ACQUISITION STRATEGIES: IDENTIFICATION AND ANALYSIS

Acquisition Strategies: Identification and Analysis

Acquisition Strategies: Identification and Analysis

Acquisition History

The Whole Foods' strategy is to increase though a group of new store openings and acquisition of new chains. Even though the Whole Foods state 15-20% as the sales growth estimate, achievement of the targeted growth is subject to many factors. Predominantly, the strategy is reliant on finding appropriate locations and winning the competition for such cites from other grocers (Skidmore, 2011).

In contrast, SUPERVALU acquired 'New Albertsons', a former core supermarket business of Albertsons, in 2006. New Albertsons operated retail stores under the banners of Acme markets, Bristol Farms, Jewel-Osco, Shaw's Supermarkets, Star Market, and the Albertsons banners in the Intermountain, Northwest and Southern California regions; related in-store pharmacies under the Osco and Sav-on banners; ten distribution centers; certain regional offices; and corporate offices. The acquisition added around 1,125 stores to the company's retail store portfolio increasing the number of store locations to nearly 2,500 (Skidmore, 2011).

The acquisition increased the size of the company and reach by combining Albertsons's wide store network presence across best geographic locations and its supply chain capabilities. Further, the acquisition enabled SUPERVALU to become one of the largest grocery retailers in the US, given the leading market share of Albertsons's popular brands in major markets and its extensive supply chain system, which assist retail operations of the company and that of independent retailers (David, 2008).

Environmental Scan

Supervalu operates in a highly competitive environment, which has intensified with the customers more attracted to low prices. Food retailing is not conducive to gain significant competitive advantages given the nonexistent switching costs for consumers, who are largely driven by price. Wal-Mart's entrance into the grocery market and its aggressive expansion have proved to be a major disruption to traditional operators, whose cost structures are higher and cannot match the low prices offered by Wal-Mart. Grocery stores are price takers, and Supervalu's traditional grocery store chains have been pressured by Wal-Mart as well as other deep discounters. Competition for the consumer's food dollar is intense, and low-price leaders, such as Wal-Mart, are better positioned for a price-focused consumer. Focus on holding market share, sometimes comes at the expense of profitability while competing with low price leaders (David, 2008).

Besides Wal-Mart which is a price leader in the market, the company's prices are uncompetitive compared to other players as well. For instance, the price gap between Ahold's US Stop&Shop operations in Boston and its main competitor, Supervalu's Shaw's has increased to 14% in July 2010, with Ahold having lower prices. The company has been particularly affected by the timing of the recession, just after it acquired major supermarket properties from Albertsons, taking on debt to do so. As a result, Supervalu has been hard pressed to balance the costs of integrating the new properties, remodeling stores to standards necessary to keep them competitive and give customers price breaks they are looking for in the soft economy. This has affected the cost structure of the company ...