The supermarket industry in Sri Lanka is defined out for an explosive progress in the modern times this is with the european lifestyle of modern Sri Lankans where convenience is a key benefit sought after. (Perera 2006) The original grocery store notion has been growing in to a ''Mega Stores'' and the heavy discounter principle which bring all the products customers want (Stanton 2007). If we go through the individuals for the advancement of modern source chains, or ''Modern Trade'' they have been continual in increase demand for value added consumer products, convenience food, drink, and iced confectioneries.
''The introduction of supermarkets, urbanization, income increase, high quality retail export marketplaces, high quality large procurement, trade agreements, with other countries, increased migration of Sri Lankan people and increased female participation in labor force have created a fresh demand pattern, moving the target towards continuous way to obtain high quality, value added products with improved upon processing, presentation and labeling'' (Samarthuga A 2006 15).
Sri Lanka can be an agriculture base country primarily it includes 2 million hectares or 30% agricultural land, and almost 75% of the agricultural land is under small holdings and the balance is under estates. Sri Lanka Imports 65000 MT of journal goods mainly FCMP and diary therefore seen and device to displace, and about 70% of the contribution to the livestock subsector comes from chicken, meats and eggs (MOLARCD 2010). This agricultural and farming companies leading to backward integrations with grocery store industry which includes influence the above ''Mega Stores'' notion and consumer products FMCG, and convenience food and iced confectioneries that have shown huge probable in becoming one of the profitable industries encouraging large commercial players JKH investing in this area.
Cargills Food City, Kings Supper City, Sentra, EH Super Pola, Sunup, Laughs, Crystal, Arpico super are a few of the supermarket providers in Sri Lanka while Lanka Sathosa their state operated publics shop is also being revamped and develop to the ''Mega Stores'' strategy.
Company Background
JayKay Marketing Services (Pvt) Ltd. operator of ''Keells Supper'' chain of excellent market was contained in 1991 under Ceylon Chilly Store Plc which is a company under consumer food industry of JKH. Keells Super is a name that is synonymous with Sri Lankas high quality range of retail outlets which belong to 70 member conglomerate John Keells Holdings Ltd (JKH) which is also one of the blue chip conglomerates on the Colombo stock market. JKH is also the first Sri Lankan company to secure a listing abroad and is quoted in the Luxembourg stock exchange. Group's varied companies have offices disperse around Sri Lanka as well as the Maldives, India, Mauritius, Singapore, UK, USA, and the UAE. (JKH Sustainability Survey 2009, 2010)
Retail/
Distribution
Jhon Kells Foods India (Pvt) Ltd
Kells FOODS Mauritius (Pvt) Ltd
Ceylon Cold Stores Plc
Kells Food Products Plc
Keells SuperKeells Super is the syndication system of consumer food industries signed up under JKH.
Figure 01
JKH
Consumer
Food
Industries
Keells Food Product PLC is the marketplace leader for refined meat and the company is boasting of an 70% of the marketplace share in the country (Approximately). A subsidiary of JKH, KFP PLC started its functions in 1983 and it is responsible for the development of processed beef industry of the united states. Always keeping abreast of the industry through tactical investments in cutting edge food processing technology and continuous R & D orientation, companywide quality control system such as ISO 22000 official certification, which has altered the KFP PLC to the market innovator it is today.
KFP PLC partcipates in manufacturing a range of products these include processed meats and crumbed products as well as the sales of raw meat. The company offers a range of sausages, meatballs, hams, bacons, under their popular brand of ''Keells'' that was the average Sri Lankan clients common way of identifying sausages '' Mata Keells Sausage packet ekak denna'' they also have the Chinese rolls, formed meats, French fries, nuggets, seafood fingertips, and kieves under Halal ''Krest'' which is ''Keells Krest'' with just lately added on canned seafood and meats, both cooked properly and precooked under the banner of ''Keells''. (JKH PLC N A)
Beverage the next specialty in JKH food creation is managed and going by Ceylon Cool Store Plc. CCS PLC whose product portfolio is going under the brand ''Elephant House'' which produce carbonated carbonated drinks which are extremely popular among the Sri Lankans. EGB the natural ginger beverage, Cream soda pop, Orange crush, Orange barley, Lemonade, Necto, Soda, Apple soda, Free of moisture Ginger, Ale Tonic, Level of caffeine based outrageous elephant (energy drink) and blue fountain bottled drink drinking water under the name of ''Elephant house''.
CCS PLS is also the house for production of 1 of the country's leading make of ice cream under iced confectioneries. ''Elephant House'' range of ice products, chocks, cones, pops together with their other produce are popular brands both in Sri Lanka and in Maldives. (JKH PLC N A)
Keells Supper is merchant the supply string which links their particular selection of product with powerful brand equity to the consumer making the JKH consumer foods & retail industry a electric power house. Along they have received prestigious honours such as esteemed industrial Excellence award - Gold award for developing large category. Country wide Productivity Merit prize. SLIM-Nielson Peoples prize 2009- Most popular FMCG Drink brand of the entire year.
Keells super also offers its type of consumer goods where the company places all its low country or more country vegetable immediately from the farmers. The spices and dried up ration goods that are cleaned out and pre filled and sent out under ''Keells'' forte.
Kells Supper has 45 shops strategically found in urbanized and semi urbanized around the firms metropolitan towns. The supermarket chain use advance state of the art systems like Motorola MC3000 mobile pcs for preserving inventory as time passes saving and efficient stock reconciliation. Bar-coding, devotion cards to keep customer loyalty. Business reference planning (SAP) Customer romantic relationship management (CRM) Text alerts for key performance indications (KPI)s all with ambitious work to be the top quality supermarket in the grocery store or ''Mega Stores'' industry.
Keells super stocks its global commercial vision of '' To generate businesses that are learder in the region'' to be the first choice in the Prime range very market. (KS 2010)
Economic Value Declaration for 2009 10
Rupees in Million
For the entire year finished 31st March
2010
2009
Direct Economic Value Generated.
Revenue
16, 318
14, 483
Interest Income
14
11
Profits and sales and other Income
298
322
16, 630
14, 816
(Number 02) (JKH Sustainability Survey 2009, 2010)
The External Environmental Factors that affects the Industry.
In business strategy the process of scanning the surroundings of a business with three main types of rational environments which include Natural environment, Public environment, and Job environment with Macro- causes, and Micro-forces, is necessary for strategy formulation. Macro- environment which is the cultural environment in the surroundings scan is with four main standard forces that do not directly touch on the short term activities of the organization. These are Political, Economical, Sociocultural, Political - Legal which is often known as Infestation analysis.
Societal environment
Is mankind's communal system that includes general forces that not directly touch on the short-run activities of the business that can, and frequently do, affect its long-run decisions. These factors have an impact on multiple industries and are the following.
Economic forces - that control the exchange of materials, money, energy and information
Technological forces - that create problem solving innovations.
Political - legal makes - that allocate electricity and offer constraining and protecting laws and regulations.
Sociocultural causes - that control the worth, mores and customs of modern culture.
(Wheelen Craving for food 2010)
In examining the macro-environment, it is important to recognize the factors that might in turn affect lots of vital variables that are likely to affect the organization's resource and demand levels and its costs (Kotter and Schlesinger, 1991; Johnson and Scholes, 1993).
(Shape 03)
The one of the primary factors that would affect the consumer food and the food industry will be the Economic causes.
Economy makes. As Sri Lanka has ended a thirty time old ethnic issue with liberating the north and east of the united states from the rebel activities, country is spear going to a rapid development of infrastructure with, adding more kilometers to the street network and expanding them, with new second international harbor in Magampura Hambanthota District south of the country commencing its procedure last august. The next international airport will be set up in the southern Hambanthota district which would accomplish international trade. A new location with a tactical importance for the business has been wide open with the north and east being liberated. The business's retail outlets have the ability for development. North and east are also well-known for its down country fruit and vegetables such as onions, betel leafs, spices, as well as for fish, lamb meats, prawns and crabs, fruits like grapes which would help the buyer food supply chain. (www. priu. gov. lk) The steady improvement of the global market lead by distinct restoration by the Asian markets are encouraging lending and stabilizing parity dissimilarities. However recent indications show a well-defined decline in consumer spending vitality due to constant inflations prevailing company will have to watch out for these. (AR CCS 2009 10) Recent Tsunami which struck the north eastern coast of Japan, and politics unrest in the centre eastern countries would also have an impact on the market of Sri Lanka which is a little open net engine oil importing overall economy as petrol price have previously being increased by the global market increasing the local fuel prices.
Political forces Political doubt has been ruled out with both the Presidential and parliamentary elections coming to a finish bringing stability to the overall economy polices and politics instability prevailed. (AR CCS 2009 10) The recent budget proposal given in parliament for 2011 includes fiscal reforms with taxes relief for companies. (www. news. lk 2011) Land building tax increase to 3% and value added duty on consumer goods are affecting the bottom lines of the Kells super.
Technological forces. Sri Lankan English speaking software builders are sourced by the western world creating difficulty in keeping skilled programmers. Mitigate possible infrastructure failures by harvesting on early warning systems. Encourage the management of the company to source where possible for open up source software concerning counter the impact of the increasing cost of qualified software. (AR CCS 2009 10)
Porters method of industry analysis
Potential Entrants
Industry Competitors
Rivalry Among existing firms
Buyers
Suppliers
Substitutes
Threat of new entrants
Bargaining ability of Suppliers Bargaining ability of Buyers
Threat of Subsitiues
(Figure 04)
Threat of New Entrants will add new capacity also the new admittance would have a desire to get market share and substantive resources. In this case the core retailing activities of keells supper, focuses on a large level of consumer goods produce by the Consumer food industry of JKH (KFP PLC and CCS PLC) which has high brand equity. Convenient food industry in Sri Lanka are highly saturated specially the refined meat industry, Carbonated drink, and cold confectionaries except for the lately librated areas in the north and east. And these are dominating with the Keells Brands and the identical rival Cargills Brands. The Keells ultra product range is supported by both KFP PLC and CCS PLC's tremendous development capacity which is wedding caterers for the international market as well hence their economies of scale could be looked at very high. The Keells Super is also prepared with the range of products from the convenient food to chilly food, canned food, carbonated drinks, and cold confectionaries items, and is guaranteed by the high level of ambitious advertising providing high level of product differentiation. The capital requirement to put up cutting edge retail shopping shops will be relatively high the backward integration it includes with its creation and packaging fall into line helps it be impossible for a new entrant to come up with equal capital investment. Transitioning cost of the merchandise available in keells supper may be looked at as possible for they are really consumable and convenient food items, but brand equity of keells super may challenge this position. Access to distribution stations could be looked at low as the keells supper is wearing 46 super market segments in comparison to its rival Cargill's. But keells super can increase its circulation since it's guaranteed by JKH one of the primary companies in Sri Lanka. Cost disadvantage for new entrants against keells supper will be high impartial of its size because so many of the merchandise portfolio keells supper distributes are in the supper brand category in the island and in Maldives hence if not for a multinational company with high brand equity globally a local new entrants will be less affective to impact on Keells supper.
Rivalry among existing businesses for keells super could be considered high especially using its number one competitor Cargill's Food City who have outnumbered keells very with it island extensive circulation network 200 supermarkets. And also others medium scale competition like Laughs and Arpico who are rapidly adding capacity and increasing number of competitors because of this industry could be high. Rate of industry development is matured and saturated (in addition to the new market in the north and east)for keells supper with increase price wars between the main competitor Cargill's which is more apparent with the new keells ultra tag line ''lower than the cheapest price'' in order to break the understanding of high prices. The majority of Keells supper product characteristics would put one or the other as a commodity since they have been in the market for the last 20 years and they are popular brands one of the consumers. Keells supper is energetic in high information analyzing with constantly monitoring its key performance signals, also its development fall into line consider search engine optimization and cost lowering by increase output and minimizing waist reducing and changing and setting off the set cost as is possible. Capacity increase can be done for keells supper if required for the north and east new marketplaces but existing capacities of keells could service through these markets. Exit barriers aren't high in the grocery store industry as any retailer could easily sell of its business to some other operator. However diversity of competitors of keells supper is high as all are fighting in the same market and each one is endeavoring to increase its market share hence the effect of rivalry among existing companies are moderate.
Threats of alternative products. That is possible since Keells Super sell FMCG's and competition could substitute the products, however the competitor might have to out run the keells supper brand equity and the creation capacities which renders advantages of economies of range. Also with the worthiness engineered high tech production facilities which is backward integrated to the keells very, supermarket range. Keells very high quality expectations maintained with compliance to SLS and ISO 22000 and ISO 9001 will render it difficult to replace hence the danger could be low.
'' When we ask consumers what they might do if the brand they are looking for is not available 65 percent said they will go to another shop" 'says Dwight Watson, Ac Nielsen. (LBO 2005)
Bargaining vitality of buyer's keells super is the distribution net work to the finish user, since professional sales are managed under a different section, and from keells supers viewpoint a buyer like medium size caterer or an hotelier would be bulk buyer for variety price discount. Purchasers will not be encourage to create FMCG because they are freely available and lot of substitutes would will be there. For the convenience food in local contexts we will have significantly more than one to two provider hence if not keells excellent buyers would have alternate suppliers. The customers can change from any convenient consumable since change will involve very little switching cost. With this the buyers bargaining power to press prices down for Keells super would be low they sell FMCG products and these have suprisingly low margins and high brand equity which makes clients willing to pay.
Bargaining ability of the suppler appears to be high for keells supper being that they are core establishments and advanced brands are specific about their supplier and quality of the item. Maybe it's seen that there had been times in the process meat and milk products industry the neighborhood supplies havent been satisfactory and the companies had to transfer the material to supply the current demand and high cost was assimilated by the company. That is common to agricultural products since they could go out of produce. Turning cost of distributor wouldn't normally be low since the required quality levels are high by the designer and the consumer food industry demand rigid qualities using their company suppliers hence if this have an impact on the producer it'll affect the source chain integrated to it. Keells supper forte or the merchandise portfolio will involve in process food signifying it would be some form of conversion of the original hence substituting the bottom materials would be difficult. Keells supper concentrate mainly in providing the products produce by the parent or guardian companies hence the immediate company for the coffee lover are KFP PLC and CCS PLC, and their suppliers are farmers who will find forwards integration difficult. And in terms of quantities purchase by the very market they may be large hence Keells supper and KFP PLC and CCS PLC has the capacity to discount as a buyer using their supplier this will show that surprisingly for keells supper product line up supplier bargaining electric power is relatively high since it influence the bottom lines of these integrated producer.
SWOT Analysis
Corporate appraisal (SWOT) a critical analysis of the strength and weaknesses, opportunities and threats in relation to the inner and environmental factors influencing the entity to be able to determine its condition prior to the preparation of your long-term plan (ICASL 2010 80).
Opportunity Looking at economic value indicator for the 2009-10 though retailer hasn't performed to the expectation the present day supply string and consumer food industry mutually have archived their objectives compare to last year. It has been as a result of continuous improvement of the global economy in the year concerned with razor-sharp restoration of the Asian market segments increasing the free movements of commodities. Inflation and rates of interest have shown a constant decrease before year exhibiting and opportunity for equity borrowing. The main was the 30 12 months war arriving to a finish ensuring tranquility in the country; huge infrastructure development poses chance for enlargement and development. North and East un faucet markets are being open to Keells Super enlargement of outlets. On the other hand new sources of fresh source and live stocks and shares to the resource string of Keells Super. Both presidential and parliamentary elections are behind us guaranteeing greater political steadiness encouraging opportunities. New budget proposal implies tax relief for year at hand. And taxes exception for professional plants, expand into Maldives, Seashells, as a Retail clothing.
Threats the global catastrophe influencing the north eastern coastline of Japan and the politics unrest effecting the Middle Eastern countries will affect the global economy at large. Growing fuel coat will increase creation cost of Keells Supper and their source chain. Imitations hazards, Parity distinctions are impacting on the raw materials imported to the business. The increase in Nation building duty and impose of a high ratio of value added tax will increase product cost of convenient foods. New sustainability restrictions includes a band on a disposable packaging hence this make the keells super collect the returned bottle and storage containers which would be expensive operation. Stiff tournaments from multinationals and there brands like Coca-Cola, and Pepsi. Increasing inflation rates due cash coming into the country curtails the consumer spending electricity.
Strengths Companies quality insurance policies GRI global reposting initiative can help improve capacity of the business and encourage buyers. SLS complaisance and ISO 22000 and ISO 9001 increase sales in the new locations in the North and East. Keells ultra online shopping portal and intranets, increase sales and create recognition and product differentiation a. Motorola MC 3000 real- time inventory systems, Organization source planning (SAP) Customer marriage management systems (CRM), Unique retail attire, strategic location, Parent or guardian company support, Well trained personnel skill, corporate and business culture, Brand collateral, Credit worthiness, and financing worthiness, Distribution programs. Profit share plans for collective bargaining with non professional staff for high performers, Ability to introduce sub-brands, Ability to tie up with multinationals. Efforts to lessen energy consumptions and carbon feet print.
Weakness Customer recognized image of high grade rates, high quality requirements, complicated vertical decision-making, high place depreciation, maintenance cost, Limited provider base, limited circulation in other areas of the country apart from western province, concentration on domestic market portion alone. Low margins on consumer items, mismatch in category and tagline, (superior section -yet ''lower than the cheapest price'').
Porter's Common Competitive Strategies
Michael Porter proposes two ''universal'' competitive strategies for outperforming other firms in a particular industry: less expensive and differentiation. These strategies are called universal because they can be pursued by any type or size of business organization, even by not for- earnings organization.
Should we be competitive based on less expensive (and thus price), or should we identify our products on some basis other than cost, such as quality or service?
Should we remain competitive head to head with our major rivals for the largest but most sought-after share of market, or should we concentrate on niche where we can gratify a less sought-after but also profitable portion of market? (Wheelen Craving for food 2010)
Generic Strategy
Keells Supper
Cost leadership
Differentiations
Focus
Entry barrier
Review discloses high
O
indicates wide mass market.
T
indicates cost head ship would not be ideal
O
Indicates extensive mass marketing strategies.
T
Indicates lot of issues for cost leadership
S
Suggest Keells may be better adapting differentiation as the best strategy since they have the ability build unique brands and high brand value.
Revelry among existing firms
Review unveils Moderate
OS Talents and Opportunities of Keells super shows supermarkets high quality specifications and progress technology could continue to build strong brands like ''Keells sausages '', '' Elephant House cream soda" which would counter rival cost leadership.
Threat of substitute
Review unveils Low
OS Talents could build unique products and also and range and variety which would build strong brands and better brand devotion countering the threat of subtitles and with increase capacity and supply to reduce the substitutes.
Buyer power
Review discloses Low
S Strengths show product differentiation and strong brands would increase buyer loyalty
Supplier power
Review shows high
WS Weakness and strength indicates by implementing differentiation strategies high supplier ability results could be control by moving the additional cost on the product and charge a premium price over a power brand resulting brand loyalty lowers buyer's price level of sensitivity.
Review in renewable indicates the Keells high competiveness in porter's five forces
Review in orange reveals the Keells Medium competiveness in porter's five forces
Review in red indicates the Keells low competiveness in porter's five forces
(Shape 05)
Conclusions and recommendations
Looking at the Porters method of industry examination it is clear that ''Keells Super'' competiveness in the industry is significantly high since three out of five f forces to be competitive are and only the company, being truly a Entry barrier, potential to face the substitute issues, and having dealer bargaining power on the manageable levels improve the competiveness of the supermarket string, further the rivalry among competitors being average, with suppliers bargaining ability needs to be address as issues for competiveness of the firm.
Being competitive and looking at the best competitive strategy by looking at the SWOT examination it is noticeable that opportunity are opening up for Keells Super for development and increase of market share indicating best procedure would be purpose at a broader aim for a mass market strategy best suits instead of a concentration.
Hence Cost innovator ship, and differentiation competitive strategy is apparently matched better, looking further at the SWOT Keells Super has a considerable danger for having and keep maintaining a cost innovator ship with provider high bargaining power, commodity and natural material price increase, sustainability investment cost, and imitations getting into the marketplace, having economies of size is not promising with rising energy prices, implies best competitive technique for keells Super would be Differentiation.
Looking further into the analysis proves that competitive strategy could be best method of retain competiveness of other pushes, since keels super can and has build unique brands which have high brand commitment giving them big margins on brand collateral. This would allow them to be on control of substitutes challenging its position, and increasing brand devotion among customers who will not be price delicate, giving keells super the ability cover distributor cost increase on increased margins.
Risk of differentiation
Keells Supper should look out for cheap imitations which would damage its brand image, and keells should always maintain the additional value buyers spending money on. The differentiation strategy must ensure that employ the service of price recharged on the customer because of its high quality is not too far above than the common prime price of the competition. If not clients will not see the extra quality as worthwhile the excess cost.
