ARTICLE IN PRESS

Journal of Retailing and Consumer Services 13 (2006) 275287

www.elsevier.com/locate/jretconser

Competitive strategies in retailingan investigation of the applicability

of Porters framework for food retailers
Dirk Morschetta,, Bernhard Swobodab, Hanna Schramm-Kleina
a

Department of Business Administration, Saarland University, Im Stadtwald, Geb. 15, 66123 Saarbruecken, Germany
b
Department of Business Administration, University of Trier, Universitaetsring 15, 54286 Trier, Germany

Abstract
The objective of this research is to develop a framework for competitive strategies in food retailing. Managers of food retail channels
were surveyed in order to derive the basic dimensions of competitive advantages that companies attempt to achieve in this industry
sector. In a second study based on consumers, the central dimensions of retail store perception were investigated. Both studies reveal that
three basic types of competitive advantage seem to prevail in food retailing: (1) price, (2) quality (with a comprehensive set of qualityorientated instruments, including customer service), (3) convenience. We nd quality leadership and price leadership to be independent
factors which can be achieved without conicting with one another.
r 2005 Elsevier Ltd. All rights reserved.
Keywords: Retailing strategy; Competitive strategy; Positioning; Customer perception

1. Introduction
Competitive strategies deal with the development of
attributes that characterise a company and differentiate the
value it creates and offers in comparison to its competitors
(Porter, 1980), i.e. the core idea about how the rm can
best compete in the market place (Pearce and Robinson,
1994, p. 220). Because competition in the retail sector has
been increasing for years, the importance of developing an
effective competitive strategy appears to be increasing
constantly (Cortjens and Doyle, 1989; Ellis and Kelley,
1992; Harris and Ogbonna, 2001). Given that retailing has
become a mature industry with overcapacity, high concentration and, in many cases, price-driven marketing
strategies which have led to rather homogeneous stores,
differentiation from competitors through positioning seems
increasingly necessary (Wortzel, 1987; Walters and Knee,
1989, p. 74).
According to Porter (1985), competitive strategy can be
understood as the activities a company undertakes to gain
a sustainable competitive advantage in a particular
industry. These activities are determined by the strategic
Corresponding author. Tel.: +49 681 302 4471; fax: +49 681 302 4532.

E-mail address: d.morschett@mx.uni-saarland.de (D. Morschett).

0969-6989/$ - see front matter r 2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.jretconser.2005.08.016

decision on the particular competitive advantage which the

company is attempting to achieve, i.e. what advantage
should be used to elevate the company from its competitors? This competitive advantage should full certain
criteria (Simon, 1988; Aaker, 1992; Mintzberg, 1996, p.
88; Walters and Knee, 1989; Brooksbank, 1994, p. 12;
Corstjens and Doyle, 1989, p. 171). It must:

Relate to an attribute with value and relevance to the

targeted customer segment.
Be perceived by the customer.
Be sustainable, i.e. not easily imitated by competitors.

Consequently, the competitive advantage that a company

selects should be based on its resources, strengths or
distinctive competencies relative to competitors (Brooksbank, 1994, p. 12), but must also be perceived by
consumers. That is, consumers must be aware of these
competencies. This implies a simultaneous consumer and
competitor-orientated perspective in the development of
competitive strategies (Aaker, 1992).
In his familiar matrix with the dimensions competitive
advantage and scope of operation, Porter (1985)
assumes that there are essentially three generic types of

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competitive strategy (based on two basic types of

competitive advantage): cost leadership, differentiation
and focus on certain target segments (which itself is either
anchored through low-cost or differentiation). He also
emphasises that companies must make a choice between
the different generic strategies, since being all things to all
people is a recipe for strategic mediocrity and belowaverage performance (Porter, 1985, p. 12; see also
Mintzberg, 1996, p. 87).
While it is commonly accepted that the (basic) concept of
competitive advantage and competitive strategy is applicable across different industries, researchers have criticised
Porters concept in several respects, including the allegedly
oversimplied dichotomy of cost leadership vs. differentiation (for an overview, see Miller and Dees, 1993). Also, the
particular characteristics of certain industries, including
(food) retailing, would require a more specic concept and
allow different competitive advantages than in other
industries (e.g. Harris and Ogbonna, 2001, p. 157; Uncles,
1998; Turock, 1999).
While Porters concept has been tested for manufacturing companies in a number of studies, empirical evidence
on the generalisability of the concept to retailing is rare.
Accordingly, the purpose of this research is to investigate
empirically Porters framework of competitive advantage
in the context of food retailing. Two empirical studies are
conducted in order to develop a framework for competitive
strategy and to evaluate the transferability of Porters two
basic types of strategy to retailing, one focussing on retail
companies and the advantages they attempt to offer their
customers compared to their competitors, and the other
study surveying consumers and the dimensions in which
they perceive food retail stores. Both aspects (company and
consumer view) are treated as two perspectives of the same
phenomenon in this paper.
2. The concept of competitive strategies
Porter (1980, 1985) proposes two distinct competitive
strategies. A company (or strategic business unit) that
decides to follow a cost leadership strategy has the
objective of being able to realise its offer at the lowest
possible cost. The competitive advantage of cost leadership
is achieved by performing important value chain activities
at a lower cost than competitors (Porter, 1985). Low-cost
leaders must either have or develop some unique capabilities in order to achieve and sustain that position. Examples
of such capabilities and resources are: a dominant market
share, secured supplies of scarce raw materials or having
developed more efcient linkages to suppliers. Companies
striving for cost leadership in their industry usually look
constantly for cost reductions and efciency. They maximise economies of scale, reduce overheads and administrative expenses and use volume sales techniques (often
including aggressive pricing) to proceed on the experience
curve. Sustained capital investment is usually necessary and
so too is a tight coordination of operations (Porter, 1980;

Pearce and Robinson, 1994). Having achieved cost leadership, the company canif it simultaneously offers an
acceptable quality level (all other things being equal, or
not too unequal (Mintzberg, 1996, p. 89))either charge
the same prices as competitors and enjoy higher prot
margins or it can charge lower prices, usually increasing its
sales volume (Day and Wensley, 1988; Pearce and
Robinson, 1994).
Companies following a differentiation strategy strive to
create and market unique products for varied customer
groups. They aim to create a superior fullment of
customer needs in one or several product attributes in
order to develop customer satisfaction and loyalty, which
can often in turn be used to charge a premium price for
products. Contrary to competition with rather homogenous products, where price as a marketing instrument is in
the focus, a differentiation strategy aims at reducing
competitive pressure. It is a strategy that reduces the price
sensitivity of consumers by offering uniqueness (Porter,
1980; Aaker, 1991; Pearce and Robinson, 1994).
As mentioned, it is assumed in the Porter framework
that a company can only be successful by clearly deciding
in favour of one of the generic strategies. He characterises
companies that try to follow several generic strategies at
the same time as stuck in the middle, since he assumes
that those companies fail to achieve any of them (Porter,
1985, p. 16; Walters and Knee, 1989). Limited resource
availability is one reason for this assumption.
Many researchers have tested Porters framework in
different (industrial) sectors. Miller and Dees (1993) give
an overview of the results. Some empirical studies have
conrmed that the empirically observable strategies can, in
general, be categorised into Porters basic types (Miller and
Dees, 1993; Walters and Knee, 1989). Others criticise that
Porters two basic types oversimplify potential sources of
differentiation. Mintzberg (1996) conceptually develops six
differentiation strategies. Miller (1992) empirically conrms his own hypothesis that the differentiation strategy
(for manufacturing companies) can be carried out in (three)
different variants, namely innovation (innovative products), marketing (brand image based communication
policy), and quality (high quality and durable products).
Other academics have added other possible competitive
advantages for industrial companies, e.g. product range
(Bolz, 1992) or customer service (Loomba, 1998). However, these conceptual and empirical studies have been
conducted for manufacturing companies. Also, the argument by Gilbert and Strebel (1987) that highly successful
companies have combined differentiation advantages and
cost advantages in so called outpacing strategies is based
on observations of manufacturing rms.
2.1. Competitive strategies in retail markets
Considering the characteristics of retail markets as
mentioned above, clear competitive advantages relative
to those of competitors become essential to success.

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Companies need to be signicantly more attractive to

consumers than their competitors and to develop a
strategic position in the market (Wortzel, 1987, p. 47;
Walters and Knee, 1989, p. 75).
If a company strives for cost leadership, all sources of
cost reduction must be exploited. A retailer must minimise
cost throughout its value chain (and possibly intercompany supply chain) activities. The source of cost-based
competitive advantage in retailing lies especially in the cost
of goods sold or operating expenses. Large retailers usually
achieve cost leadership more easily than smaller retailers,
since economies of scale and the associated negotiation
power over suppliers enables them to secure low procurement prices for the purchased goods (Ellis and Kelley,
1992, p. 384; Anderer, 1997, p. 26). On the market side of
the value chain, minimum investment in store design and
ambience (often with Spartan store atmosphere) and
reduced customer service (mainly store personnel) are part
of this strategy. Highly efcient supply chain operations,
often based on limited assortments, are also necessary. The
prototypes of the cost leadership strategy in retailing are
the hard discounters, but also some hypermarkets and
superstores (Ellis and Kelley, 1992; McGoldrick, 1990, p.
98; Davies and Brooks, 1989, p. 193; Hoch, 1994). Aldi,
Lidl or Wal-Mart could be mentioned as examples for this
type of strategy.
The argument that price competition is easily duplicated
(Porter, 1980; Ellis and Kelley, 1992, p. 381) is only
relevant in the short-term. In the long run, price leadership
is not possible without cost leadership. An important
benet of cost leadership strategies is that price is an
important store-choice attribute for many consumers,
which is reected in empirical investigations as well as in
the tremendous growth of the above-mentioned priceoriented store formats in most national markets. Price
comparison isdue to the fact that retailers often carry
branded products in their assortmentsnot particularly
difcult for consumers (Corstjens and Corstjens, 1995).
However, the growth of these formats, on an almost
worldwide scale, also indicate that competitive advantage
based on price is difcult for other retailers to beat when
using other formats. Therefore, while price is important for
almost all retailers, other competitive advantages have to
be developed if the rms strive for superiority in their
competitive eld (see, for example, Davies and Brooks,
1989).
As an alternative to price competition a retailer can
differentiate its offer from its competitors. Davies (1992)
demonstrates that the rise of efcient and professional
chain store operations leads to lower cost differentials
between them which simultaneously intensies the need to
use non-price attributes to distinguish and characterise
retailer. Especially in retailing, the uniformity of competition which resulted in a lack of proled retailers with a
clear image is often criticised and blamed on a one-sided
focus on price competition (Martineau, 1958; Wortzel,
1987; Walters and Knee, 1989; Corstjens and Corstjens,

277

1995). Differentiation in retailing can be seen as a strategy

with the objective of adapting certain store attributes more
closely to the specic needs of chosen customer segments.
Douglas in Germany, Sephora in France, Nordstrom or
Trader Joes in the USA, Harrods in London, but also the
convenience stores and some supermarket chains can serve
as a few examples of this strategy. However, in the retailing
literature, a common understanding of the options for
differentiation is lacking.
While a number of typologies have been developed and
tested for competitive advantages in industrial sectors,
comparatively less work on this topic has been conducted
in retail research (Conant et al., 1993, p. 257). A number of
retail researchers have applied Porters concept in retailing
and shown that the two strategies of differentiation and
cost leadership can be found in this sector and some
indications of the expected effects on performance (i.e. that
stuck in the middle companies perform lower) have also
been found (transferring Porters concept to retailing has
been tried by several German researchers: e.g. Meffert,
1985; Patt, 1990; Anderer, 1997; Groppel-Klein, 1998). In
retailing, as for manufacturing companies, two main
arguments against Porters framework have emerged (see
for example Mintzberg, 1996; Walters and Knee, 1989,
p. 80; Corstjens and Corstjens, 1995; Wortzel, 1987; Zentes
and Anderer, 1994):

Strategies that combine several competitive advantages

are not considered by Porter.
The reduction of possible competitive advantages to two
basic types is simplistic, and especially differentiation
advantages can be reached in many different ways.

Due to the intensive competition in retailing, outpacing

strategies that offer several competitive advantages are
increasingly necessary in order to satisfy consumers and
empirical research shows that there are companies which
combine price and quality leadership (Anderer, 1997, pp.
218, 302). Tesco in the UK, for example, clearly
differentiates from the competitors, but also intends to
offer low prices.
Also, while it is widely accepted that superior product
quality (in the product assortment) can bein close
association with Porters typologyconsidered a possible
advantage in retailing (Harris and Ogbonna, 2001, p. 160),
other differentiating strategies can be added or chosen
alternatively. Whilst Porter considers the differentiation
strategy as one strategy, retailing reality shows that the
options for differentiation are very heterogeneous (Walters
and Knee, 1989, p. 80; Burkhardt, 1997).
While it is not their intention and they do not comment
on this nding, the research by Ellis and Kelly (1992)
strongly indicates that the dichotomous concept of
differentiation vs. price leadership is excessively simplied
in the context of retailers. Palmer (1994, p. 73) categorises
British food retailers with respect to the dimensions of
price and quality, but comments that this elementary

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categorisation is oversimplied for useful positioning

strategies. He points out that quality in his example
has to be seen as an aggregated construct that consists of a
range of issues: assortment, speed and efciency of
transactions, quality of store personnel, quality of store
ambience and others. Other researchers emphasise the
strength of a comprehensive experiential marketing strategy which evokes positive emotions in consumers as the
main component of the positioning strategy, strategically
managing a customers entire experience with the retailers,
focussing on store atmosphere, consumers desires, consumer excitement, entertainment and a clear, emotionfocused image, since these features are expected to be less
imitable than most functional attributes (Schmitt, 1999;
Ailawadi and Keller, 2004; Weinberg, 1986; Esch and
Levermann, 1993). Also, more than in the case of consumer
goods, retailing is also abledue to the direct interaction
with consumersto offer superior service quality. Major
retailers (maybe to a lesser degree in continental Europe
than in the UK) seek to differentiate themselves from
competitors on customer services and transform their
customer service activities in many ways (Harris and
Ogbonna, 2001, S. 164).
Wortzel (1987, p. 50) suggests three basic strategies for
retail positioning: (1) a product differentiation strategy
through offering a different assortment to those of
competitors, (2) a service and personality differentiation
strategy based on the addition of unique services and
personality to differentiate the store, and (3) a price
leadership strategy. He challenges one basic assumption of
Porter, by explicitly mentioning the possibility of combining two or possibly all three of the above positioning
strategies (p. 50). In addition, those three basic strategies
can be achieved by means of different instruments. For
example, a product differentiation strategy can mean
offering unique and distinctive merchandise or providing
the widest possible product line in every category.
However, these strategy typologies are conceptual rather
than being based on empirical results. In an empirical
study, Ellis and Kelley (1992, p. 388) reduce 24 items which
are based on the primary activities of the retail value chain
into four subscales: (1) product (variety in brands and
sizes), (2) amount of promotion (e.g. advertising and instore promotions), (3) promotion effectiveness and (4)
customer service. They also show empirically, that combinations of different competitive advantages are achieved by
retailers in their sample. Conant et al. (1993) attempt to
nd generic competitive advantages in retailing and
empirically by means of factor analysis and extract seven
factors: (1) presentation and preparation, (2) product
variety and depth, (3) low price, (4) high-priced convenience, (5) inventory control and advertising, (6) targeted
incentives (e.g. direct mailing), (7) traditional fashions and
service. Using cluster analysis, they also show that
combinations of these are common practice.
Other researchers add to this list and mention other
options for competitive advantages, among them rela-

tional attributes, i.e. the advantage of building lasting

relationships with customers, which is among the advantages that have received more attention over the last few
years, based on the development of loyalty schemes and ITbased relationship marketing, as well as in-store operational efciency (customer processes) which can directly
inuence customer satisfaction through actual shopping
experience (for example by reducing long checkout queues
or reducing inventory out of stocks (Harris and Ogbonna,
2001).
In summary, it seems evident that Porters framework is
not without its shortcomings when applied to the retail
sector. Many of the suggestions that have been made in the
context of competitive advantage in retailing show that
Porters proposed dichotomy of competitive advantages is
not adequate for a detailed investigation (and at a
managerial level, not suitable for the development of
effective competitive strategies that differentiate the retailer
from its competitors). Differentiation can encompass all
retail activities and relationships with respect to retail
companies (Ellis and Kelly, 1992, p. 385; Day and Wensley,
1988). Also, Porter separates the strategy of cost leadership
from all other means of differentiating the company from
competitors without providing clear reasoning. However,
cost leadership can also be regarded as just one of the
possible forms of differentiation with respect to the
competition (Mintzberg, 1996, p. 87). However, even those
studies that criticise Porters concept come to the conclusion that there are indeed a limited number of central,
strategic dimensions of competitive strategies. Finding a
typology for those strategies remains important if a
company is to be able to develop strategies including
bundles of instruments, instead of dealing individually with
the many relevant variables (Bolz, 1993, p. 31; Conant
et al., 1993, p. 257).
2.2. Positioning: influencing consumers subjective
perception of retailers
Closely related to the concept of competitive advantage
is the (more marketing-oriented) concept of positioning.
Positioning is the deliberate, proactive, iterative process
of dening, measuring, modifying and monitoring consumer perceptions of a marketable object (Arnott, 1993,
p. 24). For a retailer, strategic positioning involves
providing unique value [y] Strategic positioning involves
selecting and then bringing to bear an integrated set of
tools and communication techniques that identify and
explain the store to the customer (Wortzel, 1987, p. 47).
These comments (similarly Corstjens and Doyle, 1989,
p. 171; Brooksbank, 1994) link competitive strategyin
choosing the unique value and set of tools the company
wants to offer in order to differentiate itself from the
competitorand the customers perception of these values,
given that the effect of positioning is based on the
subjective perception of (store or company) attributes
and not on objective truth. At the same time, a clear

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position in retailing implies a complete strategic bundle of

merchandise, locations, customer service, communication
and other store attributes (Walters and Knee, 1989, p. 75;
Pessemier, 1980; Birtwistle et al., 1999).
In the retailing literature, both theoretically and
empirically, a number of potential benets to be derived
from a clear and distinct retail positioning have been
demonstrated (Walters and Knee, 1992; Ellis and Kelley,
1992; Birtwistle et al., 1999; Wortzel, 1987). Consequently,
strategic positioning links the concepts of choosing,
developing and maintaining certain competitive advantages
and the concepts of consumer perceptions of the retailer.
Consumer perceptions of retail stores have been thoroughly investigated in store image research (see the
extensive overview by Peterson and Kerin, 1983, p. 294
on early research on this construct and also Mazursky and
Jacoby, 1986; Birtwistle et al., 1999).
A clear positioning is considered the prerequisite for a
clear store image. The terms image and positioning are
frequently considered as synonymous or at least closely
associated with one another (Walters and Knee, 1989,
p. 78). Only the xed dimensions of positioning are seen as
different: The term position differs from the older term
image in that it implies a frame of reference (Auken and
Lonial, 1991, p. 11; and for more detail, Keller, 1993).
However, in many cases, the store image literature also
provides the frame of reference, i.e. dimensions on which to
compete with other retailers. Therefore, both concepts deal
with the same phenomenon, but from slightly different
perspectives. The store image research mainly deals with
the position of the retail stores as perceived by the
consumers. Strategic positioning through competitive
advantages focus more strongly on the relationship
between a retailer and his competitors and the realised
strategy of the retailer (Scruggs, 1995, p. 9; Mintzberg,
1996).
However, both concepts are seen as closely related to one
another. Blankson and Kalafatis (1999, p. 109) point out
that the two positioning perspectives are the managerial/
organisational on the one side, and the consumer on the
other. Since positive consumer perceptions of a retailer are
the ultimate goal of competitive strategy, the perceptional
dimensions of store attributes are important (Schiffman
and Kanuk, 2004). Only by knowing and understanding
consumer perceptions of retail stores (their own as well as
those of competitors), can a company create a differential
positioning which relates to the target customers patronage behaviour (Pessemier, 1980, p. 96; Auken and Lonial,
1991, p. 11).
3. Research methodology
The research questions for the following empirical
investigation are:

What are the basic dimensions of competitive strategy in

food retailing? Is Porters dichotomy of potential

279

competitive advantage a suitable typology of competitive strategies in food retailing?

How does the perspective of food retail managers
compare to those of consumers? Since, as has already
been shown, it is important that the competitive
advantage of retailers is clearly recognised by consumers, conceptualising competitive advantages along the
same dimensions as consumer perceptions of retailers
would seem benecial to their success.

In order to enhance knowledge about competitive strategy

in retailing and to analyse the above questions, two surveys
have been carried out, one of retail managers and one of
consumers.
3.1. Food retail company survey
3.1.1. Survey procedure and sample
For the company perspective, a written, standardised
questionnaire was mailed to food retail companies in
German-speaking countries (Germany, Switzerland, Austria) at the level of distribution channels (e.g. a retail
company with discounters and supermarkets received two
questionnaires, because the competitive strategies were
supposed to differ from one another). No exact information on the total population was available, so neither a
random sample nor a quota sample were possible. The
sample selection was based on data bases, internet and the
trade press1 for the three countries. Altogether, 176
different distribution channels were identied. Due to the
high concentration level in the retail sector in the three
markets and the availability of addresses of the most
important retailers and channels, we expected to have a
coverage of well above 95 percent (of total food retail sales)
in the mailing.2 The mailing was personalised and directed
to the CEO or the managing director or the marketing
director of the retail channel. After six weeks, the nonrespondents were contacted by telephone and the questionnaire sent a second time upon request. Altogether, 58
usable questionnaires were returned, which covered the full
1

The most important German food retail magazine Lebensmittel

Zeitung provides Top-Lists of food retailers in different country
markets (www.lz-net.de) and publishes a yearly list of the top food
retailers in Germany, which were important sources for retail addresses.
Also information by Trade Dimensions/M+M Eurodata was used.
Additionally, articles in the trade press were searched as well as the
internet.
2
Since exact turnover for each distribution channel was not always
available (sometimes only total turnover for the whole company with
several distribution channels was given), and also not even the exact
gures for total turnover in the country markets were known, an exact
calculation of the sales targeted in the survey is not possible. Given that
the top 5 food retailers in each country market (Germany, Austria and
Switzerland) realise well more than 60% of food sales as different press
releases of A.C.Nielsen and M+M Eurodata state, and that more than 30
retailers in Austria and Switzerland and more than 100 retailers in
Germany were addressed (including the top lists), an almost full
coverage of sales was targeted in the study.

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Table 1
Sample description for company survey

Table 2
Sample description for consumer survey

Sales (Mio. EUR)

No. of retail channels

Share (%)

Below 250
Between 250 and 500
Between 500 and 2500
Above 2500
No answer

13
16
10
5
14

22.4
27.6
17.2
8.6
24.2

Total

58

100.0

Original survey was in German marks. Instead of calculating with 1.96

DM/EUR, the gures were transformed with 2.00 DM/EUR (this seems
to be sufciently precise for the purpose of this table). The sales gures
relate to the specic retail channels targeted, not the retail company in
total.

range of food retail store formats, i.e. hypermarkets,

supermarkets, convenience stores, discounters and others.
The response rate of 32.9 percent is very high for studies of
this kind, which can be explained by the fact that the
respondents were in many cases personally known to the
authors or in contact with the authors research institution.
Also, single respondents were often able to complete
questionnaires for several distribution channels, depending
on their hierarchical level. A short sample description is
shown in Table 1.

3.1.2. Operationalisation and measurement

In order to collect information on the basic orientations
of retail companies with respect to their competitive
strategy, retail managers were given a list of various
potential competitive advantages and asked to evaluate to
what degree their company intends to strive for superiority
over its rival companies on that particular attribute. We
used 5-point rating scales (from 2: not necessarily better
than competitors to +2: superior to competitors). In order
to reduce the tendency to answer superior to competitors
for many or even all attributes, an explanation was given to
clarify that trade-offs usually have to be taken into
account, since superiority in all areas is not realistic,
considering the limited resources within companies. To be
able to fully capture the spectrum of potential advantages,
the notion that all (market-oriented) retail activities are
potential sources of competitive advantages was used for
developing the item battery. A pool of items was
developed, based on the retail marketing mix. The
following (potential) market-oriented company objectives
(competitive advantages) were measured: (1) quality
leadership (in assortment/products), (2) price leadership,
(3) cost leadership, (4) service leadership, (5) best variety of
assortment/widest choice, (6) leadership in customer
communication (best advertising), (7) convenience leadership, (8) leadership in store design/layout (best store
atmosphere), (9) customer process leadership, and (10)
best customer relationship management.

Respondents
Absolute

In %

Gender
Female
Male

305
255

54.5
45.5

Age
1420 years
2030 years
3040 years
4050 years
5060 years
60 and older

40
86
129
112
101
92

7.1
15.4
23.0
20.0
18.0
16.4

Household size
1 person
2 persons
3 persons
4 persons
5 and more persons

132
173
107
107
41

23.6
30.9
19.1
19.1
7.3

Total

560

100.0

3.2. Consumer survey

3.2.1. Survey procedure and sample
An empirical study was conducted in one major German
city with oral interviews based on standardised questionnaires and 560 respondents. To ensure the sample was
representative of food store shoppers, quota sampling was
undertaken, taking into consideration the age and gender
distribution of grocery shoppers in Germany (see Table 2
for sample description). Each respondent was asked about
one specic retail store in the city. Seven different stores
were chosen as stimuli (the seven stores most often
mentioned in pre-tests as places where respondents did
their grocery shopping), i.e., 80 questionnaires were
completed for each retail store. The seven stores represent
different store formats: superstores/hypermarkets (Globus,
Real), Discounters (Aldi, Lidl, Plus), Supermarkets (Edeka), and the grocery department of a large department
store (Karstadt). It was also ensured that each respondent
did grocery shopping at least occasionally in this city, so
that the respondent was able to evaluate the local shopping
situation.
3.2.2. Operationalisation and measurement
Because store image research has done a considerable
amount of work identifying the major facets of store image
(and store image-dimensions are considered to constitute
the consumers perception of relevant competitive advantages of the retailer), this study will draw on their results as
well as specic categorisations of retail marketing mix
instruments (see e.g. Doyle and Fenwick, 1974/75; Lindquist, 1974/75; Mazursky and Jacoby, 1986; Birtwistle
et al., 1999).

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281

Table 3
Exploratory factor analysis of competitive advantage items
Rotated component matrix (n 58)

Factor 1: experience/
price

Factor 2: quality of
core functions

Factor 3: convenience

Best store atmosphere

Best customer relationship management
Cost leadership
Best advertising
Price leadership
Quality leadership (assortment/products)
Service leadership
Customer process leadership
Convenience leadership
Best variety of assortment

0.859
0.839
0.761
0.677
0.662
0.275
0.392
0.383

0.250

0.169
0.206
0.419
0.541

0.104

0.103
0.791
0.735
0.731
0.137
0.371

0.801
0.677

3.363

2.101

1.791

Eigenvalue

0.166

Factor loadings below 0.1 are not displayed.

These usually encompass the most relevant elements of

the perception of a retail store (5-point rating scales were
used (from 1: much better than most competitors to 5:
worse than most competitors): (1) selection, (2) quality
products, (3) freshness, (4) price, (5) one-stop shopping
possibility, (6) advertising, (7) length of checkout lines, (8)
service, (9) convenience, (10) store design, (11) customer
relationship programmes, (12) tidiness, and (13) cleanliness.
4. Empirical results

that the dichotomy of competitive strategies that Porter

postulates (cost leadership vs. differentiation) cannot be
conrmed in the context of food retailing:

4.1. Competitive strategies from the perspective of food

retail companies
The rst objective of the research was to derive basic
dimensions of competitive strategies in retailing. As
mentioned, the retail companies were evaluating an item
battery of different competitive advantages and the
respondents were asked to indicate to what degree they
strive for superiority in that specic area.
The ten items that were included in the survey were
analysed by factor analysis. Since independence of the
basic dimensions was not theoretically argued, nonorthogonal factor rotation was used (PCA, oblimin
rotation, Kaiser normalisation), which allows for correlation of the factors. The KaiserMeyerOlkin (KMO)
measure of sampling adequacy was 0.655 and the w2 of
Bartletts test of sphericity was 265.2 (sign. 0.000), so
that factor analysis of the sample data seems suitable. The
results of the factor analysis are given in Table 3.
Three factors were extracted that are not completely
independent of each other. However, intercorrelations are
low and not signicant (r1,2 0.07 (n.s.), r1,3 0.02
(n.s.), r2,3 0.154 (n.s.)). Explaining 70.3 percent of the
total variance, the three factors account for a substantial
part of the variance of the original item battery. The
derived factors can be considered to be the underlying,
basic dimensions of competitive advantages retail companies try to achieve. The interpretation of the factors reveals

Factor 1 combines the experiential aspects of retailing

such as store atmosphere, CRM and advertising, on the
one hand and on the other hand (with negative loading)
price leadership and cost leadership. This factor can be
labelled experience/price.
On factor 2, the items quality of assortment, quality of
customer service and quality of customer processes load
highly. This factor can therefore be interpreted as the
(comprehensively understood) quality of the core
functions of food retailers. A similar combination of
merchandise and service quality can already be found in
one of the oldest categorisations of retail marketing by
Lazer and Kelley (1961), who see the goods and
services mix as one instrument.
Factor 3 is made up of the items convenience leadership
and best variety of assortment. The factor can be labelled
convenience, since this variable loads highest on the
factor and the (negatively correlated) item best variety
seems to represent the same dimension with an inverted
direction.3

Several aspects of this result are relevant to the research

question on the applicability of Porters matrix to retailing.
First, the bipolarity of the rst factor is of some
signicance. While Porter assumed that cost and quality
3
One could theoretically also consider the best variety of assortment as a
positive dimension of convenience. Wortzel (1987, p. 48) mentions that
convenience for the consumer can be reached by short driving times and
rather small stores, but also by a large assortment offering the possibility
of a one-stop shopping. While both goals usually cannot be reached at the
same time, it shows that both are facets of the convenience-phenomenon.
However, the retailer survey considered convenience in the more
traditional sense of the concept (convenience stores), i.e. small stores,
fast and efcient transactions, close-by short-term parking and so on.
Auken and Lonial (1991, p. 13) also directly link the convenience
orientation of consumers to one-stop shopping orientation.

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D. Morschett et al. / Journal of Retailing and Consumer Services 13 (2006) 275287

are one dimension, with cost leadership and quality

leadership as opposing extremes (Porter, 1985; Auken
and Lonial, 1991, p. 12), the rst factor makes clear that in
retailing, it is not the quality of the core functions that is
the converse of cost and price leadership, but only the store
atmosphere and other (mainly non-functional) store
attributes. Thus, it can be concluded that a focus on the
experiential retail marketing and a strong cost/price
orientation are difcult to achieve simultaneously. However, having cost/price leadership on the one side and a
high quality assortment, the service and the customer
processes on the other side loading highly on different
(almost independent) factors can be seen as indication that
the simultaneous achievement of both of these basic types
of competitive advantages is possible.
In summary, it can be concluded that from the
perspective of food retailing managers, the competitive
advantages in food retailing can be reduced to three basic
types, which can be denoted as experience/price,
quality of core functions, and convenience.
To analyse this outcome further, a cluster analysis was
performed with the three basic types of competitive
strategies as cluster criteria. A six-cluster solution emerged
from a k-means clustering (using the elbow-criterion).
Discriminant analysis was applied to the cluster solution.
The three discriminant functions show high explanatory
power, all three having eigenvalues well above unity (9.231,
4.194, 2.442). The cumulated Wilks Lambda was 0.005
(sign. 0.000). Since 98.4% of cases were correctly
classied, the very high discriminating power of the cluster
solution becomes evident.
To characterise the cluster solution further, Fig. 1 shows
how the analysed retail channels are positioned within the
competitive advantage space. This illustration, together
with the ANOVA shown in Table 4 with the cluster
centroids for the six derived clusters, show that the three
factors for competitive advantage are suitable for classifying retail competitive strategies and also for distinguishing
groups of retailers which follow different competitive
strategies. However, since the mapping of strategic groups
in retailing (Porter, 1980) is not in the focus of this paper,
there is no further discussion of the cluster solution.
4.2. Competitive strategies from the perspective of
consumers
As described in the section on perception, this construct
was initially measured with a comprehensive item battery
(13 items). To establish meaningful groups of items, the
items were (after an extensive examination and following
adjustment of the item battery4) analysed by an exploratory and then a conrmatory factor analysis.
4
The items tidiness and cleanliness are highly correlated and
measure similar facets of the perception of store orderliness, and were
therefore combined. The items quality products and freshness are
different facets of the quality of the assortment and they were also

quality of core functions

282

cluster
1

3
-1
4
-2

5
6

-3

1
0
expe
-1
rienc
e/pric
e

-2

-1

nce

enie

conv

Fig. 1. Surveyed companies in the three-dimensional competitive advantage space.

Theoretical considerations lead to the assumption that

the underlying factors are probably not independent of
each other, since consumers do not strictly distinguish
between each component, but tend to see the whole
picture with interrelated attributes (Oxenfeldt, 1974/75;
Zimmer and Golden, 1988; Kahn and McAlister, 1997;
Morschett, 2000; Ailawadi and Keller, 2004, p. 333).
Therefore, instead of the usual orthogonal factor rotation,
an oblique (non-orthogonal) rotation was employed, which
allows for a correlation of the factors. In this case,
principal component analysis with oblimin rotation with
Kaiser normalisation was used. The KMO measure of
sampling adequacy equalled 0.787 and the w2 of Bartletts
test of sphericity was 1066.8 (sign. 0.000). The results of
the factor analysis are given in Table 5.
Three factors were extracted that explain 73.3% of total
variance. There is signicant intercorrelation between the
three factors (r1,2 0.363; r1,3 0.126; r2,3 0.180).
These factors, which can still be clearly distinguished from
one another, can be interpreted as follows:

(footnote continued)
combined into one measure. Since Cronbachs alpha was high or
satisfactory for both pairs of items (0.79 for orderliness, 0.64 for quality
of assortment), an unweighted averaging was used for aggregation. In the
further adjustment process, four items were removed. The number of
missing values for the item advertising was too high for a useful
interpretation of the variable (12.9%) (Kline 1998, p. 7273). Since ve of
the stores used as stimuli did not have an explicit customer relationship
programme and spurious correlations of this variable with other
variables emerged, this variable was also dropped. The variable length
of checkout lines was eliminated due to very low indicator reliability in
the rst calculation of a conrmatory factor analysis. The variable
convenience did load highly, but not unambiguously, on two separate
factors and was therefore not considered.

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D. Morschett et al. / Journal of Retailing and Consumer Services 13 (2006) 275287

283

Table 4
Statistical results of the cluster analysis (nal cluster means)
Competitive advantage factors (n 58)

Factor 1: experience/price
Factor 2: quality of core functions
Factor 3: convenience
n

Cluster means

ANOVA

Cluster 1

Cluster 2

Cluster 3

Cluster 4

Cluster 5

Cluster 6

F-ratio

2-tail sign.

0.72
0.17
1.35
11

0.32
2.16
1.28
3

0.46
0.36
0.23
19

0.35
0.08
1.29
12

1.93
0.59
0.15
8

1.28
1.30
0.096
5

69.2
35.8
39.1

0.000
0.000
0.000

Table 5
Exploratory factor analysis of the perception items (reduced item battery)
Rotated component matrix (n 560)

Factor 1: quality of
performance

Factor 2: scope of
offers/convenience

Factor 3: price level

Store design
Orderliness
Service
Quality of assortment
One-stop shopping
Variety of assortment
Price

0.808
0.785
0.769
0.695

0.149
0.100

0.146

Eigenvalues

0.183

0.114

0.223
0.889
0.842

2.722

2.074

0.969
1.150

Factor loadings below 0.1 are not displayed.

Items such as quality of assortment, store design, service

and orderliness load highly on the rst factor. This
factor can therefore be interpreted as a comprehensive
kind of quality of performance.
The second factor is made up of two items describing the
scope of offers/convenience of a store, namely
the opportunity of doing all shopping at one outlet
and the variety in the assortment.5
Only one item loads highly on the third factor, the price.
This factor is labelled price level.

coefcients. However, even the highest coefcient (0.62

between quality of performance and scope of offers/
convenience) still indicates discriminant validity. Therefore, the three-dimensional structure of food retail store
perception is well conrmed by the data.
Comparing the results of the consumer survey to Porters
basic types of competitive advantages, his suggested
bipolar structure of potential competitive advantages is
(again) not supported by the empirical data:

To test this result further, the reliability and validity of the
scale and its dimensions were additionally evaluated with
conrmatory factor analysis applied to the three latent
constructs. AMOS 4.0 was selected for the analysis.
Parameter estimation was done with the ML-method
(Kline, 1998). The values of the overall t measures
(GFI 0.972; AGFI 0.935) indicate a very good t of
the analysed model to the empirical data. In a second step,
the t of the local structures of the model was also
examined. Indicator reliability, factor reliability and
explained variance of the three latent variables all imply
a good model t. The expected interdependence between
the latent constructs (which was also a result of the
exploratory factor analysis) appears clearly in the path
5
The link between convenience and one-stop shopping has already been
pointed out (Wortzel 1987; Auken and Lonial 1991). Also in a prior
calculation, the item convenience loaded negatively on this factor (but
also on another factor). This would allow us to interpret this factor as
scope of offer on the one hand, but also as the as convenience, with a
negative sign.

The factor quality of performance is much more

comprehensive than the quality advantages as presented
and explained by Porter, who focused on product
quality advantages. Quality of performance also includes store atmosphere, service and orderliness.
More importantly, the factor scope of offers/convenience extracts another basic dimension of competitive
differentiation advantage for retailers. To distinguish
oneself from the competition, a wide range of goods and
services might serve just as well as the merchandise
quality.
Also, with price being a separate factor, it becomes clear
that quality advantages and cost advantages are not the
opposite ends of one dimension as Porters assumption
would suggest. We nd quality and cost leadership to be
independent factors, whose mutual achievement is not
contradictory or characterised by a trade off.

All in all, this factor structure can be seen as evidence, from

a consumer perspective, that the bipolar pattern of
competitive advantage as postulated by Porter (1985) is

ARTICLE IN PRESS

0.000

0.000

1.23
0.95
Globus, Real, Aldi,
Lidl, Plus
0.37
Aldi, Edeka,
Karstadt
0.61
Globus, Real,
Edeka, Karstadt
0.93
Globus, Real, Plus,
Edeka, Karstadt
0.17
Aldi, Edeka,
Karstadt
Factor 3: price level
Difference sign. at
p 0.05 (Scheffe) to

0.07
Aldi, Lidl, Edeka,
Karstadt

Globus, Real, Aldi,

Plus, Karstadt
Globus, Real,
Edeka, Karstadt
Globus, Real,
Karstadt
Aldi, Lidl, Plus,
Edeka
Aldi, Lidl, Plus,
Edeka

Globus, Real,
Edeka, Karstadt

0.43
0.82
0.68
0.80
0.80
1.22

Factor 2: scope of offers/

convenience
Difference sign. at
p 0.05 (Scheffe) to

Real, Aldi, Lidl,

Plus

Globus, Edeka,
Karstadt

Globus, Plus,
Karstadt

Globus, Plus,
Karstadt

Globus, Aldi, Lidl,

Edeka, Karstadt

Real, Plus

0.74

111.1

183.1

35.8
0.72
0.28
0.87
0.15
0.09
0.47

F-ratio
Real

Aldi

Lidl

Plus

Edeka

Karstadt
Globus

0.59

Factor 1: quality of
performance
Difference sign. at
p 0.05 (Scheffe) to

This explorative grouping should demonstrate that the

classical categorisation of store formats only reects one
facet of customer perception of food retail stores. Different
central dimensions of consumer perception might be
neglected and store formats and the separation into

ANOVA

Factor values

Considering price level and scope of offers/convenience

(left diagram in Fig. 2), the groups follow the usual store
formats. The hypermarkets (Globus and Real) are close
to each other in consumer perception, and so too are the
discounters (Aldi, Lidl, Plus). The department store
grocery department (Karstadt) and the supermarket
(Edeka) are distinct from those two groups.
If quality of performance and price level are taken as
grouping dimensions (middle diagram), no clear clusters
emerge. However, different positions seem to be taken
by the relatively expensive retailers (supermarket and
grocery department), which are perceived to offer high
price/high quality and the discounters and hypermarkets
on the other hand (with relatively large intra-heterogeneity).
A third clustering results from the dimensions
quality of performance and scope of offer/convenience (right diagram). Here the different store formats
are mixed in different groups. The two hard discounters (Aldi and Lidl) are in the same cluster as Edeka,
showing the danger that discounters pose to supermarkets, since discounters are perceived to be similar in
two of the three relevant perceptual dimensions. The
hypermarket Globus is in the same cluster as the grocery
department store, demonstrating the high quality
perception of this hypermarket. The second hypermarket (real) and the discounter Plus, are distinct from
those two groups due to their lower perceived quality of
performance.

Table 6
Perception of store attributes (factor values) for seven German retailers

2-tail sign.

probably too simplistic and cost and differentiation

advantages are not mutually exclusive in retailing. The
three-dimensional structure we have found for food
retailing clearly contradicts Porters (1985) assumption of
two generic competitive strategies, if the central dimensions
of perception from a consumer perspective are accepted as
reecting potential competitive advantages.
Some further results which are based on the extracted
factors should also be discussed. Table 6 and Fig. 2 show
the discriminative power of the derived perception factors
by displaying the factor values for the seven retailers used
as stimuli in the consumer survey. Table 6 demonstrates
that the factor values of all three factors are signicantly
heterogeneous for the seven retailers, i.e. the factors are
suitable to discriminate between the seven retailers from
the consumer perspective.
Fig. 2 shows that consumers perceive the retailers
belonging to different groups (the clustering was,
due to the low number of objects, carried out only by
inspecting their position in the diagrams and the results of
the post-hoc tests shown in Table 6):

0.000

D. Morschett et al. / Journal of Retailing and Consumer Services 13 (2006) 275287

Perception factors
(n 560)

284

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D. Morschett et al. / Journal of Retailing and Consumer Services 13 (2006) 275287

low

high

high
-2

-2

Globus
Real
Karstadt

Edeka

Aldi

Lidl

2
-2

-1

low

2
high

Price Level

low

-1

Karstadt
Globus
Edeka

Aldi

Lidl
Real
Plus

Plus

-1

Quality of Perf.

-1

Quality of Perf.

Scope of Offers/Conv.

high
-2

285

2
-2

-1

low

low

high

Karstadt

Globus

Edeka
Aldi

Lidl
Real
Plus

2
2

-1

low

Price Level

-2
high

Scope of Offers/Conv.

Fig. 2. Positioning of seven German retailers along the central dimensions of store perception.

intra- and inter-format competition might become superuous when seen from the customer perspective. Obviously, the clustering procedure used here has
substantial methodological shortcomings and is used only
to indicate a possible direction for future research in which
more stores would have to be included and a cluster
analysis can be undertaken, which is based on the three
dimensions simultaneously.
5. Discussion and conclusion
One central research issue was to identify distinguishable
competitive strategies in food retailing. There is a paucity
of detailed and large-scale empirical research and the
results obtained in earlier research are, in any event,
ambiguous. One objective of this investigation was to
derive basic types of competitive strategy for a specic
retail sector and to do this from two perspectives.
Firstly, whether there are basic dimensions of competitive advantage was tested from a retail company perspective. Reducing a large item battery of potential advantages
by means of factor analysis, three factors were extracted
and discussed in detail. It was shown that three dimensions
of competitive advantages can be derived and that Porters
dichotomy of quality and cost leadership is not conrmed
by the empirical data in the company survey. Quality and
cost/price leadership do not contradict each other, but are
independent dimensions of competitive advantage. In
addition, a third dimension, convenience, was shown to
be a potential basic competitive advantage for food
retailers.
From the consumer perspective, different food retail
store perception items were aggregated by factor analysis.
Again, the analysis resulted in three factors, which did not
support Porters hypothesis of only one dimension of
strategic strength. As in the company perspective, from the
consumer perspective, price advantages and quality advantages are not diametrically opposed, but separate

Table 7
Basic types of competitive strategies from the company perspective and
central dimensions of consumer perception of retail stores
Company perspective

Consumer perspective

Experience/price
Price leadership (), cost leadership ()
Best store atmosphere
Best customer relationship management
Best advertising

Price level
Price

Quality of core functions

Quality leadership
Service leadership
Process leadership

Quality of performance
Quality of assortment
Service
Processes
Store design

Convenience

Scope of offers/
convenience
Variety of assortment,
one-stop shopping

Best variety of assortment ()

Convenience leadership
() indicates a negative loading on the factor.

factors (only slightly negatively correlated). Convenience

is also a central dimension of retail store perceptions of
consumers.
Table 7 compares the results of both empirical studies.
Considering the basic types of competitive strategies and
the central dimensions of consumer perception of retail
stores, the results are very similar and in the core ndings,
even parallel. In each perspective, three dimensions were
extracted, (1) a price-orientated dimension, (2) a qualityorientated dimension, and (3) a convenience-orientated
dimension. None of the conceptual papers on competitive
strategies in retailing (e.g. Walters and Knee, 1989;
Wortzel, 1987) have proposed these exact dimensions, but
the nding resembles the results of an early store image
analysis. Doyle and Fenwick (1974/75) used multidimensional scaling to extract quality, selection and price as

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D. Morschett et al. / Journal of Retailing and Consumer Services 13 (2006) 275287

central dimensions of grocery store perception. The strong

focus on convenience in our survey (which is related to
selection) probably only developed later.
On the one hand, this supports the enduring high
relevance of price and quality as central competitive
advantages (while quality now has to be seen as comprehensive and not only assortment-based) and, on the other
hand, the high signicance of convenience (i.e. to complete
shopping comfortably and efciently, either through small
convenience stores or through one-stop shopping) as a
third basic type of competitive advantage in food retailing.
There are slight differences between the managers
perspective and the consumer perspective only at the level
of attributing specic items to the dimensions. While, from
the consumer perspective, the experiential aspects of
marketing (here: store design) are closely connected to
the evaluation of the quality of performance in general,
managers associate them with the price/cost dimension.6
Obviously, the consumersas previous research has also
shown (Kahn and McAlister, 1997; Morschett, 2000;
Ailawadi and Keller, 2004)use indicators such as store
design to evaluate other facets of quality. A positive and
emotionally appealing store atmosphere might therefore
bias consumer interpretations of other quality attributes.
From the company perspective, however, a dichotomy
between the experiential marketing instruments and cost/
price leadership seems to be based on the (realistic)
assumption that store atmosphere and other experiential
instruments cannot be easily achieved without sacricing
some cost advantages.
Besides these differences, food retail companies seem to
develop their competitive strategies along the same
dimensions that consumers use to evaluate the retailer.
Thus, the cost-quality-convenience-framework obviously
can adequately serve to describe the development of
competitive strategies in food retailing as well as to
evaluate the positioning success from the consumer
perspective.
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