Hayley Rush

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• Hayley Rush
• Alex Beverly
• Everett Gibson
• Andrew Keeling
• Charity Moore
• Kolt Pederson
• Emily Dale
• Carli Slingerland

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Historical Analysis
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Acquisitions Mergers

• (48-72)- 1,016 mergers amounting to 13.0
  billion.
• National Commission on Food Marketing Report.
• Mid-1960s- Federal Trade Commission

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Current Market Share
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Historical Forces of Change

• Self-Service
• Impulse Buying
• In-store Branding
• The Super-Store

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History

• Safeway began in 1915 when M.B. Scaggs purchased
  a grocery store from his father.
• By 1926 Safeway had doubled in size.
• Scaggs philosphy was to give his customers value
  and expand by keeping a narrow profit margin
• Examples

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Current

• Owns 1,775 stores
• Operates on the NYSE as SWY
• Also owns the following stores Vons,
  Pavillions, Randalls, Tom Thumb, Genuardis,
  Dominicks and Carrs
• Owns 49 of the 137 Casa Ley stores
• Private-label success

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SWOT

• Strengths
• Private-labels
• Financial ratios Net profit margin and days
  supply of receivables
• Ingredients for Life
• Community Caring
• Environmental Campaign

• Weaknesses
• One stop shopping
• Downgraded stock
• Consistency in stores

• Opportunities
• Prepared food niche
• Threat of new entrants is low

• Threats
• Commodity prices have increased
• Altered shopping style

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Environmental Scan

• Involve 6 factors
• Social
• Economic
• Technological
• Government
• Competitive
• Geographical
• Purpose to look at the components of these
  factors that affect the food retail industry and
  use them as a basis to help Safeway make better
  strategic decisions

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Social Factors

• Food Trends
• Eco-Friendly Foods
• Local, Natural, and Fresh Foods
• Food safety concerns
• Rising food costs
• Probiotics and prebiotics
• Whole grains
• Simple ingredients and clear labels
• Lower salt
• Artificial sweeteners
• Bottled water backlash

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Social Factors

• Going environmentally Friendly
• Green processing
• Green distribution
• Green retailing
• Green consumer

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Economic Factors

• Inflation in food prices
• Consumers going to cheaper versions of products
  as well as store brand versions
• How do you expect private-label penetration to
  change in 2009, in terms of dollar sales?

Decreased 3.1
Not at all 4.1
Up less than 2 29.9
Up more than 2 61.9
No answer 1.0
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Economic Factors

• Economic recession is causing consumers to change
  their buying habits
• Looking for more meaningful discounts
• The smart shopper is back
• Shoppers stock up on items only when on sale
• Using more coupons than before
• Reading more circulars to find the better deals
• These changes are expected to be more permanent
  than temporary

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Economic Factors

• 26 of people have left supermarkets for smaller
  more discounted venues
• 11 have left the smaller venues to go to
  supermarkets

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Government Factors

• FDA regulation- the FDA regulates five areas of
  the food retail industry
• Management
• Human Element-Staff
• Human Element-Public
• Operations
• Facility

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Technological Factors

• Small Format Stores
• RFID
• ECR motors

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Technological Factors
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Competitive Factors

• Difficult to Gain Competitive Advantage
• Similar products/services among competitors
• Difficult to achieve Differentiation

• Strategic Changes in the grocery industry
• Main Competition over Price (differentiation is
  low)

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Geographic Factors

• Owns close to 1,800 stores between the United
  States and Canada
• Also owns stores in Mid-Atlantic region, and
  Eastern Seaboard

• Corporate Headquarters is located in Pleasanton,
  California
• 1,521 in the U.S., and 222 in Canada. 80 in
  western provinces
• Most Safeway stores California 521, Washington
  168, and Colorado 122
• Sixteen Distribution Centers, thirteen of which
  are in the U.S. and the other three in Canada

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Rivalry among existing firms HIGH

• Low Growth
• High concentration
• Low differentiation
• Large economies of scale
• Low exit barriers

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Rivalry among existing firms HIGH

• Low Growth industries key players have to fight
  each other for market share, Safeway has sales
  growth of 3.6
• Concentration 50 out of 40,000 companies in
  industry own 70 of market share
• Differentiation Most grocers sell similar
  products so it is difficult to differentiate one
  chains product assortment from others.
• Economies of Scale Large companies have an
  advantage in this industry because of their own
  distribution centers and ability to offer the
  lowest prices.
• Exit Barriers Easy to exit the industry, asset
  are highly liquid.

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Threat of substitute LOW

• There are virtually no direct substitute for
  grocery stores, restaurants or convince stores
  are the closest.
• Relative price and performance Many retail
  stores carry and off brand product line allowing
  cheap prices for low income consumers, but have
  brand name products to provide for brand loyal
  consumers.
• Buyers willingness to switch Almost all grocery
  chains that are in direct competition with
  Safeway are selling similar products so consumers
  typically do not find a reason to switch from
  chain to chain except for the occasional
  promotion but the switch is not permanent.

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Threat of new entrants LOW

• Scale economies In the grocery industry scale
  economies is high. Companies in the industry
  usually own their own distribution centers,
  causing a new entrant to have high initial start
  up costs to keep up with competitors
• First mover advantage The first mover advantage
  in the grocery industry can only be obtained by
  new entrants if they offer a new product that
  sets them apart from the current chains that run
  the industry.
• Distribution The companies in this industry
  often own their own distribution copying a good
  format and providing the capital for the project
  is usually difficult for new entrants
• Relationship Relationships take a long time to
  establish, new entrants have trouble building
  relationships that can allow for competitive
  strategy in prices in the beginning of their time
  in the industry
• Legal barriers The regulations in this industry
  are extensive, for new companies it can take time
  and money to make sure they are properly prepared
  to overcome and follow all legal barriers.

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Bargaining power of buyers HIGH

• The buyers in the grocery industry have a high
  bargaining power because their suppliers often
  provide to their chains regularly.
• Safeway is a consistent purchaser from their
  suppliers, so as buyers they have a lot of power
  because of how much market share they control.
• The opportunity for new buyers is low in the
  industry, so suppliers have to maintain good
  relationships with their buyers.

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Bargaining power of suppliers Moderate

• The bargaining power of suppliers is moderate
  because there is a balance between the products
  importance to the buyer, but also the supplier
  needs those main purchasers to continue to buy.

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Management OverviewLeadership

• CEO -Steven Burd
• Leader since 1993
• Helped expand the company
• Spirit Reward
• Level 5 Leader
• Strategy
• Change stores to changing customer
• Lifestyle Formats, Organics, Giftcards

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Management OverviewCultural Elements

• Safeway culture developed over time
• 5 Step Process
• Ambition
• Walk the walk
• Manage conflict
• Create champions
• Leadership
• Engage and inspire, Train and develop,
  Retailtainment

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Management OverviewCultural Elements

• Reviewing
• Reviewing
• Learning
• Measuring
• Rewarding
• Reward, Promote, Encourage
• Commitment
• Communication, Measurement, Feedback

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Management OverviewOrganizational Chart
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Organization Life Cycle

• Phase 1- Sam Seelig
• Phase 2- Charles Merrill
• Phase 3- 80s Bust
• Phase 4- Steven Burd
• Phase 5- Present Day

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Strategic Management Position

• Position of Power
• History
• Blue Ocean
• New competition
• New Innovations
• Gift cards, Lifestyle, Organics
• Great Leadership
• CEO, Training, Empowerment

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Supply Chain

• Developed Over Time
• New Technological Advances
• Simple, But Efficient

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Safeways Liquidity
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Safeways Profitability
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Marketing Overview

• Ingredients for Life Campaign
• Store remodeling
• Increased emphasis on health wellness
• Repositioning proprietary corporate brands
• Transition from private label brands to consumer
  brands
• Brand-Enhancing marketing campaign
• New emphasis on packaging design

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Public Relations

• Well Executed
• Heart Healthy Women Campaign
• Recall of Three Peanut Based Items

• Poorly Executed
• Being Two-Faced about cigarettes

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Competitive AdvantageMarket Share

• When compared to traditional retail stores,
  Safeway has a good share of the food retail
  industry
• Safeway could set a goal to gradually close the
  gap between itself and Kroger Co.
• Safeway makes greater use of its space than its
  competitors
• Utilizing its capital to the fullest extent

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Competitive AdvantageHigh Barriers to Entry

• Consumers ate an average of 861 meals at home in
  2007, from 817 meals in 2002.
• Inflation in food prices
• Consumers are trading down
• Creates higher margins for food retailers

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Competitive AdvantageProduct Quality Strength

• Safeways private-label brand has a reputation
  for quality and freshness
• The Quality Assurance Division of the company
  strives to uphold this reputation with its
  consumers.

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Competitive AdvantageCustomer Loyalty
Satisfaction

• Club card The Smart Way to Shop
• Save money on weekly specials
• Receive additional savings
• Save money on Safeway gas
• GroceryWorks.com

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Competitive AdvantageReputation Image

• The Safeway Foundation
• Promotes a positive opinion of Safeway
• Over the past 8 years, The Safeway Foundation has
  donated almost 60 million to breast cancer
  causes.

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Competitive AdvantageRaw Materials Access Cost

• Health trends consumers desire for organic
  foods result in higher raw material costs
• Corn wheat costs rose a couple of years ago
  raising the price of many items

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Competitive AdvantageManufacturing Capability

• Revolves around its private-label merchandise
• 22 of Safeways private-label merchandise if
  manufactured in company-owned plants.

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Competitive AdvantageSupplier Strength
Material Availability

• Safeway has suppliers for all different
  categories of perishables and non-perishables
• Safeway Quality Assurance Auditor
• Safeways Quality Assurance Supplier Expectations
  Manual, A Bridge to Quality
• Safeway has more of a hold on the suppliers than
  its suppliers have on Safeway
• Boldly pronounce the quality of its products

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Competitive AdvantageInvestment in RD

• Safeway created new concept stores
• The Market
• 15,000 square feet
• 15 of the stock
• Trademark Patent ownership
• Over 400

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Summary

• Analysis Conclusion