Evaluating and reconfiguring the value chain associated with the pet industry, PetSmart change their vision and business strategy. In the early years of operation, they were mainly a warehouse of pet supplies.
Taking the risk in being a first mover has given PetSmart the competitive advantage over the market. Compared to Petco, PetSmart started most of these services in the early 90’s and they followed a few years later.
In 1996, PetSmart took the plunge..the global plunge that is and invested in a large pet retailer in the U.K. In this purchase, they took over 52 stores.
The company reported comparable store sales growth of 5%, services sales growth of 9%, and total sales up 6.8%.
“Every Pet, Every Parent, Every Time”<br />Trinity Autumn Stone<br />
History <br />Founded in 1986 by Jim and Janice Dougherty <br />In 1987, opened their first two stores in Arizona<br />PetSmart Charities, Inc., a nonprofit organization that’s dedicated to ending euthanasia and finding homes for homeless pets <br />Went “public” in 1993 on the NASDAQ market <br />
History <br />In 1996, PetSmart made their Internet debut<br />Added pet boarding services, PetsHotels in 2000<br />As of today, there are over than 1,192 pet stores in the United States, Canada and Puerto Rico with over 184 in-store PetsHotel facilities <br />
What is PetSmart’s strategy?<br />To be the preferred provider for the lifetime needs of pets<br />Create differentiation that drives brand preference <br />Offer superior customer service <br />Focus on operating excellence<br />Grow our pet services business<br />Add stores and provide the right store format to meet the needs of our customers<br />
Internal Environment of PetSmart<br />Resources and Capabilities<br />PetPerks® - giving them direct insight into the wants and needs of “pet parents”<br />
Internal Environment of PetSmart<br />Resources and Capabilities<br />Variety of pet services offered under one roof<br />Examples: <br /> PetSmart Grooming<br /> PetSmart PetsHotel®<br /> PetSmart Training<br /> PetSmart Doggie Day Camp℠<br />Banfield Veterinary Clinics<br /> PetSmart Charities<br />
External Environment of PetSmart<br />Threat of Substitutes<br />Warehouse clubs<br />Grocery stores<br /> Specialty pet supply stores<br />Independent pet stores<br />Veterinarians<br />E-commerce retailers<br />
External Environment of PetSmart<br />Rivalry<br />Large amount of competitors creates intense rivalry for PetSmart<br />Establishing a strong identity<br /> Creating brand loyalty <br />
Business Strategies<br />Convenience<br />generally located at sites co-anchored by strong destination mass merchandisers<br />In or near major regional shopping centers<br />Also engaged in an ongoing expansion program, opening stores in new and existing markets<br />
Business Strategies<br />Differentiation<br />Wide variety of product lines<br />Store exclusive brands<br />Martha Stewart Pets and GNC Pets<br />
Reconfiguring Value<br />Radically New Value Chain<br />In 2000, PetSmart evaluated their mission and vision and changed it<br />Changed from a warehouse mindset to a more service driven pet retailer<br />Expanding pet services<br />
First Movers<br />First movers in the pet industry in almost every service offered<br />PetSmart Charities <br />Veterinary Services<br />Pet Training <br />PetsHotels<br />
Types of Diversification <br />Vertical Scope <br />Adding pet services to their existing business structure<br />Subsidiary companies of PetSmart<br />Provided the company with increased control and power in the market<br />Fortunate in the successes of the integrations<br />
Types of Diversification <br />Geographic Scope<br />Acquired an established pet retailer in the United Kingdom<br />Eliminated some of the start up risks in the market<br />“Bit off a little more than they can chew." <br />Opened new stores in the Canadian market<br />Eight stores <br />Ontario Market<br />
CAGE Framework<br />Cultural distances<br />PetSmart chose to enter markets with a similar culture as the U.S. market<br />Value of having a pet<br />Language and social norms<br />Administration distances<br />European Pet Food Industry Federation<br />European Union <br />
CAGE Framework<br />Geographic distances<br />Locations of the stores purchased<br />Distribution centers<br />Possible shipping from U.S.<br />Economic distances<br />Consumer buying trends<br />Consumer incomes<br />
Entry Vehicles<br />Nonequity Vehicles<br />Opening the new stores in Canada<br />Licensing<br />Franchising<br />Equity Vehicles<br />Acquisition <br />Pet City Holdings, plc<br />
Alliances<br />In 2010, PetSmart teamed up with two major retail companies<br />Martha Stewart<br />GNC<br />Smart business move <br />Opened up different segments in the market<br />
Martha Stewart Pets<br /> “Exclusive Product Line Combines Martha's Dedication to Pets with Quality and Style”<br />Product line hit the shelves in June 2010<br />Expanded the pet accessory division<br />apparel, collars, leashes, bedding, feeding, grooming and bathing supplies <br />Products designed, tested and approved by Martha and her pets <br />
GNC Pets<br />Designed a dietary and supplement product line for dogs and cats<br />Targeted for health consensus pet parent<br />Partnership came from the customer requests<br />Demonstrates the shift in the view of pets by our society <br />
Acquisitions<br />Started acquiring companies in 1993<br />UniPet Distributors<br />The whole pet product warehouse idea got started with this company<br />Almost every year of business since 1993, PetSmart has been involved in an acquisition<br />
More Acquisitions<br />PetStuff, Inc in 1996<br />Pet Food Giant in 1996<br />Sporting Dog Specialties, Inc in 1996<br />Medical Management International, Inc (MMI) in 1999<br />PetsHotel Plus in 2000<br />
Creating Synergy <br />Adding the specialty product lines increased PetSmart market share and power<br />Increased their financial strength, especially during the current economic standings<br />Creating the alliances helped PetSmart gain access to others’ capabilities<br />
New Venture Creation<br />PetSmart started as an opportunity in 1986<br />Knowledgeable management staff <br />Constantly generating new “ideas” <br />
PetSmart’s Management<br />Multidivisional organizational structure<br /> finances, marketing, counsel, store operations, supply chain, real estate, human resources, and strategic planning and development <br />All divisional leaders report to the President and CEO <br />Bob Moran elected in 2009<br />
Changes in Our Economy <br />In 2008, our economy took a downward turn for the worse<br />“Great Recession”<br />Luxury market <br />However, pet industry seems to be unaffected the recession<br />
Pet Industry Statistics <br />Total U.S. Pet Industry Expenditures<br /> Year Billion <br /> 2011 $50.84 Est.<br /> 2010 $48.35 Actual<br /> 2009 $45.5 2008 $43.2 2007 $41.2 2006 $38.5 2005 $36.3 2004 $34.4 2003 $32.4 2002 $29.5 2001 $28.5 1998 $23 1996 $21 1994 $17 <br />http://americanpetproducts.org/press_industrytrends.asp<br />
PetSmart Statistics<br />Reported strong first quarter 2011 results<br />Net income of $71 million on $1.5 billion in revenues, with earnings up 33%. <br />12% dividend yield, based on closing stock price of $45.37 as of 7/5/2011<br />
Recommendations<br />Be conscious of individual margins on sales of high and low end merchandise<br />Continue to track product trends with the PetPerks program<br />Monitor services that have outgrown their profitability or their marketability cause budget cuts may be looming <br />Explore new niche markets<br />