Industry Value Chain

Hired by Rexall
Acquired the small chain from Rexall
Financing from Adohr Milk Farms
Adohr got acquired by 7-11 which Coulombre found it untenable
Set up Trader Joes
First Trader Joes in Pasadena
Acquired by Aldi North
With Coulombre still as CEO
Stepped down in 1988, John Shields took over as CEO
Expanded beyond Southern California base
North California 1988, Arizona 1993, East Coast
John Shields stepped down, replaced by Dan Bane
Launches Charles Shaw Winery
In 2013, expanded to approximately 400 locations across 37 states and the District of

Columbia

Bargaining Power of Buyers is LOW

Sophisticated consumers interested in finding good bargains of new products

Buyers do not buy in large quantities
Products are differentiated

Bargaining Power of Suppliers is HIGH

Offer products that are differentiated

More concentrated than the industry it sells to
Dependent on the industry it sells to
No close substitutes

Therefore, favorable for Trader Joes, making it profitable.

Core Competencies of Trader Joes

1. Valuable Resources
Network of suppliers that are willing to maintain secrecy in their business relationships

with the organization and provide them with quality, diverse products that are then

branded under Trader Joes private label

o CREATES value: source these products at costs that are much lower than those

of their competitors
Ability to attract and retain high volume of extremely loyal customers, with minimal

marketing which is attributed to their well-trained staff and perceived low prices for quality

private label goods

o CREATES value: provide customer with above industry experience without much

investment
2. Rarity
 Most organizations tend to lean towards more bureaucratic process and procedures

in order to simplify communications and transactions throughout their value chains

and physical retail locations. Instead, Trader Joes gave their employees autonomy to

do as they please they could decide how they wanted to place their products in the

store as they felt that the employees know the clientele the best.
Most organizations rely on advertising, special sales, and coupons to attract

customers to make purchases. Instead, Trader Joes had minimal marketing and yet

had a strong loyal customer base.

3. Cost of imitation
Very costly to imitate Trader Joes practices as
Trader Joes has been built on historical customer loyalty
Social complexity is inimitable as customers have created a vast social media

presence for an organization with absolutely no corporate presence

Casual Ambiguity: unknown suppliers that Trader Joes partners with due to

their secrecy policy

4. Organized to capture value
Trader Joes teaches employees to adhere and embrace its 7 core values
These values are the basis of training and induction of new employees, and crew

members are trusted to adhere to these values and implement them into all aspects

of their job within the organization

Hired people who best understood their target audience increased economic value

creation

Resources

Tangible
o Customers provide free advertising for Trader Joes through WOM marketing
Intangible
o Located near centers of learning allowed Trader Joes to be located near their buyers,

to understand their needs better

o Positive reputation of being the only grocery chain that offered unique products at low

prices as well as bring a company that many would want to work for due to their

strong organizational culture

o Knowledge of target market needs what unique items were they exactly looking for

Capabilities

Human Resource management

o Treasure their employees as an asset by providing them with healthcare benefits,

employee benefits, autonomy in workplace led to low employee turnover rate

o Aligned corporate values to employees own values (7 core values)
 o Trained employees to do every job = frequent rotational basis required proper HR

staffing methods
Logistics Management
o Stock keeping unit lower than most grocery chains, yet demand is still high with no

stock outs imply that they have an efficient logistics system.

Important trade-offs that Trader Joes has made

Sourcing cost for unique products Unique product offering

Advanced logistics systems Small location, low SKU,

meant higher operating cost ability to meet demand

High Salary Expense eating into High employee retention rate

profits
In replace for
Couldnt do public relations to Secrecy it had to keep

open up and interact with the

public despite fervent online

activity which could potentially

increase sales

Key sources of Trader Joes Competitive Advantage

People
o Consumers who appreciated Trader Joes product variety = voluntary advertising =

WOM Marketing
o Employees who were fun-loving, funky whom related well with customers, and the

business concept of Trader Joes

Organizational Culture
o Trader Joes had a strong operational culture fun-loving, well-paid, collaborate work

environment, clear core values aligned with employees in the beginning, employee

benefits
Process and Practices
o Low SKU given small land area and low stock outs = efficient logistics systems
o Free sampling for customers despite small size of shops
o Autonomy given to their employees to make decisions based on their experience
Capital
o Aldi North acquired Trader Joes gave Coulombe the autonomy to run Trader Joes as

he wished

Main threats to Trader Joes Competitive Advantage (See SWOT Analysis Threats)
 Substitutes such as Retail Giants like Wal-Mart who had similar operating strategy everyday

low-pricing
Evolving consumer preferences. Must do R&D regularly to identify pereferences and match

product offering accordingly

SWOT Analysis

Strengths

Product and brand diversity

o Attract different customers with varying budgets and requirements to its stores =

broad customer base

Decentralized operations
o Treats every store as an independent business and decision-making lies with the local

management
o The organizational structure enables the company to provide goods and services as

per local demands and respond effectively to their dynamic needs.

Strong Market Position
o Built its brand equity and helped the company in establishing itself as leader in the

retail of food and non-food items in the United States.

o Enhanced customer loyalty and relationships with local suppliers, along with strong

reputation generated over decades

Strong Brand Image
o Coupled with wide private label portfolio enables the company to attract new

customers and enhance customer loyalty, thereby increasing profit margins

Weaknesses

Lack of retail channels and online presence

o Confines operations to limited regions and customer reach
o Prevent Trade Joes from realizing benefits of online shopping
Overdependence on US Market
o Walmart: Diversified geographically
o Overdependence also puts company at a risk as any adverse development on the

region will directly affect profits

Opportunities

Rising demand for organic products

o Whole Foods, with main source of revenue stemming from United States signified

high organic demand

o Growing awareness about harmful effects of pesticides and increasing health

concerns
 Rising demand of private labels
o Rising demand of private labels due to budget constraints
Business expansion
o Increase number of stores in United States provides proximity to reach out to even

more customers

Threats

Evolving consumer preferences

Preference of substitutes by retail giants like Wal-Mart