Introduction
The North West Company is a global Canadian grocery and retail company operating stores in the northern and western territories of its home country and US states such as Hawaii, Alaska, and other countries in the Caribbean and US Oceania territories. The history of the organization dates back to the North West Company, which used to be involved in fur trading in Montreal between 1779 and 1821 (Brown 2015). The high levels of competition with the Hudson’s Bay Company resulted in a severe environmental impact with multiple fur trade posts being created, the Canadian interior being explored, and the beaver population being exhausted. As a result, the fur trade increased tensions between the British, the French, and the Aboriginals.
The current operations of the North West Company occur from its head office in Winnipeg, Manitoba, Canada. The company also operates two large offices in Boca Raton, Florida, and Anchorage, Alaska. The focus of the organization is placed on being the leading retailer to underserved rural communities and urban neighborhood markets within the limits of its geographic operations. According to the official website, the North West Company prides itself on its ability to adapt its product mix to the characteristics of each market that it serves. Besides, the company is dedicated to serving Indigenous and lower-income consumers, and this competitive advantage has so far helped to maintain a good reputation when addressing the needs of customers with unique needs.
Organizational and operational growth at North West has been associated with the market share expansion within the already existing locations and from applying the knowledge and infrastructure to capture new markets and complementary businesses. For instance, the company has engaged in wholesaling to independent stores in both urban areas and rural communities in Western Canada. Besides, it acquired Cost-U-Less, Inc. in 2007, which is a chain of mid-scale warehouse-type stores that target the South Pacific islands and the Caribbean. Therefore, the main competitive strength of the North West Company is its ability to adapt to the niche local lifestyles, cultures, and selling opportunities better than the competition.
The grocery store industry in which the NWC operates is highly competitive. Such affordable grocery store chains as Walmart have stores in all Canadian provinces and do price matching programs to provide the most appealing deals to customers. In addition, No Frills is great competitor among affordable grocery stores in the country because the company is focused on offering significant savings to customers of a lower income or those who have to buy a lot of products at once (Retail Insider 2021Ny adopting online ordering solutions, which have become particularly popular during the COVID-19 pandemic, another competitor, Sobeys has reported an improvement in supply chain efficiency due to the need to meet customer needs fast (Gerckens et al. 2021).
VRIN Analysis
The “Valuable, Rare, Inimitable, and Non-substitutable” VRIN framework has been widely applied for evaluating the resources of the company, including its internal resources, the potential for competitive advantage, as well as the possibilities for improving resources within the relevant areas of business (Thompson 2017). In its essence, the framework allows for analyzing the factors that bring value to the organization. For the North West Company, the four specific resources include supply chain efficiency, value chain maintenance, customer (community) relations, and profit-sharing incentives. The company has used these factors on a consistent basis to establish its position in the market.
The supply chain efficiency is a resource that is considered highly valuable at the North West Company because it represents the core tool for the organization to structure its operations, specific to the unique needs of customers. However, the resource is not rare as many retailers in Canada and the US have successfully established an efficient supply chain. For example, by adopting online ordering solutions, which have become particularly popular during the COVID-19 pandemic, Sobeys has reported an improvement in supply chain efficiency due to the need to meet customer needs fast (Gerckens et al. 2021). Besides, in order to prevent any disruptions within supply chains, companies have begun sourcing products from more distributed networks (Thompson 2017). In addition, more and more retailers have been adopting various technologies to facilitate real-time tracking, thus making the supply chains more efficient. The resource is imitable because supply chain efficiency at the North West Company has been developing over decades of experience. However, the organization has recently undergone a transformation of handling over incentive techniques to managers for encouraging competition and profitability. Finally, the resource is non-substitutable because the company incentivizes the enhancement of supply chain managers’ execution skills both generally and locally.
When it comes to value chain maintenance, the North West Company owns its value chain in terms of its ideological underpinnings of serving communities in need. Therefore, the resource is valuable because the company understands how to optimize its products for delivering the right products at the right costs. In combination with the efforts of store managers, who are continuously incentivized to customize the assortment of products to target niche customer needs, as well as to exceed competitors. The value chain maintenance at the North West is a rare advantage because it cannot be acquired by any other organization as it is something that the company owns and has developed itself. The maintenance of the value chain and its ongoing improvement based on the changing needs of niche clients of the North West creates at least a temporary competitive advantage. The value chain maintenance resource is inimitable because it has been developed on the basis of the organization’s historical development and its work on contributing to communities. Historically, the North West Company has been dedicated to serving niche communities of Canada, taking into account the devastation brought by the trade of fur by the original North West Company. It is a non-substitutable resource because it has been embedded into the organization and structure of the company, facilitating a unique competitive advantage.
Customer (community) relations represent the core strategic resource of the North West Company as the organization strives to “make a positive, progressive difference within each community” it serves (“Our Business Today”). This is a valuable resource because it enables the organization to implement strategies that can improve the firm’s efficiency and effectiveness by exploiting opportunities or mitigating threats. Through the long-standing relationships between the NWC and Indigenous and underserved communities of Canada, the company has achieved the rarity of the resource that no other company can acquire. The management of the organization has reported that throughout the years, the NWC has developed mutual respect and dependency. In many cases, both the lifestyle and the quality of communities’ life would change for the worse if the company had not been there. The strong relationships between the company and the local communities it serves are inimitable because the company prides itself on the great sense of purpose and high obligations attached to such connections. Finally, the resource is non-substitutable as the organization works consistently on building rapport with its clients that have niche demands. Therefore, the high-quality community relations that the NWC has developed is a resource that has helped the company maintain a sustainable competitive advantage.
Profit-sharing incentives are a significant part of the North West Company’s operations as the organization introduces the model that provides incentives in the form of salaries and bonuses for high levels of performance. This resource is valuable because it has consistently allowed the NWC to improve its efficiency and effectiveness by encouraging workers to come with innovative ideas for streamlining the supply chains and finding the best solutions for customers. The resource is not rare and can be implemented by any other organization in the industry, especially considering the importance of boosting workers’ performance to benefit organizations. It is also an imitable and substitutable resource, which results in a competitive disadvantage for the organization. Because of this, it may be recommended for the North West Company to facilitate a transformation of its profit-sharing incentive to have such characteristics of social complexity that will make the resource more unique and specific to the organization.
Porter’s Five Forces Analysis
The Porter’s Five Forces analysis applied to the North West Company is intended to reflect the competitive environment in Canada’s grocery store industry. The strategic tool can help the organization to avoid or reduce the adverse impact of risk losing the competitive advantage that a company uses for ensuring its profitability (Dobbs 2014). Within its industry, the profitability of the North West Company depends on the level of competitive rivalry, the threat of new entrants, the threat of substitutes, the bargaining power of suppliers, and the bargaining power of customers.
The competition among companies that sell groceries to consumers across Canada and the United States is high, which is explained by the lucrative nature of the industry in which rivals compete to maintain power and competitive advantage. The competition of the North West Company is being maintained predominantly with the help of diversity and community servants rather than price differentiation and sizeable geographic area coverage. Such large competitors as Walmart have stores in all Canadian provinces and do price matching programs to provide the most appealing deals to customers. In addition, No Frills is a great competitor among affordable grocery stores in the country because the company is focused on offering significant savings to customers of a lower income or those who have to buy a lot of products at once (Retail Insider 2021). Therefore, NWC-owned brands, such as Cost-U-Less, Giant Tiger, North Mart, Northern Store, or Northern Quickstop, experience significant pressure from competitors in the affordable grocery store industry
The threat of substitutes is on a high level in the industry in which the North West Company operates. There is an abundance of alternative products that the NWC offers at its stores that can be substituted by others available in Canadian shops and supermarkets. The threat of substitutes is high because of the prevailing technological advancement and the capacity of producers to manufacture similar products at lower prices. The large variety of substitute items presents a threat to the NWC-operated stores because customers can find similar items at other retailers. If it is more convenient for customers to shop at non-NWC-operated stores and if prices are comparable, there is a high likelihood of the company’s locations losing customers. The only advantage that the NWC has at this time is its close collaboration with local communities regarding their needs and demands for the supply of products and their prices. It is important for the company to continue capitalizing on this advantage further.
The bargaining power of suppliers within the industry is moderate because the overall supply is steady, the individual suppliers are often large and reliable, and there is a high number of suppliers from which the company can choose. The North West Company works with a lot of suppliers, including local, regional, and Canada-wide experiences and producers, including those from the US and other locations. The external factors that influence the collaboration between the NWC and various suppliers weaken the power of the latter. However, because the company is looking to offer the most accessible and reliable products to its consumers, only suppliers that offer reasonable prices on their items and services are acceptable for work. To reduce the power of suppliers, it is possible for the NWC to diversify its supply chain.
The bargaining power of customers is strong in the grocery store industry in which the North West Company operates. The force is strong because the choice that customers make in favor of other retailers and brands is harmful to the performance of the NWC and its subsequent profitability in its industry. The low switching costs have a strong force, the high quality of information is a strong influencing force, while the small volume of individual purchases from the store has a weaker force of impact. The majority of NWC consumers are individuals whose purchases are small in comparison to the total revenue of the organization. Nevertheless, it is quite easy for customers to choose other retailers, which is reflective of the low switching costs. Besides, NWC customers are aware of the recent information on the prices of products in other stores and have the capacity to properly evaluating which products are more affordable for their quality. This enables the NWC to address the concerns of consumers, and, if not, the latter will move to other retailers.
Finally, the North West Company experiences a strong force concerning the threats of new entrants in the market. This element of Porter’s Five Forces analysis illustrates the impact of new firms in the industry. In the case of the company, there are external influences that contribute to the threat of new entrants. The strong force is exhibited by the high ease of doing business in the grocery store industry as well as the low switching costs of doing the business. The manageable costs of doing business exhibit a moderate force. Establishing a new chain of stores in Canadian provinces requires average spending, and even smaller-scale retailers can engage in competition with the company by offering affordable products and household items to customers locally. Besides, new industry entrants exhibit high chances of success because they can offer more attractive propositions to customers and lure them away from NWC-operated stores. Therefore, the threat of new entries is threatening for the North West Company presents a strong influence on the business. For addressing this issue within the Five Forces analysis model, the NWC may have to focus on the quality of its offerings to keep customers close.
Strategies and Justification
The analysis of the industry showed that there is significant pressure placed on the organizations in the affordable grocery store segment. Good value is reflected in the company’s ability to hold to ethical standards, respect their customers, and facilitate innovation and not imitation. However, the strength of the forces makes it challenging to remain competitive, which is why it is imperative for the NWC to offer the best value possible to attract and retain customers (Thompson 2017). Considering the findings of Porter’s Five Forces analysis carried out for the North West Company, the cost focus strategy is recommended for the company. Cost focus is a narrow cost-related strategy to be applied in the market in which a particular organization operates (Islami et al. 2020). It emphasizes to offering a specific price within the context of a niche market, namely, the underserved populations and socioeconomically disadvantaged individuals.
For decades, the NWC has worked on building strong and trusting relationships with local communities throughout Canada and surrounding territories in order to serve their unique needs. By understanding the dynamics and the peculiarities of that market and the specific expectations that customers have, the North West Company will develop low-cost products for the specific market that will be sold at stores. The strategy is strongly connected to working on brand loyalty and reputation as an important component of developing trusting relationships with customers. In addition, as the North West Company captures the attention and loyalty of specific niche groups, that particular market segment will seem less attractive to competitors.
In the context of the COVID-19 pandemic, the cost focus strategy will combine well with community servants, which will further improve brand reputation and help the company maintain relevancy in its respective industry. The need for offering low-cost products at NWC-operated chain stores is justified by the possibility to get a brand name out to more people and being visible as a reliable and customer-centric organization. As suggested by Thompson (2017), reducing prices on certain products can spur sales by making items more affordable to lower-income households. Besides, due to the changing societal concerns and lifestyles, it is necessary to offer options to underserved customers that struggle economically (Thompson 2017). Because it is expected to focus on customers that value affordability and accessibility over premium products or brand status, the cost focus will give the NWC the opportunity to exploit differences in cost behaviors. To implement the strategy, the stores operated under the NWC umbrella are expected to provide items at a cheaper cost compared to rivals while also maintaining the level of quality that customers report expecting. Under the cost focus strategy, there are several options that the North West Company can implement for achieving a competitive advantage. For example, it is possible to open partnerships with other organizations that serve the needs of a similar market niche. For instance, the NWC can work with non-profits that work with minorities and underserved communities across Canada to facilitate better community engagement and look for new opportunities for collaboration. As a result, the NWC can generate customer loyalty by becoming the most trusted provider in its industry.
Organization Culture
The recommended strategies fit the organizational culture agenda that is being championed both internally and externally. In the environment of the global health crisis, the North West company has been dedicated to safeguarding the wellbeing of workers and clients with an emphasis on preserving work positions and ensuring a safe environment for all. In addition, the company shows great dedication to embracing the diversity of its team with Indigenous, Black, and other workers of color (“Empowered Employees”). The implementation of the recommended strategies goes hand-in-hand with the NSW’s commitment to enhancing the effectiveness and satisfaction of workers by imparting the values of customer services, trust, and accountability. Finally, it should be noted that the NSW provides comprehensive training programs for equipping workers with the skills and knowledge they need to advance in their careers and move to take greater responsibilities and higher pay.
Leadership
In spring 2021, the North West Company announced a CEO transition, which entailed the change of leadership that had been consistent for the past twenty-five years (“The North West Company Inc. Announces CEO Transition”). The new leadership will have to embrace the current changes that the retail industry has been enduring for the past one and a half years and develop an approach that the organization can sustain in the long run. Considering the high competition in the market, the threat of new entrants as a result of the pandemic-related retail transformation, and the socioeconomic barriers that customers endure, the NWC is expected to show consistency in its servantship to its clients.
Conclusion
To conclude, the North West Company has historically been working on adapting its product mix to the market it serves and emphasizing the importance of addressing the unique needs of lower-income and Indigenous customers. The competition in the grocery store industry is steep, with rivals working on providing the best deals to steal away clients. The threats of substitutions, new market entries are high while the power of buyers and market rivalry is intense, which pushes the NWC to implement the cost focus strategy that emphasizes niche customer needs. To sustain a positive brand reputation and capitalize on good relationships with customers, the company will work closely with its clients to understand their needs in terms of the delivery of products and services. The cost focus strategy will be supported by the company’s ongoing work of adapting to local lifestyles and cultures through the flexibility of store development as well as community relations intended to support the leading market position.
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