Kaufland Romania

Being part of the same group as Lidl and Handelshof, Kaufland represents a German hypermarket chain. Their first store opened in 1984 in Neckarsulm and moved along to become a leader in East Germany. Kaufland International owns over 1,000 stores in Germany, Czech Republic, Slovakia, Poland, Romania, Bulgaria and Croatia. The history of Kaufland company began when Joseph Schwarz entered the “Südfrüchte Großhandlung Lidl & Co” at Heilbronn as a shareholder in 1930, which was afterwards, renamed “Lidl & Schwarz KG”. The next goal of the company for the following years was to develop its products and turn into food wholesaler. The company was rebuilt after the war: in 1954 it entered the “A & O-chain”. Their first regional warehouse was developed in northern Wurttemberg. Furthermore, in 1964 the company revealed a wide variety of products by initiating a meat department. The first “Handelshof” discount store was established in Backnang, and in 1977 hypermarket carrying the same name was opened. After the death of Joseph Schwarz in 1977 his son Dieter Schwarz took over the management of the company.

In 1984, the first Kaufland hypermarket was opened in Neckarsulm, which became the company’s headquarters since 1972.After the reunification of Germany, the Kaufland chain expanded into the Eastern German states and established numerous markets. The first East German Kaufland store was opened in Meissen in 1990. The first department store outside of Germany was established in 1998 in Kladno, Czech Republic. In the following years years, the company established branches in Slovakia (2000), Croatia (since 2001), Poland (2001), Romania (since 2005) and Bulgaria (2006). Kaufland chain entered the Romanian market on 13 October 2005 by building its first subsidiaries in Bucharest, Ploiesti and Ramnicu Valcea. By 2009 they reached revenues exceeding 872 billion Euro on a local level. Moreover, until 2008, 34 magazines were opened, which are indicated on the below Romanian map. By 2009 their revenues exceeded 872 million Euros on a local basis, becoming the second largest chain in Romania after Carrefour, by the value of their sales.

The company‟s strategy was very different of its direct competitors: Kaufland is the hypermarket chain which targeted small cities in Romania, with a population of 25.000- 40.000, while its direct competition avoided such placements and opened their stores in big cities. In 2008, Kaufland had opened 31 hypermarkets, having 5.650 employees, at its headquarters and in the logistic department situated in Industrial Park Ploiesti. The medium number of employees that a branch of Kaufland has is of 150. By 2011, Kaufland opened 54 units and owned the largest budget of expansion in retail, which is estimated at over 100 million Euros.

INDUSTRY AND PRODUCTS Retailers can be seen as part of a system which provides different retail mix to its customers taking into account the customer demographics, lifestyle and purchase behavior. Such systems are helpful in the ingenious display products and customer targeting for boosting the sales. Kaufland or Kaufland Romania SCS offers products of diverse categories as follows:     food items, non-food items, household goods, leisure and gardening products.

It embodies a shop for home, food and office products. In Kaufland‟s product portfolio you can find fruits and vegetables, cheese, dairy products, spongy cakes, electronic goods such as, ovens and other related products. Furthermore, the service portfolio of the company deals with rental and lease of commercial spaces for the galleries in the hypermarket across Romania. Credit card services and newspaper information services are also provided. Kaufland store assortments contain up to 15,000 different items (branded products, regional products and exclusive brands), offering its customers not only low prices for the products, but also freshness, variety and quality. The product portfolio includes also own trademarks such as K Classic, that offer products with guaranteed quality at low prices as products from local producers and brand goods. Besides the the wide variety of food products, Kaufland offers a lot more non-food items for affordable prices: household articles, porcelain, textiles, electrical devices, stationery, toys, free-time articles, seasonal goods etc. The entire assortment in the Kauland‟s chain stores is finalized by trade objects.

Kaufland offers both variety and great volumes of selected merchandise at lower margins. The operating cost is comparatively less than other retail formats. As a strategy for prices a Hi-Lo strategy is characteristic for Kaufland. It is a self service store containing mostly grocery and products of non food items, but in a limited quantity. The company is committed to helping its customers sustain responsible consumption and provides a wide range of products based on sustainable-development policies and initiatives. Kaufland embraces CSR and offers responsible products at attractive prices to as many consumers as possible through its own-brand ranges, K Classic, which can be identified in the left figure.

Kaufland‟s mission is, undeniably, offering products and services at lower prices than its competitors, such as Carrefour Romania, Mega Image, Real-Hypermarket or Dedeman. The Quality policy relies mainly on authenticity. Partnerships with producers, traditions and protection for the environment are also quality related. In this respect, producers are required to submit to a set of specifications, including an integrated approach to agriculture, breeding conditions that respect animal welfare, a ban on chemical treatments after harvesting and the absence of GMO products in animal feed (pork, salmon, eggs, poultry etc.) and plant production processes (fruit and vegetables). Kaufland desires to welcome its customers with the most attractive and user-friendly shopping experience. In order to realize this goal, they employ a variety of services to better satisfy their customer‟s needs, such as: family exclusive parking spaces, strollers loan, free wireless internet access, soft sitting areas available for resting, lost property, emergency intercom service (lost children, assistance to the elderly, etc.), breakdown service with free battery boosting and unlocking, soft sitting areas available for resting and relaxation, loaning of wheelchairs and strollers, gift cards available.

Quality requirements at Kaufland are encountered throughout the life of its products, from initial conception to consumption. If a new product enters the market, the technical teams incorporate in its development such criteria as customer expectations (as reported by the Customer Service department) and information on regulatory compliance, manufacturing processes and raw materials‟ origins. A commitment to safety and customer satisfaction is of utmost importance for the product‟s evolution.

In order to make sure that the suppliers‟ products are compatible with Kaufland‟s safety requirements, they also carry out production-site audits. Kaufland prepares in advance specifications that describe requirements regarding the production methods to be used and the origin of raw materials. The majority of products are controlled through annual monitoring plans. All textile clothing products sold under Kaufland brand names offer a high level of safety .This means that no substances or colorants identified as potentially dangerous have been used in any of these products. Moreover, a rigorous quality control program has been initiated in order to ensure the quality and safety of imported toys. Particularly, Kaufland tests the toys for mechanical, electrical, fire and chemical risks. In addition, Kaufland maintains its toy standards for any products that might be handled by children, such as paper products and pet toys.

Furthermore, in 2008 the company was involved in the preparation of a European Commission report that assessed the effectiveness of safety measures implemented in the toy industry. With respect to its cosmetic products, Kaufland assigns recognized toxicology experts to the task of developing these types of products. Being concerned with meeting consumer needs while also guaranteeing the total safety of its products, the company develops the best in cosmetics biology and has pioneered the launch of the first ever UHT (Ultra High Temperature) range to be sold in supermarkets and hypermarkets. Kaufland‟s experts have also been part of Germany‟s work with regard to developing as many eco-label certified ranges as possible. The company has also been involved in drafting the IFS HPC European auditing benchmark (published at the end of 2009), which will allow suppliers to ensure best practices and better risk control relating to their products and production.

RESOURCES ALLOCATION AND IDENTIFICATION One of the challenges managers and face with nowadays, in both for-profit and not-for-profit organizations is the task of allocating resources by balancing costs, benefits and risks and gaining commitment by a wide constituency of stakeholders to those decisions. The complexity and difficulty of the tasks appears from the multiple options and from benefits and risks that are rarely expressed as single objectives, multiple stakeholders with different agendas compete for limited resources; also individually optimal resource allocations to organizational units are rarely collectively optimal, and those dissatisfied with the decisions taken may resist implementation. From Kaufland Romania‟s perspective, there is an obvious need of a wide variety of resources such as material, financial, human resources, IT. Their appropriate distribution and correlation are the contributions to the success of Kaufland Romania. Together with the rich food goods‟ assortment, Kaufland Romania offers a lot of non-food products at attractive prices: household articles, porcelain, textiles, electrical devices, stationery, toys, freetime articles, seasonal goods etc.

Trade objects and shops of already proved on the market companies supplement the whole assortment in the Kauland‟s chain stores. Kaufland Romania‟s provisions for food and non-food products come from Romania. It is part of the contract to supply goods that the suppliers are held responsible for respecting the legal requirements, including relevant provisions for labor and OHS management. Supply chain monitoring mechanisms are being developed. Since entering Romania, Kaufland expanded exclusively by building new stores. The official statements of the company are that the expansion strategy does not include takeovers, but the possibility is not excluded in the future, on the condition that the characteristics of the targeted location adapt to the Kaufland concept. After analyzing the current economic situation, most of the specialists agree that discount stores such as Kaufland Romania have an advantage on other types of commerce. Studies and reports from surveying institutions certify it. According to them, in 2010 the supermarkets lost 4% of the market share to hypermarkets and discount stores.

Most of the retailers are offering way too many products. This is a symptom specific to dysfunctional relation between the purchasing policy and company‟s ability to understand consumers, in general. In the case of Kaufland Romania, the discount is the type of selling used and it has the following characteristics: • Low prices for the whole range of products; • A clear manner of displaying goods (box, pallet); • Low costs in maintaining the store, meaning first of all selling goods directly in the cardboard or plastic packing; it leads to the lowest costs as far as displaying and handling the goods are concerned; • Regarding the shelves and the whole aspect of the store, functionality comes before esthetics; • Branded products will be sold only if the difference in price is balanced by quality or they are too important to be abandoned; • The image of price – the most advantageous business in the area/region; • Choosing the competitive variety out of a wide range of products of the same kind; each product can also be found in the lowest price category; regional variety; the quality of local products.

Kaufland International defines the Human Resources policy framework which is implemented through country level operational procedures adapted to take into account both legislative requirements and local norms in the country of operation. The policies are implemented for employees through training and written materials presented at induction, notice boards in stores, regular meeting and in certain cases (explaining any changes to existing policies) through written material accompanying wage slips. Kaufland Romania has established an employee representation structure consistent with national law. Each store elects its own workers representative. Three of them representing headquarters staff, stores and logistics have concluded a “collective agreement” with the company that covers employee terms and conditions, but not salary levels which remain an individual matter.

Kaufland Romania puts a lot of emphasis on young employees because they are more competitive and ambitious and because they work in a more relaxed way. This was demonstrated by the fact that married persons do not cope well to the schedule since it involves working in weekends and doing overtime. Kaufland Romania‟s design processes require that stores are designed to the minimum of both German and local standards in the country of operation. Stores have well-signed emergency exits, and the stores visited had unlocked and unobstructed exits. Fire protection is provided by portable extinguishers, hydrants and sprinklers throughout all stores. All employees are trained in life and fire safety matters. Potential impact of traffic, due to customers and store or distribution center logistics, is analyzed and managed through measures agreed with the local authorities during the building permitting process, and implemented by the company. This includes the design and construction of road intersections and new infrastructure that respond to the anticipated traffic load increase.

There has been a controversial discussion about the fact that Kaufland
Romania employs energyconscious design with high levels of building insulation. Utility systems designed are specified to be energy-efficient, for example condensing gas-fired boilers and modern control systems are used for space heating, and heat is recovered from refrigeration systems for hot water heating in stores where wash-down water is required. Utility consumption is monitored by the companies, and corrective actions taken as necessary. The newer stores include a building management system which provides for monitoring from a single point. Kaufland Romania increasingly uses modern, energy efficient technology. Romania benefits a lot through advanced logistic systems and infrastructure as well as energy efficient construction techniques that are closely correlated to the group‟s store rollout plans.

With regards to financial resources, Kaufland has obtained a 150 million Euro loan from the European Bank for Reconstruction and Development (EBRD) for its expansion in Romania and Bulgaria and thus it had managed to develop its business even more. The Bank monitors the Kauflands‟ environmental and social performance for the lifetime of the loan through annual environmental and social reporting and via periodic site visits. Procurement of products locally constantly generates strong backward linkages and encourages local producers to process according to best business practice.

BUSINESS ROLE Kaufland Romania is a discount store and has focused on crowding out competition by amassing square footage. Positioned as proximity stores, the compact discount outlets trade on price and convenience and this fact makes rivals find themselves with surplus square feet, chasing the same consumers. In this case, consumers are looking at four things: Clarity: consumers are facing a “flood of products” in stores. In contrast, Kaufland Romania frees consumers from having to choose between so many products, thereby reducing “mental costs” rather than just economic costs. Orientation: this flood of products (e.g. line extensions, product variations and private labels) has shaken consumers‟ faith in brands. Predictability: the introduction of constant price campaigns by supermarkets has created a “flood of prices”. In reaction, consumers flee to the stable-priced Kaufland Romania world. Security: retailers are becoming less “homey” because they constantly rearrange products and other elements in the store.

Discount stores like Kaufland Romania have a clear and constant range, look and affiliation. The surveys conducted lately have shown that consumers have become more discriminating: they now apply a range of criteria to selecting brands and retailers. Discount stores have reacted to this trend by extending their fresh food offer and adding drugstore and luxury items. Other retailers have the potential to tempt customers, but these shoppers still feel that their needs have not been taken into account by traditional retailers. One of the main characteristics of the Kaufland Romania supermarkets‟ working environment is the rigor. If a command is given then it must be respected the tasks must be completed right away, perfectly, and the deadlines must be also met. The working program must be respected, delays or absents are not admitted, because they have an important negative impact on the activity in the subsidiary.

Moreover, the management board of the supermarkets chain is aware of the fact that, in Romania, it is harder for people to find a workplace and, consequently, in return of some advantages offered to the employees (a salary that surpasses a little the average wage, good working conditions), they have also requests, they come with higher claims: the employees have to work harder and the working environment is more stressful than in the other companies. So, the employees comply with these claims, in order not to lose their workplace. At Kaufland Romania, the way of expression imposed to the employees is more formal, more select. The employees must carefully choose their words, the use of abusive words being forbidden. The controls performed by the Germans and by the local manager are quite often and, especially, those who come in contact with them tend to control themselves in order not to make mistakes and, in time, this type of behavior becomes a habit. Kaufland Romania develops its activity based on the accent put on the attitude towards clients, which should be respectful and polite. The pleasantness towards clients it is a mandatory rule, because it brings profit.

To understand how important is this aspect we have to think about the first days, after the opening of the supermarket, when a series of trainings are held with all the employees and one of these trainings is the “Politeness towards clients Course”. The amiable attitude towards clients is assumed, however, by some of the employees, only at a superficial level, because it is evident when the employees are stressed out, frustrated or tired and use only imposed greeting formulas, without any emotional implication. The clients have a lot to win due to the opening of the Kaufland Romania supermarkets. Thus, they care find a wide range of products in just one place. The atmosphere in a supermarket is clearly different from the unpleasant one in the old stores. It is cleaner, well arranged, with self-service, and you are welcomed by serviceable employees, who help you if you have a problem. The supermarkets Kaufland bring a specific German aspect, through which they differ from the other supermarkets.

Another advantage which offers comfort is that parking is free and the customers can use pushcarts to carry their commodities up to their cars. Kaufland Romania managed to integrate almost perfectly on the Romanian market and to successfully achieve its goals, creating a strategic and important business role. As far as the employees‟ reaction is concerned, at the attempt of implementation of the foreign procedures, although at first there are rumors and there is a general discontent with the rules, the employees adapt to standard procedures and claims, because they need a workplace and a source of income. They also adapted to the crazy pace at the opening of the subsidiaries and to the rules imposed by the Human Resources Department. The employees‟ policy is fair, but the sales and the pace of work specific to every subsidiary can influence the need for extra working hours. Anyway, the actual tendency, sustained by the advent of the rival supermarkets on the local market (Carrefour, Real), is to emphasize to the fullest the needs of the employees, an idea also promoted in the national meetings with the general directors of the supermarkets, or with the human resources managers.

RISKS Political Operating in a globalized environment with stores around Europe (Kaufland now operates in six countries in Europe in addition to Romania; Czech Republic, Slovakia, Poland, Croatia, Germany and Bulgaria), Kaufland’s performance is highly influenced by the political and legislative conditions of these countries, including the European Union (EU). Besides legislation, the political instability in Romania could also affect Kaufland‟s business by the constant change of the social policies – fiscal, monetary, trade, investment, industrial, income, labor and developmental or events related to political instability (e.g. strikes) Economical Demand, costs, prices and profit can be influenced by the economic factors and this is the reason that they are of great concern to Kaufland.

One of the most influential factors on the economy is high unemployment levels, which decreases the effective demand for many goods, adversely affecting the demand required to produce such goods. These economic factors are largely outside the control of the company, but their effects on performance and the marketing mix can be profound. Although international business is still growing, and is expected to contribute greater amounts to Kaufland’s profits over the next few years, the company is still highly dependent on the Romanian market.

Hence, Kaufland would be badly affected by any slowdown in the Romanian food market and are exposed to market concentration risks. Social and cultural Current trends indicate that Romanian customers have moved towards „one-stop’ and „bulk’ shopping, which is due to a variety of social changes. Kaufland have, therefore, increased the amount of non-food items available for sale. Demographic changes such as the aging population, an increase in female workers and a decline in home meal preparation mean that Romanian retailers are also focusing on added-value products and services. In addition, the focus is now towards; the own-label share of the business mix, the supply chain and other operational improvements, which can drive costs out of the business. National retailers are increasingly reticent to take on new suppliers. The type of goods and services demanded by consumers is a function of their social conditioning and their consequent attitudes and beliefs. Consumers are becoming more and more aware of health issues, and their attitudes towards food are constantly changing. One example of Kaufland adapting its product mix is to accommodate an increased demand for organic products.

Environmental In the past few years, there has been increased pressure on many companies and managers to acknowledge their responsibility to society, and act in a way which benefits society overall. The major social issue threatening food retailers has been environmental issues, a key area for companies to act in a socially responsible way. Hence, by recognizing this trend within the broad ethical stance, Kaufland’s corporate social responsibility is concerned with the ways in which an organization exceeds the minimum obligations to stakeholders specified through regulation and corporate governance.

Legislative Various government legislations and policies have a direct impact on the performance of Kaufland. The presence of powerful competitors with established brands creates a threat of intense price wars and strong requirements for product differentiation. The government’s policies for monopoly controls and reduction of buyers’ power can limit entry to this sector with such controls as license requirements and limits on access to raw materials. In order to implement politically correct pricing policies, Kaufland offers consumers a price reduction on future purchases based on the amount spent on groceries at its stores. While prices are lowered on promoted goods, prices elsewhere in the store are raised to compensate.

BUSINESS MODEL

When we think of the business model of a company, we think about how it intends to make money and also why the customers would ever want to give that company any money. The business model is about creating value for the consumer, and also how that value will be captured by the firm. Most hypermarkets focus on offering discount-level prices but coupling this with a comprehensive offering of both fresh products and brand products and often having more appealing stores than conventional discounters. Which leads to the conclusion the focus is on low-margin and high-volume sales. Kaufland Romania has become the greatest player in the Romanian retailer market after surpassing Metro Cash and Carry which was the market‟s leader for 15 years. By focusing on continue growth and development, Kaufland: Provides high quality products (from fresh lemons to fresh cakes); Has its own brand, K-classic which embodies the company‟s commitment of providing quality products for money; Manages to adjust their product offering and even their range of products in such a way as to meet their customers „needs; Understanding customers‟ need; Strong image.

Starting 2012, Kaufland opened units in Alexandria, Bucharest, Bistrita, Medgidia, Drobeta TurnuSeverin, Sf. Gheorghe and Iasi, and now it has 79 units in Romania. Kaufland is one of the most aggressive retailers in expansion by opening 13 units in 2010 and 13 units in 2011. The company wants to open its 100 unit in Romania in 2014. Kaufland continues to win customers with its broad range of products and high-quality service. The company has the largest assortment of products, with a range of 30,000-60,000. The chain garnered several awards in 2011, including best food retailer by DISQ; and YouGov rated Kaufland as one of the most popular food brands. This year, Kaufland expanded stores geographically, took a more proactive social media strategy, and continued to focus on the integration and re-branding of its Handelshof stores. The company wins high marks with employees as well. However, there remains a gap between Kaufland‟s performance and its brand perception: Kaufland could communicate its positive efforts and results even more to the public.

Core competence of Kaufland The superior performance of a company has to be determined by the skills and abilities by which resources are deployed through an organization‟s activities and processes such as to achieve competitive advantage in ways that others cannot imitate or obtain. Core competencies are the ones that lead to levels of performance that are significantly better than competitors for they are difficult for competitors to imitate. Core competencies relate to an activity that underpins the value in the product features. Hypermarkets are in store format crisis with only Kaufland beating the trend, through price aggressiveness. All hypermarkets besides Kaufland are suffering from low growth or even sales losses. In Food and Non-Food, many specialists have sprung up competing against the hypermarket‟s limited assortment per category, but Kaufland has solved this problem by minimizing the share of Non-Food and becoming price leader in food through cost leadership.

Thus we can say that the management of Kaufland focuses its attention on achieving competitive advantage. Kaufland has a limited range of products, which means that it keeps down complexity, labor costs and depreciation or slow-moving items, while also achieving lower purchasing costs thanks to higher volumes for individual articles. Through a long period of operations, core competencies of Kaufland have to be rather fixed, practically respecting the German way of doing business. Still if we take into consideration Porter‟s approach which centers the idea that core competencies should change in response to changes in the company’s environment and be flexible and evolve over time. Even if his is true, Kaufland with its “rigid” way of doing business adapts to the new rapidly changing circumstances and opportunities.

As an example we can say that over the years Kaufland has shifted almost all its administrative processes from the stores into the company‟s head office. But, full-range retailers, like Kaufland should take into consideration that by adapting to the new rapidly changing circumstances and opportunities means that it is vital to ensure that the different elements of the business model are consistently harmonized. For a careful consideration, sound preparation and an understanding of the consequences core competences framework suggests three factors that can boost Kaufland position on the market: 1. The first one is the creation of new products and services. This core competency is well imbedded in Kaufland “world”. Kaufland is one of the retailers that offer quality products, low prices, best services and strong guarantees, based on a good customer relationship

management. It is the company that dethroned Metro Cash and Carry after 15 years of being the best. This leads us to the conclusion that when it comes to new products and services, Kaufland knows what is best for the customers; 2. The second factor is that it should deliver a fundamental customer benefit. In other words it should have the answer to “why is the customer willing to pay more or less for one product or service than another”. Kaufland manages to adjust their product offering and even the size of their range in such a way as to meet their customers‟ needs. This shows that Kaufland designs and implements effective supply systems and deliver an efficient “customer interface”.

3. Difficult for competitors to imitate highlights the need for a core competence to be competitively unique. This highlights the importance of product differentiation. Kaufland has a very strong position within the retailing industry because it had and it still has a different approach to the service concept, providing good corporate reputation and introducing new premium quality products. An individual retailer‟s response to the industry structure is the root of Generic Strategies. In order for Kaufland to obtain sustainable competitive advantage they should follow either one of Porter‟s generic strategies. Cost leadership is the first strategy in which Kaufland can strive to have the lowest costs in the industry and offer its products and services to a broad market at the lowest prices. Kaufland ability to control their operating costs so well that they are able to price their products competitively and be able to generate high profit margins is this strategy focus. If Kaufland uses another strategy of differentiation, then it has to try to offer services and products with unique features that customer‟s value. Kaufland will be able to create brand loyalty for their offerings, and thus, price inelasticity on the part of buyers. The last strategy of focus can be either a cost leadership or differentiation strategy aimed toward a narrow, focused market.

In pursuing a cost leadership strategy Kaufland focuses on the creation of internal efficiencies that will help them withstand external pressures. Therefore, it appears reasonable to think that Kaufland will have frequent interactions with the governmental/regulatory and supplier sectors of the environment. In accordance to this framework, while both overall cost leadership and differentiation strategies are aimed at the broad market, Kaufland may also choose to confine their products to specific market areas or may choose to offer a smaller line of products to the broad market, thus pursuing a strategy of focus or niche. In other words, Kaufland pursues a strategy of cost leadership or differentiation either in a specific market or with specific products.

Market objectives and strategies implementation For a good assessment of information, companies use strategy frameworks and structuring tools. Risk and value trade-offs are made explicit, leading to concrete proposals to add value and reduce risk. Explicit plans for action, including effective planning need to be developed by Kaufland as the strategic alternative. Taking into consideration the generic strategies discussed above, Kaufland is likely to employ two strategic options that are also likely to be primary market objectives of focus on market development through partnerships and diversification through new product development.

Market Development Strategy: Joint Developments and Strategic Alliances One of the suggested strategic options in case of Kaufland is in international alliances with the local retailers in Romanian markets. It may be formed to exploit current resources and competences and it will surely be considered as a tool for development. Entering joint ventures or partnerships, it will gain a larger economy of scale and larger market presence, and thus Kaufland will draw on the extensive local knowledge and operating expertise of the partner whilst adding its own supply chain, product development and stores operations skills to deliver a better shopping experience to customers. However, given the huge scale, potential and complexities of these markets, Kaufland may feel that being the first mover is not necessarily an advantage. Entering a partnership will be related to sustainability, acceptability and feasibility. Sustainability will be concerned with whether a strategy addresses the circumstances in which the company is operating.

The acceptability relates to the expected return from the strategy, the level of risk and the likely reaction of stakeholders. Feasibility will be regarded to whether Kaufland has the resources and competence to deliver the strategy. Product Development: Diversification When the business environment is changing it creates demand for new products and services at the expense of established provision. This is what theoreticians believe. The Ansoff‟s matrix suggests that if new products are developed for existing markets, then a product development strategy has to be considered by the management level of a company. In expanding and diversifying Kaufland‟s product mix, it is also crucial to implement internal development when new products are developed. The nature and the extent of diversification should also be considered in relation to the rationale of the corporate strategy and the diversity of the portfolio. By following the changing needs of the customers, Kaufland can introduce new product lines.

This may require more attention to R&D, leading to additional spending. Innovation is a major driver in the retailing industry, for this industry is experiencing overcapacity. For example, Kaufland can develop a portfolio of different store formats in Romania, each designed to provide a different shopping experience. While the majority of Eastern European and Far Eastern outlets are hypermarkets, Kaufland can also develop different store types in these markets as well. This value added by the uniqueness will eventually lead Kaufland to command a premium price. Kaufland has to exploit their internal strengths and minimize their internal weaknesses in order to achieve sustained competitive advantage. Suppliers Many retailers bring their goods from overseas manufacturers who are more competitive on price and volumes. This is also the case of Kaufland. For many years the company looked abroad for products that were not available in Romania, in order to keep their customers satisfied, but tried to do it through long-established Romanian partners. The foods continued to be heavily Romanianbased due to the very successful range of prepared foods. But in recent years, Kaufland has been supporting Romanian jobs and expertise by encouraging large branded suppliers to develop exclusive production facilities.

It is the company policy and company’s main approach to have unique relationships with suppliers because the company works with many different suppliers around the world, with employees from many different cultures and ethnic groups. Applying advanced technology in its communications and cooperation with the suppliers, the company aims to control the work of its suppliers and heavily relies on their efficiency. The direct suppliers use a number of sub-contracted suppliers, selected to be best in class in their country. Kaufland has established close relationships with the contractors believing that regular and long term orders promote the investment necessary to improve conditions in the supply chain. Customer interface In order to be in line with the company strategy, Kaufland Romania aims to: – Bring down prices, thereby improving customer acceptance of the reduced range; – Quickly rectifying errors; – In order to grow in the face of people, the focus is on optimizing the coordination of marketing strategies;

– Adjusting their product offering and even the size of their range in such a way as to meet their customer‟s needs and in order to attract more customers; – Enhance responsiveness and seamlessness. IMPACT ON SOCIETY 1. Economic and politic When it comes to the political and economic impact, we think at employment legislations. Retailers are encouraged by the government to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs. Kaufland understands that retailing has a great impact on jobs and people factors, being an inherently local and labor-intensive sector. Kaufland focuses on the whole population, meaning that it employs large numbers of students, disabled and elderly workers, and often paying them lower rates. In an industry with a typically high staff turnover, these workers offer a higher level of loyalty and therefore represent desirable employees.

2. Social Kaufland wishes to provide its customers with the most pleasant and easy shopping experience. The company is committed to helping its customers embrace responsible consumption and offers a wide range of products based on a variety of sustainable-development policies and initiatives. And as many retailers, Kaufland has been involved in various social affected categories. 3. Environmental When it comes to having new buildings designed in an ecologic way to recycling office supplies, Kaufland goes beyond just talking about commitment in Romania. A characteristic of Germans is their businesses are equipped with modern technologies that are eco friendly and energy saving. After utilization, all the materials like carton, paper, wood, polystyrene, organic waste and other

leftovers are being collected and recycled. Having a German organizational culture imbedded in Romania makes customers trust more and more the Kaufland Empire. 4. Technological Kaufland like all the others retailers use points of sale equipment (POS), bar codes and huge storage capacity for billing and payment database. Operations are recorded in a systematic way, providing detailed analysis of sales and volume of transactions. Kaufland uses technology to monitor inventories and expenses of establishments. With automated machines and high-end computers making the task simpler, the focus of retailers can stay on retailers can stay on retaining customers with new strategies. Security systems contribute for a safer shopping, for retailers as well as for customers. 5. Legal and Political Kaufland has an eye on any proposed legislation or regulatory shift that could have a substantial political impact on how their company operates and its bottom line.

STRATEGIES FOR GROWTH In an increasingly high competition business environment, Kaufland has to change the already existing strategies or develop new ones in order to remain in the top position withing the market. Formulating strategies should be based on a continuous learning process (regarding the goals, and factors that would influence in any way the achievement of these goals). Being a large company, using the internal competences and convert them into competitive advantage means meanly focusing on the resources. Discounters supermarkets have as a strength the lower prices. Kaufland has a supermarket format operating on a lowest prices policy. It has an universal concept, which are duplicated across all countries where the stores are present, with only minor changes in some places to satisfy local idiosyncrasies. Kaufand’s marketing efforts are focused on communicating its stores. Kaufland stores satisfy the food need of human beings, so their target audience ranges all the population.

In these modern times the different chains use all kind of strategies to increase their sales, becoming the sales process almost a science. That is because in the process of merchandising are involved studies of psychology, science and business, which seek to know the tastes, habits, needs and way of thinking of consumers. For this reason and in these times of ruthless competition is an excellent idea to have tools like “merchandising”, to try to gain advantage against the other competitors. A whole theory has been developing about this topic. The base of the theory is “promotion” (tool of “marketing mix”) and is focused in the POS (point -of- sale) merchandising. It has several tools to carry out its aim, but the most important tools are the one that the consumers can find in the supermarkets. These are, advertising on the point of sales, through posters and displays; how the shelves are distributions on the establishment and also the product on them; the different use of music, lighting and colours on the establishment.

Kaufland opearates an own label. It offers an umbrella budget brand named “K-Classic” to compete with the hard discounter’s ranges. It was introduced in Germany in 2003 and has since been extended to other markets. K-Classis ranges from food to non-food,including automotive products and clothing. For some categories, there are sub brands, for example pet food. Accourding to some estimates K-Classis accounts for around 30% of Kaufland’s turnover. The brand is massively promoted in Kaufland’s stores through gondola-end placements and large scale photo banners on the walls featuring the different categories. Kaufland should split the strategies for the existing customers and the new ones. Missing from Kaufland‟s strategies to retain its‟ customers are loyalty programs, by which to offer the customers regularly promotions, discounts. Loyalty cards are not part of Kaufland’s strategy.

The strategy is to keep customer loyal by offering the lowest prices. The customer relationship management should be focusing on retaining information about the shopping habits of the regular customers, etc. For gaining new customers, Kaufland should approach a market expansion strategy in order to reach out to new market segments and add up to its customer base. This strategy involves tapping new geographical markets, introducing new products to the existing range that appeal to a wider audience, expansion by adding new retail stores to existing network, The HR department should be implicated in choosing the right people for the jobs, in order to be able to implement correctly the strategies.

ASSESSMENT OF THE ENTREPRENEUR Kaufland‟s CEO, Adrian Viman is in charge of the business development and growth of the retail units in Romania and is the only Romanian to be in charge of an international retail business in our country. He previously was the manager of the sales department within the same chain. In 2008 he planed to increase its number of stores in Bucharest from two to nine in the long term. Viman stated, “In the medium run, the network could reach five stores in Bucharest. This year, we do not have any plans in Bucharest.” The plan that in 2014 the chain to open another hundred stores in Romania, despite of the present economic crisis.

This would be a bold move, but as he declared in Business Week Magazine, he gains his motivation by seeing the expansion Kaufland has in Romania and by being able to directly involve into this growth, making sure that it is sustainable on a long term basis. But having an IT and process optimization background, his first decisions were taken on the technological side. For Kaufland, he stated, operations have become necessities rather than luxuries. Systems that control stock, keep all the stock and deliveries records and analyze business transactions are the lifelines of the company. It can also be said that IT has risen beyond its traditional support role and taken up a central role in business strategy formulation.

CONCLUSION Kaufland Romania SCS (Kaufland) offers products under different categories such as, food items, non-food items, household goods, and leisure and gardening products. It is a one stop shop for food, home and office products. Its product portfolio includes fruits and vegetables, cheese, dairy products, spongy cakes, electronic goods such as, ovens and other related products. Kaufland wishes to provide its customers with the most pleasant and user-friendly shopping experience. To do so, they have put together a variety of services to better satisfy their needs.Taking into consideration the present economic situation, most of the specialists agree that discount stores such as Kaufland Romania have an advantage on other types of commerce. Study papers and reports from surveying institutions certify it. According to them, last year the supermarkets lost 4% of the market share to hypermarkets and discount stores. Most of the retailers are offering way too many products Kaufland Romania develops its activity based on the accent put on the attitude towards clients, which should be respectful and polite.

Bibliography

 Integration of the Multinational Subsidiaries in the Romanian Social Economic Environment, Livia Catalina Baetica Transparent prioritization, budgeting and resource allocation with multi-criteria decision analysis and decision conferencing, Lawrence D. Philips, Carlos A. Bana e Costa www.kaufland.ro www.emergingmarkets.org www.businessweek.ro www.revistapiata.ro www.magazinulprogresiv.ro http://www.mbaknol.com/retail-management/impact-of-technology-in-retail-industry Best Retail Brands, 2012 edition McKinsey&Company, Getting it simply right