Kroger: Maintaining Competitive Edge in an Ever-Shifting Landscape

Table of Contents
EXECUTIVE SUMMARY.................................................................................................................................4
STRATEGIC ISSUE.........................................................................................................................................4
KROGER OVERVIEW.....................................................................................................................................5
 INTERNAL ENVIRONMENT.......................................................................................................................5
Resources............................................................................................................................................5
Physical assets.................................................................................................................................5
Intangible Assets..............................................................................................................................5
Capabilities..........................................................................................................................................6
Core Competencies..............................................................................................................................6
EXTERNAL ENVIRONMENT.......................................................................................................................7
Competitors.........................................................................................................................................7
Porter's 5 Forces..................................................................................................................................8
Environmental Analysis.....................................................................................................................10
MARKET CONDITIONS AND TRENDS..........................................................................................................11
CURRENT STRATEGIC PLAN....................................................................................................................12
STATE OF CURRENT STRATEGY..............................................................................................................12
RECOMMENDATIONS TO ADDRESS THE ISSUE..........................................................................................12
IMPROVE TIME AND PRODUCT AVAILABILITY FOR DELIVERY................................................................12
EXPANDING INTO GLOBAL MARKETS.....................................................................................................14
CONTINUE THE FOCUS ON MARKET ANALYTICS....................................................................................15
CONCLUSION.............................................................................................................................................18
REFERENCES..............................................................................................................................................19
KROGER

EXECUTIVE SUMMARY

1-overview of Kroger as a company

Kroger is currently the number two ranked player in the grocery industry, only behind Walmart in
market share. They are currently pursuing a merger with Albertson’s which would essentially double
their holdings of stores, pharmacies etc. and further solidify their position in this market. Despite their
strong position, grocers generally operate on small profit margins and certain economic and demand
factors can quickly shift the playing field.

2- current strategy and how that is going, strengths and weaknesses

Currently Kroger has a strong strategy aligned with reported trends in the industry. Their strategic pillars
include a focus on the freshest foods, personalizing advertisement and shopping experience to each
customer, store generic brands, and digital shopping/ordering for pick up or delivery. Additionally, their
move to merge with Albertson’s is a strong strategic move to expand market share and compete with
others in the industry to offer the lowest prices and most convenience.

3- what we recommend they should do

With our first recommendation, we suggest that Kroger improve time and product availability for
delivery. Electronic ordering and grocery delivery are identified by McKinsey as demand trends in the
grocery industry and Kroger promotes these as two strategic areas of their strength. Kroger ‘Now
Delivery’ features delivery in under 30 mins, much quicker than Walmart delivery. Our 2 nd
recommendation is that Kroger goes global. Currently Kroger is only based in the United States.
International business has become a big part of the world's overall economic activity. They need to jump
on board, Walmart is an international company, and this is why they're #1. Kroger joining this wave will
allow them to stay 2 steps ahead of their competitors and possibly take that #1 spot. Our 3 rd and main
recommendation is that Kroger continues to focus on Market Analytics. Targeted advertising data and
analytics have become increasingly important tools for retailers in recent years. By analyzing customer
data and purchase history, retailers can identify patterns and trends that provide valuable insights into
customer behavior, preferences, and needs. These insights can be used to make informed decisions
about inventory management, to improve profitability and customer satisfaction.

STRATEGIC ISSUE
How does Kroger maintain its competitive advantage? With there being an extensive list of
competitors and the offering of online grocery shopping (e-commerce), will Kroger be able to
remain a top market leader?
In all markets there is a thing called a competitor environment and within this environment we
have a general environment. The general environment is then made up of seven environmental
segments. These seven affect all industries and companies competing in them. It is then up to
the companies to determine the strategic relevance of environmental changes and trends.
KROGER OVERVIEW
INTERNAL ENVIRONMENT
Resources
Physical assets
Kroger has a rich array of physical assets, from their 2,800 grocery stores (History - the Kroger Co., 2022)
and the to the manufacturing plants that produce the food, to all the auxiliary services that have been
added onto grocery stores over time, including pharmacies, clinics, and gas stations. Kroger owns the
distribution centers that store and distribute food in a hub and spoke model.

Kroger, the 2nd largest grocery store in the US, has proposed an acquisition of Albertsons (the 4 th largest
grocery store in the US) for $34.1 billion which would increase Kroger’s share of total dollars spent from
9.9% to almost 16%, closing the gap between Kroger and the number one grocer Walmart at 20.9% of
total dollar share. (Repko, 2022) Both Albertsons and Kroger resources are considered, although the
merger has not yet been approved, as it is pending an anti-trust review from the FTC. (Creswell, 2023)

Property
The resources of Kroger and Albertsons are extensive and cover a wide range of physical assets.
Combined they have a total of 5,000 stores across 36 states, including pharmacies, gas stations, and
convenience stores. Kroger alone has approximately 2,800 stores, and after merging with Albertsons,
will gain an additional 2,200 stores. (Kroger and Albertsons, 2022) However, as part of the merger
agreement, they are planning to sell 100-375 stores to SpinCo, a subsidiary of Albertsons.
(Kroger/Albertsons Resources, 2022)

Fulfillment Centers
Kroger currently owns 38 fulfillment centers (Distribution, 2021) and will add on an additional 24
from the Albertsons merger.

Autonomous micro-fulfillment centers allow for better tracking of inventory (as it’s scanned by
robots), less labor, and more efficient operations. These centers act as the last stop for grocery
delivery which inventory accuracy means that consumers grocery delivery orders will also be
improved. Kroger has partnered with Ocado to provide the technological resources to power these
centers acting as the last stop for grocery delivery and has 7 operational, 10 more announced and
planned. (Redman, 2023) This allows Kroger to enter new markets without opening any stores like
Oklahoma City only having a CFC and food ships 200miles from Dallas, the range of their refrigerated
vans. (Carlisle, 2023) After the merger, Kroger will gain seven micro-fulfillment centers from
Albertsons. (Kroger/Albertsons Resources, 2022)

Pharmacies
Kroger Health has 2,200 pharmacies and 225 clinics. (About Kroger Health, 2022)

Equipment
Kroger also has 250 refrigerated delivery vans in Monroe, their main Cincinnati fulfillment center, and
2,800 refrigeration delivery vans, which are essential resources for their delivery services. (Coolidge,
2021)
 Financial Resources
One of the significant resources that Kroger and Albertsons possess is their financial resources.
Albertsons has cash reserves of $2.902B and equity of $2.923B for 2022. (Albertsons Company
Information, 2022) On the other hand, for the 3rd quarter of 2022, Kroger has cash reserves of
$2.903B and equity of $9.429B, with full 2022 results available in March. (Kroger Reports Third
Quarter 2022, 2022) These financial resources allow them to borrow money and generate equity to
finance their operations and make acquisitions. Last fiscal year Kroger had a 1.19% net profit margin,
which is solid for the grocery sector (typically expecting between 1-3 %). These slim margins are
made up for by the massive quantities sold.

Human Resources
710,000 people employed from Kroger and Albertsons (Kroger/Albertsons Resources, 2022)

Intangible Assets
Brands
Kroger consists of 28 different grocery chains (History - the Kroger Co., 2022) each with different
consumer loyalty in an area but can consolidate purchasing power as one. Albertsons also have
intangible assets, such as their brand equity and loyalty programs. Both companies have a perception
of quality products, with Albertsons' store brand seeing a penetration rise to 25%, while Kroger's is at
a similar level of 26%. (History - the Kroger Co., 2022)

Loyalty Programs
Both companies also have loyalty programs that offer perks like fuel miles and free delivery, such as
Kroger's Boost subscription service, which allows free delivery on any orders, and Albertsons' Fresh
Pass.

Technology
The companies' technology capabilities are also a crucial resource, with targeted ads that are
personalized based on their purchase history and other factors. They also have e-commerce
platforms, such as Nutricost.com and Home Chef.

Kroger Personal Finance

Kroger personal finance has a joint venture with US Bank to launch a World Elite Mastercard with
cashback and rewards. (U.S. Bank and Kroger Co., 2021)

Organizational Capital
The companies have also partnered with Google Cloud to enhance their productivity and supply chain
network planning and coordinating capabilities. (History - the Kroger Co., 2022)

Capabilities
Kroger has a strong supply chain, lower costs and higher quality of goods sold. Their distribution centers
have a hub and spoke model have fulfillment centers that serve several stores in key regions, but have
autonomous hubs that are close to consumers to ensure quick grocery deliver. Kroger’s Delivery Now
enables quick delivery, in as little as 30mins compared to Walmart’s same day delivery.

Large cash and equity allow acquisitions of other firms which enables Kroger to gain market share in
regions, enabling them to control pricing. Kroger has a total market share per dollar spent of 9.9% in
2022. (Repko, 2022)
Kroger has a strong in-store brands with in-house manufacturing and dairy production enabling reduced
transportation to distribution centers. The in-store brands have three levels of brands: value tier,
premium tier, and organic/natural which appeal to a wide variety of consumers. Their in-store brands,
also gives them leverage with suppliers for pricing.

Furthermore, Kroger has advanced capabilities in Marketing. In 2015, Kroger acquired dunnhumbyUSA
to make use of their digital analytics assets and set-up 84.51°. (Springer, 2015) They analyze 60 million
households’ grocery transactions, up to 3 billion online grocery carts, and have 35 petabytes worth of
consumer data. (Behavioral Analytics, 84.51°, nd.) Through this, 96% of transactions are linked to a
specific household. (Kroger/Albertsons Resources, 2022)

Core Competencies

Kroger and Albertsons' core competencies include personalized and targeted coupons, quick delivery of
fresh foods, and a strong portfolio of in-house brands. They have a hub and spoke model, which allows
them to have fulfillment centers that serve several stores but also have hubs that are close to
consumers, enabling quick delivery of products. Investment in Ocado-sheds increase the efficiency of
distribution centers and allow Kroger to penetrate into markets as far as 200 miles away.

Kroger in-house brands have 26% penetration and have a tier that appeals to almost any consumer.
(Kroger/Albertsons Resources, 2022)They also have marketing insights and strategies that allow
them to optimize inventory and offer favorable pricing for goods. Personalized ads increase the
relationship between Kroger and the consumer, offering coupons that are relevant to them based on
their shopping habits.
EXTERNAL ENVIRONMENT
The current grocery market size is approximately $818.6 billion for 2023 (Diment, 2022). This is
a massive industry because every consumer is a customer. Everyone must eat, and grocers supply a
good bulk of this food to consumers. However, it can be a challenge to appeal to such a wide
demographic and to retain customer loyalty when profit margins are narrow on most food goods and
competitors mostly have similar strategies and advantages.

According to McKinsey reports in 2021 and 2022, Grocery customers in the current landscape
are increasingly demanding the following things from their grocers:

 Personalization: Customers want to have ads, recipes, and services tailored to their individual
needs and wants without having to sift through the noise of irrelevant ads and products.
 Fresh and Healthy food: Increasingly there is a focus on access to fresh and healthy food by the
younger generation of shoppers.
 Convenience: This includes food that is ready to be eaten or meal packs with all ingredients
together and recipes. Post-pandemic life has become increasingly busy, and customers no
longer have as much time to cook. To stay competitive with restaurants, groceries need to make
cooking easier for customers.
 Omni-channel shopping: Already gaining traction before 2020, but greatly accelerated during
the pandemic was the demand for online ordering of groceries along with quick, easy, and
accurate pick up or delivery.
 Novelty: Customers want to try new things and be surprised by offerings at their grocery.
  Sustainability: Customers are now demanding more from an ethical and environmental
perspective from their businesses. This will continue to be a factor in the industry as more
legislation and regulation is put in place to reduce the impact on the environment.

Competitors

WALMART- 3000 stores that offer same day delivery. Walmart has also pushed into the robotic
fulfillment sector.

COSTCO- not a one stop shop and does not have a focus on healthy or fresh, but does provide customers
with lower prices they are seeking.

ALBERTSONS- Are attempting a merger with Albertson’s currently (Repko, 2022), would gain huge
market share if approved; must go through regulatory approval which may be a challenge. (Creswell,
2023)

AMAZON- Amazon has recently increased grocery delivery fees as of later this month

ALDI – Fastest growing grocery chain in the US, opened 49 stores in 2022. Based on low prices but have
little selection of foods. Aldi owns the third most stores in the US after Kroger/Albertson and Walmart
(Redman, 2023)

H-E-B – Texas based grocery chain, has focused on building stores greater than 100,000 sq. ft. to create a
more pleasant and holistic grocery experience with benefits like live music, barbeque, etc. inside the
store. (Redman, 2023)

Porter's 5 Forces
Porter’s Five Forces Analysis of Kroger covers the company’s competitive landscape and the factors
affecting its sector. The analysis focuses on measuring the company’s position based on forces like
threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers
and competitive rivalry.

The five forces design and model were created to strengthen company performance, solve various
problematic issues, measure the industry’s competitive nature, and develop corporate strategies
appropriately. The Porter framework lets the business analyze and explore the major forces that
influence and determine industry profitability.

Threat of New Entrants:

Kroger is a multi-department supermarket chain operating in the United States. The departments in
Kroger range from consumer electronics, groceries & food to beauty, health, wellness and many more.
Kroger has not expanded yet beyond the U.S. and is the world’s largest hypermarket chain. For a new
entrant to establish themselves, they will have to cross the barriers of entry which are capital costs to
set up physical stores, logistics and supply chain well set up to compete for the low prices the
competitors are offering, high brand equity and ability to drive economies of scale to drive profits,
bargaining power against suppliers to bring down the cost of purchase of goods for retail sale to match
prices with competitors, etc. The threat of new entrants is moderately high.

Threat of Substitutes:

Department stores, direct to consumer sales, e-commerce, local brick and mortar stores, departmental
chain stores, and other kinds of retail outlets exist. Products sold at Kroger are likewise sold at the
above-mentioned retail outlets.

The substitute products of another industry may meet the same needs. The additional substitutes of any
product indicate a bigger competitive environment, which means less probability of profits. For instance,
for a boxed fruit juice producer, coconut water, fresh juice, and soft drinks remain major substitutes,
even though they are different categories. The substitutes can impact on the company’s cost of
products, hence, reduce profits.

These alternatives are easily available and do not incur any additional switching costs. The price and
delivery time are the only elements that can influence customers to choose a retail chain. Although the
price may be comparable to that of e-commerce, the product can be delivered to your home with a
delay. Kroger also has the option of home delivery for groceries available now. Overall, the
differentiability factors are less and hence, the threat of substitutes is high.

Bargaining Power of Customers:

The customers are mostly individualistic purchasers, in the case of the retail supermarket industry.

The factors that affect the bargaining power of buyers are the existing competition in the industry,
switching costs, availability of substitutes, number of competitors, cohesive behavior of customers, the
quantity of purchase, etc. For Kroger, there is also competition from the supermarket players, local brick
and mortar sales which have localized customer loyalty, e-commerce firms such as Amazon entering into
the grocery and retail industry with record delivery times, etc. So, the competition can be considered
high, and there are a wide variety of sellers for customers to choose from. There is no cohesive behavior
of customers as they are mostly individualistic customers, and hence the purchased quantity is also not
high. But owing to the sheer amount of competition, Kroger must continuously keep up with the price
competition and variety to retain the customers. There is no scope for backward integration.

Bargaining Power of Suppliers:

Given Kroger's size, it is understandable that the company buys in copious quantities from vendors.
There are also several providers in the market, far outnumbering the number of large-scale supermarket
chains. The scope of forwarding integration exists, but because of brand equity, supply chain availability,
and cost rivalry, the amount of sales they can create is nothing near that of Kroger. If the O.E.M. is
Kroger's supplier, the O.E.M. may sell directly to consumers through the D2C channel, but this does not
guarantee the number of sales that the company may generate. Post considering the above-mentioned
factors, we can conclude that the bargaining power of Kroger's suppliers can be considered incredibly
low.

Competitive Rivalry:

The retail market is extremely saturated and extremely competitive, and the customers are also very
price sensitive. Given the fact that the switching costs are minimal, it makes it even harder for retail
customers. There are numerous players operating in this domain, and customers have the option to
choose between different players and go for the best value for money option. So, the players get
aggressive to capture the market share, and supermarkets provide discounted offers to woo customers
and drive profits by economies of scale. Adding to it, the e-commerce industry has made the
competition even more aggressive. The current players competing with Kroger in the multi-department
retail industry are Amazon, Target, Costco, Walmart, etc. Some are operating online-only, and some are
operating both online and offline. All these players have price rivalry and continuously produce
competitive offers.

To conclude, the above Kroger Porter Five Forces Analysis highlights the various elements which impact
its competitive environment. This understanding helps to evaluate the various external business factors
for any company.

Environmental Analysis
Demographic- the target market of Kroger seems to be married, suburban baby boomers and serves
over 60 million households according to the Insider. By 2050 the United States is expected to be one of
the most populous nations in the world (#3).

Economic- Following the worldwide pandemic COVID19, the economy is facing a recession/inflation. The
price of living has increased all over including food and groceries. How will families afford food?
Consumption for consumers will decrease and so will profit. Also, will Kroger be able to afford to pay
workers? They have recently faced some legal issues regarding labor laws and such, inflation will not
help that issue.

Political/legal- They have had issues of being sued, guilty of child labor laws violation? According to the
U.S. Department of Labor, a Kroger supermarket located in Mississippi was found guilty of violating child
labor laws accessing a $13,673 civil penalty. They are also facing lawsuits currently in different states for
payroll issues, employees are not being paid at all or being underpaid. Workers are stating that they are
“tired of having to beg” (Popular Info).

Sociocultural- Kroger has a good reputation for being a diverse work environment but a few of the
external factors above may have affected the way people look at and feel towards Kroger. They have
lost trust and it has caused some consumers to stop shopping with them. There has been some damage
to the company's reputation, which was well respected before. How can Kroger get back to that high
respect level?

Technological- With technology being on such a rise, it is imperative that businesses adapt to
new/current technology. Currently Kroger is using data analytics, which can help Kroger increase its
profits while minimizing expenses. There is also a ride in e-commerce allowing consumers to online
orders which they can then choose pick-up or delivery. Kroger has jumped on this technological
advancement, but will it be enough?

Global- Kroger has no international presence. Being one of the largest department stores chains in the
states, distributed in 35 states, Kroger is at 84.51a disadvantage globally. There are competitors, such as
Walmart, expanding internationally. Expanding globally can create opportunities to enter new markets.

Sustainable physical environment- invest in sustainable development. Kroger thrives off the idea of
“fresh for everyone” guaranteeing fresh produce for everyone. They also developed a “Zero hunger,
zero waste” motto which is geared towards helping communities stay free of hunger and waste. They
also have a goal of impacting climate, packaging, human capital management, human rights and animal
welfare, a positive change for the people and planet. With the current climate changes and a rise in food
cost, will the “affordable” fresh food they promote remain affordable?

MARKET CONDITIONS AND TRENDS

Companies must always be assessing trends and conditions in their industries to navigate change and
remain competitive. The current landscape of the grocery industry indicates the following trends:

SUPPLY CHAIN- There have been significant supply chain issues over the last few years of the pandemic.
Those grocers who were able to keep things in stock or who had acceptable substitutes due to their
larger selection were able to pull ahead in the industry.

LABOR MARKET- There continue to be labor shortages and demand for higher wages. The labor
availability has still not returned to pre-pandemic levels. This has accelerated the push for more
automation in the industry.

AUTOMATION- Automation has increased in the form of self-checkout, grocery check-out scanners,
warehouse automation and more. This has been further emphasized since the pandemic saw demand
for reduced interaction and increased cleanliness, in addition to increased labor shortages.

INFLATION- Inflation over the past year has been the highest it has been in almost 40 years per the labor
department (Horsely, 2023). Many customers are placing a higher importance on the cost of groceries in
where they choose to shop. This means that the growing pre-pandemic trend deep. However, there are
some signs that inflation may subside, and prices may normalize a bit. Though there have been
predictions of possible other economic concerns, such as a recession.

INCREASED CAPITAL INVESTMENT - There has been a surge of investment into the grocery industry and
technology in the past few years by venture capital firms. Additionally, big players in the industry saw
huge profits during the pandemic and have since continued to invest in advancing their technology and
changing the way they do business.

DEMAND- with the of pandemic restrictions and the shift back to normal life, there are indications that
cooking at home may decrease a bit or that demand will shift to more convenient options like meal prep
kits.

The landscape of what customers expect may clash with the profitability and difficulty of getting
groceries to consumers quickly and cheaply AND in an environmentally sustainable way. Finding a way
to make this happen will be essential to remaining competitive in the next decade.
CURRENT STRATEGIC PLAN
Competitive Advantage

Kroger asserts that their competitive advantage lies in four primary areas. These include the freshness of
their products, their ability to personalize to their customers, their store brand offerings and the online
functionality including pick-up and delivery. These areas have huge advantages within the current
grocery landscape. The 2021 and 2022 McKinsey reports on the North American grocery industry
outlined many of these domains as key trends in the industry to focus on in the coming years, as people
have become more focused on fresh and healthy products and ease of acquiring groceries- reducing
trips to the grocery drastically from pre-pandemic numbers.

STATE OF CURRENT STRATEGY

Kroger continues to lag behind Walmart in terms of market share. Although Kroger offers quick grocery
delivery, most non-food items are only available for shipment. Walmart and Target offer products
beyond grocery products for delivery. Furthermore, the Albertson acquisition will greatly increase
Kroger’s resources and share of the grocery market. However, there are still legal implications of the
acquisition that need to be settled prior to the full acquisition, which is estimated to take place in 2024.

RECOMMENDATIONS TO ADDRESS THE ISSUE

#1
IMPROVE TIME AND PRODUCT AVAILABILITY FOR DELIVERY
This recommendation involves improving and expanding Kroger Delivery options. Electronic ordering
and grocery delivery are identified by McKinsey as demand trends in the grocery industry and Kroger
promotes these as two strategic areas of their strength. Kroger Now Delivery features delivery in
under 30 mins, much quicker than Walmart delivery.

Picture:
To bolster this success and maintain their market share and competitive advantage long-term Kroger
would need to do the following things:
1. Continue to expand by opening customer fulfillment centers in major market hubs.
 a. Increase Ocado fulfillment sheds that are all-autonomous.
b. This allows to serve market hubs as far as 200miles away, for example serving Oklahoma
city from Dallas
2. Improve weekend order time slot availability so busy customers who are ordering on the
weekends can have their deliveries that weekend without utilizing Instacart to supplement,
which often results in substandard order fulfillment. For this advantage they could implement an
additional "surge" charge.
3. Additionally, more staff and fuel may not be needed if increase in orders come from within the
same neighborhood.
4. Enable customers to have household goods offered in stores delivered to their home with
grocery order, rather than having them labeled as "ship only". For example, you can buy a
shower curtain or sewing kit in store, but not currently offered for delivery.
5. Find and hire staff to manage centers and deliver goods.
6. Invest in more delivery staff and vehicles for increased delivery demands.
Pros Cons
Staffing for additional weekend deliveries may be
hard to find and may be prohibitively expensive.
Storing household goods may take up valuable
Expand Market Share Boost loyalty to Kroger by
space in Customer Fulfilment Centers Kroger
increasing number of people with Kroger app and
partnership with Ocado may pose financial
Kroger Plus Card Higher profit margin on
burdens later down the line.
household products Maximize fuel and staff
Requires hiring skilled Process Automation and
usage.
Controls engineers and Robots experts to
Able to penetrate new markets more easily.
troubleshoot problems.
Better tracking of inventory in real-time
Need to hire engineers as technicians constantly
Need less labor in warehouses with autonomous
on-call if something breaks down
– good for labor in the US
if they are moving into places that don’t normally
have a Kroger, then how do they integrate their
name into the current grocery market
Financial Implications
It cost Kroger about $55 million dollars to build their first customer fulfillment center in 2018.
Additional centers would likely cost a similar amount, or more. Additionally, to add capacity to
process more weekend order fulfillment and to house more household goods could expand the cost
to build and operate these facilities. Finally, more weekend staff for delivery and additional vehicles
would have incur costs.

#2

EXPANDING INTO GLOBAL MARKETS

This recommendation involves expanding Kroger and going global. Currently Kroger is only based in
the United States. International business has become a big part of the world's overall economic
activity. There is not a better time than now for Kroger to join the other American companies who has
expanded globally.

To be successful globally and maintain their market share and competitive advantage long-term
Kroger would need to do the following:
 1. Be aware of exchange rates and realize that unexpected currency changes can destroy profits.
Currency hedging is a viable way to control this. Invest in a professional currency trading firm.
2. Mandate an official language for the company (English) allowing for better communication with
a larger group of people.
3. Be aware of diverse cultures. This plays a huge role in relationships that are international when
it comes to selling and buying. Being aware of social etiquette and cultural differences will gain
Kroger the respect and trust they would need.
4. Ensure that Kroger can be reliable with product delivery. Invest in a great international
packaging company
5. Be aware of the possible competition and threats of new entrants
6. Gain insight/understanding of HR and legal practices because managing overseas can be
difficult.
7. Learn how to compete with foreign countries.
8. Maintain the fresh food by having farms and plants globally, easily accessible products

Pros Cons
- Global expansion allows you to enter new
markets and expand business. - Unexpected currency fluctuation can possibly
- Brand recognition destroy profits.

- Possible lower operational costs - International laws and regulations vary in

different countries.
- Gain strong knowledge of the international
regulatory environment - more competition and threats of new entrants

- International talent and access to new - Cultural barriers

customers - Political and economic risks
- stay ahead of competition

Financial Implications

With global expansion comes setup and exiting costs. They would need to consider tax and
compliance, expatriation costs, cultural changes and premises and rent. They would need to consider
how much properties/buildings would cost and the minimum wages per country to get an idea of how
much to pay employees. With Kroger being such a big company already, it will not be a cheap task,
but it will be worth it.

#3 (MAIN)

CONTINUE THE FOCUS ON MARKET ANALYTICS

Targeted advertising data and analytics have become increasingly important tools for retailers in
recent years. By analyzing customer data and purchase history, retailers can identify patterns and
trends that provide valuable insights into customer behavior, preferences, and needs. These insights
can be used to make informed decisions about inventory management, to improve profitability and
customer satisfaction.

One way that targeted advertising data and analytics can be used is by identifying products that are
popular among certain customer segments. For example, if data analysis shows that customers in a
particular geographic region are buying more organic produce, a retailer could adjust their inventory
accordingly to ensure that they are stocking enough of these items to meet demand. Data can also
identify underperforming products by analyzing sales data and customer feedback, and stores can
adjust by reducing the amount of stock or replacing it with a different product that is more in
demand.

Kroger has developed a sophisticated analytics program that analyzes customer data to identify
patterns and trends that can be used to improve inventory management. According to Kroger's Chief
Information Officer, "Ten years ago, our opportunities to optimize our supply chain performance were
limited. Today, we can more precisely monitor the temperature of every distribution unit in real time
through sensors, which helps us improve the freshness and quality of our customers’ experience."
(Ammanath, WSJ, 2023). Kroger has several resources for analytics, including its data analytics
subsidiary, 84.51°, which specializes in customer insights and strategy. 84.51° collects and analyzes
data from Kroger's loyalty program, as well as other sources, to provide personalized and targeted
coupons and promotions to customers.

Kroger's analytics program includes a variety of tools and technologies, including machine learning
algorithms, natural language processing, and computer vision. These tools allow Kroger to analyze
vast amounts of customer data, including transaction data, social media activity, and online search
behavior. Kroger can identify patterns and trends that can be used to improve inventory
management, as well as other areas of the business such as marketing and customer service. From
the 84.51°, the sheer amount of data is enormous:

“· 1250 consumer packaged goods partners

· 60 million households
· 1 billion personalized offers delivered to customers last year
· Over 10 petabytes of customer data analyzed” (Behavioral Analytics, 84.51°, nd.)

In addition to its in-house analytics capabilities, Kroger has also formed partnerships with a number of
technology firms to further enhance its data analysis capabilities. Kroger has partnered with Google
Cloud to use its machine learning and data analytics tools to improve supply chain efficiency and
optimize inventory management. Similarly, Kroger has partnered with Microsoft to develop a new
retail technology platform that will integrate data from a variety of sources, including social media,
online reviews, and customer feedback.

While targeted advertising data and analytics can provide valuable insights into customer behavior
and preferences, there are also potential drawbacks to using these technologies. One concern is
privacy. Customers may be uncomfortable with the idea of retailers collecting and analyzing data
about their shopping habits and may be less likely to share personal information or purchases from
retailers that they perceive as invasive. Another concern is accuracy. While data analysis can provide
valuable insights, it is not always accurate, and retailers may make decisions based on faulty or
incomplete data.
In conclusion, targeted advertising data and analytics are powerful tools that can be used to improve
inventory management and other aspects of the retail business. Companies like Kroger are using
these technologies to gain a competitive edge by better understanding customer behavior and
preferences. However, it is important for retailers to use these technologies responsibly, and to be
transparent about how they are collecting and using customer data.

Pros Cons
- Data may not be accurate or complete, need
specialized data analysts to clean-up the data
- Better Understand Consumer’s needs and and draw out insights
preferences - Consumer privacy, data collection, and
- Make informed decisions about product concerns about personal data sold third parties
offerings and pricing - Data security and the risk of cyberattacks
- Optimize supply chain to reduce excess - Additional cost to train the average employee
inventory by capacity utilization to a working level of data science knowledge
- Stay ahead of competition by offering the - Overreliance on data and analytics, which can
products consumers want lead to a lack of human intuition and creativity in
decision-making

- Cost of constant reinvestment in technology,

moving towards the limits of AI

Financial Implications

Investing in analytics technology for marketing can have significant financial implications, both in
terms of the upfront costs of implementation and the ongoing costs of maintaining and analyzing the
data. However, the potential benefits can also be substantial, including increased revenue, improved
customer engagement and loyalty, and better decision-making. Targeted marketing efforts can lead to
higher conversion rates and more efficient use of resources.

However, investing in analytics technology is only one piece of the puzzle. To use analytics effectively,
a company must also have a culture that values data-driven decision-making, as well as the necessary
expertise to analyze and interpret the data. This may require additional investments in training and
hiring skilled data analysts.

The cost of implementing analytics technology can vary widely depending on the size of the company
and the scope of the project. Other factors that can impact the cost include the complexity of the data
being analyzed, the level of customization required, and the ongoing maintenance and support costs.

Despite the potential costs, the benefits of investing in analytics technology for marketing can be
significant. By using data and insights to make better marketing decisions, companies can drive
revenue growth, improve customer engagement and loyalty, and gain a competitive advantage in
their industry.

Organizational Implications

In centralized organizational structure, the power to move organizational resources and make
decisions lies within a single chain of command1
 Having decisions made at the top and filtered down through the layers gives some specific
characteristics of centralized structures.

1. Leadership has more control over the work Since leadership is making all the decisions, they
are able to enable that work is aligned with the overall organizational goals
a. When org goals are prioritized, then leadership can throttle work, time and resources
towards non-value add projects.
2. Single chain of command, makes it clear who will be making decisions on what projects to run

A centralized IT organization sets up sets up standards, methods, procedures for company alignment.
It also promotes collaboration and coordination to make impact through multifunctional teams

CONCLUSION
Kroger is known for fresh food and produce, which allows them to sit at the top of the competition. But
with ever changing technology, the growth of e-commerce and an extensive list of competitors, how will
Kroger maintain its competitive advantage? In the case study above, we looked at Kroger and broke
down the things working for them and ways for them to improve so that they remain a top competitor.

In regards to the recommendation to improve time and product availability, electronic ordering and
grocery delivery are identified by McKinsey as demand trends in the grocery industry and Kroger
promotes these as two strategic areas of their strength The recommendation about going global would
give Kroger an advantage over its competitors. It will allow them to always be a few steps ahead, it will
allow their brand to grow and be recognized while bringing in new consumers, and it will give Kroger the
necessary knowledge about international markets all while possibly lowering operational costs. It is a
win-win for the company if it becomes successful. Kroger will have the potential to be the #1 in the
grocery industry. Targeted advertising data and analytics are powerful tools that can be used to improve
inventory management and other aspects of the retail business. Companies like Kroger are using these
technologies to gain a competitive edge by better understanding customer behavior and preferences.
However, it is important for retailers to use these technologies responsibly, and to be transparent about
how they are collecting and using customer data.

1
Hage, J., & Aiken, M. (1967). Relationship of centralization to other structural properties. Administrative Science
Quarterly, 12(1), 72–92. https://doi.org/10.2307/2391213
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