Kroger is a large grocery store chain operating over 2,600 stores in 34 states. It has pursued a strategy of diversification beyond just grocery into areas like fuel stations and jewelry stores. Kroger's "Customer 1st" strategy focuses on having great people, products customers want, good prices, and creating a shopping experience that encourages repeat visits. Kroger analyzes its strengths in areas like its brand and private labels, as well as weaknesses in intense competition, to guide its strategic goals around sales growth, debt management, and expanding through acquisitions.

1. GENBUS 450 – Section 001
by
Andy Amoureux, Wade Aldridge, Candy Kingsley, & Kurt Mathiesen

2. Executive Summary
• Current and Future of
Supermarket Industry
• Kroger’s Multi-Facet Strategy
• Customer First Focus
• Product Differentiation
• Corporate Branding
• Diversification
• Recommendations
(Candy)

3. Summary of Kroger Co
• Barney Kroger Opens First Grocery Store in
1883
• His Motto: “Be particular. Never sell anything
you would not want for yourself.”
• Kroger Company Today
– 2,640 Stores in 34 States with 98 Billion
Dollars in Sales
– Diversification: 1,240 Supermarket Fuel
Centers, 786 Convenience Stores, 320 Jewelry
Stores, 38 Processing Plants and 36
Distribution Centers
(Candy)

4. Vision and Mission Statement
• “Our mission is to be a leader in the distribution and merchandising
of food, pharmacy, health and personal care items, seasonal
merchandise, and related products and services. We place
considerable importance on forging strong supplier partnerships. Our
suppliers, large or small, local or global, are essential components in
accomplishing our mission”.
(Kurt)

5. Values
• Honesty:
- We insist on truthfulness with each
other, with our customers, with our
vendors and in our business records.
We expect and value openness.
• Integrity:
- We act in accordance with our values,
even when it’s difficult.
• Respect:
- We treat all with dignity and value the
opinions and perspectives of
others. (Kurt)

6. Values
• Diversity:
- We seek and embrace differences in
the backgrounds, cultures and
ethnicities of all associates,
customers and vendors.
• Safety:
- We protect our customers and each
other from injury with a safe and
secure workplace and shopping
environment.
• Inclusion:
- We encourage and expect
collaboration, teamwork and
the active involvement of all
associates (Kurt)

7. External Analysis
• Political
• Low due to dependence on retail
• Economic
• High, fluctuations can effect all
aspects of prices and distributions.
• Social
• Medium; constant changes in
generations and new customers to
market towards.
(Kurt)

8. External Analysis
• Technological
• High; innovations in supply chain
and customer applications
separate the competition.
• Ecological/Environmental
• Medium; growing concern with
being a ‘green’ corporations
without violating the Jevons
Paradox
• Legal
• High/Medium; preventing huge
lawsuits is crucial
(Kurt)

9. Financial Analysis
Costco
• January 2011
Revenue:
• $88,915 Million
• January 2014
Revenue:
• $112,640 Million
Kroger
• January 2011
Revenue:
• $82,049 Million
• January 2014
Revenue:
• $98,375 Million
Walmart
• January 2011
Revenue:
• $421,849 Million
• January 2014
Revenue:
• $476,294 Million
• January 2011
Net Income:
• $1, 462 Million
• January 2014
Net Income:
• $2,058 Million
• January 2011
Net Income:
• $1,116 Million
• January 2014
Net Income:
• $1,519 Million
• January 2011
Net Income:
• $16,389 Million
• January 2014
Net Income:
• $16,022 Million
(Candy)

10. FI
ve
F
or
ces
Porter’s
• Rivalry is high among competitors – High Concentration
• Supermarkets Compete on Value, Service & Location
• Low Switching Costs
• Threat of Substitution is High
• Product Differentiation
• Corporate Branding
• Threat of New Entry is Low
• High Startup Costs
• Food and Drug Administration 2011
• Buyer Power is Low
• Must Choose between Lower Prices and Quality.
• Pricing Discounts
• Supplier Power is Low
• Slotting Fees, Promotional Discounts & Stocking Fees
• Regulatory Costs
Competitive Rivalry
Threat of Substitution
Threat of New Entry
Buyer Power
Supplier Power
(Candy)

11. Competitor Analysis
• World’s Largest Retailer
– Every Day Low Prices
– Distribution Centers
– Cross Docking
– RFID
– Universal Product Code
– Lawsuits, Working Conditions, No
Differentiation
– Profit Margins
– Sales System Tracking
• Wholesale Warehouse Retailer
– Selling Bulk at Low Prices
– Cap on Profit Margin
– Diverse Product Mix
– Co-Dependency on U.S.
– Dependency on California
Operations
– Low Prices & Product Mix
– Executive Members & Work
Environment
(Candy)

12. Internal Analysis
(Andy)

13. Resources
• Distribution centers – 36. Three tier distribution network: dry food, freezer,
and perishable. Each tier gets closer to grocery stores with perishable
distribution centers within 200 miles of grocery store
• Supermarkets and multidepartment Stores - 2,640
• Shareholders Kroger March 28, 2014 - 30,449
• Items carried in stores - 40,000-50,000
(Andy)

14. Capabilities
• Total sales 98.4 billion
• Reaches 34 states and the district of
Columbia
• Operation profit (GAAP) 2.7 billion ( P.3,4)
• Profit Margin: 1.51%
• Operating Margin: 2.76%
• Return on Assets: 6.69%
• Return on Equity: 32.14%
• Revenue: 103.96 B
• Quarterly Revenue Growth: 11.6
• Gross Profit: 20.24B
• Total cash: 248 M
• Total Debt: 11.2 B
• Operating cash Flow: 3.52 B
• Levered free Cash flow 659.75 M (P.1)
(Andy)

15. Core Competencies
Innovation
• Installed Quevision to help reduce check out time by 30 seconds. (2010)
• Kroger (2013) website “providing customers with a single place to find
information”(P.47)
• Express line Harris Teeter stores Provide on-line ordering with store pick up.
Customer Oriented
• Customer 1st strategy. The key of this strategy according to Kroger’s (2013)
Customers should say:
• The people are great!
• I get the products I want, plus a little more.
• The shopping experience makes me want to return.
• The prices are good. (pg.49) (Andy)

16. Kroger SWOT Analysis
(Andy)

17. Strengths
• Brand Name
• Private Brand
• Customer and Technology Driven
• Diversification
(Andy)

18. Weakness
• Intense Competition
• Quality Control
• Legal Proceedings
(Andy)

19. Opportunities
• Private Label
• Sustainability
• Expansion
• In-Store Health Clinic
(Andy)

20. Threats
• Contamination
• Post-environmentalism
• Operation Cost
(Andy)

21. Current Strategy
• Customer 1st implemented in
2009
Kroger's Sales 2010-2013 from Kroger’s
Fact Books
2013 2012 2011 2010
Sales …………….. 98,375 96,619 90,374 82,049
Change …………….. 1.8% 6.5% 9.2% 5.8%
(Kurt)

22. Current Strategy
• Corporate Social Responsibility &
Sustainability Strategy
Implemented 2014
- Designed to provide economic and
environmental transparency.
- Keep social and governmental
issues in good standing.
(Kurt)

23. Goals & Objectives
• Customer First Strategy
• Great People
• Products People Want
• Good Prices
• A place the customer will
return to
(Wade)

24. Great People
• Hiring the right customer
focused individuals
• Training Programs
• Balancing staffing levels
(Wade)

25. Products People Want
• Products People Want
– Specialty products that enhance the
experience
• Corporate Owned Brands
– Why corporate owned Brands
– Not just generic
– Packaging
– Loyalty
(Wade)

26. Products People Want
• Product Options
– Healthy & Organic
– Locally sourced goods
(Wade)

27. Good Prices
• Don’t try to beat Walmart
• Give the customer a reason
to pay more
– Specialty products
– Product differentiation
– Unique experience
• Coupons
– Online, and smart phone app
• Customer relationship
(Wade)

28. Good Prices
• Fuel Centers
– Fuel Rewards
• Online Shopping
– Convenience
(Wade)

29. Repeat Customers
• Shopping Experience
– Store Layout
– Time and convenience
• Unique Products
• Customer service
• High quality / great value products
(Wade)

30. Financial Objectives
• Existing Stores Sales Growth
• Carefully selected new markets
• Managing Debt Load
(Wade)

31. Business Corporate Strategy
• Differentiation
– Justification of higher prices
• Related diversification
• Mergers and acquisitions
– Harris Teeter
– Vitacost
(Wade)

32. Recommendation
• Customer first strategy
– Supports goal of differentiation
– Don’t try to be Walmart
• Continue Diversification Strategy
• Growth in existing Markets
• Monitor Prices
– Economy is still recovering
– Consumers are more price sensitive
(Wade)

33. Work Cited
• http://sheblogsit.com/2013/07/02/kroger-brand-bbq-party/
• http://www.mmbearcupoftea.com/2013/03/simple-truth-products-review.html
• http://www.trashsociety.com/2011/01/29/aldi-vs-walmart-a-shopping-comparison-
day-248/price-shopping-comparison-kroger-aldi-walmart-groceries-toiletries/
• https://www.flickr.com/photos/retroweb/5983092140/?rb=1
• https://ld.fgiresearch.com/fgireportbuilder/kroger/gw?proc=1
• http://www.todayifoundout.com/index.php/2010/06/where-the-dollar-sign-comes-
from/
• http://www.prnasia.com/blog/archives/5601
• http://www.tecnomastergroup.com/capabilities_eng.html
• http://joelfromcanada.com/strength/

34. Work Cited Continued…
• http://www.thekrogerco.com/corpnews/corpnewsinfo_values.htm
• http://www.sodahead.com/united-states/cass-sunstein-out/question-2852781/
• http://www.digitalmanagementblog.com/2013/09/24/digital-marketing-platforms-
equal-opportunities/
• http://www.dreamstime.com/photos-images/threats.html
• http://www.greenretaildecisions.com/news/2013/06/27/kroger-commits-to-zero-
waste-sustainable-palm-oil
• http://www.miheadlines.com/2014/05/03/michigan-kroger-stores-double-coupon-
policy/
• http://wepartypatriots.com/wp/2014/08/28/holding-out-fred-meyer-forces-teamsters-
strike-after-competitors-ratify-new-deals/
• http://www.findagrave.com/cgi-bin/fg.cgi?page=gr&GRid=2037

35. Work Cited Continued…
• http://corporate.walmart.com/
• http://www.watchlistnews.com/profit-rises-for-costco-wholesale-by-
3/32844/
• http://www2.houstonisd.org/HISDConnectDS/v/index.jsp?vgnextoid=910d
6430597f4310VgnVCM10000028147fa6RCRD&vgnextchannel=051bdfb83d
e94310VgnVCM10000028147fa6RCRD
• http://www.gopixpic.com/640/kroger-customer-first-demo-13-
minutes/http:%25257C%25257Cb*vimeocdn*com%25257Cts%25257C861
%25257C961%25257C86196170_640*jpg/
• http://www.just-food.com/analysis/kroger-in-safe-hands-after-dillon-exit_
id124576.aspx