Corporate strategy METRO Group
Corporate Strategy METRO Group
Background
Metro Group, also known as Metro AG, is a leading German international retail and wholesale/cash and carry group with headquarters in Düsseldorf, Germany. Metro Group is the fourth largest corporation in the world, behind Wal-Mart, Carrefour, and Tesco respectively. The company currently operates in 32 countries across Europe, Africa and Asia with a total workforce of about 280,000 employees drawn from about 180 nations working in its over 2,200 outlets.
Metro Group does business in four broad categories: wholesale (Metro Cash & Carry – the world’s market leader); food retail (Real hypermarkets & Extra supermarkets); non-food specialty stores (Saturn and Media Markt consumer electronics – Europe’s market leader); and department stores (Galeria Kaufhof – the system leader in department store business). The group has also recently ventured into e-commerce platforms for all of its retail businesses besides operating Metro Properties, Metro Group’s real estate entity. Metro Group was established in 1996 following the merger between Asko Deutsche Kaufhaus AG, Deutsche SB-Kauf AG, and Kaufhof AG.
Metro Group’s corporate thinking and action is characterized by responsibility towards their customers, stockholders along with the public. The company is reputed for its innovative strength. As a high-performance as well as foresighted group of companies, Metro Group envisions to add to the further development and modernization of the domestic and national retail sector.
The Environment
Metro Group operates in a highly competitive business environment that is dominated by such established industry players as Wal-Mart, Carrefour, and Tesco. The competition has built up their retail and wholesale presence from scratch. The Cash-and-carry business is projected to experience tremendous growth by 2017 (Metro Group 2012, p.5).
As a global retail and wholesale company, Metro Group is affected by both political and economic situations in the different countries in which it does business. In majority of European markets, customers are currently affected by the sovereign debt crisis and its implications, including austerity programs by governments, along with rising unemployment (Metro Group 2011, p.2). This has had negative impact on their purchasing power, consumer confidence and private consumption which has made it rather challenging for Metro Group to achieve its sales growth objectives. The Group expects the economic situation to improve, especially in Europe and other developed economies. The growth markets of Asia show signs of get better following a continued intensification of domestic demand together with the emergence of affluent middle class (Metro Group 2012, p.9). As compared to 2012, the risk-and-opportunities picture for short- to medium-term development of the entire retail sector and consequently for Metro Group have improved slightly in 2013. The Group is thus paying attention to business units along with nations where it can develop a distinct profile together with strong market position.
The international position of Metro Group demands of it to respond to potential economic, political, and legal risks. The business environment in individual countries can always change rapidly. In this regard, Metro Group’s business is always at risk from possible changes in political leadership, unrest, natural disasters or terrorist attacks (Metro Group 2011, p.16). In all countries, therefore, Metro Group takes insurance coverage as far as possible. The company’s professional crisis management is design to undertake fast response along with crisis management. The international expansion of the business provides the company with the chance to offset political, economic and legal risks together with demand fluctuations in individual countries.
The business environment, particularly the saturated Western Europe markets, is typified by rapid change and stiff competition. The resulting conditions impact significantly on Metro Group’s business developments and are themselves natural business risks. The greatest business risk for leading companies like Metro Group in these markets is the consumers’ fluctuating tendency to consume (Metro Group 2012, p.11).
The environment is largely characterized by changing consumer behavior along with customer expectations, which pose both risks and opportunities for Metro Group. There are significant demographic changes and growing digitalization. Demographic changes in the industry at present relate to such factors as a shrinking labor pool, growing migration to Western Europe, and a rising average age of employees (Pradhan 2010, p. 38). Metro Group’s sales and growth objectives are therefore highly dependent on its ability to leverage customer trends, trends in the company’s assortments, price developments and new sales channels. The company strives to account for these elements by continually optimizing its merchandizing concepts and adapting them to consumption patterns and customers’ needs. Metro Group regularly evaluates internal and external information in order to keep in touch with market trends and shifting customer expectations in time. To facilitate this, the Group’s own market research utilizes qualitative market, trend analyses and quantitative methods (e.g. projections of market developments or time series) drawn from sales data analyses and results of panel market research (Metro Group 2012, p.15).
The industry has also transformed with growth of the Internet in retail and wholesale business around the globe. The Internet presents both opportunities and considerable risk to leading companies like Metro Group. With the spiraling growth of online retail, companies are faced with the need to strengthen their Internet sales channel so as to keep the competition is kept in check in terms of gaining large market share (Pradhan 2010, p. 187). Metro Group has been keen on this by striving to expand their sales lines’ online business. For instance, the company has made effort to transform from a solely stationary provider to a company whose online stores utilize dove-tailed multichannel sales activities.
On the flipside, the Internet continues to bring about such problems as high demands on information technology and logistics: the success of Metro Group’s multichannel offering is highly dependent on the company’s ability to not only offer fast and reliable deliveries to customer, but also assure safe, convenient ordering (Krafft & Mantrala 2010, p.43).
In 2011, Metro Group redeployed its corporate strategy geared to enhance their competitiveness across all sales lines. In this regard, the whole company would focus on creating value for their customer through five priorities: transformation, growth, improvement, expansion, and innovation. However, the corporate strategy also targets to boost the performance of the company by increasing their margins along with cash flow and cost position.
Transformation element of the corporate strategy relates to the customer needs and expectations of Metro Group, which form the preliminary point of all the company’s strategic considerations. There is dedication towards seeking to understand the type of products that customers need in their different local stores. Focus is also on ways in which the company can diversify its services portfolio so as to provide new services that would attract more consumers, especially commercial customers (Pradhan 2010, p. 212). The transformation is also targeted at identifying the sales channel that the company needs to develop so as to better meet the increasing demands of customers. In general, the transformation aspect of Metro Group’s corporate strategy is geared to provide appropriate answers to all these issues so as to determine the direction that the company needs to take in repositioning the business models of their sales lines.
Development within METRO Group
The growth element of Metro Group’s new corporate strategy aims to achieve substantial growth across the business. The desired growth is thought of in two ways: (a) sales per square meter of selling space; and (b) customer satisfaction. Metro Group is committed to make significant improvement in either of these areas (Metro Group 2013, p.2). In this regard, the company is embarking on targeted investments in a number of new services together with selective modification to their sales lines’ price level so as to improve their response to the needs of consumers and commercial customers in addition to targeting to remain competitive in the industry. Furthermore, Metro Group is seeking to promote productivity enhancements by means of putting in place modern incentive systems for its employees.
The new corporate strategy also targets improvements in light of the fact that a company’s competitiveness is highly dependent on its process performance together with appealing product and service offerings (Metro Group 2013, p.5). As such, Metro Group has thought to continually examine their process so as to identify and minimize if not do away with cost drivers to realize streamlined, effective organizational structures. This is believed will significantly help Metro Group to improve its cost position along with increase its cash flow and consequently a greater proportion of their investments.
Metro Group has also included expansion in its new corporate strategy, where it targets efficient processes together with optimized cash flows to achieve continued, stable sales growth in the international market (Metro Group 2013, p.5). There is great opportunity for the company to enhance its footprint in the many external markets it is currently operating in. Metro Group aims to make the best of these opportunities by setting up new stores in countries like China, Russia and Turkey, in addition to enhancing its offering in all other markets.
The new corporate strategy is also keen on the aspect of innovation. In this respect, Metro Group has focused on by staying abreast of technological and social trends, making sure to identify their potential relevance to the company and devising specific solutions that would create added value for customers. Metro Group’s plan is to cultivate a structured dialogue with both the internal and external experts.
Metro Group has placed greater emphasis on the principle of sustainability in their corporate strategic, where there is targeted alignment of the company’s economic objectives with the social and ecological obligations (Metro Group 2013, p.8). The company, as espoused by its mission statement on sustainability, is of the belief the long-term economic growth is only possible if it is in tandem with a very responsible approach to the environment and society. This principle of sustainability is thus Metro Group’s framework for its five strategic focal elements of the corporate strategy.
The company launched the “Go sustainable 2012” program in 2010, design to provide a roadmap for assimilating sustainability into their core business activities. In other words, Metro Group has committed itself to aligning its decisions and processes with the social and ecological requirement, particularly as relates to pressing global challenges (Metro Group 2013, p.13). This implies the retailing and wholesaling giant is focusing on conserving resources, safeguarding food supplies, making consumption sustainable and dealing with demographic change in the world. Metro Group is well aware that these challenges present both opportunities and threats to it as a large business. In response, the company has considered to integrate sustainability-associated factors into their risk management system so as to avert potential negative implications and take note of positive trends at a very early stage. The inclusion of this in the new corporate strategy has meant that Metro Group now not only monitors product risks but also environmental risks.
Metro Group as a leading retail and wholesale company now considers it as their obligation to make sustainable contribution to solving global challenges in the context of their business processes (Krafft & Mantrala 2010, p.59). Equally, the company is dedicated to meeting the increasing expectations of their various stakeholder groups through commitment to sustainability. Thus, Metro Group’s sustainability mission statement developed in 2011 takes into account external requirements together with global challenges, besides describing the company’s four fields of action. In addition, the sustainability mission statement also spells out the organization of the company’s sustainability management system (Metro Group 2013, p.20). The sustainability mission statement has been built upon to produce the Group’s sustainability vision, which would be managed at a strategic level and then converted into sales-specific strategies that would trickle down into the core business of the sales divisions.
Changing Work Environment
Metro Group operated in a dynamic environment characterized by a host of macroeconomic and social challenges. The company’s vision to transform itself into a consistently customer-oriented as well as forward-looking retail-cum-wholesale company has come under the challenging circumstances throughout the industry (Krafft & Mantrala 2010, p.140). Metro Group has remained vigilant by acknowledging the significance of sustainability to their business. The retail and wholesale company considers it crucial for the sake of its long-term business success to link economic aspects with its sustainable social and environmental requirements. This implies that Metro Group’s day-to-day business activities take into account the global challenges that the company faces by identifying the social, economic and environmental factors relevant to the business.
Human Resource Strategy
The retail working environment has characteristic dynamic processes as well as diverse activities and responsibilities, where people from around the world are connected, goods are constantly moving to different destinations in near-by and far-flung markets as well as ever-evolving formats to meet changing needs of consumers. This translates the employees play a central role in development and the selling process of goods and offering high quality services to customer hold a crucial place in the retail and wholesale industry.
Metro Group’s corporate strategy places greater value on supporting its employees. This is done from the understanding that a company striving to achieve success in trade in trade and retail must be equipped with highly qualified and committed workforce. The retail and wholesale company thus adopted a forward-looking personnel strategy that strives to undertake systematic measures geared at helping the staff in developing their talents to the maximum and boosting their overall performance. Metro Group places a major focus on training together with professional development of its employees. This facilitates identifying of talented people, promoting and developing them. In this regard, Metro Group has put into place clearly structured and all-inclusive programs for the promotion and development of its personnel. The company offers a broad range of career opportunities to school-leavers, graduates, seasoned professionals as well as managers. Metro Group offers not less than 25 varied vocational training categories, ranging from information technology and marketing communications to accounting and trading. The company’s commitment to supporting its own employees is evident in it high training rate, which is in the range of about eight per cent in Germany, for instance.
Leading People and Managing Diversity
Metro Group also offers career development opportunities to people of different backgrounds and heritages due to the company’s strong belief in diversity (Metro Group 2009, p.4). This is evident from the fact that Metro Group’s pool of employees is made up of individuals from about 180 countries around the world. The Group regards diversity and internationality as a key source of competitive advantage along with added benefits for the employees, customers and the company at large (McKeown 2011, p.42). The company corporate strategy thus strives to take nurture and cultivate a multifaceted working environment together with diverse team compositions so as to achieve increased employee loyalty, involvement and ultimately success. Metro Group strives to promote talent and abilities of all their employees, regardless of nationality, ethnic background, gender, sexual orientation, age, religion or possible disability (Metro Group 2012, p.2).
Metro Group is keen on practicing responsible human resources management by taking responsibility for their employees through creation of training opportunities for relevant retail and wholesale know-how. In addition, Metro Group is committed to providing friendly working conditions in which employees are able to perform optimally and remain highly motivated in the long term (Metro Group 2009, p.9). The company also is responsive to the needs of its employees so as to ensure high employee retention, especially for the most qualified specialists and managers.
Fair Pay and Reward Systems
The corporate strategy of Metro Group as relates to human resource is such that most of the employees are salaried staff having open-ended employment contracts. The company policy clearly spells out that its stores and outlets should only make use of temporary employments on an individual basis as a short-term intervention to seasonal increased staff demands (McKeown 2011, p.68). Metro Group’s corporate strategy respects the company’s wage agreements in addition to honoring those of its subsidiaries across the world. In the wholesale sector, for example, the company pays its employees wages that are generally higher than the stipulated statutory minimum of €8.50 per hour (Metro Group 2012, p.3). The Group also supports the sector wide statutory minimum wages, advocated by unions and most political parties, in the belief that it would go a long way in safeguarding employees from many exploitative payment practices particularly where there are no collective agreements. Metro Group also does not offer work contracts for their core operations and adheres to relevant legal mandates when giving commissions of this type. This is unlike other companies which allow their core functions to be performed by external individuals on contract arrangements so as to circumvent wage agreements (Metro Group 2012, p.3).
Effective People Resourcing & Recruitment
In order to safeguard its long term positive earnings development, Metro Groups always seek for managers and employers with the capability to bring the company’s corporate strategy to life on job on a daily basis. In this regard, the company is always after skilled people who are “Made to Trade” (McKeown 2011, p.72) This is implies that a prospective Metro Group’s recruit must not only demonstrate the ability to think like an entrepreneur, but also be ready take responsibility in his/her own hands. With the growth of the company’s growth strategy along with international expansion, Metro Group continues to seek motivated and qualified personnel while it undertakes far-sighted human policies.
The bulk of Metro Group’s employees are stationed outside their domestic market of Germany. On average, the company recruits 50 to 250 new employees at each of its new location – depending on the individual store’s sales format. Metro Group is keen on strengthening its employer brand so as to position the company, exceed the competition and attract skilled new employees (McKeown 2011, p.694). In order to attract many qualified employees to the company, to motivate and gain their long-term commitment, Metro Group is committed to offering state-of-the art working conditions by not only pursuing systematic investment in human resources programs, but also developing concepts to promote work-life balance and employee health.
In positioning itself to effectively compete for the best skilled executives and employees, Metro Group is committed to polishing its image among potential applicants. The company makes use of personnel marketing to deliver targeted messages to prospective skilled people seeking first employment or those seeking to move to another company (McKeown 2011, p.89). Metro Group would engage in advertising campaigns targeted at different groups of human resource. In order to introduce itself to future employees, Metro Group utilizes such strategies as liaising with selected institutions of higher learning, universities of applied sciences together with student groups.
Metro Group is also keen affording employment opportunities to older people as well as people with evident severe disabilities.
The company, besides already being above the average of DAX 30 companies, is committed to increasing the number of women on its three management levels to not less than 20 percent by the end of year 2013, and to 25 percent by the end of 2015 worldwide. The company has efforts towards making it much easier for women in managerial positions to strike balance between their professional and family lives (Zentes et al 2011, p.215). At the Düsseldorf headquarters, the company has three bilingual day-care centers supplied with not less than 230 full-time childcare spaces. The facilities provide children of parents at the headquarters with kindergarten programs. Also, Metro AG is committed to care of family members as the company allows their employees with such responsibilities on full-time basis to receive two-year leave at the end of the statutory nursing period besides giving them statutory social benefits.
Performance Management and Realization
Metro Group practices minimal hiring of executives as the company provides potential managers from their own ranks with tailored career and professional development opportunities. This is achieved through a value-oriented managerial culture at the company (McKeown 2011, p.176). Metro University is the company’s central platform for developing and qualifying their current and future executives. Metro Group has put into place high standards for those seeking managerial positions at the company. The executives are required to serve as role models to the rest of the workforce. The managers are expected to be highly inspirational so as to encourage the employees to be as productive given their crucial role in Metro Group’s success (Zentes et al 2011, p.52). The executives are also tasked with the demanding mandate of implementing Metro Group’s business strategy as well as refining it. The company has settled on three major levels of management: General Management/Management Board; Divisional Management, Main Departmental, or Departmental Management; and Store Management (Metro Group 2012, p.3).
Metro Group is also dedicated to providing their employees with flexibility working and living. In the interest of the employees’ desire for individual planning of their lives, the company looks to provide the workers with flexible work schedule along with job models. The models relate to rules pertaining to trust-based working hours as well as tele-work at home (Zentes et al 2011, p.155).
Conclusion
To this end, it is evident that Metro Group has refined its corporate strategy so as to address all elements of the business that would increase its competitive advantage in the highly competitive and rapidly changing global retail and wholesale industry. During Q3, Metro core business, Group’s Cash and Carry, experienced major problems in their markets in Western Europe and Germany. While the company has implemented different corporate strategies, its profits has remained below expectations. While this can be attributed to effects of economic crisis in Western Europe, Metro Group could benefit from seeking to motivate its employees more through incentives and better working conditions. The company needs to adopt a highly versatile employee motivation system and integrate it to overall corporate strategy, while offering bonuses depending on the results of the company in individual quarters, so that employees identify more with the success of the company.
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