Developing an Innovation Strategy for a Healthy Lifestyle at the Co-operative Group

Critical Analysis of the Current Context at the Co-operative Food

The food market, unlike many other forms of markets requires a sensitive approach to provide its services to the various demands of a cynical and critical market. Cynical approach adopted by the market extends beyond issues such as health and preference, which also raise different considerations on the type of service that a market player provides. It therefore implies that the delivery of food products in the market equally follows the opinion of the customers and critics to remain sustainable. In terms of the kind of competition that the company experiences and expects to face from the market, it is imperative that a strategic approach to resolve the uncertain market share is developed for purposes of sustenance in the short and long terms.

Critical Analysis

In view of the major players that CF has, different approaches may prove effective to deal with specific competitive threats posed by each of the competing sides. The identification of the major competitive threats is perhaps important in the enumeration and quantification of the competitive input required at CF. some of the main market players likely to pose competitive threats to CF include ASDA, TESCO, Morrisons, Waitrose and Sainsbury’s. ASDA presents a particular market competition threat by its popular consumer involvement strategy referred to as ‘Chosen by You’ category of products which enter on the company’s menu through recommendation by the customers (Cooperative Food 6).

With respect to capturing customer demands, the magnitude of this competitive threat illustrates the success levels likely to be attained by CF if a more customer caring and customer response approach formulate marketing concepts adopted. As an illustration of the ASDA wrought competition expected in 2012, over 1,000 such customer requested additions will enter into the competitive aspect. CF must therefore adopt more customer consultative platforms to capture customer care for retention purposes, which can also translate into an aggressive new market penetration strategy. Tesco as a huge food market player has accurate brand association with the market and intends to launch a re-launch of its traditional brands represented by over 8,000 units on its product portfolio. Tesco’s excellence in terms of continued development in food products witnessed by the brand labels applied in its market presence resonates well with the requirement of a competitive market player (Cooperative Food 6).

As such, CF must adopt ways of dealing with a specific market presence adopting clear branding for a competitive experience. In terms of the brand loyalty competition presented by Morrisons, CF faces a British roots presentation contest, in order to win the national market for upholding British cultural values and pride in business. Waitrose and Sainsbury’s retailing prowess with competitively branded labels in its chain distribution platform presents a major threat that must be overcome through a clearly defined competitive strategy. The market specificity in grocery business cuts across a risky food market segment that influences demand for products by CF in its target market. Perhaps a stronger brand presence would coincide with the market demands reminiscent of the competitive environment created by Waitrose.

In terms of the CF’s market segmentation and differentiation approach, a commendable analysis facilitated by the product tier allocated to the six units enables target market identification (Cooperative Food 8). The importance of a market differentiation concept in offering the appropriate market driven services is captured in the different shopper profiles. Analyzing the various shopper profiles such as among housewives age-groups, classes, family and non-family as well as plain age-groups is an interesting move in selection of target groups for competitive and quality management strategy formulation. However, a clumsy profile may be overcrowded in certain instances, generating a very broad scope that the company does not comprehensively cover. A more specific scope to facilitate narrowing down on the marketing focus would be important in the actual implementation of the shopping profile-driven-operations approach. However, the information derived from a long list of analyses may facilitate in the definition of a more representative NPD functionality.

Co-operative Food has three quality tiers, that is, good, better, and best. Currently, the company has approximately 3,000 lines. Simply Value (Good) has 110 lines which constitute 2 percent of own brand sales. Truly Irresistible (Best) has 400 lines which entail 9 percent of own brand sales. The standard tiers include Eat in, Organic, Wholefoods, Free From, FT, and Healthy Choices sub brands. The target for the company for each year is 300 lines. It has refreshed other 1000 lines to keep the range relevant and modern. The company manages NPD (New Product Development) of an average of 1,500 lines each year. From the year 2005, the brand performance of the company has been growing. Brand is an important element that has defined the success of Co-operative Food (Co-operative Food 2).

Other than the brand, differentiating of its offers remains an important part for the company’s proposition (product and customer). The company physically represents its values and brands into its consumer’s homes. It communicates for its ethical agenda and support for British. Co-operative Food (CF) provides its customers with value for money offer and demonstrates its food credentials by a quality range (Co-operative Food 4). From these statements, it is evident that the brand image of CF is a crucial element in its operations. The company has adopted strategies to sell its brands and values to the consumers. For instance, the company physically represents these elements into its consumer’s homes. Though this strategy has worked, it can be enhance it by a adopting a strategy that makes use of technology. For example, the company can aggressively use the social media and mass media to reach both its existing and new customers.

It is important to note that the effects of the economic meltdown in the United Kingdom have changed the pattern used by the consumers to purchase products and services. Family life still exists, customers still spend and the trend has been to seek balance between indulgences and savings. Coping methods for the consumers has been to buy cheaper products, and for CF, the standard tier is the primary own brand. The driving force for market growth for CF is the standard tier, thus, there has been a decrease for co-operative (Co-operative Food 5).

The Healthy Next Generation Project run by CF is leading the way in its green dot campaign. However, they have received stiff competition from its competitors. Consumers do not perceive CF as a Healthy Retailer. Although CF states its Healthier Choice range is restricted and some products need reviewing, it does not state how these products will be reviewed. The company needs to state clearly if the products will be from artificial or organic sources. Going green indicates adopting strategies that go beyond, for instance, reducing the levels of calories in a product. The focus of the company in this project is based on the Public Health Responsibility Deal (Co-operative Food 12).

Healthy food proposition is gaining popularity in the market. Recent trend has been a shift from diet-related market to a market that is related to an all-round healthy lifestyle. This has given retailers and brands the opportunity to add value and differentiate. The emphasis on healthy products has seen the launch of major own brands such as Waitrose, Morrisons, and M&S (Co-operative Food 13). Dieting is still a big market in the United Kingdom. Most of the products generated by CF and its competitors are diet-related and therefore, it is important for CF to take advantage of new niche such as providing products that are related to an all-round healthy lifestyle (there are only five companies that produce these products) (Co-operative Food 15). There are three holistic approaches that CF intends to use so as the consumers attain a healthy and balanced diet; they include Healthy Choice (HC), HC Reduced, and Naturally Healthy Lifestyle (Co-operative Food 16). The approaches are very important since they will assist CF in reaching its target market. However, more clarity is needed as to what these products will contain.

Introduction to the Model

The proposed innovation strategy for adoption by CF captures the blue ocean innovation concept as well as low cost strategy with regard to operations ambitions. In the blue ocean innovation approach proposed by W. Chan Kim and Renee Mauborgne, competition as a market force threatening smooth operations, CF will find it advisable to explore new product and market profiles without the traditional limitations of competition (Kim and Mauborgne 3). Overcoming the completion limitation, referred to as red ocean, will facilitate CF accessing unlimited opportunities in new markets. Coupling this approach to the low cost leadership strategy, the blue ocean innovation will ensure that the operations at CF remain sustainable, particularly in the financial constrained operations space experienced today in Europe. Four main areas of the innovative strategy will be encompassed in the model as enumerated below.

New Product Development

Low-cost leadership has created ways for success in most companies. CF can adopt this strategy to gain competitive advantage over its competitors, and enhance its brand image and product development. The strategy entails using services or products that are similar to those offered by its competitors. In this case, CF sells food products similar to those sold by TESCO, ASDA, Waitrose, Sainsbury’s, and Morrisons. Products developed by CF and its competitors are found everywhere, in shops, supermarkets, media, big food brands and even in restaurants. However, to gain competitive advantage, CF must adopt a strategy to capture the entire market segment. The success of low-cost leadership is based on the ability of the company to deliver the consumer’s anticipated level of value at a cost that will ensure a sufficient level of profitability (Harvard Business School Press 31).

The new trend in the market is to develop products that coincide with healthy lifestyles. CF had attempted to venture into this market but was afraid that its consumers will perceive them as not ‘Healthy Retailers.’ The company can still develop those products based on the low-cost leadership strategy. The strategy will help them gain a competitive advantage over its competitors and also give them an opportunity to venture into other new niches. Right competitors can yield various strategic benefits that can increase competitive advantage (Porter 202). It is important that CF widens its perspectives as it strategizes to develop new products. Golsorkhi, Rouleau, and Vaara (147) states that strategizing goes beyond companies’ strategic plans, goals, or even intentions. Strategy is best defined as something done or the practice of individuals in an organization, taken as agents. It considers feelings, judgments, thoughts, and conduct.

The low-cost leadership model first adopted Harborne Stuart and Adam Brandenburger explains how the strategy works as demonstrated in Figure 1. below. The range of pricing in which each company must operate is represented by the vertical distance between the consumer’s willingness to pay (top line) and the cost of offering the product itself (bottom line). The vertical distance also corresponds to the value added by the firm; this is based on the consumer’s perception. For undifferentiated or commodity-like products, the distance between these lines is thin. The top line (what the consumers are willing to pay) is generally in such a case (Harvard Business School Press 31). To gain greater profitability, the retailer must shove the cost of offering line lower. The company can accomplish this through pressuring suppliers or contractors for low prices, operational efficiency among other means (Harvard Business School 32). CF can achieve this by improving operations within the company.

Expected Value

571500309245Added value as perceived by customers

Added value as perceived by customers

Customer’s willingness to pay

Range of pricing opportunities

Cost of providing the good or service

Figure 1: Low-cost leadership strategy (Harvard Business School Press 31)

Co-operative Food can also consider not competing in the food market with its rivals as the blue ocean strategy indicates. In this strategy, blue oceans represent all the industries that do not exist today. It is defined by demand creation, untapped market space, and the chance for highly profitable development. The blue ocean is the unknown market space. In the red oceans, the boundaries of the industry are described and accepted, and the competitive rules are well known. In this realm, the companies attempt to outdo their rivals to get a greater share of present demands. This leads to overcrowding of the market and prospects for growth and prospects are reduced (Kim and Mauborgne 4). To venture into the blue ocean will require a considerable amount of time as CF looks into the untapped market space. This strategy can work very well for CF because it will spend less time competing with its rivals and use the saved time for new product development.

Branding

Co-operative Food considers branding as one of the key elements for its success in the food retail industry. However, the strategies it has been using cannot give them the competitive advantage over its competitors. Loss of consumers can dampen the brand image of the company. The low-cost leadership strategy can help CF enhance its brand image. This can be achieved through offering quality products and services at a low cost while at the same time maintaining the profitability of the company (Harvard Business School 31). The blue ocean innovation strategy can also be employed in this context. Co-operative Food needs to create a strong and unique brand name that will capture the quality of the product, the expectations of various market segments, and the company’s values. Creation of such a brand name will make CF unique from its competitors.

Competition

Whereas CF identifies the above five highlighted competitors as its traditional rivals in the food industry, the blue ocean innovation approach proposes exit in the market space in which these player participate in. practically, it would be difficult to rapidly and entirely exit the traditional market in which CF has orientated itself, which leaves the option of a gradual exit as an advisable option. Sudden leave from the market would lead to a huge risk that may prove unsustainable, since the uniqueness of the proposed market direction offers little information for preparedness purposes. CF must therefore venture into a unique form of food market, with openness to other products in the health market. Kim and Mauborgne (4), reckon that concentrating in a single market leaves the players exposed to reducing earnings and increasing costs of operations as players try to outcompete each other. The model proposes that the new product development functionality of the research and development department at CF devotes considerable attention to complete relocation to a unique market with new exciting products. This will amount to the creation of blue ocean opportunities where no competition limitations influence productivity.

Due to the management of expected risks as well as assurance of sustainability of the current operations, CF will implement this model function in specific stages touching on the various product portfolios. Cost benefit analyses of the new ventures will formulate the implementation appraisal since low cost leadership strategy of remaining competitive in the interim period will be the key to success in the exploitation of the blue ocean opportunity. The dynamics of competition encompassed in the Porter’s model will be employed in determining the long-term characterization of the newly acquired markets under blue ocean innovation (Kim and Mauborgne 219).

Marketing and Market Segmentation

Innovation strategy proposed with regard to the functions of marketing, differentiation and segmentation employs specified market target groups identification for maximization of productivity and profitability. Using the analytical shoppers profile generate at CF as discussed above, it will be important that the reliance thereon generates the appropriate marketing optimization (Chesbrough 186). As an illustration, the non-family market tier composed over 75 percent of the shoppers’ profile, indicating a momentous opportunity in exploiting its loyalty. However, using the family brand loyalty trajectories is important such as those enjoyed by McDonalds to an extent that profiling of the parent-child consumption patterns informs its strategy.

Paying extra attention to the traditional markets from where undisputed strength originates will facilitate a successful transition into the new blue ocean opportunity. Innovation in exploiting the untapped potential of the relatively weaker market segments will also formulate an important concept in the model. As illustrated in the CF’s brand enhancement projections as well as NPD concepts for 2013, market presence through market motivated brand and product portfolios must be approached from an informed perspective (Bowman 59). The importance of a highly segmented and differentiated market in terms of shoppers profiling can therefore not be underestimated.

With a market guided by product development projects, it is important for CF to keep up with the pace, while embracing innovative tactics to remain competitive and productive. Product development guided by a clear market segmentation will promote the overall objectives of venturing into new frontiers encountered in the blue ocean opportunity. For a successful marketing functionality backed by a constantly updated market analysis, CF will require to harmonize its research and development functions with market expectations (Wheatley 76). Continuous improvement must sustain the new venture for less risky encounters in the market.

Works Cited

Bowman, Cliff. Strategy in practice, Harlow Essex, UK: 1998. Print

Chesbrough, Wiliam. Open innovation: The new imperative for creating and profiting from technology, Boston, MA: Harvard Business School Publishing, 2006. Print

Cooperative Food. “Own Brand Overview,” n.d., Cooperative Food, PPT

Golsorkhi, D., Rouleau, L. & Vaara, E. Cambridge Handbook of Strategy As Practice. Cambridge, UK: Cambridge University Press, 2010. Print.

Harvard Business School Press. Strategy: Create And Implement The Best Strategy For Your Business. Watertown, MA: Harvard Business Press, 2005. Print.

Kim, W. Chan. & Mauborgne, Renee. Blue ocean strategy: How to create uncontested market space and make the competition irrelevant, Boston, MA: Harvard Business School Publishing, 2005. Print

Porter, Michael E. Competitive Advantage: Creating And Sustaining Superior Performance. New York, NY: Simon and Shuster, 1998. Print.

Wheatley, J. Margaret. Leadership and the new science: Discovering in a chaotic world, San Francisco, CA: Barrett-Koehler Publishers, Inc., 2006. Print