Grocery Checkout (Gco) Inc.

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Grocery Checkout

Key Issue
Nathan Felder must decide whether or not it is in his best interest to listen to his investors and attempt faster growth. Alternatively, he needs to be able to defend to his investors that maintaining status quo is best for the company because it avoids the risks associated with the growth options. The final decision the needs to be made is whether or not he sells the company. Analysis

External Analysis:
Porters 5 forces helps to reveal the opportunities for growth. They are as follows:Rivalry- Grocery Checkout’s main competitors are Loblaw’s and Valu-Mart. Their proximity to the University of Western Ontario makes them accessible to the students, but by public transportation or their own cars. The distance is too far for students to walk. These companies are larger than Grocery Checkout in size and annual sales and if Grocery Checkout becomes profitable with their online business model there is no reason for these companies to not also begin offering online grocery shopping and delivery services.

Threat of New Entry- The Grocery market is extremely competitive, with food sales increasing yearly. The large supermarket grocery stores have economies of scale, which makes it harder for new smaller companies to enter the grocery market. Grocery Checkout has a unique niche where it is the only online grocery store in London right now, but other companies that can’t compete with the supermarkets may think of the online rout to gain an advantage. The capital required to run and online store is considerably less than the capitol required to run a supermarket.

Supplier Power- Since all of Grocery Checkout’s suppliers are small and local, there is no real supplier power. Grocery Checkout has great working relationships with these local suppliers so there is little chance that these suppliers will all of a sudden start charging higher prices for their services. There are many suppliers in the grocery industry so if one of the suppliers did start charging higher prices, Grocery Checkout can simply choose another supplier.

Buyer Power- Grocery Checkout has many suppliers to choose from in the London area so they do have some buying power. It is also easy for them to compare prices with other suppliers so if for whatever reason they do not like the prices they are paying for their products, they can negotiate with other suppliers and hopefully reach a contract where they pay less for their products, thus increasing their profitability.

Threat of Substitutes- Grocery Checkout is in the unique situation where it is the only online grocery business in London. If customers want to purchase their groceries online and have it delivered to their home, then they could only do so using Grocery Checkout Inc. There are no substitutes for this unique business model. Holistic analysis of external environment – The Canadian grocery market is dominantly run by supermarkets. 74% of all grocery shopping is done in the traditional grocery store atmosphere. This makes it hard for Grocery Checkout to compete with the big chains, but they have found a niche market segment where they have had some success. If the other chains start using the online method of grocery shopping, it will be hard for Grocery Checkout to compete because the big chains have more capitol and better buying power than Grocery Checkout, so they would probably be able to sell their products cheaper and be able to get the groceries to their customers quicker. Internal Analysis:

The VRINE analysis will help to reveal the internal capabilities of Grocery Checkout. It is as follows:
Valuable- The capability of Grocery Checkouts online grocery business is valuable in the London market because it enables them to meet the market demand of customers wanting their groceries purchased online and then delivered to them. This allows Grocery Checkout to compete in the Grocery market in London even though they are not as big as the traditional...
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