Future public policies that will affect the U.S. Supermarket and Grocery Store Industry

The rise of e-commerce and online retail has altered the general trends in the ‘U.S. Supermarket and Grocery Store industry’ and the position of brick and mortar giants is now under siege. How will traditional brick and mortar stores fare in this current scenario and are they transforming themselves to compete? This paper will shed light on the current and potential challenges that this industry is poised with, whilst simultaneously adopting a conventional approach in analyzing key ethical aspects surrounding public policies that can be shaped by this industry. Obviously and intuitively, it relates to the evolution of traditional brick and mortar retail into dynamic multi-functional digital platforms. The primary focus lies in the consumer's shift in paradigm and the manner in which e-commerce giants such as Amazon are craft fully influencing this change. The likes of Amazon have the power to create favorable perceptions - Their logistics, services and prices are nearly unmatched and got them into this influential position in the first place. But now, they are almost capable of leading consumers into believing that there actually isn't any conceivable reason for them to visit stores anymore. It is quite similar to the Apple approach - Don't follow the trend, create it. However, in this case we are talking about the effective extinction of the physical storefront through engineered processes by e-commerce giants to even overcome storage and delivery issues with perishable food products. This paper will simulate a plausible world one decade from now, wherein physical stores are on the verge of functional obsolescence and now mere boutiques, sculpted towards individual experiences. Virtual stores have evolved along with technological developments in requisite logistics to the extent that they thrive solely and most retailers have either embraced this change or folded. It will also explore the potential challenges that the industry may face in advancing towards this probable reality with regard to legal issues and implications that may arise.¹              

The emergence of online grocery retail in the future can easily be plagued with several issues ranging from food sourcing and inspection to quality concerns and tampering. With the advancement of sophisticated grocery delivery models, similar to the now defunct Web-Van system², by giant online retailers, there will be a lot of speculation and suspicion about the food products in question. One of the most pressing worries may relate to the fact that consumers will be unable to manually inspect the food items before purchase, nor will they be able to accurately gauge whether the items they receive are in fact the same ones they ordered online. Consequently, one might expect federal agencies governing U.S food law to implement regulations for containing such issues. This in turn will spur a significant degree of non-market action, more prominently in the form of lobbying, by industry leaders whose businesses will suffer as a result of these new laws. It is quite tenable to anticipate a public backlash against such non market activity as well. However, as stated earlier, the profound economic prowess and influential stature of these pioneering titans of the industry will be difficult to combat. Under such circumstances, they may even leverage their superlative brand to meander public perception in their favor as observed so often in the past. But on the other hand, traditional retailers who would then be former behemoths of the industry, will work to rally support in the direction that would benefit them. As this is a vital turning point that could potentially revolutionize the food retail industry, with several critical interests involved, the notion of a highly likely battle for public opinion and legal approval will provide tantalizing fodder for the media. This cumulative effect might foster several other non-market issues in sequence of a viscous cycle.

Assuming the role of an executive for an enterprise representing the new wave in U.S retail, the following two mutually dependent strategies may be adopted in an effort to insulate the firm from legal complications and resolve the issue in its favor, whist simultaneously taking into consideration their ethical implications: 

1.       It will be absolutely paramount that all the major enterprises running the risk of being negatively affected as an outcome of the new laws, temporarily put their competitive rivalries on hold and unite in contention against opposing forces. The pursuit of similar ambitions can help align expectations even amongst the fiercest of rivals and forge the establishment of a united consortium of industry leaders that can tackle the situation more effectively.     

2.       Since a lot rests on public opinion in this case, it is obvious that this newly formed alliance must work towards winning them over. In a struggle for decisional influence between this block and the traditional retailers and with the government playing judge, it is not hard to foresee that the public is the only significant neutral force capable of tilting the balance. In order to obtain public support, it is important for the enterprises in question to ensure that they seek the very best for their consumers and people, in general. To do so, they cannot ignore the driving force behind consumer perception – The media. Engaging in specialized public relations regarding this matter and candidly communicating with the media will be the key to achieving this goal.

It is equally essential to maintain a high degree of transparency while deploying this strategy as its fundamentals are based on trust, honesty and duty. This is simply because people appreciate the truth, while the media likes anything that viewers do. Assessing these approaches through a utilitarian lens, we can infer that they would in fact generate the greatest benefit for the most number of people if they uphold and protect the very virtues that made them a public favorite in the first place. The rationale behind this is that people had an open choice to select their preferred retailer and they opted for the virtual retailers simply because they were convenient, better and more efficient. Now if these very same retailers continue to sincerely serve people’s needs and do what they know propelled them to the top, they can be rest assured that their actions will be well received universally. Moreover, by being transparent, people will also be aware of the consequences of their support and thereby be vary of its negatives as well. Observing these tactics from a deontological perspective, it is clearly evident that the representative will fulfill his or her organizational duty and also avert any repercussions that the firm would otherwise have to incur as a result of dishonest informational disclosures or iniquitous vested interests.   

End Notes

1.      This hypothesis has been formulated by me, for my Industry Analysis paper, geared towards answering the questions below in relation to the U.S. Supermarket and Grocery Store industry – I thought it might be intriguing to combine the two approaches. (Please let me know if you would like to discuss the build up to this hypothesis or prefer more information on the same)

• How has the rise of online retail giants such as Amazon.com altered the general trends in the industry?
• How do traditional ‘brick and mortar stores’ fare in this current scenario and are they transforming themselves to compete? 

2. Introduction to Webvan - an online "credit and delivery" grocery business that went bankrupt in 2001:

    http://en.wikipedia.org/wiki/Webvan

Government agencies that administer regulations in the U.S Supermarket and Grocery Store Industry

Safety is the first concern that comes to mind when one brings up a topic relating to the retail of food products. This complex challenge of assuring safe food has led to numerous federal and state government agencies having a role in U.S. food safety matters. This paper provides an overview of the role of various agencies that formulate and implement regulations relating to food safety, taking into consideration the economic rationale and compliance measures associated with them. Essentially, this paper will focus on the analysis of a few critical ‘prohibited acts’ administered by the law.¹

Much of U.S. food law is predicated on federal law, albeit many states withal have addressed issues relating to food safety.  The number of agencies involved in food safety research, regulation and inculcation integrates further intricacy, but it additionally illustrates the breadth of issues involved in assuring a safe food supply. All federal agencies are granted their ascendancy from Congress; federal agencies can do no more to regulate food safety than Congress sanctions them to do. Thus food safety issues often take on a political appearance as Congress works to define the role of regime in addressing these concerns. The substratum for federal regime involvement in many of food issues lies in the U.S. Constitution.² Federal statutory law clearly mentions that it is regulating only those food items that involve interstate commerce; but the truth is that approximately all food involves interstate commerce. As a consequence, the federal regime has ascendancy to regulate proximately all food engendered or consumed in the country.

Food safety concerns frequently fixate on the processing sector of the industry; it is only since the mid-1990s that discussions about food safety have broaden to encompass "farm to table."  Despite the integrated breadth, the accentuation for food safety is still on processing and final preparation of food items. Accordingly, this exordium to agencies involved with food safety commences with an overview of agencies responsible for regulating the processing sector of the industry. The Food and Drug Administration (FDA) primarily, but not entirely, fixates on the processing of food products; that is, post-harvest. FDA inspects facilities, accumulates and analyzes samples of products and provides standards for labeling on food packages.³ It relies on scientific expertise in consummating its mission. "The Food Safety and Inspection Service (FSIS) is the public health agency in the U.S. Department of Agriculture responsible for ensuring that the nation's commercial supply of meat, poultry, and egg products is safe, wholesome, and correctly labeled and packaged."⁴ FSIS inspects the operations of plants processing meat and poultry products as the plants are being operated; these plants cannot operate without a federal inspector or federally-approved inspector on site. It withal inspects the animal before slaughter and the product after slaughter. Albeit not directly regulating food processing businesses, the Centers for Disease Control and Obviation of the Department of Health and Human Accommodations impacts the food industry through its role of obviating food-borne illnesses and its involvement when a food safety quandary arises. The Environmental Protection Agency (EPA) is responsible for regulating the utilization of pesticides on food. ^5&6

In terms of economic rationale relating to these regulations, the benefits from providing information about risks must be considered in light of the costs. For example, the FDA might refrain from passing an incipient drug for testing to reduce risks, but this is costly to the people whose lives could be preserved if the drug were approved. However, the flipside is also equally compelling in that several lives could have been lost if a potentially hazardous drug were to be freely marketed without proper prior testing, of the highest order.

In order to comply with these regulations, enterprises from within this industry such as Walmart and Tesco must establish certain expected standards that will inevitably increase costs. These measures may include sourcing limitations or mandatory labelling requirements, for instance. This would mean that foodstuffs which do not meet federal requirements cannot be legally retailed and products which contain even miniscule amounts of substances deemed imperfect by law must carry a caution label, thus impairing their luster. In a nutshell, these prohibitions hamper an enterprises’ ability to be entirely competitive in the market and often have drastic cost implications.

   

In conclusion, it is pertinent to restate the importance of ensuring good standards of safety in matters pertaining to food retail. It is also equally essential to take into consideration the sheer authority and leeway that governmental bodies possess in administering these laws, as well as the resulting implications that they may have on consumers and retailers alike, either economically or otherwise. In retrospect, these issues have always been highly sensitive and policy makes involved in their formulation need to be all-inclusive and exercise a great deal of good judgment.  

End Notes

1. http://www.law.cornell.edu/uscode/text/21/331 - 21 USC § 331 - Prohibited acts
2. "Section 8: The Congress shall have power to ... regulate commerce ... among the ...states"
3. Food and Drug Administration (FDA) of the Department of Health and Human Services
4. Food Safety and Inspection Service (FSIS) of the U.S. Department of Agriculture
5. Agency History -- provides an excellent overview, including an overview of the agency's current philosophy. Responsible for administering the laws and regulations associated with meat, poultry and eggs
6. FSIS Fact Sheets on a range of topics
7. Another Relevant Agency (Not stated or cited anywhere in the paper) - "The mission of [Centers for Disease Control] CDC's Food Safety Office is to lead CDC's food safety programs to prevent illness, disability and death due to domestic and imported foodborne diseases. We collaborate with and support other CDC organizations with focus on attainment of food safety program plans, goals and objectives. We work in partnership with the U.S. Food and Drug Administration (FDA), U.S. Environmental Protection Agency (EPA), U.S. Department of Agriculture (USDA), state and local health departments, and other public and private organizations to strengthen regulations and policies for prevention of foodborne diseases."  Taken from CDC's Food Safety Office

Interests in the Supermarket and Grocery Store Industry: Resources, Coverage, and Organizing Costs

Introduction

The Supermarket and Grocery Store Industry worldwide currently faces public policy issues relating to Labeling Regulations, Food politics and Abuses of buyer power. This paper will explore the nonmarket activity of the three leading retail giants from this industry, namely Tesco PLC ($101.3b), Walmart ($72.2b) and Kroger ($96.5b) respectively. It will also focus on drawing comparisons between their lobbying efforts and those undertaken by the industry’s prime trade associations.

Nonmarket Activity among Interests in the Supermarket and Grocery Store Industry

All of the three leading enterprises within this industry have a significant amount of non-market spending. British retail juggernaut, Tesco PLC, boasts of $101.3 billion in revenue and employs 530,000 people globally.^1&2 This emphasizes its economic and personnel prowess in the nonmarket realm. Internationally, Tesco operates in 12 markets and in all the 39 counties (states) of the United Kingdom.³ Therefore, it has a strong geographic presence domestically. Moreover, Tesco is also a household favorite in the U.K and that allows the company to leverage its strong brand as a catalyst to rally favorable political impetus. In addition, Tesco also invests significantly in campaign spending and lobbying in order to garner greater political support.⁴

North America’s largest retailer, Walmart, recorded a revenue of $72.2 billion and employs 2.2 million people worldwide. Walmart has 8,500 stores in 15 countries, under 55 different names. In 2009, it generated 51 percent of its US$258 billion sales in the U.S. from grocery business and is said to employ 1% of the American working population, making it a very robust force to reckon on the political front.^6&7 To reinforce this stance, within the U.S.A, Walmart operates in all 50 states and the district of Columbia. As of 2013, Walmart invested $3.8 million in political contributions, of which $1.47 million went to candidates, with the remainder going to political parties.⁸ (Exhibit 1)

Fellow U.S retailer Kroger totals $96.5 billion in revenue, operates 2,435 stores and employs 343,000 individuals in 31 states of its home nation. Compared to Tesco and Walmart, Kroger’s human resource penetration within its parent country may seem fractional, but it is still considered relatively strong on a general industrial scale.⁹ Surprisingly and rather uncharacteristically, Kroger has also reduced its cumulative political spending with expenditure on lobbying amounting to a measly $200,000. However, in retrospect, while looking at historic data pertaining to Kroger’s political investments over the last decade, it is evidential to infer that the company has not only been cutting down on such expenses, but was never actually big on political spending.¹⁰ (Exhibit 2)    

The National Retail Federation (NRF) is the world's largest retail trade association and represents an industry that contains over 1.6 million U.S. retail establishments with more than 24 million employees and sales of $4.4 trillion, as of 2005.¹¹ All the three major global retailers discussed above are a critical part of this umbrella group, which saw political spending of $1.1 million⁵ this year. Intriguingly, the $3.5 million spent in 2012 eclipsed this amount. (Exhibit 3) Other significant food retail trade associations include ‘The Food Institute’, ‘Foodservice Sales & Marketing Association’ and ‘National Association of Convenience Stores’ among others.¹²

Conclusion

The analysis conducted in this paper has highlighted a consistent trend - Reduced spending in political activity and lobbying in the Supermarket and Grocery Store Industry, largely characterized by the fractional cut in expenditure exercised by the industry’s largest and most vital trade association as well as its leading players. (Exhibits 1,2&3) It is also conclusive to recognize this industry’s dense and geographically well dispersed human elements, as viable forces that have the power to attract political attention and bring about requisite changes, if necessary.

End Notes

1.       Tesco Company Stats: http://www.dailymail.co.uk/news/article-1319718/Tesco-numbers-Employs-472-000-people-makes-6K-minute.html

2.       Tesco Company Stats: http://en.wikipedia.org/wiki/Tesco

3.       Tesco Company Stats - Store dispersion: http://www.store-locations.co.uk/tesco/

4.       Tesco’s Lobbying activities: http://www.corporatewatch.org.uk/?lid=254

5.       NRF’s Lobbying activities: http://www.opensecrets.org/lobby/clientsum.php?id=D000000741

6.       Walmart Company Stats -Annual Revenue & Store dispersion: http://en.wikipedia.org/wiki/Walmart

7.       Walmart Company Stats - Employee data: http://www.statisticbrain.com/wal-mart-company-statistics/

8.       Walmart’s Lobbying activities

·         http://www.opensecrets.org/lobby/clientsum.php?id=D000000367

·         http://www.huffingtonpost.com/al-norman/walmart-lobbyists_b_3632526.html

9.       Kroger Company Stats: http://en.wikipedia.org/wiki/Kroger

10.   Kroger’s Lobbying activities: http://www.opensecrets.org/lobby/clientsum.php?id=D000027084

11.   National Retail Federation Info: http://en.wikipedia.org/wiki/National_Retail_Federation

12.   Major Food Retail Trade Associations: https://www.technomic.com/Resources/Links/

EXHIBIT 1

EXHIBIT 2

EXHIBIT 3

Media Coverage and Treatment of Nonmarket Issues in the Supermarket and Grocery Store Industry

The Supermarket and Grocery Store Industry consists of retailers that are predominantly involved in the procurement and sale of a vast variety of food items. This industry currently faces public policy issues relating to Labeling Regulations, Food politics and Abuses of buyer power. This industry’s issues are vastly covered online by individual journalists, bloggers and organized free-lance writers who seek to spread awareness about farmer’s rights, consumer exploitation as well as environmental hazards. In addition to these sources, a few major media outlets also cover similar issues but by and large, the sources remain fragmented and scattered. Significant literature pertaining to this issue also exists from books and offline sources.    

            There have been ample publications relating to the issue of labeling regulations⁵. Authors such as Calver, Dean, Fiedler and Jankowski (among others) address this issue through their books and also provide appropriate suggestions to best resolve this issue. While these authors remain relatively unknown outside the realm of food retail, their work has gained many plaudits in the academic space, as these titles are extensively used in several university courses within this field. Since these pieces of study were created with the inherent goal of being utilized as scholarly material, ‘media bias’ as per Baron’s Theory of Media Coverage and Treatment is practically absent as there isn’t an inherent desire for the writers/publishers to profit out of its publicity in any way.              

             Websites such as food politic.com¹ and foodretailworld.com² serve as viable information sources pertaining to the issues of food politics. Thepacker.com⁶ is the online version of a weekly newspaper that has been covering food retail news and relative issues, since 1893. These online platforms are established and managed by considerate individuals of society who are passionate about such issues. Among the more niche sources, The New York Times³ and The Wall Street Journal⁴ remain very prominent as well. Since the problem of food politics has a very extensive meaning and encompasses many dimensions of the food retail industry, a lot of these articles target issues that relate to the larger problem. Monbiot, G. (2000) Captive State and Basingstoke: Macmillan (pages 162-208) are publications that further investigate this issue. Based on the nature of this issue, it seems unlikely that the publishers produced this material with even a partial objective to gain profit through sensationalization of this issue or otherwise.

            In terms of the third issue i.e. Abuses of buyer power, a lot of information has been generated by educational institutions and professional organizations studying the business operations of retail organizations as a part of the curriculum or for research purposes respectively. These material resources, existing in the form of research projects and class papers, are widely used in the academic space and are constantly propagated through research initiatives, thus indirectly raising awareness about the issue at hand. A majority of this data is based on the writer’s opinions, thoughts and suggested courses of action. Over time, multiple revisions by different experts from the field help refine the study⁸. The topic of large retailers exploiting consumers through superior group purchasing power, makes for interesting news and has the potential to stir a response from the public. Although instances of perceived monetary gain through academic publication on these issues are sparse, media vehicles such as news channels, newspapers and magazines tend to sometimes blow such issues out of proportion to engage readers and thereby make the most out of the issue at hand. In a sense, they sometimes tend to report the issue as being much larger than what it actually is.  

           The issues in the Supermarket and Grocery Store Industry have received moderate coverage and editorial treatment in the media. The media’s interest in issues such as food politics and labelling regulations remains low on account of their relatively technical and ‘dry’ nature. On the other hand, Abuses of buyer power is a globally advertised issue that claims much intrigue across the globe and is thereby, greatly covered by media platforms.

End Notes

1. http://www.foodpolitic.com/
2. http://www.foodretailworld.com/
3. The New York Times: http://topics.nytimes.com/top/reference/timestopics/organizations/f/food_and_drug_administration/index.html
4. The Wall Street Journal: http://blogs.wsj.com/moneybeat/2013/09/11/hot-in-the-market-the-supermarket-deal/?KEYWORDS=food+retail
5. Labeling Regulations:

·         Calver, G., What Is Packaging Design, Rotovision. 2004, ISBN 2-88046-618-0.

·         Dean, D. A., 'Pharmaceutical Packaging Technology", 2000, ISBN 0-7484-0440-6

·         Fiedler, R. M, "Distribution Packaging Technology", IoPP, 1995

·         Holkham, T., "Label Writing and Planning – A guide to good customer communication", 1995, ISBN 0-7514-0361-X

·         Jankowski, J. Shelf Space: Modern Package Design, 1945–1965, Chronicle Books. 1988 ISBN 0-8118-1784-9.

·         Leonard, E. A. (1996). Packaging, Marcel Dekker. ISBN 0-8247-9755-8.

·         Lockhart, H., and Paine, F.A., "Packaging of Pharmaceuticals and Healthcare Products", 2006, Blackie, ISBN 0-7514-0167-6

·         McKinlay, A. H., "Transport Packaging",IoPP, 2004

·         Morris, S.A. "Food and Package Engineering", 2011, ISBN 978-0-8138-1479-7

·         Opie, R., Packaging Source Book, 1991, ISBN 1-55521-511-4, ISBN 978-1-55521-511-8

·         Pilchik, R., "Validating Medical Packaging" 2002, ISBN 1-56676-807-1

·         Robertson, G. L., "Food Packaging: Principles and Practice", 3rd edition, 2013, ISBN 978-1-4398-6241-4

·         Selke, S., "Packaging and the Environment", 1994, ISBN 1-56676-104-2

·         Selke, S,. "Plastics Packaging", 2004, ISBN 1-56990-372-7

6. http://www.thepacker.com/
7. Food Politics: Monbiot, G. (2000) Captive State & Basingstoke: Macmillan, pp. 162-208

8. Abuses of buyer power:  http://www.ftc.gov/ogc/healthcarehearings/docs/030926bloch.pdf

Public Policy Issues in the Supermarket and Grocery Retail Industry

The Supermarket and Grocery Store Industry consists of retailers that are predominantly involved in the procurement and sale of a vast variety of food items, including fresh fruits and vegetables, fish, meat, milk and milk products, and other sustenance products. Chain grocery retailing was a phenomenon that took off around the beginning of the twentieth century. Natural and organic food was and continued to be a successful and growing category in the grocery industry in the early 2010s. The largest consumer of natural and organic food and beverages was the United States, which claimed more than 50 percent of the market in 2011. The European Union and Japan were also important markets.

The Supermarket and Grocery Store Industry, which falls within the NAICS code 445110, reported a combined annual revenue of $714.9 billion, largely influenced by the revenues of the leading retail industry giants vis-à-vis Tesco PLC ($101.3b), Walmart ($72.2b), Kroger ($96.5b) and the Shwarz Group ($67.8b) respectively. However, this Industry also faces significant public policy issues that are summarized in this paper.

Labeling Regulations

Issue: The FDA has proposed regulations that would regulate grocery stores under a “Nutrition Labeling of Standard Menu Items at Chain Restaurants” provision included in the Patient Protection and Affordable Care Act (PPACA). The law was initially intended to provide a uniform standard for chain restaurants with 20 or more locations to comply with various state and local menu labeling laws, none of which have regulated grocery stores. By expanding these regulations to grocery stores, FDA would impose a $1 billion initial cost on grocery stores.

Interests: End consumers and grocery store shoppers have a stake in this issue as the new labeling laws will have an impact on their purchase decisions and value perceptions with respect to nutritional facts and information. Quite obviously, organized interests will include all the major grocery retailers and supermarkets, and the FDA, on account of the economic repercussions and reputational issues they have at stake.

Institutions & Life Cycle: In the U.S, this law is currently in the formulation phase and there is a debate as to whether it would limit restaurant menu labeling regulations to establishments that primarily sell restaurant foods. And since grocery stores are not similar to restaurants in that respect, there is every possibility that they might not be regulated under restaurant menu labeling. There are a few European countries where similar laws are currently in the enforcement stage, although the specifications of the same may vary.

Food politics

 Issue: Food politics are the political aspects of the production, control, regulation, inspection, distribution and consumption of food. The politics can be affected by the ethical, cultural, medical and environmental disputes concerning proper farming, agricultural and retailing methods and regulations. Government policy now plays a significant role in the production, safety, and distribution of food. Today’s governments have the authority to regulate the storage and preparation of foods, and the enforcement of these regulations has been strongly influenced by public outcry following outbreaks of food poisoning. Due to the buying power of the large supermarket chains they can put huge demands on producers, often pushing prices artificially low, whilst still making large profits on the food themselves with some products selling at over 400% the price paid to producers. This buying power also allows supermarkets to transcend national boundaries in sourcing food. However overly stringent policies, defeat to a certain extent, the bargaining power of the retailers, eats into their profits and diminishes their ability to reap benefits of volume and price.

Interests: This problem affects all the parties involved right from the supply to the purchase of food products as well as the government’s regulatory authority. Therefore, suppliers such as local producers, farmers, transportation agencies, and the supermarkets themselves are impacted.

Institutions & Life Cycle: Food politics is an ongoing problem across the world and is at varying stages on the life-cycle in different countries. In many cases, corruption plays a big role in determining the nature of these regulations. 

Abuses of buyer power

Issue: Consumers are the final link in food supply chains which are increasingly international. The processes and dynamics operating along such chains affect consumers in both positive and negative ways. Over at least 30 years, supermarkets in developed economies round the world have acquired an increasing share of grocery markets, and in doing so, have increased their influence over suppliers – what food is grown and how it is processed and packaged – with impacts reaching deep into the lives and livelihoods of farmers and workers worldwide. At national level in many countries, a large share of the grocery market is frequently in the hands of only a handful of supermarkets. One of the consequences of this concentration is a growing imbalance of bargaining power within food supply chains. Major Supermarket chains play a key role in shaping consumer demand and because of the power they wield in the marketplace, they have a strong influence over what consumers buy. Supermarkets can be seen as gatekeepers rather than passive transmitters of consumers’ wishes, and their gate-keeping role can work to the detriment of consumers and suppliers alike.

Interests: Consumers, suppliers, the supermarkets and consumer organizations are the affected parties in this case, with interests in this issue.

Institutions & Issue Life Cycle: With a mandate to inform consumers and act in their interests, consumer organizations have a vital role to play in preventing the negative effects of buyer power. Although at present there are several seemingly potent legal hurdles established to keep this problem in control, the sheer financial and influential prowess of giant supermarket chains is fairly capable to exploit potential shortcomings in the system. Effective measures to curtail unfair B2B commercial practices and the resulting detriments to small-scale producers and consumers are urgently needed, and remain an ongoing concern with a dynamic life cycle.

Conclusion

The Supermarket and Grocery Store Industry is experiencing the following three public policy issues at present: Labeling Regulations, food politics and abuses of buyer power. End consumers & shoppers, farmers, consumer organizations, transportation agencies, suppliers, and legal regulatory & government organizations cumulatively comprise of the interest groups, with respect to these broader issues. While all these issues exist at different stages in their respective life-cycles, it is reasonable to infer that some of them can be effectively resolved faster and easier than others. However, several aspects of the larger issues such as food politics and abuses of buyer power continue to be heavily complicated and the processes needed to resolve them, increasingly labyrinthine.  

Business Development, Growth & Expansion Planning for Aspire Public Schools

Aspire Public Schools, a CMO headquartered in San Francisco, establishes and operates public charter schools in California focused on providing low-income, urban youth with a high-quality education that will prepare them for college. With a current total of 10 schools, Aspire’s objective goal was to operate 100 charter schools in the state while maintaining its credible image of consistent improvement and delivering quality service. In addition, they also aim at attaining sustainable self-sufficiency through exclusive revenue from administration fees for running their Home office’s operations.

Despite widespread recognition and ardent praise directed towards their model of imparting education, Aspire’s financial situation and academic performance at the time were far from optimal. Only two of their schools were barely meeting the minimum API score requirements and decile rankings set by the state, while astronomically high and disproportionately distributed facilities expenses across their existing schools were resulting in an average net loss of 5% of revenue per school. This was their prime concern and a specific objective was to operate facilities at an average of 12% of revenues by ensuring that new school facilities amount to a maximum of 10%. Moreover, the cost of running the home office was proving to be very expensive, with personnel expenses accounting for 70% of its budget. However, Aspire envisions increasing its staff by 50% which would characterize a further increment. Rapid expansion with a target of opening 35 schools by 2008 or less optimistically, 90 schools by 2013 coupled with philanthropic donations of 11 and 25 million dollars respectively were seen by COO Gloria Lee as a plan to attain financial stability by breaking even.     

Management at Aspire is currently poised with the lucrative yet complex prospect presented by LAUSD to establishing their nascent presence in Los Angeles by opening the first of their schools in southern California – A project that is estimated to partially capitalize on an overwhelming demand of 130,000 prospective students. While entry into LA’s school district is eventually imminent for Aspire to develop a healthy alliance and stronghold in the state, it simultaneously runs the risks associated with growing at an uncharacteristically fast rate. These include the economic burdens of opening a new regional home office, compromising on quality, sacrificing autonomy and adhering to an array of bureaucratic norms prevalent in the district along with the volatile political landscape and legislative issues that comprise of the daunting realities for schools in LA.

The second alternative that management contemplates is gradual and controlled growth of Aspire public schools within Northern California, largely influenced by historical successes in San Francisco and Oakland. With a functional home office already present in the region, increasing the number of schools under its jurisdiction seemed to be an economical and operationally efficient model. Also, owing to its stature and prowess in the region, this option would also give Aspire the flexibility to independently operate these new schools as it desired. After few years, once the region becomes saturated and when sourcing charters becomes a significant challenge, pursuing growth inwards and down the coast to find new opportunities would be the next step.

Another option is to stall growth, refine and enhance their current efforts and in few years when they are better prepared, revisit the prospect of entering Los Angeles. This would presumably entail upgrading the quality standards and performance ranking of their existing schools by focusing exclusively on the suggested five year improvement plans that were put in place, prior to considering any expansion options.

On evaluating the problems and opportunities that surround these three alternatives, I have taken the decision to pursue the first option i.e. accepting LAUSD’s offer to expand into Los Angeles, primarily because it aligns perfectly with their long term vision. However, I have recommended a slightly different approach for Aspire’s growth efforts in southern California. To begin with, the target of opening 35 schools will be met over a suggested period of 10 years by 2013 as opposed to 2008. The reason behind this is to ensure that they do not expand too fast which in retrospect, can have a detrimental impact on the quality of their services. With this comparatively conservative growth plan, Aspire will see an addition of 2 new schools per year till 2008 followed by an addition of 3 new schools per year till 2013. In this way, the percentage increase in the number of Aspire’s schools will never exceed 15% barring the first year (2004) where it will be 20%. Also, these 25 new schools will be composed of 15 elementary schools that will be opened initially, followed by 10 high schools respectively as the cost to open elementary schools is lower and Aspire has a history of successfully operating them. This will provide Aspire with time to further develop and perfect their model for high schools in the future. This model will yield a projected net profit of $1,435,275 in year 10 (2013) for all the 35 schools cumulatively while the home office will see a net profit of $266,332 as well in the same year. (Click on the spreadsheet below for forecasted calculations)

Analyzing this decision strictly from a qualitative standpoint, its potential benefits are not difficult to foresee. Firstly and in an obvious sense, it would be duly irrational for Aspire to surpass an ideal premium opportunity like this to make its segway into southern California.  With its apparent domination in the north and going to the tune of its vision to expand throughout the state, penetration into Los Angeles is all but eventually inevitable. Moreover, it will provide Aspire with the chance to leverage its unique and highly sought after teaching style to several students from the region that are in dire need of their services. This will serve to enhance their credibility and presence in the community as well. While the several issues that await Aspire as a part of this project cannot be neglected, they will also put aspire in a position Aspire to test themselves on unfamiliar terrain – A challenge that if they overcome, will set them on a perfect course to achieving their much cherished long term vision. 

In addition to this, Los Angeles is expected to spend around $8 million on new schools in the forthcoming years with about $50 million directed towards the support of facility costs for charter organizations like Aspire. LAUSD also seemed to suggest that several utility costs for Aspire-purchased land would be covered too. As identified by Lee and Shalvey, the location of this project would serve as a means of attracting a wider, ethnically diverse and greatly talented pool of prospective recruits for teacher and principal positions. Based on these possibilities, it is imperative that the decision to venture into Los Angeles will be a promising and fruitful one for Aspire.

Strategic analysis of Safeway's business model

Safeway, Inc. is a leading operator of grocery chains in North America with three prominent competitive Advantages. The company’s broad product portfolio helps it to cater to a diverse range of customers. Safeway is one of the largest food and drug retailers in North America with an extensive network of distribution, manufacturing and food processing facilities across 1,678 stores in the US and Canada. At Safeway, innovation is considered as the top priority and continues to be the cornerstone of the company’s corporate strategy. Two years ago, the company implemented the Autonomy's Intelligent Data Operating Layer software to increase operational efficiency. This continued focus on innovation and regular launch of products helps the company to align itself to the change in customers’ tastes and preferences.

However, on the other hand, Safeway is also plagued by certain weaknesses. Firstly, its failure to source and market the company’s merchandise efficiently and creatively could impair its ability to compete successfully and could adversely affect its growth opportunities. Next up is the critical issue pertaining to declined Liquidity. The company reported a decline in all the liquidity ratios. Its liquidity ratios decreased due to the increase in current liabilities. Its total current liabilities increased to $5,038.3m in the fiscal year ended 2011 from $4,314.2m in 2010. This led to a marginal decline in its liquidity indicators such as current ratio, quick ratio and cash ratio. The declining current ratio indicates that the company is in a weak position to meet its short-term obligations. The company also reported a decrease in cash and short term investments in fiscal year 2011 to the extent of 6.3% which was responsible for a recorded negative net change in cash of $49.4m. The decreasing cash reserves indicate the company’s inability to obtain additional debt to finance acquisitions, capture business opportunities and meet capital expenditure or other capital requirements in the future. In addition to this, Safeway has also recorded an increasing number of product recalls. Such recalls can hamper Safeway’s brand image and have a significant impact on its product sales. In addition, they not only affect the company's current revenues, but could also affect its long-term performance by reducing customer confidence. Another vital concern focusses on revenue concentration: Safeway’s financial performance is highly dependent on the US and Canadian operations, which comprised about 84.6% and 15.4%, respectively, of its total revenue for fiscal year 2011. The US economy is recovering very slowly and any such macro-economic factors slowing its revenue generation or decline in its business and financial performance from the US segment could have an adverse effect over its operating cash flows.

That being said, Safeway has a number of opportunities that they can capitalize upon characterized by a wide range of Private label brands, growing demand for organic products, an increase in Online Sales and an array of strategic agreements and partnerships with the USDA and the CNPP.

On the flip side however, Safeway is also faced by several key risks such as fierce competitive pressures from traditional grocery retailers, non-traditional competitors such as super-centers and club stores, as well as from specialty supermarkets, drug stores, dollar stores, convenience stores and restaurants. Unfavorable alterations in Government Regulations as well as changes in Labor Laws make for an even more challenging environment.

Discount Rate Analysis: During the fiscal year ended December 2011, Safeway recorded an increase in revenues of 6.29% over 2010.  The operating profit of the company was USD 1,134.60 million during the fiscal year 2011 - A decrease of 2.14% from 2010 while the net profit of the company was USD 516.70 million during the fiscal year 2011, a decrease of 12.39% from 2010. Based on these financial indicators, I would recommend a conservative discount rate of 15% taking into consideration the volatility of Safeway’s business environment, their low liquidity and the growing prospects of potential threats from giant retailers like Walmart.  All these factors create a predicament of ambiguity for Safeway’s future.

International Advertising Assignment: New Fiat Panda - "This is the Italy we like"

Advertising is often a direct reflection of cultural and societal values. In recent years, empirical studies have shown the emergence of several “global brands” that cross borders and attempt to appeal to a mass market of consumers. However, a debate exists as to how much ethnocentrism occurs in the way advertising is created and distributed to target audiences. In this assignment, I will critique an ad from outside my home country. The purpose is to review the ad and see what research and information I can come up with to better understand the cultural context under which it was created.

This well-crafted TV advert for Fiat first aired in Italy in January 2012. With the intention of spreading messages of national pride and integrity, it draws striking similarities to the 2011 Jeep Grand Cherokee Manifesto Commercial aired in the United States. Both car manufacturers seek to leverage their unique competitive advantage as one of their nations pioneering automobile companies to attract attention, inject interest, facilitate desire and eventually persuade a course of action. The Fiat commercial appears to be directed at promoting the new Panda hatchback model but actually assumes a much greater objective – Reminding Italians about everything the company stands for, its nationalistic values, culture and ethics in a desperate effort to start anew. It fosters a bigger picture perspective as it highlights everything that defines the nation such as craftsmanship, design, structural inventions and a glorious history of prolonged excellence in automobile manufacturing. Based on Fiats then worrisome position in the global market, the ad was seen as a source of redemption for the automaker in a time of anxiety and growing concern for a nation bewildered with an array of economic crisis and growing uncertainties. 

As mentioned earlier, the commercial targeted several aspects of Italian lifestyle with the mention of design and aesthetic value being the most prominent. It also aimed at selling the concept of ‘hope and faith’ in an effort to encourage Italians that their days of prosperity and wealth can be restored if they just begin to trust the values that built the nation in the first place. Considering Italy’s Roman Catholic ancestry and religious standing, these phenomena seemed to align well with Fiat’s goal of refurbishing its image and leading people to believe that through the company, the nation is on the verge of a new beginning. In addition to this, artistry, creativity, passion and the desire to produce are other critical Italian characteristics that were very relevant in the context of this ad. Displaying the current state of affairs in the initial part soon followed by the notion of an ideal Italy, this ad inspires positive change through dire action.   

The laws, rules, and regulations governing the use of advertising in Italy are as liberal as those in the United States without any major distinctions, censory restrictions or prohibitions. A good method of understanding the differences between advertisements aired in various countries is by undertaking a comparative study. Identifying and analyzing two very similar TV ads produced by two very different companies, operating within the same industry and seeking to communicate a similar message was intriguing. While the predicament of both these automotive giants were relatively similar at the respective times during which these ads were broadcasted, the key factors that were touched upon to stimulate almost identical viewer response were quite different. The Jeep commercial targeted core American values and beliefs such as pride in American manufacturing and engineering, telling the world that American manufacturing is getting back on track, and that Chrysler is working hard to build the best new products for the market. On the other hand, Fiat looked to drive home elements of day to day Italian life such as the importance of creativity and design, beauty, aesthetics and perfection while consequently reiterating their legacy as one of the oldest and largest automobile manufacturer in Italy. Both commercials were characterized by these similar values that were thought to have built the nation as well as the company and inevitably reinforce this popular connection. The timing and character of these campaigns were spot on as they aired during a tumultuous period of great difficulty for both companies. Both automakers decided to go back to their roots and market a campaign that would encourage consumers to make purchase decisions based on their ‘responsibility’ towards their country and to entice their patriotic pride of driving a vehicle that strongly represents their nation. In hindsight, the Fiat ad might have well been exactly how the Jeep ad was, if it were tailored to be created and broadcast in the United States.