Denner Currently Operates in the

Denner currently operates in the grocery store business in Switzerland. The group is the largest discounter in the country, and the third-largest supermarket group overall. As a mass marketer, Denner seeks to appeal to a broad section of the populace. In general, their target market can be characterized as adults 18-65. Within this broad swath of society, Denner is focused on a particular psychographic, rather than demographic, of those consumers who are focused primarily on price as a determining factor in their purchasing decisions.

These consumers encompass a wide range of demographic variables, but are united in their high degree of price sensitivity and low degree of sensitivity to other variables, such as quality. The most significant market trend is Swiss grocery retailing is the increase in competition from major European players from larger countries. France's Carrefour has entered the Swiss market, and Denner also faces direct competition from Aldi and Lidl, two German discounters (Answers.com, 2010).

This trend has already led to Denner selling a 70% stake to Migros, and has also reshaped the firm's competitive landscape. It should also be considered that while there is some growth in the hard discount segment of the Swiss market, the country as a whole is subject to minimal growth, due primarily to a slow-growing population. This situation results in increasing competitive intensity as more rivals are fighting to gain share in a market that is not growing.

In addition to the discount segment, there are standard and high-end segments within the Swiss grocery market. Historically, Denner has competed in these segments in the past, before switching to the discount format in 1988 and undergoing several different incarnations of this strategy since then. The company still has the option to move out of discounting, especially given its ties to Migros, which operates high-end food stores.

In addition, there is the potential to break out of the Swiss market, and move into other markets in order to increase the firm's economies of scale. It is predicted that this situation will continue in the Swiss grocery market. Most European grocery and discount operators are faced with stagnant growth in their home markets, and are turning to foreign markets for growth. The Swiss market itself is not a high-growth market, but these firms believe that they can enter the market and take share from established players like Denner.

It is predicted that this competitive intensity will continue, with discounters continuing to wage price wars with each other. This situation may also lead to overcapacity in the industry over the coming years, as firms attempt to build out networks of stores in order to attract customers. The core issue facing Denner at present is how to respond to the influx of new competitors. Denner is well-positioned with respect to both its distribution network and its strong brand name.

However, it does not have the same economies of scale that some of its foreign competitors posses. Thus, it may have difficulty waging this war for market share strictly on price. The SWOT matrix for Denner is as follows helps to identify the strengths, weaknesses, opportunities and threats that the company has. Optimally, the strengths will match up to the opportunities in the market and the weaknesses will not match up to the threats the firm faces.

Strengths Weaknesses Opportunities Threats Brand recognition Lacks economies of scale International expansion Increasing competition Domestic distribution network Small market share Tie-ins with Migros Stagnant market Strong ownership Small product selection Move upmarket Shift in consumer tastes away from discount From this SWOT analysis, Denner's weaknesses match up to the threats. Increasing competition will drive down prices, and Denner may not have the economies of scale in its purchasing and distribution to compete with much-larger rivals.

That it also carries a small selection of goods in its stores places it at risk of competition from firms operating discount warehouses with far greater selection. Denner therefore faces considerable risk that.