Denner Currently Operates in the Research Paper

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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.

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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 its weaknesses can be exploited by the most prominent threats that it faces.

Denner's strengths do not necessarily match up to its opportunities. A strong domestic store network and brand is irrelevant for international expansion, for example. The company may be able to move upmarket or otherwise exploit its connection to Migros, however, should it be able to identify a specific unfilled niche in the market.

With respect to purchasing, Denner believes that price is not the only factor in purchasing decisions. Even with discounting stores, the company believes that convenience of location is important. Denner also trades on its status as a domestic company, for example using the motto Der Schweizer Discounter as a means of conveying to customers that by shopping at Denner, the customer will be supporting a local rather than foreign company (Denner.ch, 2010).

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