CORPORATE STRATEGY
John Gregg, the father of the present Chairman, founded Greggs plc in the 1930's as a family bakery business in Tyneside. Ian Gregg gave up his plans for a legal career in 1964, when his father suddenly died and took over the business. During that time their business consisted of only one shop with a small bakery at the back. Under Ian Greggs' leadership, the chain expanded in the North East that established the principle of centralising the services from a single store. With this strategy they achieved efficiency, which could be, passed on to the consumer in value-for-money pricing.
Business expansion out of its North East heartland by acquiring and developing established regional bakery chains based in Glasgow (1972), Leeds (1974) and Manchester Birmingham (1984), South Wales (1985) and North London (1986). In the middle of 1994, it already has 502 shops in seven regional divisions. During that time, they were able to acquire Allied Bakeries Limited, which added 424 shops and a new brand – Bakers Oven.
They decided to develop and operate Bakers Oven as a separate premium brand. The format of Bakers Oven complemented that of Greggs, since many of the shops had its own bakeries that enabled it to operate efficiently in areas with lower population density, where Greggs' large central bakeries and satellite shops were inappropriate. Also, Bakers Oven has seated catering facilities, which Greggs shops did not offer. Other Bakers Oven shops, which seemed unsuitable for its market positioning, were converted to the Greggs brand. Over 90 shops in the west and south London
The other nine of its division were formed by the acquisition of Birketts in 1996 (a family company in Lake District ). They replaced in 1999 the former regional trading names from the Greggs Yorkshire and Midlands divisions to Greggs and Bakers Oven brands. They also improved their shop designs, Greggs new format for improved access to takeaway food and speedier service, and Bakers Oven enhancement of seated catering concept. They also made two major investments, one in Balliol Park , Newcastle upon Tyne and the Group Technical Centre. Today, they are planning on further expansion to the parts of the country where Greggs and Bakers Oven brands are currently unrepresented.
The Group's mission is to be Europe 's finest bakery-related retailer, achieving their ambitious growth targets by attaining world-class standards in everything they do. Their purpose is the growth and development of a thriving business for the benefit and enjoyment of employees, customers and shareholders alike. Their values – Greggs is a customer-focused business, seeking to provide excellent products and services that deliver enjoyment and value-for-money. They are committed to people development, within a considerate culture that combines autonomy and accountability, and maintains a strong focus on profitability. In all their activities, they aim to achieve excellence through continuous improvement.
The founder John Gregg first started the bakery to be a family business. When he died and his son Ian took over the shop, there were no plans for expansion, since the company started in the 1930s and yet he did not expand the business. But through his son expansion materialised. Since the time that John Gregg died, there have been numerous expansion projects, which brought the company to its current state. The mission of the company to be the finest in Europe will not materialise without its current chairman, Ian Gregg. Yes, the company may expand even if the chairman is not the son of the founder, but the path may be questionable, since Ian Gregg has brought in most of its current assets. And also, the next chairman may not have the same visions for the company, which would make a big difference on the path that the company will take on.
The major stakeholders of the company are: the government, its employees and its consumers. The most influential among the three are the consumers. This is because it is the consumers that made the business what it is today. They make the business successful and they are the ones that spend their money on the products that the company offers. It is their money that gives the business its capital and reason for growth. The changing need of consumers makes the company strive for better quality and taste. The consumers also dictates on what changes are needed to be done to improve how the company provides them service and what presentations would appeal to them to make them buy a certain product.
The employees are also major stakeholders of the company. The employees provide the services that the owners of the company could no longer provide. They face the consumers and in turn they are being paid for what they had provided. Without these employees, the company will have no room for expansion. This is because the owners cannot possibly run more than one thousand shops with them being the service providers. Therefore, the company has to please or at least compromise with its employees, so that in return the employees will give the company's consumers the service that want to be provided with.
The government being a stakeholder depends on the taxes that companies such as Greggs and Bakers Oven provide to have money to spend on its projects to improve the welfare of its people. Without companies to pay their taxes, the government will not be able to provide infrastructure that can help in the progress of the country. Also, without these companies the government will have no employment opportunities to offer its people.
Being the market leader, the company has to be a role model for other small companies that wishes to be like them. And they are fulfilling that by continuously finding ways of improving what they are presently offering the market. It is the responsibility of the company to help improve the welfare of the country it is doing business in. An example of this is the Children's Cancer Run. It is a charity project founded by Colin Gregg, a member of the Greggs bakery family. The charity project has been running for 21 years and is aimed in helping provide for the medical needs that children with cancer needs. The money raised from the runs is donated to Children Cancer Charities in the areas where the run has taken place. At first, it was only done in Newcastle
Every business is a risky one. The capitalist can never guess what the consumers will think about their business. Every aspect should be looked into before letting out money for a business that has no guarantee. For the Greggs and Bakers Oven brand the PESTEL Analysis and Porters 5 force model has been done. This was done to evaluate what is the company's effect on its environment.
PESTEL ANALYSIS
Political - Changes in government and law
- Increased legislation on food hygiene
- EU laws, regulations and political changes
- Increased environmental pressure
- Major events (war and terrorism)
Economic - Economic booms and slumps
- High interest rates and inflation
- Disposable incomes and unemployment levels
- Weak consumer expenditure
Social-cultural - Changing consumer needs and expectations
- Increasing time cautious society
- Communication barriers between staff and customers
- Social responsibility
- Increase in health and hygiene
Technological - (EPOS) Electronic Point of Sale
- Advanced cooking and catering equipment
- More complex market research tools
- Marketing (website and video displays)
- Wider circle and future developments
Environmental - High waste disposable
- Pollution (mainly rubbish)
- Building controls
- Environmentally friendly ingredients and products
- Recycling facilities
Legal - Health and safety legislation
- Employment law (minimum wage and part time workers rights)
- Food hygiene and product safety
- Consumer rights
- Building controls
PORTER FIVE FORCES
Potential Entrants Bargaining Power of Suppliers
- initial cost of capital - large number of suppliers
- product differentiation - importance of suppliers
- economics of sale - very easy to switch
Competitive Rivalry The Power of Buyers
- diversification - undifferentiated products
- similar companies - unspecified target group
- non-perishable products - money saving offers
Threats of Substitutes
- canteens
- fast food companies
- supermarkets
The SWOT Analysis of the company is made to show the companies potential against new entrants and its advantages over them.
SWOT ANALYSIS
Strength
- established business of over 30 years
- strong brand association
- nationwide coverage
- entering European market
- unique products and ingredients
- growing profit, earning and dividend growth
- sound reputation of quality products
- featured in the Times 100 Best Companies to work for in 2003
- ability to expand to supply base to meet sales
- good product and market knowledge
- strong market research team.
Weakness
- staff retention
- seasonal downturns (summer)
- high product wastage
- poor peak time control
- decline in traditional staples such as bread and rolls
- low skilled and trained staff
- lack of in-house design and development
- weak information transfer between front line staff and management
- inadequate training facilities for staff
- late delivery / arrival times
- lack of store managers
- can be seen as minimal rewarding job
Opportunities
- entry into European market (Belgium
- diversification (selling brand foods in supermarkets)
- plans to add 45 more shops in UK
- plans to sell ice cream products
- increasing adoption of market research
- future outlook to include seating
- possibility to extend to pre-order foods
- plans for EPOS (electronic point of sale)
- new refurbishment plans for 2004
Threats
- competitors
- hot weather
- increasing health cautious society
- entry of supermarkets selling ready made sandwiches and similar products
- increasing cost of ingredients
- bad media coverage of food industry
- increased concern for hygiene
- takeaway ready made foods (now it is possible to eat spaghetti Bolognese in less than 10 minutes)
- increased government regulations in relation to food hygiene and contents of ingredients
The objectives that Greggs plc are implementing are:
Objective 1: To remain UK
Objective 2: To strengthen and enhance the profitability of Greggs plc through business activities nationwide.
Objective 3: To build on Greggs strengths and reputation of bringing a new generation of unique bakery products.
Objective 4: To be Europe 's finest bakery related retailer.
Building on these objectives, the company applies the following strategies to achieve its objectives:
Enjoyable Experience - To deliver customer satisfaction by offering great tasting food at unbeatable value and to the highest standards of food safety.
Business Excellence - For staff to seek continuous improvement in their areas of responsibility enabling them to make a real and lasting contribution to the objectives of the company.
Challenging Targets - To strive to achieve a turnover of £1 billion by 2010 through continued core growth and the acquisition of new units, taking to over 1,700 shops.
Caring for the community - To place emphasis on social responsibility to encourage an even greater involvement in local charity activities and social projects.
Their current strategies if implemented with caution can lead them to their objectives. For example, their target of achieving a turnover of £1 billion by 2010 can lead them to achieve their second objective, which is to strengthen and enhance the profitability of Greggs through nationwide business activities. An example of their strategy that will have subtle effect on their objectives is giving emphasis on social responsibility. This will have subtle effect because the consumers will not be directly affected by the company's work for charity, but the consumers will remember the good deeds that the company is showing. Not that it involves it self in charity to gain anything from their consumers but that could not be helped especially since even without the charity, Greggs plc still has that part in their market's heart.
As an alternative, the following strategic options are being suggested: for the first objective it is suggested that the company opt for product development. For the second objective, which is to enhance profitability of the company, it is suggested that the company to an extensive market penetration. For the third and fourth objectives, differentiation and market development are what this paper would like to suggest as an alternative to what the company is currently implementing.
It is suggested that the company opt for product development. By doing so, they will be able to cater to all sorts of taste that people may be looking for in other products and this way they will also be able to cater all generations. To enhance profitability of the company, it is suggested that the company do an extensive market penetration. It was mentioned earlier that the company is planning to open more shops and place them in areas that has no company representation. The problem with this is that most of the time, they acquire their representation by acquisition of existing business establishments. If the locales of the area are conservative, it is likely that they would open up to the new owners longer than what the company may be expecting.
Differentiation and market development are what this paper would like to suggest as an alternative to what the company is currently implementing that relates to the third and fourth objective. In order for the company to be the finest bakery related retailer in Europe , they have to build up their reputation first. Differentiation will offer their customers variations in what they will purchase next time. Also, they will keep customers a little bit excited as to what the company may offer them next. Their market development strategy should involve updating their processes and incorporating in it new technological advanced that they think would be suitable for their growing market. This does not suggest that they fully-automate their processes, just making it easier for employees to perform their work but not sacrificing the quality of products that the company id known for.
These strategies are suitable and can be easily accepted, but only to a certain degree. An example would be as what was stated earlier that market penetration through acquisition may only work for certain areas because not all areas are as liberal as the others. For the market development, it is very much feasible that the company incorporate current technological advancements to aid in the processing of their products as this would speed up their production and increase their output. The acceptability and suitability of the suggested strategic options rely mostly on how the company will execute its plans. They should choose carefully where, when and how they will execute their plans for each region to assure them of its success.
There may experience difficulties in implementing the suggestion for market development and differentiation. In differentiation, the company may encounter problems in making their customers try their new products. This is because most people does not like to have that much variety in what they are used to have. For this specific problem they should try marketing their new products in new ways that will encourage consumers to try what they never had before. In market development, if new technologies are going to replace people, then they may encounter problems with their employees. Also the skill needed to operate new machines may need special trainings for their employees.
The writer of this paper would do what it suggested as solutions to problems that may be encountered in using what the writer suggested as an alternative strategic option. In facing the problem that relates to technological advancement. The writer will provide trainings to the employees of the company; it will be treated as skill development in the part of the employees and a way to provide better products in the part of the company. For the problem in market penetration, the writer thinks that it would be better if acquisition will only be done in areas that want change and variety in their community. For areas that this cannot be applied to, it would be better if the company will open it's own shop or that the company's products be made available through locale bakeshops through concessions.
REFERENCES:
Johnson, G. and Scholes, K. (2002). Exploring Corporate Strategy. United Kingdom
Thompson, J. (1997). Strategic Management. United Kingdom
---. (2003). Greggs annual report 2003 [online]. Available from: http://www.greggs.co.uk. [Accessed 13th January 2003].
---. (2003). Greggs interim statement 2003-10-22 [online]. Available from: http://www.greggs.co.uk. [Accessed 13th January 2003].
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