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Talking strategy
Introduction
Dan Bane, CEO of the grocery chain Trader Joe's, recently was a guest speaker at an Association for Strategic Planning meeting in Los Angeles. His presentation focused on how seven core values shape the company's differentiation strategy and its daily practices. Here is the CEO's view of how values, differentiation and competitive advantage drive growth at a grocery chain that started in California and now has an enthusiastic fan club and big national ambitions.
Company background
Trader Joe's was acquired in 1979 by the Albrecht family of Germany, which owns and operates a discount food chain of 4,500 Aldi stores in Europe and parts of the central USA. In contrast, Trader Joe's loyal customers flock to its small local stores for unique foods and sundries that cannot be found in any big chain.
Trader Joe's, headquartered in Monrovia, California, had revenues of $2.4 billion in fiscal year 2002. It plans to grow by expanding from 174 stores to 800 stores at a rate of about 25 per year.
Though it has a fervently enthusiastic tan club of customers in a few big cities like San Francisco, Los Angeles, Indianapolis, and Boston, Trader Joe's is not yet well known nationally in the USA because most of its stores are in western states. In recent years, Trader Joe's has located about 50 stores in the mid-west and on the east coast in small cities like Larchmont, New York and Cambridge, Massachusetts that have a high percentage of affluent customers (see http:// www.traderjoes.com/locations/index.asp).
The chain has a long tradition of hands-on top management. Its founder, Joe Coulombe, ran the company for eight more years after he sold it in 1979. At that time, he said he could not imagine expanding beyond 26 stores, that being as far as he was willing to drive to manage them and maintain quality. Coulombe began the company more as a convenience store rather than a grocery business, and recognized early on after a visit to a 7-Eleven in Texas that the only way he could compete with the large convenience-store chains was to be different. So he focused on stocking unique products and on cultivating loyal customers. He particularly enjoyed going to France and buying wines and other foods...