Trader Joe's: "Adventure, discovery, and fun at a phenomenal value"
The first step in developing a strategy canvas is to identify the factors that affect competition within your industry. We will illustrate the strategy canvas with an example from the grocery industry in the U.S. The factors of competition for this industry are as follows:
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Notice that each of these factors of competition are key elements that a customer would recognize when thinking about a grocery store. The chart below, called a value curve, reveals how a typical large regional grocery store chain in the U.S. competes.
The value curve shows the industry factors of competition on the horizontal axis and the degree to which the typical grocery store invests in each factor on the vertical axis (high to low). By connecting the dots, we reveal the strategic profile for the industry. The strategic profile quickly shows that the typical grocery store carries a lot of national brands, offers a lot of sales and discount incentives through coupons, and invests a lot in advertising including radio and weekly sales flyers.
Trader Joe's, a grocery store chain operating in various regions throughout the U.S., has created a focused and compelling alternative for customers over the typical large regional grocery store chain. (See Below).
Visually, you can see very quickly how Trade Joe's has a distinctive strategy. Trader Joe's does not follow the industry by carrying national brands, conducting weekly sales, or spending large dollars on advertising. They have invested in creating a fun shopping experience by providing exclusive international foods and an atmosphere of adventure. This strategy encourages shoppers to experience different tastes from around the world. Enthusiastic customers create word of mouth advertising by sharing their experiences with friends and family, and thus encourage them to go to Trader Joe's to experience the fun and adventure.
Trader Joe's business strategy has resulted in high margins by eliminating and reducing costs that are associated with the typical large regional grocery store. A typical Trader Joe's store carries about 2,000 stock keeping units (SKUs) which is less than 10% of what is typically found in a large regional grocery store. By purchasing unqiue products directly from suppliers (not carrying national brands), Trader Joe’s has taken cost out of its supply chain by eliminating the middle man.
What about internal capabilities?
When looking at the strategy canvas for Trader Joe's you may be asking yourself, "what about information technology?" Or perhaps you are wondering why there is no mention of the "supply chain" as one of the factors of competition?
Of course, internal capabilities like the supply chain and information technology are important in terms of a business strategy. The value curve is the first step in revealing your business' strategic profile and provides a reference point for business investments and internal capabilities.
Are you ready to reveal your strategic profile?
Revealing your strategic profile is not as easy as it may look. At Value Innovation Associates, we can help you to develop a strategy canvas that results in a distinctive and winning business strategy that is clear to communicate. Please contact us for more information.