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Aristotle On Virtue

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Ing. Ivan Kopriva, Managing Director of the SESAM Formula
Table of Contents
Introduction. p. 3
The Czech economy p. 3
Euronova p. 4
Brief profile of Euronova''s retail store chains p. 5
The Marketing Concept p. 6
Conclusion p. 8

Appendix I: Division of FDI in the Czech Republic p. 10
References p. 11
Royal Ahold N.V. is one of the biggest players on the food and beverage retail markets as it owns or franchises about 3,200 supermarkets, hypermarkets, and discount stores in 17 countries. Royal Ahold (hereafter referred to as ''Ahold'') is a leading supermarket operator in the US (mainly on the East Coast under the BI-LO, Giant, Tops, and Stop & Shop names). It will grow even bigger in the US with its purchase of Giant Food Inc. (unrelated to its existing Giant stores). Ahold also has liquor and confectionery stores, an institutional food supply company (GVA), and a majority share in a leading Dutch wholesale food distributor (Schuitema).

The holding company is rapidly expanding in Asia and Latin America. Besides in these countries, Ahold is recently also active in Central Europe and Russia. Since the economies in Central European countries have just become more open and freer, Ahold has seen a promising business opportunity over there. One of the countries in Central Europe to which Ahold has already expanded business activities is the Czech Republic. Nowadays, Euronova, Ahold's subsidiary in the Czech Republic that specializes in food retailing, is the largest foreign investor in this country. Since the Czech Republic has a merging economy, many competitors are looking for capturing the Czech market. The thesis statement that will be elaborated on in this paper is the following: In order to gain and maintain considerable market share Ahold''s subsidiary Euronova has to develop and adopt a good marketing strategy.

Before analyzing the right marketing strategy for capturing the Czech market, an overview of the Czech economy and a profile of the four Euronova retail formulas will be given.

The Czech economy
On January 1st 1993, the former communist country Czechoslovakia was separated into the Czech Republic and Slovakia. Ever since, the government has stimulated cooperation with all other European countries both in economical and political ways. The Czech Republic possesses a strategic location right in the center of Europe with very good access to both established western and emerging eastern markets. It accommodates 10 million residents, and prospects for the future are that this number will hardly change, so the market potential is limited. The year 1997 was a year that ended the approximately three-year period of relatively dynamic growth of the Czech economy. This economic growth, however, was accompanied by certain economic imbalances. In the years 1994, 1995 and 1996 it was connected with a growth of domestic demand that exceeded growth of domestic supply. This disproportion resulted in a deficit of trade balance and deficit on the current account of the balance of payments. Accordingly, the Czech Republic is welcomes FDI and since the early 1990s it has been actively promoting inward foreign direct investment. International comparisons reveal that it has been among the most attractive countries for foreign direct investment in Central and Eastern Europe with the total of US$8 billion of FDI attracted from 1990 to September 1997. ''Data available suggest that foreign companies have been performing well in the Czech Republic. Many foreign-owned Czech companies have indicated to CzechInvest( ) their desire to expand their operations in the Czech Republic, to hire more staff and build new plants.''

Most foreign direct investment since 1990 has come from Germany, the Czech Republic''s largest neighbor. The Netherlands and the USA ranked second and third followed by
Switzerland, France and Austria (see also Appendix I). The year of 1997 saw a growing interest among Asian companies to invest in the Czech Republic.

Euronova began its operations in the Czech Republic in 1991 when the first MANA supermarket was opened in Jihlava. In addition to the MANA supermarket chain, other formats have gradually been introduced: Cash&Carry MEGA (1992), SESAM discount stores (1994) and PRIMA megamarkets (1995). A new chain 'V HYPERNOVA hypermarkets 'V is being prepared for 1998. Euronova presently has a network of nearly 130 stores throughout the Czech Republic. A turnover of 8.41 billion CZK made it the largest food retailing company and the second largest retail company in general in the Czech Republic in 1997. The company owns and rents a large number of estates that are managed and maintained with top expertise. ''The ultimate aim of Euronova is to provide customers with first-class services and high-quality goods at reasonable prices in pleasant and friendly atmosphere. As it wants to remain number one in the Czech retail market and in order to meet its strategic plans and customer''s needs, Euronova never stops extending its qualified staff or introducing state-of-the-art information technology, logistics and distribution methods in their work.''

Brief profile of Euronova''s retail store chains
MANA is the largest Euronova chain. Their primary assortment includes more than 6,000
foodstuffs (including fresh vegetables, fruit, bread and meat products), toiletries, cosmetics and other products. The MANA range, offering high quality at low prices, is constantly enlarged. Having a selling space of 800-1,500 m2, MANA supermarkets are found in cities with a population of more than 20,000.

Intended for weekly family shopping, SESAM offers 1,000 articles in basic foodstuffs, toiletries, cosmetics and stationery at discount prices (95% of the goods originate in the Czech Republic). The assortment is often completed by meat and meat products sold by concessionaires. Having a selling space of 600-800 m2, SESAM stores are found in ''natural'' shopping centers with a catchment area of more than 10,000.

PRIMA mega-range stores offer an assortment of more than 20,000 articles. These megamarkets combine the advantages of buying foodstuffs (more than 4,000 articles) at
discount prices with the availability of a wide range of nonfood: industrial goods, consumer electronics, household and gardening equipment, shoes, clothes, toys and stationery. Providing the lowest average prices in the region, PRIMA shops are open seven days a week for weekly family shopping. Hire-purchase sale and credit-card payment are available as extra services. PRIMA megamarkets serve as regional shopping centers in areas with a population of more than 30,000. They have a selling space of 2,000-3,500 m2.

The HYPERNOVA hypermarket is basically just a huge supermarket. The first hypermarket 'V and the only one yet 'V has been opened in august 1998 with a shopping area of 8000 m2 and an assortment of 60,000 articles (of which 25 % is foodstuffs). For the further development of the hypermarket chain in the Czech Republic, Ahold has founded a joint venture together with the British developer Stannifer.

The Marketing Concept
As stated in the thesis statement, Euronova should have a good marketing strategy to differentiate itself from competitors. Before adopting the strategy, the company should know their customers for example. This is the point where the marketing concept should be used.
According to Dibb et al the marketing concept is ''the philosophy that an organization should try to provide products that satisfy customers'' needs through a coordinated set of activities that also allows the organization to achieve its goals'' .

To use the marketing concept, a business should:
1) Determine the needs of their customers (marketing research).
2) Develop ...

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