An important step in building a successful small business is understanding what your business does well, where it can grow and improve, and the variables that pose a risk to your business in the future. The analysis of these elements is by performing a strength, weakness, opportunity, and threat (SWOT) analysis.
A SWOT analysis is a useful process for individually reviewing and understanding the changing conditions of your market, and to better prepare your business for fundraising, marketing, sales, and general business strategy.
The Kroger Company
Founded by Bernard Kroger in 1883, the Kroger Company is one of the world's largest grocery retailers, employing approximately 500,000 associates.
Headquartered in Cincinnati, OH, Kroger had fiscal sales of $121.2 billion in 2018 through the operation of more than 2,760 supermarkets and multi-department stores. The Kroger brand operates under various grocery, convenience store, and jewelry banners, including Kroger, Ralphs, Dillons, Tom Thumb Food Stores, Turkey Hill Minit Markets, QuikStop, Fred Meyer Jewelers, and Littman Jewelers. Kroger is also a player in the personal finance space, cultivating an ongoing joint venture with U.S. Bank.
A completed SWOT analysis of Kroger is detailed below, and is intended to demonstrate how this kind of analysis can be valuable for both small businesses and established corporations.
Kroger owns significant market share in 49 markets, located across 35 states and the District of Columbia; geographical distribution and a greater focus on customer service helps Kroger maintain a competitive edge against its larger competitors like WalMart and Target.
Kroger is also the owner of a valuable private label business, offering approximately 10,000 items in 2019, with 231 new items launched during the year. This included plant-based cleaning products, meatless burger patties, and thousands of other niche products.
The company operates 36 food production plants including dairies, bakeries, beverage plants, and slaughterhouses. Complicated food manufacturing and distribution networks can carry an inherent risk of logistical breakdowns, food contamination, and bad publicity. Serious cases of contamination can permanently damage a company's brand and cause corporate profits to suffer.
Also, there is tremendous pressure on the brand to invest in the technology that will help it battle Amazon for the online grocery business. Kroger has been slow to get started, failing three times to partner or acquire retail-connected technologies. Over the past 20 years, Kroger tried to develop online service through Shipt, an online grocery delivery service, as well as with meal-kit company Plated, and online retailer Boxed.com. Target acquired Shipt in 2001, Albertsons bought Plated in 2017, and Kroger's negotiations with Boxed stalled early.
“We’ve got to get our butts in gear,” Kroger CEO Rodney McMullen told the Wall Street Journal in 2018. “There was no doubt we were behind. It’s like driving on the autobahn. It’s incredibly exciting. But there’s a lot going on, and it’s going on fast.”
Kroger has expanded their grocery customer experience with 1,685 pickup locations and 2,126 delivery locations, covering over 93% of Kroger households. They've introduced Home Chef meals, including fully-cooked "heat-and-eat" choices, that are ready in minutes.
In 2019, Kroger announced their plan to pilot a new reusable packaging system with Loop Industries, a sustainability and plastic innovator. Kroger has stated its commitment to "Zero Hunger | Zero Waste" and innovating around the problems of single-use plastic waste. To build loyalty with those customers who expect grocery packaging solutions to be less wasteful, Kroger is seizing the opportunity to ship products packaged in reusable glass or metal containers directly to consumers (in a specially designed tote.) Once used, the products are retrieved through free at-home pickup, then cleaned, refilled, and reused.
Kroger is catering to a debt-laden marketplace of consumers and the risk of inflation stands to affect the price of food, goods, and transportation. Inflation is also a threat to the myriad of logistical costs inherent in managing a huge network of manufacturing and distribution. An inflationary trend would almost certainly mean lower profit margins for Kroger in both consumer goods and food, as cost-conscious consumers may shift their buying habits to the internet, and away from higher-margin gourmet food.
SWOT for Small Businesses
Typically presented in a matrix format, a full SWOT analysis would uncover five to ten points in each of the four categories, and would explore the business' logistical processes in greater depth than the example featured above.
While your small business almost certainly doesn't have the reach or diversification of a corporation like Kroger, the consideration of your strengths and weaknesses in the context of broader economic threats and opportunities is still extremely helpful. If you want to raise money to grow your operation, or just want to develop an air-tight business plan, a SWOT analysis is essential for contextualizing the competition, future, and potential exit strategies for your venture.