Trader Joe’s Harvard Case Solution & Analysis

Basic financial ratio analysis:

            The super market industry uses to generate higher incomes through the mean of debts as it is the practice of the industry to buy goods on credit and follow the strategy of having more debts to give fixed interest rate to debt holders and another return with the company. The stories go for extensive revenue and however, profit in terms of sales islow but it is high as compared to the equity and return on equity is higher as above the 10 % average from store investments. Most of assets relate to inventory, and therefore they have an opportunity to have goods on credit. The firms explore the opportunity and get a higher return for the shareholder.

        Whole food is going for less debt and higher equity because its strategy may be to have a concept of just-in-time inventory method in that they use to have lower inventory costs and borrowings. This method is helpful as it reduces the obsolescence of inventory risk.

        Kroger and Safeway have more debts, and its return on equity is most favorable for these four firms. Itstrategy is to have extensive sales, therefore it has 3.85 times and 2.89 assets turnover ratio to Kroger and Safeway respectively.

        Supervalu has also followed the extensive sale approach along with the higher debt approach, but it failed to put enough equity to have profits. The company has used extensive debts; therefore, there may be some obsolescence inventory due to higher inventories with it. It is making a net loss due to little equity and 57,295 debts to equity ratio.

Key sources of Trader Joe’s competitive advantage:

            The company has targeted a specific number of persons or class that is educated class, and the educated class has higher income therefore they can spend more on the goods. The company has targeted the class of customers, and we can say it follows niche market strategy to focus on the specific class of customers.

            It offers those goods that are not easily available in supermarkets, therefore, the demand for the goods that are specific type of nature and not easily available gives it an added advantage of different variety of goods. This strategy also focuses on the niche market strategy.

             Joe’s has a competitive advantage of less working capital investment in inventory because in the supermarket business most of working capital is used to finance the inventory, and this is not the case for Trader Joy’s. This strategy also saves inventory storage; holding and it results in less obsolete inventory cost.

            It hires only quality staff that can better understand the work as well they can perform their duties more than excellent as compared to other supermarket staff. It is ready to pay higher wages, and their quality staff may not switch because of higher wages they get at Trader Joe’s.

            It supplieshigh-quality goods with comparative prices of low-quality goods. Therefore, this strategy is unbeatable by many of the buyers because they cannot sell the goods at the comparative prices to Trader Joe’s. The reason is the bulk purchase from the supplier whowishes to charge lower price for it as compared to other buyers of the supermarket from the same supplier.

            It does not discloses the name of its suppliers because the supplier is giving the competitive advantage to Trader Joe’s by charging lower price and the advantage can be taken away from competitors if they know about this arrangement. It has good relationships with their suppliers, therefore they get a comparative cost advantage of buying the same goods as compared to the industry.

List of things that Trader Joe’s choose not to doto relate to the chosen strategy and competitive advantage:

            Trader Joe’s has decided many things that it does not wants to follow the same practices as many other supermarkets are following the same practices and it gives it a competitive advantage.The list of the things is given below;Trader Joe’s Case Solution

Its store cannot be found in old strip malls in suburban locations. The stores have less than 15000 square feet of selling therefore they use to avoid having a large place that cannot be managed. They use to display only limited products, and it gives a competitive advantage.

Joe’s does not invest in technology in its store, any checkout line and any flat screens on the checkout counters. It costs high and results in less interaction between customers and supporting staff of the store. It increases the efficiency of employees to know their customers better.............

Share This


Save Up To




Register now and save up to 30%.