also be answerablefor assigned task.


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STRATEGY OPTIONSExpansion

PRIORITY 3OPTION E, METHOD 5

Go for new and suitable locations for opening newbranches.

PRIORITY 3OPTION F, METHOD 6

Go for merger, acquisition of already existing retailoutlets.


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EVALUATION & SELECTION

Priority 1

Option A,Method 1

Priority 2

Option D,Method 4

Priority 3

Option E,Method 5


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STRATEGIC CHOICE

CRITERIA


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PRIORITY 1Problem Identified: Review the procedure of approvalOption Chosen: Option A, Method 1

Suitability: (Why we dothis?)

Feasibility: (Can we dothis?)

Acceptability: (Shouldwe do this?)

The internal process istime taking and MCC islosing its customers thatmay harm the

companys image inlong run.

We are doing thisbecause we want ouroperations to be

efficient and effective sothat we can retain thecustomers.


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We have enoughresources to deploy thesuggested process.

he Information system isalready available andall we need to do ischanging theprogramming.

Its highly cost effective

and feasible in long run.


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Yes, we should do thisbecause it doesntrequire huge changes inthe policies and

program.

The employees arealready familiar with thesystem.

hey need only overview

of the change inprograms.


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PRIORITY 2Problem Identified: Implementation of HR policiesOption Chosen: Option D, Method 4



Acceptability: (Should wedo this?)

Employee behavior of anyorganization depicts theculture of thatorganization.

Specially, for supermarketlike MCC, employeesinteract with customersdirectly and their behaviorhas huge impact oncustomers buyingbehavior and

perceptions. To sustain MCC in long

run, that behavioralchange is much needed.


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Yes, we can do this.

The departmentmanagers throughoutthe world are

responsible for theirsubordinates.

Its nothing new if weenforce the MCCsdepartment managersfor this.

The managers have toface the reluctance butthey have to dealanyway.

O 2


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Yes, we should do thisbecause it doesntrequire huge changes inthe policies.

Its all about theimplementation ofalready developedcode of conduct.

PRIORITY 3


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PRIORITY 3Problem Identified: ExpansionOption Chosen: Option E, Method 5




The competition isexpected to beincreased in upcoming 5years.

To stay competitiveMCC needs to expandits chains in Pakistan.Secondly, 55-60 % of thetotal market is still

underserved, that is anopportunity for MCC.

PRIORITY 3


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Mr. Jeroen de GrootQuoted, We acquirethe breakeven in only 5years after our

operations in Pakistaneven our performance isbetter than Metro ofIndia.

We can open 30 stores

in Pakistan in the next 3years to serve 1 Millionpopulation of Pakistan.

PRIORITY 3


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Yes, we should do thisbecause competition isincreasing day by dayand to stay competitive,

MCC needs to expandits availability andvisibility.


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STRATEGIC DIRECTIONS

FOR FUTURE


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MCC plans to open 30 stores in Pakistan in the next 3 years toserve 1 Million population of Pakistan. They will increase itsavailability staying in present market and present product.


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MCC has done international (outside) merger. They came Pakistan established their limited stores.

Later on, for the purpose of expansion they merged theirbusiness with Makro (its only direct competitor).

In future they will expand its overseas operation in Pakistan

and will open 30 more stores in next 3 years.


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CONCLUSION


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