Cooperation in the retail landscape
How can manufacturers select suitable supermarket chains to enter into a
co-development relationship?
Rijksuniversiteit Groningen
Faculty of Economics and Business
MSc Business Administration
Master Business Development
Student:
M. F. L. Mulder
Student nr:
1565583
Supervisor:
Prof. dr. R. T. A. J. Leenders
Second supervisor: Drs. O. C. J. Lappohn
Preface
This thesis is a result of a research project conducted at H.J. Heinz in Zeist. I performed an internship of six months at H.J. Heinz which was twofold; performing assignments for the trade marketing department and conducting this research project on Fridays.
The performed research project provides a clear description of the situation within H.J. Heinz and hopefully it will be useful in practice. Starting up the research project was tough, as there was a specified problem at H.J. Heinz which was not suitable for a master thesis of Business Development.
My internship at H.J. Heinz was a great experience, as it gave me the opportunity to work for the second largest organization in the food industry in the Netherlands. The working experience gave me the opportunity to find out what I find essential in performing a job and I learned a lot, especially analyzing data from IRI and GFK.
I would like to thank everyone who supported me during my research project and writing this thesis. In particular I would like to thank my colleagues from H.J. Heinz for guiding me during my internship and partly guiding me in starting up my research project. Furthermore, I would like to thank prof. dr. Leenders, my supervisor, for his critical and detailed feedback. And I would also like to thank dr. Lappohn, my second supervisor, for reviewing my thesis unexpectedly fast.
Last but not least, I would like to thank Florine Eggink en Juliette van Wessem for correcting my English. And of course, thanks to my family and friends for their endless support.
Amsterdam, July 2011 Mariska Mulder
Table of contents
Preface ... 1
Table of contents ... 2
Chapter 1 Research motive, details and scope ... 4
1.1 Introduction ... 4
1.2 H.J. Heinz ... 4
1.3 Co-development ... 5
1.4 Manufacturers problem ... 5
1.5 Research objective ... 6
1.6 Main question and sub questions ... 6
Chapter 2 Retailer selection criteria ... 8
2.1 Introduction ... 8
2.2 Process of selecting criteria ... 8
2.3 Evaluation of selection criteria ... 8
2.4 Selection criteria ... 9 2.4.1 Technical competence ... 9 2.4.2 Market knowledge ... 9 2.4.3 Overlapping knowledge ... 10 2.4.4 Goal correspondence ... 10 2.4.5 Size ... 11 2.4.6 Compatible cultures ... 11 2.4.7 Propensity to adapt ... 12 2.4.8 Long-term orientation... 12 2.4.9 Business health... 12
2.4.10 Capability to access new markets ... 13
2.4.11 Resources complementarity ... 13
2.4.12 Experience ... 13
Table 1: literature about partner selection criteria ... 15
Chapter 3 Measuring the selection criteria ... 17
3.1 Introduction ... 17
3.2 Data collection... 18
3.2.1 Interviews ... 18
3.2.2 Questionnaire by e-mail ... 19
3.3 Measuring chosen selection criteria ... 19 3.3.1 Technical competence ... 20 3.3.2 Market knowledge ... 21 3.3.3 Goal correspondence ... 24 3.3.4 Size ... 26 3.3.5 Propensity to adapt ... 28 3.3.6 Long-term orientation... 29 3.3.7 Business health... 31 3.3.8 Experience ... 32
3.4 Process of applying criteria ... 32
3.5 Application in practice ... 33
Chapter 4 Changes in the retail landscape ... 35
4.1 Introduction ... 35
4.2 Trend to cooperate... 35
4.3 Treat for A-brands? ... 35
4.4 Long-term orientation ... 36
Conclusion and recommendations ... 37
Limitations of this research ... 39
References ... 40
Chapter 1 Research motive, details and scope
1.1 Introduction
This chapter will illustrate the reason for this research project, a problem derived from H.J. Heinz in the Netherlands. First of all, H.J. Heinz will be introduced, followed by background information on the research topic. Additionally, the management problem and research objective will be described, and the main research question and sub questions will be specified.
1.2 H.J. Heinz
H.J. Heinz is the second largest player in the food industry in the Netherlands. They own a broad assortment of A-brands, including Heinz, Honig, De Ruijter, Venz, Karvan Cevitam, Roosvicee, Brinta, Wijko and Amoy. There is a strong cooperation between H.J. Heinz and various supermarket chains, resulting in growing sales of their products. This cooperation exists at different levels of intensity and takes different approaches. Some examples: advice on promotional activities, advice on assortment- and shelf optimization, various demo’s and pilot studies and sharing knowledge on categories, trends and future possibilities. Sharing knowledge on categories needs some explanation; the range of products in a supermarket is broken down into groups of similar or related products, examples are drinks, tomato products and Italian pasta. These groups of similar or related products can be managed as a separated business unit. The most intensive form of cooperation can be seen in the combined efforts of product development.
The described cooperation is essential for supermarket chains and manufacturers alike.
Manufacturers face pressure from private label competition (Larson, 2003) and accordingly they need to build strong relationships with supermarket chains to stay competitive. Supermarket chains need this cooperation to set themselves apart from the crowd, and to improve sales (Turock, 2004). Because the manufacturer can help the supermarket chain with differentiation. For both parties, it is evident that cooperation may lead to raised profits, and is necessary to stay competitive.
There are five main forms of cooperation between manufacturer and supermarket chains (Grievink and Van Groesen, 2009):
• Trade relationship: manufacturer and supermarket determine if they want to deal with each other periodically. In this case, it is not standard that the manufacturer supplies goods to the supermarket;
• Assortment supply relationship: the supermarket is in need of a certain product or certain products for its assortment, but he expects nothing more of the supplier (the manufacturer). Appointments made between them are just about pricing and supply. Thus, this relationship differs from a trade relationship in the way that the manufacturer is a standard supplier to the supermarket;
• Sales promotions relationship: besides supply of the assortment, it is important that certain products will attract attention from the customer through promotions. Therefore, periodic appointments about promotions between the supplier (the manufacturer) and the
supermarket are needed to grow sales;
• Preferred supplier relationship: the supermarket expects much more from the manufacturer in this relationship compared to the relationships mentioned above. For example, the supermarket expects advice from the manufacturer about assortment and shelves. In this relationship, there is openness between the supermarket and the manufacturer about information, knowledge and moreover, the manufacturer is allowed to come up with
initiatives. Being a preferred supplier represents a source of competitive advantage for the manufacturer (Ulaga and Eggert, 2006);
• Co-development relationship: the manufacturer contributes to the fundamentals of the supermarket chain. This relationship is about coming up with new ideas and initiatives, and following up on developing products together. There is bigger mutual trust between the manufacturer and the supermarket compared to the relationships mentioned above. Initially, cooperation seems to be the solution for both manufacturer and supermarket chain to grow profits. This need for cooperation is becoming increasingly important.
1.3 Co-development
As explained above, Grievink and Van Groesen (2009) stated there are several ways of cooperation between manufacturers and supermarkets. The most intensive relationship in which they can cooperate is co-development. Co-development is a relationship with a long-term strategic objective. Becoming business partners is a strategic choice for both manufacturer and supermarket, and by entering into this type of relationship both are improving their chances of higher profits than before entering into a co-development relationship. Moreover, a co-development relationship is based on an existing relationship between the manufacturer and the supermarket chain, and incorporates both long-term and short-term objectives. The co-development relationship is primarily founded on a short-term objective, the development of a new product, but the final objective of the
co-development relationship is creating a sustainable and profitable relationship for the future, a long term objective.
Co-development is the most intensive relationship, based partly on shared knowledge and
information. The relationship is characterized by combined efforts in product development, which can contribute to performance in relationships (Wang and Kess, 2006).
An example of co-development is the cooperation between H.J. Heinz and Superunie. Superunie is a purchasing organization of 14 independent retailers: Boni, Boon (MCD), Coop, Deen, Dekamarkt, Dirk van den Broek, Hoogvliet, Jan Linders, Nettorama, Poiesz, Sanders, Sligro, Plus and Vomar. Although Superunie is not a retailer, this relationship can be characterized as a co-development relationship. H.J. Heinz and Superunie developed a product together: Brinta bread. Brinta is a traditional Dutch brand which belongs to H.J. Heinz. The common products of Brinta are breakfast meals in different flavors.
During their existing relationship, H.J. Heinz and Superunie decided to become strategic partners and work together in a co-development relationship. They developed the idea together. The production of the bread itself commissioned by H.J. Heinz and Superunie through Gb plange, a supplier of bakery commodities. The partners do not produce their own bread due to the fact that none of the parties in the co-development relationship have the ability to do so.
Guus Sturing, entrepreneur of Plus, is positive about the new product. He stated that the main advantage over other bread is that he can control his own stock of Brinta bread. This is possible because the bread needs to be baked off in the supermarket.
1.4 Manufacturers problem
Manufacturers in the Netherlands face the issue of receiving requests from supermarket chains to cooperate, because they are willing to cooperate to set themselves apart from the crowd. On the other hand, manufacturers are interested in cooperation to solidify their relationships with certain supermarket chains to obtain a competitive advantage. An example of a competitive advantage as a result of a strong relationship is the increased speed of introduction of new products to the market (Bonder and Pritzl, 1992; Deck and Strom, 2002).
As a result of these requests, a problem arises for manufacturers; a strong relationship with retailers is essential for a competitive advantage, however there are no clear guidelines as to which
supermarket chain should be chosen for co-development. The problem is that manufacturers, and especially H.J. Heinz from whom this problem is derived, need advice in selecting supermarket chains for cooperation in a co-development relationship. They need to cooperate with supermarkets who deliver the most advantages as a result of the relationship.
It can be concluded that the problem at H.J. Heinz, and for manufacturers of food in general, is that manufacturers do not know which supermarket chains are most suitable for a profitable co-development relationship.
The problem at H.J. Heinz is more general; they would like to know which supermarket chains suit which form of cooperation according to Grievink and Van Groesen (2009). However, this is a broad issue and therefore this research project focuses only on the co-development relationship.
The reasons for focusing on co-development are the developments in the retail landscape. Besides requests from supermarkets to cooperate with manufacturers, manufacturers face intense competition from private label products. For example, in 2003 Albert Heijn started with segmentation of their private label products. They offer the consumer private label products in different segments:
- Euroshopper: products with extreme discount prices;
- Albert Heijn private label: standard private label products with a lower price than A-brand products;
- Albert Heijn Excellent: unique top-end products, made with top quality ingredients which are especially made to inspire the consumer and let the consumer enjoy. These products are expensive and form the highest segment, usually more exclusive than A-brand products; - Albert Heijn Puur & Eerlijk: eco-friendly products which are produced while caring about
people, animals, nature and environment; keeping social responsibility in mind. As a result of this segmentation and the emergence of private labels in general, A-brand
manufacturers face increasing competition from private label products. Currently, it is a hot topic. Co-development could be a solution for A-brand manufacturers to solidify their relationship with supermarket chains, and accelerate the process of introducing new products.
1.5 Research objective
The objective of this research project is to advise H.J. Heinz on the suitability of various supermarket chains for the establishment of a co-development relationship.
The goal of this co-development relationship for the manufacturer is to build a strong relationship with the supermarket chain and to gain a competitive advantage. Cooperation is often a strategy for managing a long-term relationship (Nix et al., 2008).
1.6 Main question and sub questions
The main question which guides this research project is:
How can manufacturers select suitable supermarket chains to enter into a co-development relationship? The main question refers to the problem of manufacturers. They do not know which retailers are suitable to establish a co-development relationship with. This leads to the following sub questions:
1. What criteria can manufacturers use to select supermarket chains for a co-development relationship?
2. How can manufacturers measure those criteria and apply them to potential co-development partners?
These two sub questions will provide an answer to the main question. Note that the results will only be applicable for co-development between manufacturer and supermarket chains. Whether the results are applicable for co-development projects in other industries should be further investigated.
Chapter 2 Retailer selection criteria
2.1 Introduction
The importance of partner selection is confirmed by many authors including Solesvik and Encheva (2010), who stated that the choice of the right partner is viewed as a crucial prerequisite for successful cooperation, and Deck and Strom (2002), who stated that partner selection is one of the success factors for co-development success. However, most companies including manufacturers, select their partner in an ad-hoc way. Their partner selection is based on word-of-mouth or they cross their fingers and hope for the best. Choosing the wrong partner may lead to problems in the later development stages such as increased product development time, higher costs and the production of less competitive products (Fraser et al. 2003). Thus it is clear that partner selection should be taken seriously, and should be done based on several selection criteria. This chapter will lead to an answer for the first sub question:
What criteria can manufacturers use to select supermarket chains for a co-development relationship? 2.2 Process of selecting criteria
In order to obtain information about selection criteria and their applicability in a co-development relationship between manufacturer and supermarket chain, a search of existing literature has been done. The most cited partner-selection criteria will be discussed below and it will be examined if they are crucial in the process of choosing partners for a co-development relationship. Note that there is some overlap in literature between the most cited selection criteria and therefore, this overlap will also be evident in this paper. An overview of the selection criteria, their source and the possibility for application in a co-development relationship between manufacturer and supermarket chain is given in table 1.
2.3 Evaluation of selection criteria
The resource-based view (work of Penrose, 1959; further developed by Barney, 1991 and Connor, 1991) is a theory which is useful in determining which partner selection criteria are crucial for a successful co-development relationship. The fundamental thesis of this view is that, because
resources are significantly heterogeneous across organizations, each organization’s resource set is in some ways unique (Wittmann et al., 2009)
This distinct set of resources (Emden et al., 2008) can be a reason for entering into a co-development relationship, because organizations are able to gain access to these distinct resources through partnerships (Hunt, 2000; Morrow et al., 2007). The partnership strategy focuses on creating the highest value out of one’s existing resources and by combining these with others’ resources (Das and Teng, 2000).
Another theory which can help determine if a partner-selection criterion is useful, is the resource dependency theory. This theory states that organizations must engage in exchanges with their environment to obtain resources (Scott, 1987). The difference with the resource-based view is that the resource dependency theory focuses exclusively on resources that must be obtained from external sources to survive or prosper (Barringer and Harrison, 2000), while the resource-based view focuses on combining unique sets of resources to create the highest revenue. Therefore, to manage any dependencies, manufacturers should acquire control over critical resources in an effort to decrease the dependence of supermarket chains and, acquire control over resources that increase the dependence of supermarkets on them (Barringer and Harrison, 2000; Nix et al, 2008). In other
words, manufacturers can try to increase their power in the relationship with supermarket chains by selecting criteria using the resource dependency theory.
2.4 Selection criteria
2.4.1 Technical competence
Many authors mentioned technical competence as a selection criterion for cooperation, including Emden et al. (2006) and Büyüközkan et al. (2008). They described the criterion technical competence as an innovative technology or technological expertise in a certain field. Potential partners could also own technical competence in the form of patents or technical knowhow (Geringer, 1991).
Emden et al. (2006) emphasized that technical competence is an important selection criterion, as it can give the manufacturer ideas about opportunities and possibilities for the development and production of innovative products. Büyüközkan et al. (2008) have chosen this selection criterion based on a detailed literature survey.
The resource technical competence is needed to leverage into NPD-related activities of co-development (Emden et al., 2006). However, technical competencies are somewhat scarce in the retail landscape. For example, in the Netherlands it is uncommon for supermarket chains to own factories to produce their private label products. According to the resource dependency theory, organizations pursue innovations that use alternative resources due to scarcities (Pfeffer and Salancik, 1978; Sherer and Lee, 2000; Hessels and Terjesen, 2010). Such an alternative for supermarket chains could be co-development, to become dependent on manufacturers for their technical competencies. Manufacturers can gain an advantage by this lack of technical competence in the form of collective development of new products, while building a stronger relationship.
Moreover, complementary technical competencies, or patents, can be a motive for entering into a co-development relationship (Wang and Kess, 2006).
As a result, it can be concluded that technical competence should be a criterion for manufacturers to rate the suitability of supermarket chains before entering into a co-development relationship. Supermarket chains without technical competence are potential partners, because manufacturers can offer them technical competence in assisting the development of new products and thereby keeping their own interest (building a strong relationship) in mind. Subsequently, supermarket chains with numerous technical competencies will become a less appealing choice, as they can develop products by themselves and there is only a small competitive advantage to be gained by both sides.
2.4.2 Market knowledge
The selection criterion market knowledge is frequently cited in literature. Büyüközkan et al. (2008) and Feng et al. (2010) described market knowledge as resourceful knowledge about the market. Bosch-Sijtsema and Postma (2009) also mentioned knowledge on market issues as an important criterion for cooperative innovation projects. They stated that a strategic focus of organizations based on giving access to market knowledge, instead of acquiring knowledge, can enhance innovative potential and provide competitive- and developmental advantages for both parties.
Emden et al. (2006) emphasized that sharing complementary market knowledge, instead of obtaining it, can be a reason to cooperate, because the organization that is looking for a potential partner can also draw on this data when they co-develop. Moreover, literature covering cooperative innovation projects declares that aiming for complementary market knowledge during cooperation can create a more innovative context, which can result in unique products.
Hence, to create an environment for co-development in which the probability of success for a new product is high, complementary market knowledge is important. In the Dutch retail landscape,
manufacturers usually possess vast amounts of information about the market, which they use to optimize their assortment and respond to trends by means of innovation. However, it is clear that market knowledge of supermarket chains could provide a valuable contribution to the knowledge of manufacturers. Especially knowledge about shelving, categories and observations from customers in the supermarket would be expected to contribute to the process of the development of new products as it is part of their unique set of resources. Therefore, market knowledge of the potential partners is an important selection criterion for co-development.
2.4.3 Overlapping knowledge
Another frequently cited selection criterion for cooperation is overlapping knowledge. It refers to partners having somewhat similar knowledge bases (Emden et al., 2006; Feng et al., 2010). Emden et al. (2010) mentioned overlapping knowledge as a selection criterion for 3 reasons:
- It provides the necessary common ground to realize the technology’s potential; - It can help to discover complementarities of competencies;
- It can be useful by communicating competences inter-organizationally.
Hitt et al. (2000) emphasizes the importance of overlapping knowledge given that if a partner is willing to share expertise and work in tandem, it might help the other party to develop adequate absorptive capacity. Therefore, in the absence of overlapping knowledge bases, managers may choose to cooperate with partners who are willing to share their capabilities and, perhaps, to make special efforts to help their partners acquire these capabilities. Thus, the benefit of overlapping knowledge for an organization is being able to see the value of competencies of the potential partners. Moreover, when organizations have similar capabilities, mutual learning will be easier, as organizations are better equipped to absorb each other’s knowledge (Colombo, 2003).
However, overlapping knowledge does not only include one eventual overlap in knowledge, but may comprise more overlaps between potential partners. Examples of such overlaps are same educational background or simply working with similar technologies or in the same industries.
The presence of overlaps is not an essential criterion to select partners, because there is no evident added value in the process of co-development. As explained in 2.4.2, with regards to market knowledge, especially complementarity knowledge adds value to co-development instead of overlapping knowledge. In some relationships, a certain level of similarity within knowledge domains is necessary to understand existing knowledge and new knowledge. But in the case of manufacturer and supermarket chain, the cooperation is not only founded on knowledge.
2.4.4 Goal correspondence
Goal correspondence and motivation correspondence are selection criteria which are used over and over again. The first one refers to partners who have noncompeting goals (Emden et al., 2006; Feng et al., 2010 and Büyüközkan et al., 2008), while the second one refers tothe extent to which the partners’ perceived ulterior motives correspond to one another (Smith and Barclay, 1997). Despite these different terms, they refer to almost the same criteria, that is having the same goals or motives prior to entering into a co-development relationship, or at the very least noncompeting goals or motives. Deck and Strom (2002) described it as a shared destiny of cooperation. The term goal correspondence will be used in this thesis.
Emden et al. (2006) and Feng et al. (2010) based the importance of this criterion on a detailed literature survey. Moreover, Emden et al. (2006) combined literature with research in the form of case studies.
Correspondence of goals is important, as it signals whether partners have mutually beneficial intentions. Besides, it determines the likelihood that the partners will engage in opportunistic behavior (Emden et al., 2006; Feng et al., 2010). Opportunistic behavior of a partner in a
co-development relationship can limit the innovative potential, because both manufacturer and supermarket have to contribute to the co-development relationship to gain a competitive advantage. Emden et al. (2006) emphasized that a company should have different, yet corresponding
motivations prior to entering a co-development relationship. For example, it is likely that
supermarket chains are not interested in the technical competencies of the manufacturer. Instead of that, they are interested in selling more products and becoming a better supplier to their customers. In contrast, manufacturers are trying to penetrate the market of the supermarket chains. They could use a lot of help in understanding the market. That is where supermarket can join them. In this example, motivations are clearly different but corresponding. This example also clarifies possible goals. Goal correspondence is about what both partners want to achieve during the co-development relationship and as a result of the co-development relationship. In other words, goal correspondence is about goals which can immediately be achieved, such as a strong relationship and growing sales. Goal correspondence is adopted as selection criterion in this research project, because high goal correspondence enhances the consistency of expectations and it assures mutual gains. If the goals are not corresponding, potential partners could enter into a co-development relationship to gain access to confidential knowledge, for example. Motivations to enter into a co-development relationship need to be strong because for both manufacturer and supermarket chain, co-development is not their core business.
2.4.5 Size
Another frequently cited selection criterion is size. Size refers to the organizational size of the potential partner (Büyüközkan et al., 2008; Geringer, 1998).
This organizational size probably has a direct influence on the distribution of the product which is developed within the co-development relationship. Thereby assuming that potential partners are willing to distribute the new product in all their stores.
Moreover, Ataman et al. (2008) found that the effect of distribution on new products exceeds the combined effect of all other marketing efforts including feature/displays, line length, regular price, advertising and discounting. This stresses the importance of maximizing distribution for new
products, because it has the largest impact on sales. Enhancing sales is one of the reasons for entering into a co-development relationship and thus, size and distribution are important factors. Ataman et al. (2008) also found that distribution is directly linked to both the rate of growth and the market potential of the new product.
Another argument to adapt the selection criterion size is explained by Jones and Ritz (1991). They note that a new brand or new product cannot stimulate sales if consumers are unable to find a store in which they can purchase it. In this case of co-development, consumers should be able to find the product in every store of the supermarket chain who cooperates with the manufacturer in the form of co-development. Therefore, the size of the supermarket chain is an important selection criterion. It determines the potential diffusion and distribution of the new product. And if the new product, as a result of the co-development relationship, leads to sales growth, it will have a positive influence on the relationship between manufacturer and supermarket chain.
2.4.6 Compatible cultures
To determine the applicability of the selection criterion compatible cultures, it is necessary to have a clear understanding of the concept culture. Culture is the collection of cognitions, expectations, mindsets, norms, and values within an organization (O’Reilly et al., 1991). The culture of an organization has vast influence on people who work within the organization, especially on their behavior and on the decision-making processes.
Geringer (1988) and Büyüközkan et al. (2008). It refers to a cultural fit between both partners which is necessary to have effective communication and exchange of knowledge. Compatible cultures may lead to synchronization of expectations and behaviors.
However, Emden et al. (2006) stated that in the absence of cultural fit, there may be other attributes of the partner which may create the necessary ground for cooperation such as openness and consistency. Likewise, Hitt et al. (2000) argued that in the absence of compatible cultures there can be other common grounds for communication and knowledge transfer such as the commitment of a partner to the relationship. This might create a willingness to share tacit knowledge.
It can be concluded that compatible cultures is not a necessary selection criterion for selecting partners for a co-development relationship, as it can be replaced by alternatives.
2.4.7 Propensity to adapt
The selection criterion propensity to adapt refers to the willingness of partners to adapt as the requirements of cooperation change (Emden et al., 2006). Emden et al. (2006) stated that propensity to adapt may be considered a necessary criterion since it may form the basis for the needed flexibility for both new product development (Sivadas and Dwyer, 2002) and sustained cooperation (Doz and Hamel, 1998).
This needed flexibility is an important selection criterion for a co-development relationship, because both partners must be flexible when circumstances change. Otherwise, chances of success of the co-development project will be diminished.
2.4.8 Long-term orientation
Long-term orientation is a partner selection criterion which refers to the willingness to make short-term sacrifices for long-short-term results (Emden et al., 2006). It focuses on long-short-term potential for both manufacturer and supermarket chain (Deck and Strom, 2002).
Ganesan (1994) explained that term orientation focuses on achieving future goals and that long-term goals are concerned with both current and future outcomes. In contrast to the short-long-term goals, which focus only on the outcomes of the current period.
Anderson and Weitz (1992) mentioned that a long-term orientation is important, because it can be equated with relationship commitment. Evidently, there should be relationship commitment in a co-development relationship, because it results in closely working together to increase mutual gains. It is found that partners with long-term orientations are selected over others because long-term orientation gives the partner the ability to overcome obstacles, to resolve conflicts, and to continue under uncertainty (Emden et al., 2006).
Partnerships could disintegrate quickly when there is a large amount of work involved and the opportunities on the short term appear small. Partners should be willing to contribute in the co-development project without knowing the exact outcome on the long-term.
Accordingly, it can be concluded that long-term orientation is an important partner selection criterion for co-development partners, because it indicates whether the partner is willing to put an effort in the relationship without seeing results on the short-term. Basically, co-development is a short-term cooperation project, which may only truly result in profits in the long term.
2.4.9 Business health
The selection criterion financial health is mentioned by many authors, including Geringer (1991), Feng et al. (2010), Büyüközkan et al. (2008) and Salavrakos and Stewart (2006). Even though every author defines different measures for financial health, they appear to be equivalent. Büyüközkan et al. (2008) mentioned financial stability as a partner selection criterion. Feng et al. (2010) mentioned a good financial status on return on stockholders’ equity, return on assets, return on long-term
investment, and profit margin as indicators of financial performance. Salavkros and Stewart (2006) mentioned a low debt-to-equity ratio as an indicator for financial resources of the potential partner. The criterion financial health has also been identified as essential by Geringer (1991). The term business health will be used to refer to all those criteria.
Business health is an important selection criterion for co-development partners, as adequate financial resources of the potential partner are essential in minimizing the potential risks associated with the co-development relationship. Moreover, adequate financial resources may make the partner less opportunistic, because cases of failure or loss will have harmful effects on the partner as well. In conclusion, business health is an important partner selection criterion for co-development, because it minimizes risks and provides an indication for the possible investment in the co-development relationship.
2.4.10 Capability to access new markets
The selection criterion capability to access new markets refers, according to Feng et al. (2010), to a potential partner who has a good relationship with local government, who understands competitors and customers and who can provide high quality service. These factors can facilitate in accessing new markets.
Geringer (1988) mentioned a different criterion, namely access to marketing and distribution systems, but the explanation is almost the same. Access to marketing and distribution systems are tools which can help an organization to gain access to new markets.
However, accessing new markets is not a goal of a co-development project and therefore, the capability of a potential partner to access new markets is not a selection criterion in this situation.
2.4.11 Resources complementarity
Resources complementarity refers to resources which can be exploited or can create opportunities by integration with the resources of the potential partner (Emden et al., 2006; Feng et al., 2010; Geringer, 1991). Likewise, Das and Teng (2000) argued that this added value through integration of resources might provide a competitive advantage.
Emden et al. (2006) stated that partners may be able to generate new market segments for their mutual product (mutual market expansion) through complementary resources. Situations can also occur where one partner may gain access to a new market, and where the other has the opportunity to become a value-added supplier (Emden et al, 2006).
In selecting partners for a co-development relationship, resources complementarity is an essential selection criterion as it can add value to the co-development project. However, in this research project there is chosen to leave resources complementarity out of the list of criteria. The reason is that most important complementing resources, namely technical competencies and market knowledge, are already selection criteria in this research project.
It can be concluded that resources complementarity is an essential criterion, but already covered in the other criteria and thus it does not add any value to the list of selection criteria for
co-development between manufacturer and supermarket chain.
2.4.12 Experience
The selection criterion experience of potential partners refers to the experience of managerial personnel with cooperation in the past (Geringer, 1988). Feng et al. (2010) explained managerial experience as a selection criterion by managerial experience of the partner with cooperation in new product development-projects. Dekker (2008) described it more generally and stated that experience relates to familiarity between exchange partners generated during prior ties. Partner experience is
indicated by whether or not the buyer and supplier had transacted before (Dekker, 2008; Batenburg et al., 2003; Buskens 2002; Gulati, 1995; Gulati & Singh, 1998).
Examples of experiences which can contribute to the success of the co-development relationship are previous work done on the same subject or previous work done in the same context; the context of co-development between manufacturer and supermarket chain. In many situations, previous experiences lead to knowledge, and this may provide a valuable contribution in subsequent partnerships. Therefore, experience of co-development in the past with potential partners can potentially lead to a higher chance of success and is thus considered an essential selection criterion.
Table 1. Literature about partner selection criteria
Criterion Explanation Study Criteria Suitable for application
in co-development? Technical competence Partner should have an Emden et al., 2006 Technical capability Yes
innovative technology or Feng et al., 2010 Technology capability
expertise in a certain field Geringer, 1991 Patents/technical knowhow
Büyüközkan et al., 2008 Technical expertise
Market knowledge Partner should have Büyüközkan et al., 2008 Market knowledge Yes
complementing resourceful Feng et al., 2010 Knowledge and managerial
knowledge about the market experience
Bosch-Sijtsema and Market knowledge
Postma, 2009
Overlapping knowledge Partner should have similar Emden et al., 2006 Overlapping knowledge bases No
knowledge bases (easier to Feng et al., 2010 Overlapping knowledge bases
predict potential business opportunities)
Goal correspondence To what extent partners’ Emden et al., 2006 Motivation/goal correspondence Yes
perceived motives/goals are in Feng et al., 2010 Motivation/goal correspondence
correspondence with one Büyüközkan et al., 2008
another (at least non- competing goals)
Size Size of potential partner Geringer, 1988 Size Yes
Büyüközkan et al., 2008 Similar size
Compatible cultures Partners with compatible Emden et al., 2006 Compatible cultures No
cultures are more likely to Feng et al., 2010 Compatible cultures
understand one another Geringer, 1988 Culture
Propensity to adapt Willingness to adapt as Emden et al., 2006 Propensity to adapt Yes
requirements of collaboration Verma and Pullman, 1998 Flexibility
change
Long-term orientation Willingness to make short-term Emden et al., 2006 Long-term orientation Yes sacrifices for long-term results
Business health Financial status on return on Feng et al., 2010 Financial health Yes
stockholders’ equity, return on Büyüközkan et al., 2008 Financial stability
assets, return on long-term Mikhailov, 2002 Financial stability
investment, profit margin Chen et al., 2008
Capability to access new markets Relationship with government, Feng et al, 2010 Capability to access new markets No
understanding competitors and Geringer, 1988 Access to markets
customers Geringer, 1991 Access to marketing and distribution
systems
Resources complementarity Partner should possess a Emden et al., 2006 Resource complementarity No
technical resource that is Feng et al., 2010 Resource complementarity
distinct or complementing Geringer, 1991 Complementary (in general)
Experience Past experience Geringer, 1988 Past experience Yes
Geringer, 1991 Experienced managerial
personnel
Chapter 3 Measuring the selection criteria
3.1 Introduction
According to chapter 2, the partner selection criteria which should be applied for co-development projects between manufacturer and supermarket chains are the following: technical competence, market knowledge, goal correspondence, size, propensity to adapt, long-term orientation, business health and experience. These criteria need to be measured, which will lead to an answer for the second sub question:
How can manufacturers measure those criteria and apply them to potential co-development partners? This chapter should give insights about the applicability of the selected criteria in practice. A list of potential co-development partners is needed before measuring the criteria. An overview of the Dutch retail landscape is given:
Table 2. An overview of supermarket chains in the Netherlands Purchase
organization
Organization Supermarket chain
Koninklijke Ahold N.V. Albert Heijn wijkwinkels Albert Heijn to Go Albert Heijn XL
Bijeen C1000 B.V. C1000
Jumbo Groep Holding B.V. Jumbo
Super de Boer (in 2011, all these stores become Jumbo stores) C.I.V. Superunie Boni-Markten B.V. Boni
Boon Beheer B.V. MCD
Coop Holding B.V. Coop
Deen Supermarkten B.V. Deen Detailresult Groep N.V. Deka
Dirk van den Broek Bas van der Heijden Digros
Hoogvliet Super B.V. Hoogvliet
Jan Linders B.V. Jan Linders
B.V. Nettorama Distributie Nettorama Poiesz Supermarkten B.V. Poiesz Sligro Food Group Nederland B.V. Sligro
Emté
Golff (in 2011, 35 supermarkets will be converted into Emté stores and the other 10 are too small for Sligro Food Group, they have to look forward to convert into another supermarket chain)
Spar Holding B.V. Spar
B.V. Sperwer Holding Plus
Vomar Holding B.V. Vomar
The supermarket chains in the table above are potential co-development partners with the exception of Super de Boer and Golff, as these chains will become other chains through acquisitions in 2011. Moreover, the different formulas of Albert Heijn will be seen as one potential co-development partner. The reason is that in the current situation there is no separated data for the different formulas and there is only cooperation with Koninklijke Ahold.
3.2 Data collection
Prior to measurement, the methods of data collection will be explained. The process of data collection differs per criterion, as for every criterion different variables need to be measured.
3.2.1 Interviews
Interviewing is one of the main methods of data gathering (Van Aken et al., 2007). It is the primary data collection method for gathering qualitative data (Cooper and Schindler, 2006). Interviews will be conducted in this research to gain deeper information in comparison to for example
questionnaires, as there is room for open questions and additional information.
Telephone interviews will be conducted to obtain information on the technical competencies of supermarket chains. The advantage of these interviews is that they offer the opportunity to draw participants from a wider geographic area (Cooper and Schindler, 2006). Interviews with the development departments of all the potential partner supermarket chains are necessary to obtain information on technical competencies. These departments are wide spread in the Netherlands and therefore there is chosen for telephone interviews. Moreover, this choice can be stressed by a quick and high response rate (Wright, 2003). An advantage in comparison to questionnaires, as it was not known in advance who are working on development departments and willing to participate in a research project.
The telephone interviews are semi-structured, which means that they will start with specific
questions (Cooper and Schindler, 2006) such as “can you describe the stages in the development of a new private label product?” and “who is responsible for the development of your private label products?”. Subsequently the interview can be customized to the participant.
Next to the telephone interviews, an in-depth interview with supermarket expert Peter Smit, editor in chief of the Levensmiddelenkrant, will be conducted. The Levensmiddelenkrant is known as the most widely read magazine in the food industry. Hence, Peter Smit is asked for an interview. He has a lot of expertise and knowledge in the food industry. This interview was carefully prepared, to obtain as much as information as possible.
Preparation started with sending an extended e-mail, prior to the interview, with an explanation about the research project and specified questions per criterion. Examples of questions for the criterion business health are “which possible acquisitions do you expect in the future?” and “which supermarket chains are financial healthy enough/will still exist over a few years?”. There was also room for open questions such as “what are the developments and trends in the market?”, “what do you think of co-development between manufacturers of A-brands and supermarket chains?’’. And Peter Smit will be asked to give his overall feedback on the research topic and selection criteria.
3.2.2 Questionnaire by e-mail
A questionnaire is a good tool to gather a lot of information in a rather small time span (De Leeuw, 1996). Due to the characteristics of this data collection method, the results remain quite superficial. However, a questionnaire by e-mail with a rating scale will be done to let the participant’s judge properties (Cooper and Schindler, 2006) of the supermarket chains. Eight account managers of H.J. Heinz are asked to be a participant for this questionnaire. They are responsible for achieving profit targets for a certain supermarket chain (some of them are responsible for more than one
supermarket chain) and therefore they know their customer, the supermarket chain, very well. There is chosen for a questionnaire by e-mail with a rating scale to make the results comparable to each other. The results can be analyzed by putting them in a table per topic. The questionnaire can be found in appendix 1.
3.2.3 Documentation
It can be helpful to use existing documents as a source of information (Van Aken et al, 2007). An advantage is that documentation is often a more reliable source of information than the opinion of organizational members. Examples of documentation are annual reports, mission statements, policy documents and databases.
Prior to the actual data collection, there is investigated which data exists about supermarket chains. The main sources of data which are frequently used are IRI and GFK. Those databases need some explanation.
IRI is an organization specialized in market research; they obtain scanning data (all the products which are scanned in supermarkets, effectively all sales) from all the supermarkets in the
Netherlands. Most of the analyzes are done by the trade marketeers of H.J. Heinz, and some data will be analyzed by IRI in commission of H.J. Heinz. This data is especially suitable for analyzing statistics about sales, but in this research project the number of stores and market shares are analyzed. This information can also be obtained from the database.
GFK is an organization that obtains data from 6,000 households in the Netherlands. These the households scan the products they purchased in a supermarket at home; GFK analyzes their
purchases. For example: combination of purchases, amount of money they spend, family composition. The analysis of GFK are available online, just for members with an account. In this research project, GFK data is applied for investigation of the geographical coverage of the different supermarket chains.
Other documents which will be analyzed are the industributierapport 2010 and annual reports. The ‘industributierapport 2010’ contains a research conducted by the EFMI Business School and IRI. In this report, supermarket chains judge A-brand manufacturers on several areas, including account management, trade marketing, category management and supply chain management. It is available at H.J. Heinz.
Annual reports are available at the internet and especially analyzed for measuring financial health. There is chosen to make use of these documents, because they are a reliable source of information.
3.3 Measuring chosen selection criteria
The process of measuring every criterion consists of four parts. It starts with a definition according to the literature in chapter two, followed up by an operational definition. An operational definition is a definition stated in terms of specific criteria for testing or measurement (Cooper and Schindler, 2006). This operational definition makes clear how the definition from literature can be applied in practice. In the next part, a desired value for the measurement will be determined and it ends with the actual measurement.
3.3.1 Technical competence
Definition
Technical competence refers to potential partners who own an innovative technology or technological expertise in a certain field.
Operational definition
Possessing an innovative technology or technological expertise refers in practice to owning factories with technical competencies. Moreover, it should be known whether supermarket chains are able to develop products completely by themselves.
The development of a new product can be split up into 4 different stages: having an idea for a new product, selecting resources for the new product, designing a package for the new product and manufacturing of the new product. These stages need some explanation:
- Idea: whether a supermarket chain puts effort into market research, brainstorming and coming up with a complete new product concept. When a supermarket chain just imitates products, they are not able to develop a new idea for a new product by themselves. - Selecting resources: whether a supermarket chain is able to develop a product and select
commodities;
- Designing a package: whether a supermarket chain is able to design a package; - Manufacturing: whether a supermarket chain owns factories where the product can be
developed. Supermarket chains that outsource the manufacturing of their product to other factories are not able to manufacture the products by themselves.
Technical competencies according to the view of supermarket chains are clear, there are only 4 stages (source: telephone interviews). From the perspective of manufacturers, it is essential to know if supermarket chains dispose of factories, as a lack of technical competencies can deliver them a competitive advantage.
Desired value
Ultimately, the potential partner should not be able to influence the last 3 stages of the development process: no capability to select resources, no capability to design the package an no manufacturing facilities. Then they are a more appealing choice to manufacturers, as supermarket chains are dependent on them for the complete development process of new products.
Measure
As partly explained in 3.2.1, the measurement of the criterion technical competence will be done through telephone interviews with the development departments of supermarket chains.
Additionally, the knowledge of Peter Smit on supermarket chains that own or do not own factories is used to obtain this data. These are the data sources for the measurement of technical competencies. During those telephone interviews, it is found that there are many small supermarket chains that have common private labels such as Perfekt, Markant, Topvit, Bonbebe and First Choice. These small supermarket chains are not able to develop and manufacture products by themselves; they buy private label products from private label manufacturers. These supermarket chains are appealing co-development partners, because of their lack of technical competencies. The results of the telephone interviews can be found in table 3.
With the exception of Albert Heijn, owning factories is not common for supermarket chains in the Netherlands, according to Peter Smit. However, there are some supermarket chains who have manufactury facilities for fresh products. For example, Albert Heijn owns a coffee-roasting factory, Deka owns a bakery and Deen produces fresh ready-to-eat meals. It is remarkable that some
supermarket chains just own facilities to produce fresh products (ready-to-eat meals, soups); the reason is that fresh products are easier to produce in small quantities.
With regard to the results, note that further research prior to a co-development relationship could be necessary. For example to develop the Brinta bread, a further research was necessary to know which supermarket chains own or do not own bakeries.
Table 3. Results of telephone interviews
Retailer Idea Composition of
resources
Design of package
Manufacturing
Albert Heijn Yes Yes Yes Yes
C1000 No No No No
Jumbo No Yes Yes No
Boni No No No No
MCD No No No No
Coop No No No No
Deen No No Yes No
Deka No No No No
Dirk van den Broek
No No No No
Bas van der Heijden No No No No Digros No No No No Hoogvliet No No No No Jan Linders No No No No Nettorama No No No No Poiesz No No No No Sligro No No No No Emté No No No No Spar Yes No No No Attent No No No No Plus No No No No Vomar No No No No
Based on the results in above, there is a lot of room for manufacturers to co-develop with
supermarket chains. Albert Heijn is the only supermarket chain that can go through all 4 stages on its own, and is therefore not a potential partner based on this criterion. Furthermore, Jumbo and Deen design their own packages and Spar just comes up with the idea.
It can be concluded that, with the exception of Albert Heijn, all the supermarket chains in the Netherlands are appealing co-development partners due to their lack of technical competencies. However, prior to a co-development project between manufacturer an supermarket chain, some research about specific production facilities such as bakeries can be valuable.
3.2.2 Market knowledge
Definition
Market knowledge refers to potential partners who own complementing resourceful knowledge about the market.
Operational definition
Peter Smit indicated in the interview that the retail landscape of supermarkets is very transparent in the Netherlands. Both parties buy data from IRI; they know the statistics about every product in the supermarket and can analyze this. These statistics are not confidential. And, they both observe the competitors in the market. Moreover, the retail market is fragmented in the Netherlands, as there are many small players that focus on a certain region. For this reason, supermarket chains know their customers. The owners and employees are part of the community in a certain region and they know their needs. For example, Poiesz, a supermarket chain which is established in Friesland, knows which products people from this region prefer.
Because of the transparency, only complementing knowledge adds value to co-development. For example: knowledge about shelving, categories and observations from customers. Knowledge about categories is embedded in category management. Category management is a concept which is explained in 1.2, it is an approach to manage a product category as a business unit. There can be a lot of knowledge about this business unit in the form of information about customers, profitability, strategies and trends.
Knowledge on shelves is embedded in space management. Space management is a concept which allocates space for products on the shelves, based on sales volume and product profitability. Moreover, space management includes knowledge about customers, about the height they prefer, about the time they spend in front of a shelve and about their decisions (brand versus packaging). Another instrument which potential partners use to obtain market knowledge is customer cards. Peter Smit said that only Albert Heijn en Coop make use of this system to obtain information about the products bought by customers. Using customer cards to obtain information is a relatively expensive system, and therefore, it is not common for supermarket chains to make use of it. The Netherlands are lagging behind with customer cards in comparison to the international retail landscape. Reason for this lag is a gap between the market leader, Albert Heijn, and the rest of the fragmented market. The small fragmented supermarket chains which are focused on a certain region know their customers, and therefore information from a customer card is not necessary and does not add any value to the market knowledge of the supermarket chain.
Desired value
Ultimately, it should be investigated which complementing market knowledge is available for both parties. However, willingness to share confidential complementing market knowledge is a
requirement for co-development. This willingness to share complementing knowledge about category management should be above average, which means a 6.5. Willingness to share
complementing market knowledge on space management should be high or very high. Otherwise, confidential knowledge which is not shared does not add any value to co-development.
Measure
The existence of complementing market knowledge should be investigated during the first negotiations with a supermarket chain prior to the start of a co-development project. This information cannot be investigated prior to the first negotiations, as it is confidential. It can be concluded that the investigation of complementary market knowledge can only be done if co-development is probable with a certain partner.
However, the willingness to share this confidential knowledge is a requirement prior to co-development. To measure this willingness two data sources are obtained.
For measuring the willingness to share knowledge about category management, it has been decided to make use of the ’indistributierapport 2010’. Supermarket chains are rated on a scale from one to ten.
For measuring the willingness to share knowledge about space management, the questionnaire by e-mail with account managers of H.J. Heinz is used. They applied their expertise in the questionnaire to make an estimation of the willingness to share this confidential information on a rating scale from very low to very high.
Additionally, Peter Smit indicated that Albert Heijn and Coop are the only supermarket chains in the Netherlands that make use of a customer card. The results can be found in table 4.
Table 4. Results of the industributierapport 2010 and questionnaires by e-mail
Retailer Willingness to share
knowledge on category management (scores 1-10) Willingness to share knowledge on space management (rating scale from very low to very high)
Albert Heijn 6,55 High Customer card
C1000 6,42 High
Jumbo 6,97 High
Boni 6,18 High
MCD 5,89 Not low, not high
Coop 6,96 High Customer card
Deen 6,53 Very high
Deka 6,07 Not low, not high
Dirk van den Broek 6,07 Not low, not high
Bas van der Heijden No data available Not low, not high
Digros No data available Not low, not high
Hoogvliet 7,02 High
Jan Linders 6,56 High
Nettorama No data available No data available
Poiesz 6,28 High
Sligro No data available Not low, not high
Emté 6,14 No data available
Spar 6,53 High
Attent No data available No data available
Plus 7,30 High
Vomar 6,51 High
Based on the selection criterion market knowledge, Albert Heijn en Coop have the highest potential for becoming co-development partners, as they possess the most market knowledge through their customer cards.
For the other supermarket chains, a ranking could be made from highest potential to lowest potential to become a co-development partner for H.J. Heinz based on their willingness to share confidential market knowledge.
The result is a ranking of supermarket chains from highest potential to lowest potential: Plus, Hoogvliet, Jumbo, Jan Linders, Deen, Spar, Vomar, C1000, Poiesz, Boni, Emté, Deka, Dirk van den Broek, MCD, Bas van der Heijden, Digros, Sligro, Nettorama, Attent.
The selection criterion market knowledge is essential in practice, but cannot be done prior to the first negotiations. Therefore, the results on the willingness to share market knowledge can be used as a requirement for co-development which will be followed up by a detailed investigation.
3.3.3 Goal correspondence
Definition
Goal correspondence refers to potential partners who have the same goals or motives prior to entering into a co-development relationship, or at the very least noncompeting goals or motives. These goals should be immediately be achieved during the relationship or as a result of the relationship.
Operational definition
Goal correspondence refers to potential partners who pursue a goal which matches the goal of H.J. Heinz. The goal of co-development for H.J. Heinz is to build a strong relationship. The for about one-year goal of supermarket chains can be found in their annual reports and the information on their website. Annual reports and websites give information about their future plans, about what they want to achieve. To reach an optimal goal correspondence, it is important that goals of supermarket chains match the goals of H.J. Heinz.
Desired value
The ultimate value for goal correspondence is a perfect match. Building a strong relationship, for different reasons such as speed up the introduction of new products and growing revenues, is consistent with striving for growing revenues through expanding existing markets or acquisitions. Moreover, the goal of actively developing a product together is a requirement prior to
co-development.
Measure
The goals of supermarket chains are presented in their annual reports and on their websites. These two data sources are used to obtain the data for this selection criterion. Goal correspondence can be measured by comparing the published goals of supermarket chains with the goal of H.J. Heinz, building a strong relationship. Moreover, it is important that the supermarket chain does pursue the goal of co-development, actively developing a product together. However, it is assumed in this research project that they pursue this goal. In practice, it could be checked during the first
negotiation if they are truly willing to cooperate and willing to invest in the co-development project. For every supermarket chain, a short explanation is given of the goal they pursue. An estimation is made whether this goal matches with the goal of H.J. Heinz. The results of this measurement are given in 3 categories: perfect match (high goal correspondence), potential match (moderate goal correspondence), and no match (no goal correspondence). The explanation will declare the choice for a certain category. The results can be found in table 5.
Table 5. Results of annual reports and the internet
Retailer Perfect match Potential match No match Explanation
Albert Heijn X Growth in existing new markets
(www.ahold.nl)
C1000 X Franchisees, only the same logo (Ton
Heidman, CEO C1000, www.popai.nl)
Jumbo X Every day low price
(www.jumbosupermarkten.nl)
(www.bonisupermarkt.nl)
MCD X Offering low prices
(www.mcd-supermarkt.nl)
Coop Offering low prices and standard
A-brand products
(www.coopsupermarkten.nl)
Deen X No day without Deen, friendly for
wallet (www.deen.nl)
Deka X Exploit new chains (www.digros.nl)
Dirk van den Broek X Exploit new chains (www.digros.nl)
Bas van der Heijden X Exploit new chains (www.digros.nl)
Digros X Exploit new chains (www.digros.nl)
Hoogvliet X Being friendly, corporate responsible
and offering quality and service (www.hoogvliet.com)
Jan Linders X Being the best supermarket of south
east Netherlands (www.janlinders.nl)
Nettorama X Being an A-brand discounter
(www.nettorama.nl)
Poiesz X Being a supermarket for everyone,
strongly committed to the region. The customer determines what Poiesz sells (www.poiesz-supermarkten.nl)
Sligro X Growth, focused on acquisitions
(Annual report Sligro Foodgroup 2010)
Emté X Offering the best fresh quality, being
beneficial and friendly (www.emte.nl)
Spar X Franchisees, focus on neighborhood
(www.sparholding.nl)
Attent X Franchisees, focus on neighborhood
(www.sparholding.nl)
Plus X Being profitable on the long term
(www.plusretail.nl)
Vomar X Growth of the number of stores
(www.vomar.nl)
This table gives some insights. Co-development with discount supermarkets such as Nettorama are not appealing, as they just focus on low prices. C1000 is also a difficult co-development partner, because most of the C1000 supermarkets are owned by franchisees. They conduct the business with just a few restrictions from the head office, C1000 entrepreneurs do what is necessary, what is possible and what is allowed. They determine their own strategy. Franchisees such as C1000, Spar and Attent are not appealing for co-development, because there is no strong unity within this chain with the exception of the logo.
Supermarket chains with the highest potential to co-develop with manufacturers based on their goals are those who pursue growth, aspire expanding existing markets or planning for acquisitions. The reason is that these supermarkets are willing to invest in a co-development project which can help achieving their goals quickly.
3.3.4 Size
Definition
Size refers to the actual size of potential partners in comparison to all the supermarket chains in the Netherlands.
Operational definition
The organizational size of a supermarket chain aims at distribution and diffusion of a new product. The bigger a potential partner, the higher the distribution of a new product will be. The criterion size of potential partners can be compared by looking at the number of stores and the market shares of all the supermarket chains in the Netherlands. Moreover, the geographical coverage of a supermarket chain is important to consider what the impact of a co-development project can be.
Desired value
With regard to market shares, it is difficult to set a minimum for co-development, as the retail landscape is fragmented. So the number of stores and geographical coverage are more relevant, but market shares gave some insight in the general size of the supermarket chain.
A supermarket chain should possess at least 50 stores to be eligible for co-development, as the distribution is an important factor to the success of co-development. Co-development with a supermarket chain with less than 50 stores will have almost no impact in the Netherlands. With regard to the geographical coverage, at least 3 regions should be covered to have the largest impact in the Netherlands as a whole.
Measure
Different sources are used to measure the size of supermarket chains. First of all, size can be measured by market shares and amount of stores. Secondly, size can be measured by geographical coverage to measure what the impact of a co-development project can be.
The measures are performed by analyzing the database of IRI and the internet, with additional information from GFK about geographical coverage. Market shares are given by IRI at H.J. Heinz and an overview of the market shares is given at www.distrifood.nl. Data about the number of stores is also available at H.J. Heinz, in the database of IRI. The geographical coverage of supermarket chains will be given in words, according to GFK data and the internet. The results can be found in table 6 and 7.
Table 6. Results from IRI, MAT 52 2010 (number of stores) and www.distrifood.nl (market shares)
Retailer Market shares Number of stores
Albert Heijn 33,6% 870
C1000 11,5% 375
Jumbo 5,5% 148
Boni No data available 34
Coop 2,5% 191
Deen 2,0% 60
Deka 90 (source: www.detailresult.nl)
Dirk van den Broek 4,2% 45 (source: www.detailresult.nl)
Bas van der Heijden 30 (source: www.detailresult.nl)
Digros 20 (source: www.detailresult.nl)
Hoogvliet 2,0% 60
Jan Linders 1,0% 52
Nettorama No data available 29 (source: www.nettorama.nl)
Poiesz 1,0% 54
Sligro No data available 45 (source: www.sligro.nl)
Emté 1,9% 94 (source: www.distrifood.nl)
Spar 2,2% 322 (source: www.distrifood.nl)
Attent No data available 83 (source: www.distrifood.nl)
Plus 6,0% 267 Vomar 1,7% 54 Total: 75,4% Aldi 7,9% Lidl 5,6% Super de Boer 5,5% Golff 0,6% Sanders 0,3%
Table 7. Results of GFK and the internet
Retailer Geographical coverage
North East South West
Albert Heijn X X X X Source: GFK
C1000 X X X X Source: GFK
Jumbo X X X X Source: GFK
Boni X X Between
Amsterdam-Apeldoorn-Meppel
MCD X X
Coop X X X X
Deen X Between Hoofddorp-Den
Helder-Lelystad
Deka X X
Dirk van den Broek X X X
Bas van der Heijden X
Digros X Hoogvliet X Jan Linders X Nettorama X X Poiesz X Sligro X X X X Emté X X X Spar X X X X Attent X X X X
