Kroger Co. Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Strategic Audit

Current Situation

Kroger Company is a United States based retailer company that was founded back in 1883. The retail company was founded by Bernard Kroger in Cincinnati, Ohio. In terms of revenue it generates in a year, Kroger is the largest super market chain. It is one of the largest grocery retailer with the sales revenue in year 2013 was estimated to be $98.4 billion. Amongst the retail chains in the world Kroger is behind Wal Mart where it is placed second in the list. Whereas, Kroger is the fifth largest retailer globally. The total number of retail stores for Kroger are almost 2500 (Clifford, 2009).

The company is headquartered in the city of Cincinnati. The physical presence of Kroger is in 31 states of the country. The different range of stores for Kroger include the grocery stores, departmental stores, supermarkets, superstores, jewelry stores and convenience stores. Along with this, Kroger is also the parent banner for Ralphs. The employees at Kroger are represented through the United Food and Commercial Workers (UFCW). The company was started with a total savings of $372 where, Bernard opened a grocery store in the Mount Airy neighborhood of Cincinnati. Kroger was the son of a merchant or the businessman. Initially, Kroger tried many different ways to satisfy and fulfil customer requirements. Along with this, Kroger also holds one of the largest private label manufacturing in the United States (Micek, 2001).

The company uses the three tier marketing strategy. It includes the low cost products for consumers, secondly, brands that are intended to compete with the leading brands in the national market. Thirdly, the company offers a premium organic food. To start off, Kroger made breads to ensure that customers can get all things at single stop. In the year 1930, Kroger was the first company to monitor product quality. Kroger has almost 780 convenience stores which are placed under six banners located in 19 different states. Along with this, the C-stores provide value and sufficient synergies for the expansion of the supermarket fuel centers. Kroger Company is the only retailer or supermarket that operates with an economical three tier distribution system. The total number of fuel centers for Kroger are 1,217 which are one stop shopping strategy. Kroger has around 2000 pharmacies which provide everyday low prices (Clifford, 2009).

Ratio Analysis

Current Ratio

Current ratio measures the liquidity position of a company. It shows us how much current assets are held by the company to pay the current obligations as they fall due. Currently the current ratio of Kroger Corporation is at 0.72 times. This means that the company has only 0.72 of current assets to pay $ 1 of each short term obligation. This is too low, and given the characteristics of the industry in which Kroger Corporation operates this ratio is also low.

The trend also shows that this ratio has been decreasing over the last years. The company is not managing the working capital and its short term assets well, which will lead to liquidity problems being faced by the company in future. However, if we look at the competitors’ current ratios then it could be seen that Wal Mart has a higher ratio of 0.88 times, but it is also not satisfactory for the company and it might face liquidity issues in future. Meanwhile, the average ratio of all the competitors is around 1, therefore, the management of Kroger Company needs to manage the working capital of the company in order to avoid future liquidity problems.

Quick ratio:

The quick ratio also known as the asset test ratio is another method which measures the liquidity of the company. This shows us how much liquid assets are held by the company which will pay off the short term debts as they fall due. Liquid assets are those assets that are easily convertible into cash. The quick ratio of Kroger Corporation is around 0.16 times currently. This is a very low ratio which means that there are just 0.16 of liquid assets available to pay $1 of short term debts as they fall due. Also, the quick ratios of Kroger’s competitors are hardly more than 0.5, which shows that this industry is of such nature in which no huge investments in working capital are required...........................

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