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Retail Management 12th Edition by Barry Berman ,Joel Evans
Edition 12ISBN: 978-0132720823Retail Management 12th Edition by Barry Berman ,Joel Evans
Edition 12ISBN: 978-0132720823 Exercise 23
Case 4: Ahold: A European Powerhouse Facing Tough Times
Royal Ahold, also known as Ahold (www.ahold.com), is a Dutch-based global retailer with about 3,000 stores worldwide. Its Dutch brands include Albert Heijn (supermarkets, convenience stores, and online shopping), Etos (drugstores and online shopping), Gall Gall (wine and liquor stores and online shopping), and Albert (online groceries). Ahold's USA brands include various supermarkets and superstores, including Stop Shop, Giant Food, and Martin's Food Markets-as well as Peapod (online groceries and deliveries for Stop Shop). In addition, Ahold operates hypermarkets (which combine discount department stores and supermarkets), supermarkets, convenience stores, and banking services in The Czech Republic, Slovakia, Sweden, Norway, Estonia, Latvia, Lithuania, and Portugal.
Ahold had overall sales growth of 4.4 percent between 2009 and 2010 (after adjusting for exchange rates and the effect of an additional week in 2009). However, its profitability dropped during this time period. Ahold's gross profit margin (net revenues less cost of goods sold/net revenues) decreased from 27.2 percent to 26.8 percent, and its operating profit margin (gross profit less operating expenses/net revenues) declined slightly from 4.6 percent to 4.5 percent over this time period. Ahold attributed these declines to two factors: increases in costs that could not be passed onto customers and the need to reduce prices to attract customers in a recessionary economic environment.
Ahold's overall corporate strategy focuses on its brands, shoppers, and operations. These strategies are interconnected. Ahold seeks to be either the market leader or the number two share position holder in each market area in which it operates. The retailer believes that a high market share can reduce competition and provide it with cost advantages via quantity discounts, bargaining power with suppliers, and distribution economies.
Ahold strives to attract and retain consumers through better-quality products and customer services, and by being positioned as a price leader. Cost reduction programs by trimming operating expenses are part of its overall strategy. According to Dick Boer, Ahold's chief executive: "We will continue to reduce costs so that we can invest in our offering to improve the value we provide, while managing the balance between sales and margin." Specific financial goals associated with these strategies are to have long-term net sales increases of 5 percent (up from its 4.4 percent levels) and operating profits of 5 percent (an increase from 4.5 percent).
Although Ahold's U.S. operations accounted for slightly more than 60 percent of its revenues in 2010, the European operations are critical to its profit, market share, and consumer loyalty goals. One of the reasons that Ahold's U.S. operations have been growing at a faster rate than its European units is the company's decision to focus on new stores and acquisitions in the American market. In terms of same-store sales growth (from stores open at least one year), Ahold's European operations have consistently outperformed its U.S.-based units. In particular, its Albert Heijn units have done better than Ahold's U.S. units due to Heijn being a market leader in the Dutch market with about a 25 percent market share. Ahold Europe has also benefitted from centralized buying economies of scale and from being a member of AMS, Europe's second largest buying group.
1. Evaluate Ahold's overall retail strategy.
2. Discuss appropriate cost reduction strategies for Ahold using the patronage builders, patronage solidifiers, disappointers, and basics model in Figure.
Figure Classifying Customer Service
Source : Adapted by the authors from Albert D. Bates, "Rethinking the Service Offer," Retailing Issues Letter (December 1986), p. 3.Reprinted by permission.
3. Are there any disadvantages with Ahold having a high market share in some of its markets Explain your answer.
4. Comment on Ahold's decision to grow its U.S. operations through adding stores and making acquisitions rather than same store sales growth.
Royal Ahold, also known as Ahold (www.ahold.com), is a Dutch-based global retailer with about 3,000 stores worldwide. Its Dutch brands include Albert Heijn (supermarkets, convenience stores, and online shopping), Etos (drugstores and online shopping), Gall Gall (wine and liquor stores and online shopping), and Albert (online groceries). Ahold's USA brands include various supermarkets and superstores, including Stop Shop, Giant Food, and Martin's Food Markets-as well as Peapod (online groceries and deliveries for Stop Shop). In addition, Ahold operates hypermarkets (which combine discount department stores and supermarkets), supermarkets, convenience stores, and banking services in The Czech Republic, Slovakia, Sweden, Norway, Estonia, Latvia, Lithuania, and Portugal.
Ahold had overall sales growth of 4.4 percent between 2009 and 2010 (after adjusting for exchange rates and the effect of an additional week in 2009). However, its profitability dropped during this time period. Ahold's gross profit margin (net revenues less cost of goods sold/net revenues) decreased from 27.2 percent to 26.8 percent, and its operating profit margin (gross profit less operating expenses/net revenues) declined slightly from 4.6 percent to 4.5 percent over this time period. Ahold attributed these declines to two factors: increases in costs that could not be passed onto customers and the need to reduce prices to attract customers in a recessionary economic environment.
Ahold's overall corporate strategy focuses on its brands, shoppers, and operations. These strategies are interconnected. Ahold seeks to be either the market leader or the number two share position holder in each market area in which it operates. The retailer believes that a high market share can reduce competition and provide it with cost advantages via quantity discounts, bargaining power with suppliers, and distribution economies.
Ahold strives to attract and retain consumers through better-quality products and customer services, and by being positioned as a price leader. Cost reduction programs by trimming operating expenses are part of its overall strategy. According to Dick Boer, Ahold's chief executive: "We will continue to reduce costs so that we can invest in our offering to improve the value we provide, while managing the balance between sales and margin." Specific financial goals associated with these strategies are to have long-term net sales increases of 5 percent (up from its 4.4 percent levels) and operating profits of 5 percent (an increase from 4.5 percent).
Although Ahold's U.S. operations accounted for slightly more than 60 percent of its revenues in 2010, the European operations are critical to its profit, market share, and consumer loyalty goals. One of the reasons that Ahold's U.S. operations have been growing at a faster rate than its European units is the company's decision to focus on new stores and acquisitions in the American market. In terms of same-store sales growth (from stores open at least one year), Ahold's European operations have consistently outperformed its U.S.-based units. In particular, its Albert Heijn units have done better than Ahold's U.S. units due to Heijn being a market leader in the Dutch market with about a 25 percent market share. Ahold Europe has also benefitted from centralized buying economies of scale and from being a member of AMS, Europe's second largest buying group.
1. Evaluate Ahold's overall retail strategy.
2. Discuss appropriate cost reduction strategies for Ahold using the patronage builders, patronage solidifiers, disappointers, and basics model in Figure.
Figure Classifying Customer Service
Source : Adapted by the authors from Albert D. Bates, "Rethinking the Service Offer," Retailing Issues Letter (December 1986), p. 3.Reprinted by permission.
3. Are there any disadvantages with Ahold having a high market share in some of its markets Explain your answer.
4. Comment on Ahold's decision to grow its U.S. operations through adding stores and making acquisitions rather than same store sales growth.
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Retail Management 12th Edition by Barry Berman ,Joel Evans
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