Kwik Save Stores To Somerfield example essay topic

Brief Many organisations are addressing the relationship they have with stakeholders. Select an organisation that is currently changing its policies towards stakeholders and, acting the role of a key stakeholder representative prepare a positioning statement / report that summarises key issues for your supporters. Background In 1875 J H Mills in Bristol opened a small family grocery store, and in 1900 became a limited company with 12 shops. J H Mills Ltd. turned into Gateway, in 1950, when a major finance house became the major shareholder. The J H Mills shops were then converted to become self-service type supermarkets. Throughout the late 20th century the amount of stores increased dramatically with takeovers and different acquisitions across the country.

In 1996 Gateway food markets turned into Somerfield and was floated on the stock exchange and became a plc. The Somerfield group is made up of four separate businesses, which together operate over 1400 stores nationwide in the UK. Firstly, the Somerfield Stores division consists of around 1,000 stores incorporating Somerfield Stores and approximately 450 Kwik Save Stores. Somerfield is a modern high street retailer offering fresh foods, groceries, and household needs. The Kwik Save division was introduced to Somerfield when they announced their unconditional merger on March 20, 1998. Kwik Save's philosophy is to provide a full range of quality products at the lowest price on the high street.

The idea was all about no frills low pricing. Somerfield started a lb 1 billion programme to convert Kwik Save stores to Somerfield and also modernizing the original Somerfield stores. Somerfield's third business is the Convenience division, a group of about 100 stores, ideal for 'top-up's hoppers, offering a range of groceries and provisions in a small store format located in convenient positions. The last of the businesses is Somerfield 24-7, a new, recent venture that allows people to shop for groceries without going into any of the supermarkets, by using the phone, Internet or interactive television and getting the goods delivered to their door. I am a representative for the employees of Somerfield plc.

Report On Thursday November 11 Somerfield announced the sale of up to 490 stores and a reduction in its central office and distribution business. The board has decided to focus Somerfield operations on a potential lb 30 billion neighbourhood food retailer market. Somerfield currently has approximately 10% of this market and believes it can increase its market share by further emphasis ing the importance of fresh food, improving the ease of shopping and developing a more responsive culture from its employees. They believe that by converting 400 stores from a Kwik Save to a Somerfield format the leading market position will be strengthened using the following strategy: the Somerfield business will focus on local and convenience shopping in small and medium sized stores all of the larger existing Somerfield stores that will not fit into the new strategy shall be sold Kwik Save stores that cannot be converted to the Somerfield fascia shall be sold Somerfield have recognised that large scale out-of-town food retailing will experience an increase in competition growth and will heavily affect those locations that rely heavily on big trolley shopping. The market is separated between price-driven out-of-town superstores and convenient local trading.

Somerfield has concluded that its strength lies in small and medium store retailing, and serving the customer who wants to shop locally and on the high street. Somerfield intends to maximis e their profits by expanding in this area and their strategy to achieve this involves: a greater emphasis on fresh foods continued commitment to serving the big trolley customers through the home shopping business, 24-7 an investment in the employees to improve the quality of customer service in the stores an accelerated conversion of about 400 stores currently operating under Kwik Save an involvement with local communities and a range of foods that are genuinely local Somerfield are selling between 100 and 140 large stores that do not fit into the new strategy, generally over 10,000 square feet. Some of the larger stores that have a majority of 'top-up's hoppers will stay with the company. The selling of the 350 stores in the Kwik Save division is due to them not fitting into the new strategy. The new strategy is a big threat for our stakeholder group, the employees of Kwik Save, larger Somerfield stores, distribution and the central offices. At the moment the job losses are not yet calculated but it is thought that there will be more than 1000 job losses across the company.

The disposals will lead to definite job cuts at the Bristol headquarters. Our one hope is that if somebody buys the 140 large Somerfield and the 350 Kwik Save stores they will be sold as going concerns with no implications on job cuts. Chief Executive David Simons is insisting that they are not planning to close the stores but to sell them to other retailers who can further develop and build on Somerfields' business. He also quotes 'Because we are not planning to close stores but to sell them to other retailers, staff in the stores should not be affected or be made redundant. They will obviously be concerned because they won't know who the new owners are but their employment will be transferred with all their existing pay and benefits'; .

The assurances for the suppliers and the continuity of contracts (cleaners etc.) look less bleak though, the company are leaving the arrangements of these for the new purchasers. As a representative for the employees of Somerfield plc I see the new strategy for Somerfield to be very precarious because I think they will find it hard to find buyers for the surplus stores when rival Supermarkets like J Sainsbury are also restructuring. If they find no buyers the jobs at these stores will most definitely be in danger. The sale of the selected stores hopes to bring lb 450 million to the business. This is needed to invest into the new strategy. Another problem that Somerfield will encounter when reducing the size of the company is that there will also be a reduction in buying power.

This reduction in the buying power will force prices up and send the company into a downward spiral, causing shoppers to go elsewhere - probably to where Somerfield used to be. People are tending not to shop at Marks and Spencers because they have abandoned the 'We are backing Britain'; policy. They have forced the closure of factories across the country by buying supplies from European factories. If Somerfield adopt the new policy of focusing upon the High Street rather than the price driven shopper I can see the same thing happening, the employee redundancies in the eye of the consumer may persuade them to shop elsewhere.

At the moment out of town shopping may not be 'flavour of the month' but if it did suddenly become increasingly popular, where would the company stand? Allies for the changes are shareholders, board members and the city institutions. The shares have recently decreased by 82 per cent since the start of the year. The doubts surrounding the company have forced the shares down by 19 per cent on Wednesday, 10th November, and then by another 10 per cent on Thursday, 11th November, reaching an all-time low of 84 p.

It's obvious something has to be done to reverse this situation otherwise unhappy shareholders would be forced to withdraw their capital. Somerfield are insisting that the new strategy will result in a smaller, leaner, fitter business aimed at increasing shareholder value. Once all of the disposals have been completed the Board will determine how best to return any surplus funds to the shareholders. However, why should shareholders have faith in the companies plans when they have already converted 70 Kwik Save stores with only 40% of a realistic return. Now that 450 stores are to be converted, at these odds about 250 stores will see good returns. It looks like the company is going down the road where they have been before.

The local communities will be opposed to the changes because they loyally shop and rely on the larger stores week-after-week. Selling off the larger stores in rural areas where customers live means that their customer loyalty has counted for nothing - perhaps they choose to shop at Somerfield because they don't like the others. A preferred outcome for the employees would be not to sell any of the stores and to leave the strategy as it is. However, the current strategy is not working, forcing the board members to implicate a new one involving un doubtable job losses by selling the larger Somerfield stores and the Kwik Save division. All that we can hope for is that the company finds a buyer for the properties as soon as possible to minimise job losses. The employees who are unfortunate enough to lose their jobs need suitable redundancy packages, which should reflect on their position and dependence upon Somerfield.

If the company are opting to target custom through new technologies including the Internet, interactive TV etc. then retraining to deal with distribution through this method to local communities could be a solution to cut redundancies.