Analysis of Failed Company - Kwik Save

Topics: Grocery store, Retailing, Wal-Mart Pages: 9 (3046 words) Published: June 17, 2011
1. Introduction

Kwik Save was the first and once the most successful serious limited-rang discounter in the United Kingdom (Drive, 2011). It was regarded as a soft discounter (with 5-10% discounts), compared to hard discounters (with 20% discounts) (Colla, 2003). In the zenith of its business, the company had more than 800 stores nationwide (Tedlow and Jones, 1993). Nonetheless, it was taken over by Somerfield in 1998 and eventually went into administration in 2007. To investigate Kwik Save’s failure, this paper exams the operations strategy of the company which includes external market analysis and internal operations analysis. It would be followed by identifying Kwik Save’s order qualifiers and winners. Finally, recommended strategies and operations for Kwik Save are presented.

2. Background of Kwik Save

The history of Kwik Save can be traced back to 1959 when Albert Gubay, a Welsh entrepreneur, established a small grocery shop in Rhyl and registered a new private company, Value Foods Ltd. A trip to United States in late 1964 introduced Gubay to ‘baby shark’ retailing, the selling at very low prices but high volume of a limited range of nationally branded products sold in simply designed and minimally decorated stores (Sparks, 1990). Combined with ideas gained from the German discount supermarket chain Aldi, Gubay opened the first Kwik Save Discount in Colwyn Bay in 1965. By 1970 there were 24 discount stores trading as Kwik Save, based particularly in the North Wales, Cheshire, and Shropshire areas. The company was converted into a public company and renamed Kwik Save Discount Group Ltd (Tedlow and Jones, 1993).

The 1970s and 1980s witnessed a revolution in Britain's retailing history: the rise of the superstores (Drive, 2011). While many retailers moved out to suburban locations in order to build large superstores, Kwik Save took the opportunities and expanded its operations from cheap out-of-town sites into town centers and residential areas. Continuing its policy of offering the lowest possible prices on top branded products, Kwik Save occupied a middle size of range which many other companies ignored and achieved prominent growth (Tedlow and Jones, 1993). The company entered into the more affluent areas (e.g. southeastern part of the country) and changed its name to Kwik Save Group plc in 1986 (Tedlow and Jones, 1993).

In the early 1990s, Kwik Save kept on its aggressive expansion. The company became the largest discount grocery operator and by volume the third largest grocery retailer in the United Kingdom in 1994. However, Kwik Save’s glory day didn’t last long. A major turning point came in 1996. As a result of competitive pressures from both the larger supermarket chains like Tesco and newly entered overseas discounters like Aldi and Netto, Kwik Save’s profits fall from £125 to £80 million (Piercy, 2002). It was followed by closure of 107 stores and an exceptional charge of £87 (Piercy, 2002). Kwik Save became part of the Somerfield group in 1998. From then on, Kwik Save stores were either converted to Somerfield fascia or gradually sold to other companies. Eventually, Kwik Save ceased trading in 2007 (BBC News, 2007).

3. Operations Strategy of Kwik Save

According to Slack and Lewis (2002), operations strategy is “the total pattern of decisions which shape the long-term capabilities of any type of operation and their contribution to overall strategy, through the reconciliation of market requirements with operations resources.” It plays an essential role in business success as few organizations would survive without an effective operations strategy and operations management (Plunkett et al., 2008). In order to understand Kwik Save’s operations strategy, its external market environment and internal operations are analyzed below.

3.1 Market Analysis
Since 1960s, Food retailing industry in the UK has experienced remarkable development. The major food retailers enjoyed unrivalled growth and...
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