The food retail industry is highly competitive and usually exhibits the traits of perfect competition. Products usually carry low profit margins because they have large number of substitutes. But the growing health consciousness among customers has helped create a niche market for organic products that are free from chemicals and have not been altered genetically. These products usually carry higher profit margins because the targeted customer groups place higher premium on quality than price. All of this has created a perfect opportunity for RAJ’N Organic Foods, Inc. to develop a leading market position in Hawaii where there are very few organic food retailers. In order to further improve its competitive position and profitability, the company’s management also plans to make substantial investment in information technology. The company’s management believes information technology coupled with high emphasis on customers should translate to market-leading position as well as high profitability.
RAJ’N’s management is determined to do everything right the first time because it understands that the stakes are high. The management has devoted about a year and half to carefully planning how it will combine relentless focus on customers and high investments in information technology to differentiate itself from the competition. Fortunately, the conditions are ripe for RAJ’N’s entry into the organic food retail sector because the customers have fewer choices available to them and customers of organic food products tend to have low price-sensitivity. In addition, RAJ’N also hopes to create artificial barriers which should keep the level of competition low in the foresee future. The venture has a high probability of success if the management succeeds in developing an effective competitive strategy and then successfully implements it.