Grocery Checkout (Gco) Inc.
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
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