H-E-B Own Brands

Describe the relevant market boundaries (environmental influences) for H-E-B based on a PESTLE analysis. This is the macro environment not the micro or company factors and Part II) you are to apply them in order to identify the relevant market boundaries (or what factor causes a customer to prefer one competitor over the other)

The Political Market Boundaries for H-E-B are focused more on the regulations of businesses and the spending power available by the consumer. The Economic Market Boundaries for H-E-B are the long and short term prospects of the economy in the area in which H-E-B tend to operate their businesses. H-E-B Social Market Boundaries as it pertains to mostly their Mexico stores, what are the attitudes to foreign products and services, does language impact the diffusion of products or services, what is the perception of H-E-B to the populous and consumer therein. The Technology Market Boundaries include the ability to produce their Own Brands products, what type of logistics do H-E-B have and is it cost effective, what type of computer system does H-E-B use; such as Point of Sales (Point of Sales) and Self-Check out, is their store up to date with that of Wal-Mart® or Albertsons®. As it pertains to Legal Market boundaries, are they following the obligations of selling space to vendors? Are they careful to not to copy of other patented products with their Own Brands? Environmental Market Boundaries are the type of produce can be grown locally and purchased from local farmers. H-E-B stores, distribution centers, and production plants running green or environmentally friendly.

HEB offers many different products- create an SBU analysis for HEB based on product line See table C. Where would you increase invests, maintain current investments, divest of current investments (or get rid of businesses)

I would add to the Grocery, Meat and Seafood, Deli, Produce and Bakery. I would limit the Health and Beauty and General Merchandise SKU's. Based on Charles Butt statement (Page 4):

We are also keenly interested in those aspects of our business that allow us to differentiate ourselves. These include wide selection, outstanding baked goods, produce, flowers, meats and seafood. Customer-focused service and our growing Own Brand assortment are also vital elements.

According to the case study, H-E-B does not do well in Health and Beauty or General Merchandise but they have 35,000 SKU's, use a portion of 22% of store space, and only account to 15% of overall sales. If H-E-B can lower the SKU's and amount of store space of these departments, they can increase the selling space of Grocery, Meat and Seafood, produce, bakery, and deli. This according to Charles Butt statement is what differentiates them from the competition.

Department % of Sales # of SKU's % of Store Space

Grocery 50% 30000 45%

Meat and Seafood 16% 3000 12%

Health and Beauty/ Merchandise 5% 8500 10%

Pharmacy 9% 3250 2%

Produce 10% 6000 15%

Deli 5% 4000 8%

Bakery 5% 3000 8%

Perform a SWOT (strength, weakness, opportunity, and threats) analysis for the firm and from the SWOT create a VRIO table see mini-lectures for example

Strength

* H-E-B has three different segments

* H-E-B has its own brand produced by its own manufacturing plants Weaknesses

* The demographic location is limited

* Company is privately own, not investors to use capital

Opportunities

* Company has room to expand beyond Mexico, Texas, and Louisiana

Threats

* National Brand products vs. Private Labels

* Well established competitors (Wal-Mart, Albertsons)

* Self-Saturation is some current markets

Value Rarity Imitate Organization Competitive Economic

No No Disadvantage Below

Yes No <----> Parity Normal

Yes Yes No Temporary Competitive Advantage Above Normal

Yes Yes Yes Yes Sustained Competitive Advantage Above Normal

Product Positioning Maps are an important way to access the firm's competitive position. You may also use an analysis similar to the one found in exhibit 8.2, 8.6 or 8.7 of Mullins and Walker. If there is insufficient information in the case you may use the internet to gather additional information or do this assessment generically.

In looking at the whole environment assess the key factors using a Porter's Five force analysis (see Chapter 3 Mullins & Walker)

Supplier Power

* Threats of forward Integration

* Supplier Concentration

* Importance of Value to Supplier

* Presence of substitute

Threats of Substitutes

* Switching Costs

* Buyer Substitution

* Price-performance trade off substitution

Buyer Power

* Buyers Incentives

* Substitutes Available

* Product Different ion

* Price