Management Essay on Why Publix Should Venture in the UK Market

Why Publix Should Venture in the UK Market

Publix supermarket is a premium supermarket chain situated in Lakeland, Florida USA. The company is employee-owned and operates in a number of states in the US. It was founded by George Jenkins in 1930, and it operates as a private corporation whose shareholders are past and present employees. The company is ranked among the best companies to work for and is among the fortune 100 list of largest private companies. The company currently has 1080 stores with more than 140,000 employees (Publix Supermarkets, 2014).

Given the globalization trend across the grocery market, a number of chain stores have focused on expanding to new market ventures to take advantage of untapped markets. Publix being among the most ambitious companies in the world has the option of expanding to the markets beyond the US. One such market is the UK. However, the company must first explore its strategic position before taking the plunge into the UK market. This paper analyses Publix’s strategic position to ascertain whether it can enter the UK market or not.

Financial Statement

The company’s financial statement in the last four years is shown below:

Figure 1: Publix’s financial statement in the last four years (Bloomberg Business, 2014)

                From the financial statement exhibited above, it can be seen the company has achieved considerable growth in revenue from 25.13 to 28.92 billion dollars in the last four years. The increase has been steady in those four years and is an indication that the company has a healthy financial situation.

Financial Risk

                The company transacts in the US dollars whereas the UK market requires a British pound. The current exchange rate is 1.0 British pound to 1.65 US Dollars. This means the company will be forced to inject a lot of capital because it will require more dollars in exchange for few pounds. However, such an imbalance maybe offset by returns, which will be converted to dollars. In addition, any change in exchange rate will affect the company.

Inflation Rate

                The UK has a high inflation rate compared to the US. Between 2009 and 2013, annualized inflation rate was 2.40 in the US compared to 4.91 in British (Numbeo, 2014). This means prices are higher in the UK than in the US, and such Publix company will be forced to deal in essential range of products, including groceries.

Political Climate

                The UK and the US have a good political relation and thus the company will not be affected by any political issues when it ventures in the UK (Management Paradise, 2013).

Operational Cost

                Generally, the operational costs in the UK are higher than the US. Rent in the UK is about 26.2% higher than in the US. However, consumer prices in the UK are also higher than in the UK, whereby they are 30.2% higher in the UK than the US. In addition, grocery prices are 13.04% higher in the UK than in the US. This means that although the UK operational cost are high, they are offset by high cost of selling products and thus the company will realize its profits when it ventures in the UK market (Numbeo, 2014).

SWOT Analysis

Strengths

  • The company enjoys an established brand reputation for its quality services. As such, it will be easy for it to venture in unknown territory. Given that Britons are good readers, they must have read about Publix on Fortune 100 list, and thus it will be possible to launch in the UK market (Management Paradise, 2013).
  • The company has a motivated workforce established through its stocked ownership program. This means such workforce will readily help the company achieve its aim, including accepting to be sent to the UK to help roll out a new market (Management Paradise, 2013).
  • The company has its own production plants for dairy, confectioneries, and a number of consumables making it boats of its weakened channel competition. This will ensure that the company remains productive at home as it venture in the uncertain market abroad (Management Paradise, 2013).
  • The company has stable returns on its investments, whereby its returns have been on a steady rise since 2009. This means that it is in a potion to invest part of its revenue, whereby it will finance itself through profit plough-back system. In this case, the company can easily venture into the UK market without experiencing financial barriers (Management Paradise, 2013).
  • In 2013, the company was voted on the 8th position on fortune 100 list as the best company to work for in the US. This means that it will attract the best workforce in other environments, including the UK (Management Paradise, 2013).
  • The company has stores conveniently located at strategic places where the population is very high. This enables it to tap on the market and remain productive (Management Paradise, 2013).

Weakness

  • The company has been accused of gender discrimination and such reputation may ruin its acceptance in the UK whereby gender equality is valued.
  • The company has the same store design in all its locations. Such designs lucks creativity and may not entice creativity-hungry Britons when the company ventures in the UK.  
  • Prices are not fixed and may not be affordable for everyone.

Opportunities

  • The policy of standardization gives its stores a unique outlay, as well as unique customer care experience. This can help the company capture the conservative British when it decide to venture in the UK
  • The company has in the recent years concentrated in opening new stores within five states in the US. This will ensure 100% market concentration in the home market, which will act as a cushion as the company ventures abroad.

Threats

  • The company has a slow response to Internet market, and such slow response may affect its efforts to cope with emerging trends.
  • The company faces strict competition from established brands, such as Tesco and Wal-Mart among others.
  • The global rise in operational cost and labor may affect its operations.  

Conclusion

            From the analysis of the strategic position of Publix supermarket, it is evident that the company is well placed to venture into the UK market. This is based on its profitability. The company has achieved considerable growth in revenue from 25.13 to 28.92 billion dollars in the last four years. The increase has been steady in those four years and is an indication that the company has a healthy financial situation. There is no financial risk, and the inflation rate will not affect its operations adversely. In addition, the operational cost balances its profitability and the political climate is conducive.

References

Bloomberg Business. (2014). publix super markets inc (PUSH:OTC US). Retrieved March 23, 2014, from Bloomberg Business: http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=PUSH

Management Paradise. (2013). SWOT ANALYSIS ON Publix Super Markets, Inc. Retrieved March 23, 2014, from Management Paradise: http://www.managementparadise.com/forums/principles-management-p-o-m/208561-swot-analysis-publix-super-markets-inc.html

Numbeo. (2014). Cost of Living Comparison Between United States and United Kingdom. Retrieved March 23, 2014, from Numbeo: http://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+States&country2=United+Kingdom

Publix Supermarkets. (2014). Publix Supermarkets, Inc. Retrieved March 23, 2014, from SEC: http://www.sec.gov/Archives/edgar/data/81061/000119312512089457/d263014d10k.htm#tx263014_11