Publix Case Essay
Identify the relevant marcroenvironmental factors. What impact do these issues have on the focal organization? Level I: The Global Business Community
The macroenvironment consists of the global business community, focusing more on the external environment of an organization. The macroenvironmental factors that are relevant to Publix and its industry includes society, demographics, economic, natural, political/legal, and technological. I.Society:
Publix serves over 1 million customers every day. This consists of individuals being influenced by others, organizations, society, and the subcultures, which they identify with. Publix is based in the United States, initially being founded in Florida. In places such as Atlanta, Florida, South Carolina and Tennessee, where Publix has presence, consist of a melting pot of cultures that have come to the “land of the free” for convenience and freedom of choice.
Due to this, there are many subcultures that have their own preferences. Some only eat Kosher, organic, or specialty products, that may only be found in certain supermarkets; alternatively, consumers may just be looking for the best deal they can get their hands on. Customers, both men and women, are becoming more knowledgeable about products and are more demanding on quality in the goods they purchase, therefore being more involved in company’s decision making process. “Nutritional conscious supermarket shoppers are checking labels as never before”(Mujtaba et al, 2012). II.Demographics:
The growth rate of the population, the age distribution, and household patterns all account for many of Publix’s’ innovative ideas. In Florida, Atlanta, South Carolina, and Tennessee, all have a strong student population, as well as dual employed family homes. In such a fast paced society, a majority of this population can be categorized as time impoverished customers.
They opt for already pre-cut food and prepared cooked dinners. Studies show that 37% of households buy prepared products at least once a week, a major increase from 27% in the previous year(Mujtaba et al, 2012).This is the reason why Publix was one the first to incorporate self-checkout within their stores to cater to this market. Similarly, Publix tried to penetrate the online market due to the trends of customer behaviors to buying goods online. “By 2007, 20 million households in the United States will purchase groceries, goods, and other household items online”(Mujtaba et al, 2012). This is an approximate expenditure of $85 million dollars for mainly good items.
The pattern of most household shows that individuals, families, and any other consumers in the supermarket industry, on average, live in a geographical area for about 10 years. This means that the average revenue spent by consumers every year have a lifetime value of ten years, and that relationship needs to be nurtured. Despite educational level, since the recession of 2008, many individuals have felt the effects not only in their bank account, but also within their daily lives.
Therefore, in general, the United States has shifted to a “bargain shopping” way of purchasing goods. However, those living in the United States also seek the full package, and want to be taken care of [customer service], at a reasonable price. Therefore, there has been a trend showing cost- conscious customers turning away from premium brands towards individual store brands. III.Economic:
Fortunately for all in the food industry, US food spending is on the rise. However, unfortunately for Publix and other supermarket retailers, they are not capturing their fare share of that market. Instead those penetrating the available market are alternatives to supermarkets, such as supercenters, warehouse clubs, and drug stores.
When regarding the food industry in the United States it is a market-based economy, where there is currently an oversupply in choices available to the consumer. It has been 5 years since the recession hit consumers, thus companies all over the United States, and the average customer now spends $50,000 dollars as a lifetime value over ten years. However, due to recent trends, the average income of online target customers would deliver a higher profit those regular shoppers. IV.Natural:
Over the last decade, there has been a lengthy move toward environmentalism. In the past, environmentalism would not have much to do with the food industry, but this view is incorrect. Generally speaking, most companies are expected to have a corporate social responsibility towards the environment, its well being, and the well being of its stakeholders.
According to the food industry, across the board, consumers believe that corporations should have their best interest in mind and provide foods that are of quality and are not detrimental to the human body. Global activists group have arisen such as Greenpeace, who have formed two other coalitions, including True Good Now and GE free Markets. V.Political/ legal:
As mentioned, as customers obtain more knowledge and want a voice ion what is in the goods that they purchase, food safety is becoming a major issue in the grocery industry. Therefore, there have been many laws and regulations that have been enforced to ensure this. For example, seven of the nations largest grocery stores have admitted to re-dating meats and fish that had already reached their original sell by date. VI.Technological:
Due to technology, 20000 new items are hitting the market every year across the board. The on-going innovations brought forth by technology are bringing changes and new procedures in all industries, not just food retailers. Therefore, the value of understanding and anticipating changes in consumer preference cannot be overestimated.
Technology is a major success factor in the food industry and plays a major role in efforts to offer more value for the customers needs. It’s a new force in the environment that should not be reckoned with. It enhances the competitive position offering better service to the time- impoverished customer, and even those customers seeking convenience. Level III: The Focal Organization
Each successive level is part of the preceding one. This is why macroenvironmental factors affect the focal organizations. The fact that Publix serves over 1 million customers in America, does not mean that all of these consumers are similar in behavior, values, or associated subcultures. America has become a melting pot of cultures with various beliefs and household patterns.
Due to the fact that these customers are becoming more demanding, it is important to have an environment that takes care of their employees, customers, suppliers and community that they serve, to bring increased value to the customer. This results in better quality and more needs that are satisfied. Their mission is to become the premier quality food retailer in the world.
Customers are delighted with their shopping experience because Publix is responsive to the wants and needs of customers, such as already prepared food, due to their Customer Intimacy Programs.
To cater to the wide range of subcultures and demographics, Publix had to employ the Deliver plus 1% philosophy. You must meet the customers shopping needs, plus exceed it by 1%. Despite the cost- conscious consumers, they get the full package they seek at Publix, that they would not find at another competitor such as Wal-Mart. Publix supermarkets are ranked third among 46 chains, nationwide.
As their prices are slightly higher than some of its competitors, Publix received neutral ratings on prices but excelled in checkout speed, service, and cleanliness. This shows that the customer perceived value was higher than the customer perceived cost of paying slightly higher prices for high quality goods. Consumers do not mind spending a little extra to shop at Publix, once their ‘full package’ service is satisfied, with clean stores staffed with trained and friendly front line employees.
Environmentally, Publix does their part. They are a caring employer, and are known for being socially responsible in the community. By adhering to the needs of consumers and abiding by safe and clean environments, this becomes a major strength of the Publix brand.
Last but not least, technology is a major force that has aided Publix get to where it is today. They were one of the first companies to have water fountains, self- service shopping, shopping carts, and computerized scanning technology. These are all innovations that add to the Publix brand, where shopping can truly be a pleasure. Self-service checkouts cater to the time- impoverished customers, and the computerized scanning technology that assists in keeping shelves stocked.
Technology has also allowed Publix to explore the online market, founding PublixDirect. Even though they did not do well, it is a start to discovering a whole new market, where opportunities for major profit exists. All Macroenvironmental factors have had a direct influence on Publix’s operations, as described above, especially technology. 2.Discuss the market factors. How do collaboration, competition, supplier, and regulators affect the performance of the focal organization? Level II: The Market
The market consists of the microenvironment. This includes all factors such as collaboration, competition, suppliers, and regulators. I.Collaboration:
At Publix, ”where shopping is a pleasure”, everything revolves around pleasing the customer. This philosophy does not change, and should never be compromised. To do this associates are encouraged to interact with their customer on a daily basis, resulting in immediate and local feedback. The advantage of this information is that Publix can better determine customers needs, wants and desires.
To allow customers to enjoy shopping at Publix’s clean facility, management believes employees should also conduct work in a place “where working is a pleasure”. Publix offers their employees world class training programs, especially for their perishables department like the deli, bakery, produce and seafood. With over 1,000 stores, Publix has retained the largest employee- owned supermarket chain in the United States because it has a loyalty and commitment to employee training.
In an industry that can be categorized with having high turnover, most of their employees have been working with them for 10 or more years. Associates are taught to understand that they are not just in the grocery business, but also in the people business. Through this world class training program, Publix has created its Publix Customer Intimacy Program that enables managers to keep their fingers on the pulse of the customer on a daily basis (Mujtaba et al, 2012).
This is not only a phrase, but has turned into a philosophy. This allows Publix to get both information from their own consumers, and also from their competitors. Another program implemented in its stores is called the Associate Voice Survey (AVS), and Quality Improvement Process (QIP). The focus is not on the customer, but instead their associates. The fact that Publix is constantly rewarded for 100 Best Companies to Work For, Employers of Older Workers, and Employers of Choice, speaks a lot to the way they treat their employees, results in quality improvements and assures that front line employees carry out Publix’s philosophy. II.Competition:
Despite the strong competition in the supermarket industry, Publix has no immediate plans to expand internationally at this time. Whether Publix is being undercut or imitated, they are not willing to concede its customers to the competition. The idea is that “only [they] can give [their] customers a reason to shop elsewhere. As long as [they] take care of [their] customers better than anyone else, [they] will defeat [their] competition”( Mujtaba et al, 2012). Wal-Mart is one of their top competitor, similarly challenging other industries across the globe.
They are number one retail grocer in the world and opened major supercenters throughout Florida, and in many other countries(Mujtaba et al, 2012). Due to economies of scale, they are able to successfully compete on price by undercutting almost all of their competitors. Therefore focus is beginning to shift to differentiation and performance improvement versus pricing, as no profits come from matching Wal-Mart prices. Within the food Industry, Safeway and Kroger Co. take second and first place as competitors, doubling and almost tripling their revenues, respectively, in 2009.
Other companies such as Lacklusters financial performance has plagued some supermarket players in recent years, and also Walgreens, a food and drug store is one of the most admired companies. Whole foods, is a close runner up, which has achieved one third of Publix’s sales, and should be considered competition.
Publix is still small relative to other giants in the food industry. However, it consistently ranks highest among its competitors. To stay among these ranks, Publix retains their customers by benchmarking by studying the best practices of their competition; find gaps between customer needs and availability, thus, trying to fill them. Despite major profit possibilities, none of the major grocery chains have mastered the online arena. III.Suppliers
As with most companies, the suppliers that distribute to Publix are not noted in the case. However, Publix prides itself on a corporate culture of an organization that creates superior value, but also high quality goods. Suppliers are likely to have a relationship with Publix, such as the one they have with their employees. Its about quality products at good prices, with a good shopping experience.
Offering “functional foods” that are fortified with popular herbs, vitamins, and healthy additives implies that Publix must have a healthy relationship with their suppliers to supply this. Also, with the rise of cost- conscious consumers, Publix offers their own brand to cater and retain them. With private label branding continuing to grow, Publix must have their own supplier, which differs from all others, which supply their individual local brand. Private label branding grew 10.2% from 2007, and accounts for 25%( Mujtaba et al, 2012). 64% of shoppers said they often or always buy a store brand versus a national brand (Mujtaba et al, 2012), which has major implications for supermarkets and their own suppliers. IV.Regulators
Mentioned previously, food safety has become a major concern. Therefore, in the food industry, leaders are paying more attention to ensure that the food products are in a safe and clean environment. They are required to constantly look at all risks that are associated with providing good quality as well as good safety, while attempting to get rid of them. Level III- Focal organization:
Embedded in Publix’s business culture is that everything revolves around the customer, and servicing them with a smile. Their value proposition for customers clearly states that its customers want more than just groceries. Customers must be satisfied, delighted, and excited every time they visit or shop at your store. Some try to copy Wal-Marts style of providing low cost goods to customers, and almost guarantee a re-purchase. However, studies show that this is not an easy task, and is not likely favorable to those retailers. Hence the reason Publix strives for differentiation.
How do they maintain this competitive advantage whole competing with supermarket giants? Through the different programs at Publix, such as the Customer Intimacy Program and the AVS, employers are able to provide customers with value. They have created cross-functional and ad hoc teams to discuss opportunities for improvement that prove the fact that “two heads are better than one”. That is a competitive advantage in itself, being equipped with front line employees committed to making the arena a better place for the company’s consumers.
They are committed to satisfying the needs of its customers better than their competition. This is why they passionately focus on customer service, because only they can give their customers a reason to leave, and attracting new customers is about five to six times more costly than retaining the ones they.
Service is what Publix built its reputation on. As a result, Publix is ranked third among 46 chains, nationwide. Collaboration and Competition are the major factors regarding the microenvironment that affect their focal organization.