MBA 500 Walden University Trader Joes SWOT Analysis

DescriptionCase 1 Trader Joe’s Keeping a Cool Edge
The average Trader Joe’s location stocks only a small percentage of the products of local
supermarkets in a space little larger than a corner store. How did this neighborhood market
grow to major status, earn stellar ratings, and become a model of management? Take a walk
down the aisles of Trader Joe’s and learn how serious attention to fundamentals of
management made this chain more than the average Joe.
From Corner Store to Foodie Mecca
All across the United States, hundreds of thousands of customers are treasure
hunting.1 Driven by gourmet tastes but hungering for deals, they are led by cheerful guides
in Hawaiian shirts who point them to culinary discoveries such as Ahi jerky, ginger granola,
and baked jalapeño cheese crunchies. It’s just an average day at Trader Joe’s, the gourmet,
specialty, and natural-foods store.2
Foodies, hipsters, and recessionistas alike are attracted to the chain’s charming blend of
tasty treats and laid-back but enthusiastic customer service. Shopping at Trader Joe’s is less
a chore than it is immersion into another culture. Crew members and managers wear
smiles and are quick to engage in a friendly chat. Chalkboards unabashedly announce
slogans such as, “You don’t have to join a club, carry a card, or clip coupons to get a good
deal.”
“When you look at food retailers,” says Richard George, professor of food marketing at St.
Joseph’s University, “there is the low end, the big middle, and then there is the cool edge that’s Trader Joe’s.”3 But how does Trader Joe’s compare with other stores with an edge,
such as Whole Foods? Both source locally and around the world. Each values employees
and works to offer the highest quality. However, Trader Joe’s has a cozy and intimate
atmosphere that its rival lacks.
Trader Joe’s limits its stock and sells quality products at low prices – about twice as much
per square foot than other supermarkets.4 But this scarcity benefits Trader Joe’s and its
customers. According to Swarthmore professor Barry Schwartz, author of The Paradox of
Choice: Why Less Is More, “Giving people too much choice can result in paralysis …
[R]esearch shows that the more options you offer, the less likely people are to choose
any.”5
Founder “Trader” Joe Coulombe opened the first Trader Joe’s store over 50 years ago in
Pasadena, California. Its success led to expansion into a bona-fide chain, as Trader Joe’s
stores became known as islands of value that replaced run-of-the-mill necessities with
exotic, one-of-a-kind foods priced persuasively below those of any reasonable
competitor.6 Coulombe eventually sold the chain to the Albrecht family, German
billionaires and owners of Aldi markets in the United States, Europe, and Australia. 7
Cost Control
Trader Joe’s prides itself on its thriftiness and cost-saving measures, proclaiming, “Every
penny we save is a penny you save” and “Our CEO doesn’t even have a secretary.”8 Its
strongest weapon is a deliciously simple approach to stocking stores: (1) search out tasty,
unusual foods from all around the world; (2) contract directly with manufacturers; (3)
label each product under one of several catchy house brands; and, (4) maintain a small
stock, making each product fight for its place on the shelf.
Most Trader Joe’s products are sold under a variant of its house brand – dried pasta with
the “Trader Giotto’s” tag, frozen enchiladas under the “Trader Jose’s” label, vitamins under
“Trader Darwin’s,” and so on. But these store brands don’t sacrifice quality – readers of
Consumer Reports give Trader Joe’s house brands the highest ratings.9 The house brand
success is no accident. According to Trader Joe’s [former] president, Doug Rauch, “the
company pursued the strategy to put our destiny in our own hands.”10
Customer Connection
Ten to 15 new products debut each week at Trader Joe’s – and the company maintains a
strict “one in, one out” policy. Items that sell poorly or whose cost rises get tossed in favor
of new options, something the company calls the “gangway factor.”11 If customers don’t like
something about a product, out it goes – count spinach and garlic from China among the
rejected losers. “Our customers have voiced their concerns about products from this region
and we have listened,” the company said.12
Discontinued items may be brought back if customers complain. “We feel really close to our
customers,” says Audrey O’Connell, former vice president of marketing for Trader Joe’s
East. “When we want to know what’s on their minds, we don’t need to put them in a sterile
room with a swinging bulb. We like to think of Trader Joe’s as an economic food
democracy.”13 In return, customers keep talking and recruit new converts. Word-of-mouth
advertising has lowered the corporation’s advertising budget to a fraction of that spent by
supermarkets.14
Trader Joe’s culture of product knowledge and customer involvement is carefully cultivated
among new hires and current employees. Everyone is encouraged to taste and learn about
the products and to engage customers to share what they’ve experienced. Most shoppers
recall instances when helpful crew members took the time to locate or recommend
particular items. Job descriptions highlight desired soft skills, such as “ambitious and
adventurous, enjoy smiling and have a strong sense of values.” They count as much as
actual retail experience.15
Strength from Within
A responsible, knowledgeable, and friendly “crew” is a natural extension of the firm’s
promote-from-within philosophy. And crew members earn more than their counterparts at
other chain grocers, sometimes by as much as 20%.16 Starting benefits include medical,
dental, and vision insurance; company-paid retirement; paid vacation; and a 10%
employee discount.17 Assistant store managers earn a compensation package averaging
$70,000+ a year (including salary and cash bonus) while the store managers’ packages
average $109,000.18 Future leaders enroll in training programs such as Trader Joe’s
University that help develop the loyalty necessary to run stores according to company and
customer expectations. The program teaches managers how to get their part-timers to
demonstrate the customer-focused attitude shoppers have come to expect.19
What does the future hold? Will Trader Joe’s allure of cosmopolitan food at provincial
prices continue to tempt new consumers? Will management practices continue to attract
the talent Trader Joe’s needs to maintain its culture and customer focus as the competition
heats up?
Case Analysis Questions




1. Discussion In what ways does Trader Joe’s demonstrate the importance of each
responsibility in the management process – planning, organizing, leading, and
controlling?
2. Discussion What lessons does the Trader Joe’s story offer to aspiring
entrepreneurs who want to get off to a good start in any industry?
3. Problem Solving At the age of 22 and newly graduated from college, Hazel has just
accepted a job with Trader Joe’s as a shift leader. She’ll be supervising four team
members who fill part-time jobs in the produce section. Given Trader Joe’s casual
and nontraditional work environment, what skills will she need, what should she do,
and what should she avoid doing in the first few days of work to establish herself as
a successful team leader?
4. Further Research Study news reports to find more information on Trader Joe’s
management and organization practices. Look for comparisons with its competitors
and try to identify whether or not Trader Joe’s still has the right management
approach and business model for continued success. Are there any internal
weaknesses in the Trader Joe’s management approach or new practices by external
competitors, or changing industry forces that might cause future problems?

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