Executive Summary

The report emphasises on the critical success factors developed by the HQ

intrapreneurs of U.K. health food retailing industry. It also provides the ripple
effect of value demand curve and the revaluation of the success factors. The
report further tells us about the change in the parameters of competition.

Word Count - 49
 1. INTRODUCTION

The health food retailing industry is a highly profitable industry that has grown

steadily over the past few years. The specialists and the health food retailers

have been facing intense competition from the supermarkets and this is likely to

increase in future. This report scrutinizes the key factors which could be altered

or improved upon which will lead to enhanced performance, for example, by

eliminating/ taking over competitors or collaborating with new channels.

2. INDUSTRY ANALYSIS

The health food retailing has grown steadily (+19% 2002-07 to pound 464

million), helped by specialized ranges, diversification and personal advice.

(Mintel, 2008) The key segments of the health food market include organic food,

complementary medicine, meat free food, sports and energy drinks, slimming

food and vitamins and mineral supplements. The value of health food market is

estimated to grow by an estimated 12% to reach a value of pound 535 million at

current prices between 2008-13(mintel). The dominant players includes Holland

And Barrett in retail sector and Boots in VMS.

3. Critical Success Factor

It’s said to be the partial number of areas in which satisfactory results will

guarantee successful competitive performance for any industry or organization.

(Morrison, 2008)

4. Ripple Effect of Value Innovation Curve shows the elements of the

product that can be eliminated or removed. (Appendix-1) The factors

 which are inappropriate for the industry standards should be eliminated

and level of other factors should be raised according to the increasing

standards of the industry or even new factors can be generated in order to

redefine them (Kim and Mauborgne, 2005).

4.1. Product- The repercussions that would arise in relation to the product-

innovation initiated by the HQ-Intrapreneurs for the health food industry will focus

primarily on upstream and downstream relationship. The upstream relation

includes relationship with supply chain. In the value chain curve it can be seen

that the demand for the product will increase by maintaining good relationship

with suppliers.(Appendix-3) Product innovation will also help in catering new

collaborations health clubs, gym, spas etc. Similarly flexibility to provide

customized products to customers (downstream integration) can provide an edge

over the competitors and further eliminate competition.

4.2. Process- Among the major targets of the health food retailing in the current

scenario are independent health food stores, but figures suggest that the number

of these is declining and customers mostly like to purchase from super market

chains as they carry wider choices of health food, have good infrastructure,

expertise, availability and distribution which attracts customers and

manufacturers and becomes a rising factor in the value innovation curve. (Mintel,

2008) (Appendix-2,3) Another major disruption in the industry occurs due to

price. There’s always a price war between retailers, the supermarket chains and
the independent stores. Therefore, supermarkets are preferred choice in future

for manufacturers. (Mintel,2008)

4.3. People- New relationships with the current network can include

collaborations with gyms, spas, health clubs, hotels, hospitals etc and private

or own label branding. Most of the big supply chains make alliances with the

leading manufactures of the health food and sells their product under the name

of the company as well as supermarket. (Mintel, 2008) Such type of relationship

can also be used to alter the competition through Blue oceans strategy which is

when there is a very intense competition in market and all the companies are

fighting on the same parameters e.g. price, quality etc and there’s a need to

change the parameters of competition on which we are competing. By this

amendment the rules for competition are redefined. (Kim and Mauborgne, 2005)

4.4. Pressure- The industry has to face various pressures rules, regulations and

laws. The new legislation requires supplements to be licensed (which are pretty

expensive) used by the health food industry which could restrict the availability of

new products and can damage the growth of sales. The industry can overcome

such pressures by collaborating with big pharmaceutical companies since they

can afford expensive licensing of products and also have expertise. (Mintel,

2008) (Appendix-2)

5. Four Critical Success Factors

As HQ intrapreneurs we have to look for the scope to eliminate the competition

and reshape the industry through some critical factors for success which are as

follows:
 5.1. Ergonomics

“Ergonomics, (Human factors engineering) is the application of relevant

information about human characteristics to the design of equipment, the

methods they use, and the environment in which people work and live.”

(Dilworth, 2000)

In other words it is the science of job designing and making the equipments and

the working environment fit for the workers. Employees in the work place may

suffer from fatigue and distress which can increase the cost of doing business

both directly and indirectly.

• Direct costs: medical services and higher workers’ compensation

premiums.

• Indirect costs: increased employee turnover, absenteeism, and

retraining.

As a result of the above productivity, product quality, and employee morale will

suffer. (Cal/OSHA Consultation Services, 1999)

Ergonomics can improve productivity and work efficiency of workers and also

develop healthier relationships among the employees and staff (downstream

integration).

5.2. Collaboration

Under this factor, apart from the health food retailing industry in order to expand

the business opportunities, organizations can join forces with Health Clubs as

they may offer suggestions and benefits of intake of Health Food, Health Drinks
and other VMS (Vitamins, Minerals and Supplements) to their members. In a

similar way, Gymnasiums, Spas can also offer Health Food products. To cater

these organizations in doing so, kiosks can be put at these places with

company’s own trained personnel to guide the customers.

Health food retail industry can also join hands to supply VMS products through

big pharmaceutical companies which in turn can help with the funding for

licensing. (Mintel, 2008)

5.3. Strategic Alliances

“Strategic alliances subsist when more than one organization combine forces in

the manufacture, development or sale of products or services.” (Barney and

Hesterly, 2008) Therefore, small players in the health retail industry should form

an alliance within themselves in order to acquire their position in the industry as

they can reduce the production costs.

5.4. Supply Chain Network

The good distribution channel is a critical success factor for every company thus

keeping in mind the fact that many companies have been selling their products

through huge retail chains such as Holland & Barrett which is a largest

specialist’s chain, Tesco and Boots, Private Labeling Strategy can be opted

further to boost sales.

6. Conclusion:
To conclude, it can be seen that the UK Health food Retailing Industry carries

within itself various opportunities through Collaborations with other existing

industries, Alliances with smaller companies of the industry and maintaining

healthy relationships with its Distribution Channels and Employees as well

through Ergonomics.

(Word Count-1099)
 References

• Barney, J.B. and Hesterly, W.S. (2008) Stratigic Alliances, Strategic

Alliances, Strategic Management and Competitive Advantage Concepts,
Second Edition, Prentice Hall of India Pvt. Ltd., New Delhi, pp. 278

• Dilworth, J.B. (2000) Ergonomics, Design of Jobs and Compensation,

Operations Management Providing Value in Goods and Services, Third
Edition, The Dryden Press, A Division of Harcourt College Publishers, pp.
318

• Easy Ergonomics (1999), How Ergonomics Can Help?, Cal/OSHA

Consultation Services, California Department of Industrial Relationship,
pp. 2, Available at:
http://www.dir.ca.gov/DOSH/dosh_publications/EasErg2.pdf, Accessed
on: 04/11/08

• Issues in the Market (2008), Available from Mintel Avaiable at:

http://academic.mintel.com/sinatra/oxygen_academic/search_results/show
&/display/id=280590/display/id=333497#hit1, Accessed on: 02/11/08

• Kim, W.C. and Mauborgne, R. (2004), Creating a New Value Curve, Value
Innovation, The Strategic Logic of High Growth, Harvard Business
Review, pp. 175-176

• Kim, W.C. and Mauborgne, R. (2005) Blue Ocean Strategy: From Theory
to Practice, Vol. 47 (3), Reprint Series, California Management Review,
Berkeley, University of California, pp. 106-108

• Market in Brief (2008), Available from Mintel Available ar:

http://academic.mintel.com/sinatra/oxygen_academic/search_results/show
&/display/id=280590/display/id=333499#hit1, Accessed on: 02/11/08

• Market in context (2008), Available from Mintel Available at:

http://academic.mintel.com/sinatra/oxygen_academic/search_results/show
&/display/id=280590/display/id=333504#hit1, Accessed on: 02/11/08

• Morrison, M. (2008), Critical Success Factors- Determine the CSFs for

your Company, RapidBi, Available at:
 http://www.rapidbi.com/created/criticalsuccessfactors.html, Accessed on:
05/11/08

• Retailer Profile (2008), Available from Mintel, Available at:

http://academic.mintel.com/sinatra/oxygen_academic/search_results/show
&/display/id=280590/display/id=333509#hit1, Accessed on: 02/11/08
• Where health foods are bought from (2008), Available from Mintel
Available at:
http://academic.mintel.com/sinatra/oxygen_academic/search_results/show
&/display/id=280590/display/id=333512#hit1, Accessed on: 02/11/08
Appendix-1: Critical Success Factors

Existing Critical Success Factors New Critical Success Factors

Niche Market Niche Market

Distribution
Pricing Pricing
PR/ Event Management PR/ Event Management
Collaboration Collaboration
Ergonomics Ergonomics
Supply Chain Network Supply Chain Network
Strategic Alliances Strategic Alliances
Taste Taste
Naturally Healthy
Variety Variety
Convenience Convenience
Partnership Partnership
Technology Innovation Technology Innovation
Outsourcing Outsourcing
Global Suppliers Global Suppliers
Appendix-3: Value Innovation Curve

Niche Market
Distribution
Pricing
PR/ Event Management
Collaboration
Ergonomics
Supply Chain Network
Strategic Alliances
Taste
Naturally Healthy
Variety
Convenience
Partnership
Technology Innovation
Outsourcing
Global Suppliers

LOW HIGH

Reference: Kim and Mauborgne (2004)

Appendix-2: The Four Action Framework

REDUCE

 Pricing
 PR/ Event
Management
 Taste
 Partnership

ELIMINATE CREATE
A NEW
 Distribution  Collaboration
VALUE
 Naturally  Strategic
Healthy CURVE Alliances
 Variety

RAISE

 Niche Market
 Ergonomics
 Supply Chain
Network
 Convenience
 Technology
Innovation
 Outsourcing
 Global Suppliers
Reference: Kim and Mauborgne (2005)