INTRODUCTION TO METRO

METRO Cash & Carry – this name stands for one of the great success stories in modern commerce. The unique wholesale business-to-business model of METRO Cash & Carry is focused only towards professional customers such as hotels, restaurant, and caterers as well as small and mid-sized retailers. METRO Cash & Carry offers this target group a greater efficiency than the multilayered supply chain thus helping them to improve their business: By offering them a one-stop solution for their purchases, by helping them to improve their assortment, by offering them high quality products at reasonable and transparent prices and by offering them a consistent supply source.

What does METRO offer?

METRO Cash & Carry is a reliable partner for more than 20 million professional customers worldwide. It gives them a clear competitive advantage in their own markets. Professionals can purchase everything they need to run their business: A restaurant owner, for example, can buy food like fish or vegetables as well as kitchen equipment and office supplies.

METRO Cash & Carry offers an exceptionally wide range of high-quality products under one roof. Depending on the size and type of wholesale center, the assortment includes up to 20,000 items in the food range and 30,000 items in the nonfood sector. As the name implies, METRO Cash & Carry customers select their own items and take them with them to their restaurants and shops. With this unique business-to-business concept, the company has grown to become a leading international player in self-service wholesale.

Company HistoryMETRO Cash & Carry is a leading international company in self-service wholesale and operates more than 600 outlets in 29 countries. With over 100,000 employees worldwide, the company achieved sales of € 31.7 billion in 2007. By generating almost 50 percent of the total sales, METRO Cash & Carry is the top-selling sales brand of the METRO Group. Assortment and service of METRO Cash & Carry’s unique business-to-business model are targeted only towards professional customers such as hotels and restaurants as well as small and mid-sized retailers or institutions. The company offers these special groups a high level of assortment competency both in food and nonfood as well as attractive wholesale prices. An efficient and internationally conferrable concept ensures success in entering new markets.

METRO Cash & Carry – A story of expansion

The self-service wholesale trade came to Europe in the year 1964 when METRO SB-Großmärkte GmbH & Co. KG was founded in Mülheim/Ruhr. The initiator and driving force behind this concept was Prof. Dr. Otto Beisheim. In 1967 the Franz Haniel & Cie. company became a partner in the new venture. Prof. Dr. Otto Beisheim, the Franz Haniel & Cie. GmbH company and the Schmidt-Ruthenbeck family then each held one third of the shares in the German METRO activities and thus constituted the “original group of partners”.

As from the year 1968 the concept was extended beyond the German borders, with the Dutch company Steenkolen Handelsvereeniging N.V. (SHV) as a new partner. The two sides jointly established Makro Zelfbedienigsgroothandel C.V. with the original group of partners holding 40 percent of the shares in this activity. Within the framework of a first major expansion drive METRO/MAKRO Cash & Carry entered the market in nine Western European countries by 1972. In the nineties, METRO Cash & Carry expanded its activities to Portugal, Turkey, Morocco and to Eastern Europe.

In July 1996 METRO Cash & Carry merged with Kaufhof Holding AG and Asko Deutsche Kaufhaus AG and the METRO Group was founded. That year also saw the group’s going public. The Metro stock is the only retail stock listed in the German blue-chip index “DAX 30“.

The first step into Asia was taken when METRO Cash & Carry moved into China in 1996. Today the company is present in 5 Asian countries: China, India, Japan, Pakistan and Vietnam. The METRO Cash & Carry business is going to be further internationalized and expanded with the focus on Eastern Europe and Asia. Already by today, more than 80 percent of the staff is working outside of Germany. In many countries the company is on of the major employers.

METRO in Pakistan

METRO Cash & Carry announced its operations in Pakistan in January 2006. Since then, it has established itself as a potential market leader in wholesale.Under the supervision of Managing Director Mr. Giovanni Soranzo, METRO Cash & Carry Pakistan has opened its first store in the city of Lahore in October 2007.The company’s country head office is also based in Lahore and currently employs over 400 people in two offices..METRO Cash & Carry’s commitment to Pakistan is also echoed in its donations to the President’s Earthquake Relief Fund.– The company donated €100 000 in January 2006 towards President's Earthquake Relief Fund. It also has plans to fund development activities in the country in association with the German

Investment and Development Company.  Such activities have successfully been carried out in other countries. A recent example in Vietnam and a similar program for fishermen and sheep farmers in India where more than 900 fishing crew and 18,500 sheep farmers were trained about the best practices.

METRO Cash & Carry plans to invest in Pakistan on a sustained and reliable basis in the years to come. The company’s unique business model offers potential for a decrease in market prices and promotion of local goods and personnel.

10 METRO Cash & Carry principles

The success of the company is based on the following principles: • Focus on professional customers  • One-stop shopping  • Efficient store concept designed for professional needs  • Advanced customer service  • Enhanced customers’ competitiveness • Excellence in supply chain and quality management • Strengthening of local suppliers • Development of national infrastructures • Career opportunities • Internationally transferable concept

SERVICE & QUALITY

The goal of METRO is to efficiently handle thousands of orders, shipments and deliveries and ensure that goods arrive at the right place at the right time.Supply Chain Management plays an important role in our high-performance logistics system and enhances our capacity to supply food and non-food products on a daily basis with consistent high quality, diversity and freshness.

 The distribution of products that are temperature-sensitive is a huge challenge. Quality and freshness can only be assured if the goods are constantly kept under a temperature controlled environment, right from the time they leave the producer till they reach the customer.At METRO Cash & Carry Pakistan, the warehousing and transport for frozen and chilled products is ensured at a constant temperature (in minus or plus degrees), according to product requirement. Temperature monitoring is done manually and by computerized mechanisms, both during transportation truck and in cold storage.A) Fruits & Vegetables:For the first time in Pakistan, METRO Cash & Carry offers a platform for Fruit & Vegetables equipped with modern accessories for product

processing. This ensures hygienic, temperature-controlled, clean and packed fruit and vegetables as per international standards of Hazard Analysis of Critical Control Points (HACCP).B) Live Fish:METRO Cash & Carry Pakistan offers live fish at Metro centers. Now you can choose live fish of your choice and enjoy the taste of freshness.

Food

1. Fresh

The Fresh department comprises fresh meat, fish, fruit and vegetables and dairy section.

Special care is taken in handling, storage and maintaining freshness of products throughout their shelf life.

Freshness of food products is checked on a daily basis to make sure that no product is left on the shelf that does not fulfill standard requirements of quality and freshness.

2.DryFood

The Dry Food department comprises edible grocery, canned goods, beverages, sweets, confectionery, as well as detergents and toiletries.

Special attention is given to the storage of high quality grocery items such as rice, pulses, lentils, spices, etc., to maintain their colour, texture, and aroma. A separate area has been designated for spices and nuts for the ease and comfort of customers. They have their Halal certificate for verification.

3.Hygiene&Sanitation

Metro is extra cautious about the hygiene and sanitation conditions to be ensured by theirr suppliers especially for fresh food items.

Not only that we ask our suppliers to follow the quality standards, we also apply strict hygiene and sanitation requirements in the day-to-day operations of our stores.

We only buy products that are hygienically prepared and properly handled at source by suppliers. We ensure that sanitation measures are a key part of their production and processing procedures.

“Internal Environmental Analysis of Metro”

LAYOUT PLANNING

“Layout planning is determining the best physical arrangement of resources within a facility.”

This definition of layout planning is clearly visible in Metro Store.

As they have proper segmented each and every department and people can freely move between from one place to another and products can easily be located from a far distance.

All products are placed in a systematic manner as there is no wastage of resources.

Landscaping was done professionally

LAYOUT OF DEPARTMENTS

Metro has designed their departments in such a way that all the products of the same kind like fresh food, non-food & dry-food etc.

are grouped together. For the convenience of the customers currently they have 16 departments and they are:

Fruits & Vegetables Spices & Pickles Fish Dairy Meat Grill Bakery Tobacco Beverages Beauty Solutions Office, Media Home Electronics Toiletries, Detergents Edible Grocery Household/Clothing Sports & Seasonal

High volumes of food items generate greater profit and to balance them Detergents are considered a part of Food Department.

This kind of a department layout shows that customers can move between food & non food items easily.

LAYOUT PLANNING IN METRO

The pattern of layout Metro is the same for all Metro Stores over the world. They are following the “Merchandizing Principle” i.e, it is in the form of blocks and is vertical.

We have observed two types of layouts in Metro which are the:

Process Layout Fixed-Position Layout

PROCESS LAYOUT

In this kind of layout, one has to group similar resources together

Any new brand introduced in the market is placed in front of the existing Brand, based on their unique needs.

Any pair of work centers that has a large number of goods moved between them should be placed in close proximity to each other (like food items and non food items).

Their main challenge is to arrange resources to maximize efficiency and minimize the waste of movement

1. Lower capital intensity & automation2. Higher labor intensity(Shelf placement)3. Resources have greater flexibility4. Processing rates are slower(everything is manual)5. Material handling costs are higher(They have to replace the

defective one)6. Scheduling resources & work flow is more complex(More than

300 Employees)7. Space requirements are higher(Due to inventory but in vertical

way)

FIXED POSITION LAYOUT

Racks on which products are being placed is not moveable and building is also a fixed layout

The challenge is scheduling different work crews and jobs and managing the project.

TYPES OF STORES

Classic Junior Echo

CLASSICThis kind of layout is above 10,000 sqm

JUNIORThis kind of layout is equal to 10,000 sqm i.e 120 kanals

ECHOThis layout is between 5000-6000 sqm

TYPE OF LAYOUT BEING USED IN PAKISTAN

Metro Pakistan is using the “junior” Layout

Advantages of Proper Layout Planning

Proper Layout is it self Marketing of products. Critical in building good working relationships Increasing the flow of information Improving communication

Promoting the visibility of key items in retail business Contributing to customer satisfaction Customer convenience

WAREHOUSE LAYOUT

Metro has its warehouse at Sharakpur which is known as the “Metro Platform”

They use the “Proactive approach” Metro itself is a of kind ware house To locate the inventory & order placement, Metro has a

software known as GMS

Suppliers

Metro is outsourcing this service by hiring “Logistic Company” for transportation services

Metro has its own suppliers who supply directly to its warehouse from all over the world & local suppliers supply both to Metro & its warehouse

Customers

Metro is catering not only for the customers of Lahore but also outside areas like Gujranwala, Sheikupura & Sargodha

Labor

In metro, most of the work is being done by the labor. So it is important for Metro to choose such a location in which labor supply is adequate

Site considerations

Metro also considers the following factors while choosing the location, they have local zoning & taxes, access to utilities, utility cost, soil conditions, climate, adequate drainage, approach roads, parking and etc.

METRO DEFINING QUALITY

Value for price paidPeople who purchase products from Metro feel that they charge the right amount for goods that they usually buy.

Support servicesMetro gives warranty depending on the type of product purchased. Example it gives warranty on its electronics.

Psychological It has a good ambience, staff is friendly & responsive.

“Continuous Improvement & Metro”

Proper shelf placement & training of staff Metro trains its staff by two process:

o Processo System

It has its own in-house training organization called HOT (House of Training)

They also send their staff abroad for proper training They use “train the trainer” approach

Team Approach

They have a team of more than 300 employees working as a team

Quality Awards and Standards

Metro maintains their quality by the standard of ISO 9000

“COMPARATIVE ANALYSIS Regarding competition”

There is one major competitor in pakistan’s whole sale industry and that is Makro.

Both use News papers, internet, pamphlets and book lets because it contains detailed introduction about the business and its products.

Both Metro and Makro are in a wholesale business

Both Spent not much on Marketing campaigns

Metro believes in the concept of insource while Makro outsources its food production

They both have teams for customer service

Metro has trained staff while Makro has just hired sales person

Metro has proper shelf placement of products whereas Makro does not

Metro follows the same layout all over the world and Makro does not

Metro places its inventory in its store and warehouse, while Makro places inventory only in store it does not has any warehouse

Metro hire logistics for transportation

Metro focus on proper shelf placement of products while Makro has not practicing this.

SWOT Analysis of Metro

Opportunities:1. Changing trend of shopping, people prefer to go the place where they

can find maximum variety under one roof.2. Metro is planning to open new stores at different locations.3. Company name itself is an opportunity as “Metro” itself is a very

popular name and they can expand business with any company they like to.

4. People are coming more towards hygienic food.

Threats:1. Launch of Wal-Mart in Pakistan.2. Inflation3. Government instability4. Terrorism

Strength:1. Largest whole seller platform.2. They are selling few products with their own brand name.3. Metro don’t spend money on advertisements through electronic

media.4. Metro is operating their business according to the buying pattern of

the customers.5. Metro Values its Employees and Customers.6. Defined format adapted to local market needs

7. Efficient and low-cost operations

Weakness1. Not providing goods on credit bases.2. Location of the store is quite far away.3. Only deals in wholesales.4. Relatively poor security check and balance on few items.5. High priced imported items.

4 P’s at Metro

Product:

They give more attention on Fast moving consumer goods but they don’t give service after sale because they follow such standards which cause 0.2 % error occurrence ratio regarding defected products

Price:

if we observe the prices of Metro then we come to know that they are providing unique prices as compare to their competition ,they give quantity discount to their customer most of the time and which is their core competency with respect to Industry of whole sellers.

Promotion:when we observe their Promotion strategy then we see that most of the time they promote their name with the following promotions.

News Papers Magazines Bill board Pamphlets Catalogs

Place or Placement:

When metro came in Pakistan it observe that Makro its major competitor was operating in that area where people face so much traffic problem so they chose the place in Lahore near Thokar Niaz baig road which was less traffic area customer have motorway (highway) to reach here even from other cities. And they place some products to customers at their desired place but it requires specific amount and distance regarding shopping.

Tactical issues & queues

Metro faces many tactical issues because they have to change their inventory after every 14 days on Thursdays. They need very active workforce which shifts inventory from the top into the shelf space for this. On the cash counter they face problem of queues.

Positioning or segmentation Issue

Metro position it self as a wholesaler brand in Pakistan but people who don’t have retail stores they also come here and do shopping ,according to our analysis and their advertisement the target only businesses and they should position their brand also for ordinary customers who use products in their homes.

Competition’s Prices issues

If we analyze the prices of makro and other whole sale markets then we can see that metro prices are almost less than all so in order to maintain prices metro face problem during setting customer prices because customer select those whole sale markets who offer maximum discounts on quantity and transportation.

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