Porters 5 Forces and Pestle Analysis in Grocery Retail
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PGCIM
Unit 1 Assignment
Kelly Moore
December 2009
Should Rimi Baltic expand into the United Kingdom as a Discount Grocer?
Word Count: 2473
Introduction:
Rimi Baltic is the 2nd largest retailer in the Baltic States at 20.6% grocery share, behind VP Market who lead the market with 22.6% share (1). As a subsidiary of ICA Baltic AB (13.9% of sales), Rimi Baltic focussed its growth in Lithuania and Latvia, allowing period of underperforming in Estonia. After losing out to Kesko’s K-citymarket and Saastumarket, a merger between these two Estonian market leaders and Rimi Baltic took place in 2005.
238 stores now operate in all 3 Baltic States under 3 formats of the Rimi banner – Rimi Hypermarket, Rimi Supermarket and discounter Supernetto.
Rimi has experienced a difficult time over the past 24 months with total group sales down -6.2% in the 1st quarter of 2009. Rimi Latvia experienced a decline of -4.3%. This is despite showing full YOY group growth of 13%. The effect of Europe’s hardest recession hit economy is taking place. A response to this has been to open more stores (238 in 2009 versus 215 in 2008) and focus growth in Estonia, where they have previously underperformed.
Rimi’s pricing strategy is EDLP, and uses economy of scales from stocking its hypermarkets to keep prices low.
49% of Rimi Baltic’s turnover in 2008 was in Latvia, and for the purpose of this analysis, determining whether Rimi Baltic to should expand as a discount grocer into the UK, the country of Latvia will be used as a main point of reference.
PEST Analysis
Political:
In recent history the two most significant dates in Latvia’s political evolvement have been 1991 and 2004. Both have impacted greatly on forming Latvia’s political standing • 1991 - Latvia gain full independence from Russia and establish itself as a democratic republic. The sovereign power belongs to the people, whom are represented by a unicameral parliament, known in their
PGCIM
Unit 1 Assignment
Kelly Moore
December 2009
Should Rimi Baltic expand into the United Kingdom as a Discount Grocer?
Word Count: 2473
Introduction:
Rimi Baltic is the 2nd largest retailer in the Baltic States at 20.6% grocery share, behind VP Market who lead the market with 22.6% share (1). As a subsidiary of ICA Baltic AB (13.9% of sales), Rimi Baltic focussed its growth in Lithuania and Latvia, allowing period of underperforming in Estonia. After losing out to Kesko’s K-citymarket and Saastumarket, a merger between these two Estonian market leaders and Rimi Baltic took place in 2005.
238 stores now operate in all 3 Baltic States under 3 formats of the Rimi banner – Rimi Hypermarket, Rimi Supermarket and discounter Supernetto.
Rimi has experienced a difficult time over the past 24 months with total group sales down -6.2% in the 1st quarter of 2009. Rimi Latvia experienced a decline of -4.3%. This is despite showing full YOY group growth of 13%. The effect of Europe’s hardest recession hit economy is taking place. A response to this has been to open more stores (238 in 2009 versus 215 in 2008) and focus growth in Estonia, where they have previously underperformed.
Rimi’s pricing strategy is EDLP, and uses economy of scales from stocking its hypermarkets to keep prices low.
49% of Rimi Baltic’s turnover in 2008 was in Latvia, and for the purpose of this analysis, determining whether Rimi Baltic to should expand as a discount grocer into the UK, the country of Latvia will be used as a main point of reference.
PEST Analysis
Political:
In recent history the two most significant dates in Latvia’s political evolvement have been 1991 and 2004. Both have impacted greatly on forming Latvia’s political standing • 1991 - Latvia gain full independence from Russia and establish itself as a democratic republic. The sovereign power belongs to the people, whom are represented by a unicameral parliament, known in their