Market Focus and Competitive Advantage

market focus & advantage

MARKET FOCUS AND COMPETITIVE ADVANTAGE: SNAPSHOTS OF FOUR GLOBAL COMPANIES
TABLE OF CONTENTS McDONALD'S CORPORATION SEARS, ROEBUCK, AND COMPANY THE GAP, INCORPORATED DELL COMPUTER CORPORATION APPENDIX BIBLIOGRAPHY
McDONALD’S CORPORATION [top]
Company Snapshot
CEO: Jack Greenberg Fortune 500 rank: 138 Market price 4.12.01: $26.89	2000 Revenue: $40 billion 29,000 stores 364,000 employees	Competitors: Wendy’s ~ Tricon ~ Burger King
McDonald’s sells its products in franchised stores around the world, in express stores at gas stations and travel plazas, and online at www.mcdonalds.com
Efficiency: McDonald’s franchisees follow extensive rules and Standard Operating Procedures (SOPs). Work is divided between chefs and food servers to maximize food production and customer service. The McDonald’s “Made For You” customized cooking platform² ensures efficient, consistent production of a variety of foods.
Quality: McDonald’s ensures quality in its products through extensive SOPs and the use of backward vertical integration when needed. Regulated cooking procedures and training ensures high-quality food, whether you’re in America or in Russia. It incorporates rigorous quality control procedures, monitors its franchisees, and retains ownership of restaurants along US interstates in order to maintain quality and continued positive brand recognition. Few customers have bad experiences and most retain strong brand loyalty.
Innovation: McDonald’s recent innovations include the New Tastes Menu (40-item rolling menu) and Mighty Kids Meals (preteen version of the Happy Meal). In an attempt to expand beyond the hamburger market, McDonald’s has acquired 156 Donato’s Pizza stores, 700 Boston Market stores, 100 United Kingdom Pret A Manger sandwich stores, and 41 United Kingdom Aroma Caf� stores. Quantum technological changes in its production principles allow it to continually improve the flavor and texture of its food products. McDonald’s is initiating electronic payment options and has ventured into Internet commerce.
Customer Responsiveness: McDonald’s has maintained the core values of founder Ray Kroc: cleanliness and customer service. It employs a multi-domestic strategy and company managers go to great lengths to ensure their perceptions of a country’s culture and tastes in food are accurate. McDonald’s anticipates customers’ preferences and needs and quickly meets those needs. It sells toys tied to current entertainment markets in its kids’ and preteens’ meals to ensure brand loyalty in its ownership of the youth market. It satisfies customer preference for a wide variety of options by providing many different types of foods, including beef, chicken, fish, pork, eggs, breakfast foods, fries, salad, juice, soda, desserts, ice cream, and more.
Summary: McDonald's has achieved positive brand loyalty and recognition by keeping the quality of its products and franchises globally consistent. It has achieved market focus and competitive advantage by remaining true to founder Ray Kroc’s QSC&V (quality, service, cleanliness, and value for money) core values. It is committed to growth through great tasting food, superior service, everyday value and convenience⁵ and has become the segment leader recognized as the largest and best-known global foodservice retailer². It has focused on a single concentration corporate strategy combined with low-cost and multi-domestic strategies to best serve its customers. The vast number of successful franchises denotes the efficiency of McDonald’s management, organizational model, site development expertise, and advanced operational systems. McDonald’s Hamburger University has gained a reputation as a training academy that produces experienced managers. Ronald McDonald ranks second to Santa Claus in global popularity⁶. The Ronald McDonald House Charity and McDonald’s concern for social responsibility have thrust it to the forefront of customer admiration (see the Appendix).

SEARS, ROEBUCK AND COMPANY [top]
Company Snapshot
CEO: Alan Lacy Fortune 500 rank: 29 Market price 4.12.01: $34.75	2000 Revenue: $40.9 billion 2,960 stores 323,000 employees	Competitors: Wal-Mart ~ Target ~ J.C. Penney
Sears sells its products over the phone through its catalog, in its stores (Sears, Sears Hardware, Sears Dealer, Sears Auto Centers, Sears Service Centers, The Great Indoors), through the GlobalNetXchange (an alliance with French retailer Carrefour and Oracle Corporation), and online at www.sears.com
Efficiency: Sears’ recent focus on its hard lines of merchandise is an attempt to achieve greater efficiency and profitability. It may pay off, but Sears will need to make fundamental changes in order to be successful in the department retail industry. It recently closed 89 stores to funnel more resources to productive stores. Its all-encompassing organizational model combined with second-rate merchandise lines has made it difficult to remain efficient.
Quality: Sears has experienced high executive turnover and until recently neglected to synchronize its training of new management. It delivers outstanding appliance service but fails to produce perceived quality products in its “soft” lines.
Innovation: Sears utilizes an innovative “convergence” strategy¹⁰ of serving anyone, anywhere, anytime. It is trying to retail new apparel lines and other “soft” products in its department stores, Great Indoors prototypes (home interior stores), and online.
Customer Responsiveness: Sears has a very good reputation of customer service, especially with its appliances, but has failed in its ability to anticipate customers’ rapidly changing preferences and vend quality products to meet those needs. It attempts to implement its convergence strategy through the strategic placement of mall and independent stores and through its catalogs and web presence.
Summary: Sears has achieved brand recognition, though not always in a positive manner. With the exception of its “hard” lines (appliances & tools), Sears’ customers view its merchandise as second-rate. Sears has achieved market focus and competitive advantage only in the home appliance and tools segment. It has divested most of its unrelated businesses in order to focus on its core “hard” lines. Its reputation as the largest retailer of appliances in the nation¹⁰ (35% of the American appliance market and a whopping 60% of its Kenmore brand appliances in American kitchens) and its unique policy of servicing appliances regardless of the place of purchase has garnered strong brand loyalty and allowed it to remain competitive in this segment. It faces fierce competition and has struck out on a new path, targeting women as its primary customers. In the broader department retail segment, Sears has attempted many things, but has lost its competitive advantage and is no longer America’s #1 retailer. Its apparel sales are lackluster at best¹ even with its recent strides in image, customer relations, and morale. It is trying to be different and better than the competition, but has not yet learned (as Wal-Mart has) how to grow through new formats, acquisition, or international expansion. It has become a “boring company with little or no relevance” to the customer¹¹ in spite of its long-standing commitment to corporate responsibility and community participation.

THE GAP, INCORPORATED [top]
Company Snapshot
CEO: Millard Drexler Fortune 500 rank: 147 Market price 4.12.01: $23.49	2000 Revenue: $13.6 billion 3,676 stores 166,000 employees	Competitors: The Limited ~ Abercrombie & Fitch ~ American Eagle Outfitters
Gap sells its products over the phone through its Banana Republic catalog, in its stores (Gap, Banana Republic, Old Navy, Banana Republic, GapBody, GapKids, BabyGap, Gap Outlet), and online at www.gapinc.com
Efficiency: The Gap is defined by simplicity, efficiently selling only apparel “basics.” It sells products everyone else sells, but markets them better than anyone else.¹² Its discount retail model combined with low-cost and differentiated business strategies has allowed it to retain significant market share. Its employees recycle products and fixtures and work hard to reduce waste through on-line reporting. The Gap constantly works to avoid complacency and continually looks for ways to improve.
Quality: The Gap does all of its designing and advertising in-house so that it can control every aspect of its operation. It has extensive control over its manufacturers and focuses on helping them operate responsibly. Its management has worked hard to improve production processes both internally and externally.
Innovation: The Gap demonstrates its innovation by introducing new clothing lines every year. Its creation of Old Navy in order to capture an anticipated trend toward chic bargain shopping has proven hugely successful. Its goal of being the “Coca-Cola of apparel”¹² stimulates a continuous search for improvement. The Gap’s openness to all sorts of people and to fresh ideas prevents it from getting stale¹². Its innovative use of the “frozen moment” filming technique has become a benchmark for industry advertising.
Customer Responsiveness: The Gap demonstrates a respect for diversity and maintains a fast-paced hip culture. Its three distinctive brands differentiate in merchandise mix, customer target, and marketing approach, but have the common goal of delivering exceptional style, service, and value to customers⁴. The Gap effectively anticipates and recognizes customer clothing needs and produces strong sellers every year.
Summary: The Gap has achieved positive brand recognition through wildly successful TV ads and consistent image branding. Brand loyalty is strong, but there is fierce competition from Old Navy and The Limited. It has achieved market focus and competitive advantage, though it continues to demonstrate the roller coaster performance common in the retail industry. It has usually been successful in its attempt to capture the teen crowd. Key executives recently left The Gap and its stock has dropped while interest rates rise and consumers spend less. Its marketing campaigns and TV ads have been so successful that many of its competitors have imitated their strategy. CEO Drexler is known as the merchandising wizard¹³ who has more influence on American style than anyone else. The Gap is now beginning to enjoy recognition comparable to that of great American brands like Coca-Cola and Disney. Its apparel “basics” have become staples. Its products are democratic, familiar, ordinary, unpretentious, understated, and almost lowbrow¹². The Gap has consistently branded its business and that, combined with its supermarket approach to apparel retail, has resulted in solid branding, making it one of the fastest-growing global clothing retailers. The Gap builds many new stores and frequently updates and expands existing stores. The Gap Foundation and other areas of social responsibility (see the Appendix) have established it as an environmentally conscious company.

DELL COMPUTER CORPORATION [top]
Company Snapshot
CEO: Michael Dell Fortune 500 rank: 48 Market price 4.12.01: $27.92	2000 Revenue: $38.1 billion 0 stores, 4 HQ, 6 Mfg sites 40,000 employees	Competitors: IBM ~ Compaq ~ Gateway
Dell sells its products over the phone and online at www.dell.com
Efficiency: Dell’s marketing, sales, and manufacturing managers have effectively controlled its explosive growth while efficiently producing relevant products and services. Dell’s strong strategic planning has resulted in its use of a low-cost strategy combined with differentiated products and a direct distribution organization model to sustain its efficiency and maintain accountability and responsiveness to customers. It increasingly applies the Internet to its business and is realizing associated efficiencies in its procurement, customer support, and relationship management capabilities³.
Quality: Dell produces powerful, richly configured quality products at competitive prices. Its combination of reliability, service, and support has earned it global recognition as a quality brand with superior shareholder value, producing quality outcomes for both consumers and stakeholders.
Innovation: Dell led the commercial migration to the Internet⁷ and it continues to demonstrate innovation through its use of an online system (valuechain.dell.com) that allows it to share product quality and inventory information with its suppliers. Its ability to rapidly introduce and distribute the latest technology has brought it to the forefront of the global computing industry.
Customer Responsiveness: Dell effectively anticipates and recognizes its customer computing needs and develops ways to meet those needs. It responds directly to each customer by building individual machines, then remains accountable to the customer after the sale by delivering industry-leading tailored customer services such as E-Support Direct From Dell, Dell Talk, and Ask Dudley.
Summary: Dell has achieved positive brand recognition by consistently building and servicing its low-cost, customized computers. It fosters brand loyalty by continually providing superior customer service and technical support along with continuously incorporating the latest technology in its products. Dell has achieved market focus and competitive advantage by assembling purchased components from suppliers, thereby becoming one of the most successful company in the global computer systems industry. It ended 2000 as the No. 1 computer company in the United States and No. 2 world-wide and has earned the reputation as the S&P500 No. 1 performing stock of the 1990s⁸. Dell’s potential for continued growth is enormous because of its capability of providing up-to-the-minute technology customized for and sold directly to individual customers. Regional manufacturing centers serve specific geographic regions and enable it to globally vend and distribute with ease.

APPENDIX [top] McDonald’s social responsibility involvement: (from www.mcdonalds.com) Ronald McDonald House Charities Educational partnerships Excellent people practices and same expectations for suppliers Use of a Code of Conduct, training & remediation programs Formation of industry’s first independent board of academic, industry, and animal protection experts to address farm animal welfare Continued focus on reducing energy consumption, decreasing packaging/waste, and implementing sustainable and environmentally sound business practice Sears social responsibility involvement: (from www.sears.com) Sears-Roebuck Foundation Sears Good Life Alliance with America’s Promise & Points of Light Foundation Sears Volunteer Week Coats for Kids Hosting blood drives for American Red Cross in its stores American Red Cross National Disaster Relief Fund donations Fashion Takes Action program helping women make the transition from challenging situations into independent life in partnership with the not-for-profit organization Women Work The Gap social responsibility involvement: (from www.gapinc.com) The Gap Foundation Respect for environment Environment policies shaped by empowered employees Improved production processes Better built stores and offices Waste reduction and recycling President’s Award (gift of stock) to employee who has done the most extraordinary work on behalf of the community Implementation of environmental action plans Dell social responsibility involvement: (from www.dell.com) Targeted grant programs through the Dell Foundation Heavy focus on education (particularly technology and Internet literacy & access) Corporate community partnerships Employee Giving Program Volunteerism Economic and environmental impact
BIBLIOGRAPHY [top] 1. Baeb, E. (2000, September). Sears’ new chief says, ‘Charge it.’ Crain’s Chicago Business, pp. 1. 2. Cebrzynski, G. and Zuber, A. (2001, February). Burger behemoths shake up menu mix, marketing tactics. Nation’s Restaurant News, pp. 1. 3. Cuneo, A. (1999, December). Bridging the gap. Advertising Age, pp. 22. 4. http://gapinc.com/financmedia/financmedia.htm. Retrieved April 5, 2001. 5. http://mcdonalds.com/corporate/index.html. Retrieved April 5, 2001. 6. http://mcdonalds.com/corporate/info/history/history2/index.html. Retrieved April 5, 2001. 7. http://www.dell.com/html/us/corporate/annualreports/report00// letter/index.htm. Retrieved April 5, 2001. 8. http://www.dell.com/html/us/corporate/annualreports/ report00/index.htm. Retrieved April 5, 2001. 9. http://www.dell.com/us/en/gen/corporate/factpack_002.htm. Retrieved April 5, 2001. 10. http://www.sears.com/sr/framework/home.jsp?BV_SessionID= @@@@1406970484.0987292561@@@@&BV_EngineID= fkalkilelilkbgfcmgclchm.0&targetPage=%2fmisc%2fsears%2fabout %2fcommnities%2finternetalliance.jsp &vertical=SEARS. Retrieved April 5, 2001. 11. Martinez, A. (1999, July). Sears’ strategy for continuing renewal. Chain Store Age, pp. 64+. 12. Munk, N. (1998, August). Gap gets it. Fortune, pp. 68-74+. 13. Staff. (2001, January). People to watch 2001. Fortune, pp. 30-34.