Question

conduct a complete SWOT analysts of Kroger and address external environmental factors that they may face over the next three years

Answer 1

Strengths

A better combination of store format and the product lines:- As we know the company provides a number of products and services such as organic foods, fuel, pharmacy services, groceries and so on, thus it has come up as the one-stop buying center for the customers

Having a number of store formats facilitates the customers to select what they think is most critical for them. The customers who look for the value can visit one of the price impact warehouses. The variety in offerings, different types of stores have supported the company to come up as the largest grocery store operator

Stronger private label portfolio:- The company has invested a lot in the development of its own private label portfolio of products with organic options. These brands are having a significant contribution to the overall sales of the company almost about 25%. These products are quite beneficial for the company due to higher margins, stronger bargaining with suppliers

Weaknesses

High Debt Load: In comparison to most of its rivals, the company has a higher debt load. Approximately $9.6 billion of debt was present in the balance sheet of the company which was almost 62% of the total capital of the firm. The ability to get additional financing can be limited due to this high level of debts and thus limiting the ability of the firm to expand and acquire other firms. In fact, the high-interest payment will also suffer the organization

Food Price Deflation: The financial performance of the company has been further hampered due to the reduced price of grocery products, and this has the multiplier effects as these products are the primary ingredients in other products. In fact, there is a tough price war in the sector due to a deflationary environment. The company’s top line is further hurt by the reduced price of gasoline.

Opportunities

Expanding Organic Food Offerings:

The customers have really welcomed the decision of the company to come up in the organic food segment. Most of the customers are now having increased awareness about food and wellness and thus they look to buy those products which are natural and organic. The company is trying to improve its portfolio in this segment too. This will provide the company with a further opportunity to lead in the segment of organic food.

E-Commerce Initiatives:

The service ClickList has been introduced by the company so that the customers can place their order online from more than 40000 products and then these products can be picked up by the customers at curbside at the store of the company. This is seen as a nice initiative by many customers. This will provide the company with more opportunity to expand its business.

Threats

The grocery store segment is an extremely competitive one. Grocery segment is facing a lot of competition every passing day and it can be characterized as competition on the basis of price, market consolidation, expansion, entry of various players and unconventional competitors. The competitors such as Wal-Mart and Target are focusing on increasing their revenue by focusing more on the food-related segment. In fact, Amazon has also expanded its presence in the online grocery segment.

External environment threats:-

• The company can see the entry of many rival firms in the main segment i.e. grocery
• Lower business margins can also be a difficult situation for the company.
• Many existing competitors are planning the expansion in the near future which can hamper its revenue generation
• The distribution needs to be made stronger as a company like Amazon is using the fastest delivery of its online orders by using drones and various other latest technolog