engleski

Strategy and Competitive Advantage in Leading Croatian Food Retailers

1. INTRODUCTION Since the late 1990s food retailing in Croatia has undergone major changes which display characteristics of an emerging and fragmented industry. Many companies are adding employees, acquiring or constructing new facilities, trying to broaden market coverage and gain consumer acceptance. There are a large number of small and medium-sized firms, none with a substantial share of the market. Since there are low entry barriers, firms can enter the market cheaply and quickly, and managers are presented with unique strategy-making challenges. Price competition is intense and profit margins are under constant pressure. The theory of competitive advantage, which is well-supported by empirical studies, seems to have a clear and obvious relevance to Croatian food retailing. However, the theory was developed in the mature and stable markets of North America and Western Europe, and has not been tested empirically in an emerging and fragmented market such as this one in Croatia. This research thus makes a contribution to the research literature by shedding light on strategy-performance relationships in Croatia. The specific questions addressed are as follows: • What are the competitive strategies employed by leading grocery retailers in Croatia? • How are these firms’ strategies associated with their performance? • What are the sources of competitive advantage for these retailers? 2. OVERVIEW OF THE CROATIAN GROCERY SECTOR, 1998-2002 Between 1998 and 2002 large food retailers in Croatia more than doubled their sales and increased their share of the total market 37.6 percent to 60.6 percent. At the same time, small and medium-sized food retailers declined in both sales and share of the market. In 2003, supermarkets and convenience stores commanded 85 percent of the total market. Even though their shares were much smaller, hypermarkets and cash and carry stores increased their shares during the 2001-2003 period. 3. LITERATURE REVIEW: THE CONCEPT OF COMPETIVE ADVANTAGE AND RETAILING STRATEGY An integrated model of competitive advantage is presented (based on Porter 1985 and Wensley and Day 1988), in which low-cost and differentiation strategies are based on resources of skills and firm-specific assets, such as high-quality products, brand equity and effective operating and marketing processes, and the competitive strategies lead to performance outcomes, measured in terms of customer satisfaction and loyalty, sales, market share, and profitability. Several empirical studies have applied this model to retailing, the majority of them taking a customer-focused approach, examining the relationships between consumer perceptions of store attributes, store image, consumer satisfaction, and loyalty intention. Other studies (Ellis and Kelly 1992, Alexander and Veliyath 1993) have taken a competitor-centered approach, and used managerial evaluations of the firm’ s competitive strategies. Since all of the retail strategy studies were of industries in North American and Western Europe, however, an important question emerges as to whether the same theory applies to the rather different competitive and economic environments of countries such as Croatia. As Croatian firms modernize and consolidate and as West European companies enter the country, competitive pressures increase, with the result that strategies are likely to be different. 4. HYPOTHESES Two sets of testable hypotheses are developed based on the theory of competitive advantage. The first set of hypotheses compare and describe low-cost and differentiation strategies of four types of Croatian food retailers - convenience stores, supermarkets, hypermarkets and discount stores. The second set of testable hypotheses explores and predicts the sales and profit performance based on the strategies of the different types of food retailers. 5. METHODOLOGY The data used to test the hypotheses were obtained from the companies’ financial statements and from two sample surveys. The first sample survey provided responses of managers in leading food retailing firms that evaluated the pricing and differentiation strategies of their own firms in comparison with competitors. Differentiation strategies were described by nine items, based on previous empirical research, and included product selection, store location, store layout and display, customer services, advertising, parking space, store atmosphere, number of store personnel, and speed of check-out. The second sample survey was of consumers in Croatia, and it focused on their patronage motives or main reasons for selecting stores in which they shop. The hypotheses were tested using a one-way analysis of variance (ANOVA), comparing differences between the means of store strategies. 6. RESULTS The statistical results first confirmed that there are indeed significant differences between the competitive strategies used by leading Croatian food retailers and secondly supported most of the hypotheses concerning strategies and performance of the retailers. Supermarket operators are shown to have the highest-profit strategy, with their high levels of differentiation and relatively low prices. Discount stores had the lowest profits, reflecting their high-price strategy and relatively low level of differentiation. 7. CONCLUSIONS The research answered the main questions that it addressed, as follows: (1) The main strategies employed by leading Croatian retailers include five different types of strategies, which follow from the store formats that are used. (2) The strategy that resulted in the highest level of performance, measured in terms of profits, sales and market share, is that of the larger supermarkets, which employ a high level of differentiation and relatively low prices. (3) The main sources of competitive advantage are found to be large sales volumes and high levels of store differentiation. Several managerial implications for food retailers are also discussed, based on the research findings particularly with respect to differentiation and pricing strategies. Finally, the study suggests several promising areas for future research.

Grocery retailing; store formats; competitive advantage; retailing strategy and performance

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