Internal (store-) competition - the games strategists play ~ Sounds + Food 'n' Retail

Premise of this post: I'm going to get my camera fixed, for the second time in 3 weeks, at a store called Saturn. It is, as far as I know, the only other German chain focussed on consumer-electronics in the Netherlands, next to Media Markt, which is clearly the no. 1 here and in Germany. Ironically, while they appear as competitors to the consumer, they are owned by the same concern, Metro Group.

Now, I don't know the exact reason behind internal store-competition. The only company I worked for, where something like this was the case, was Sony, who allocated annual budgets to individual departments based on their performance. Reminds me a lot of the way governments are run. Of course, bureaucrats have a job for life.

While I was at Sony, I've never seen so many departments closed and managers fired, and both physical locations where I worked in Germany & the Netherlands, are no longer in existence. To a large part, in my opinion, this explains the troubles that Sony is in today, many of which are a disconnect with its audience and, very likely, caused by disconnects within the gigantic company also. But… that's a story for another day.

The other area where I know about examples of internal competitions, are product-lines. Didn't Steve Jobs once say (paraphrased): "If anyone should take marketshare away from one of our products, it should be Apple." I think that this is a conscious decision of Apple and I briefly touched upon it at Tech IT Easy, in regards to form-factor of the Macbook Air (MBA)—the screen, hard-drive, and CPU, which very much overlap with (read: fit into) other products that Apple sells, and, to me, represent economies of scope and scale to the company. It doesn't matter if the MBA sells or doesn't, what matters is that component costs will go down and innovation will go up, which is good for Apple.

Now, none of this really answers the questions why Saturn and Media Markt occupy the same market-segment. And, I have to confess, I just opened my Retail Marketing book to find the answer, and couldn't find it (the book is apparently not focussed on business strategy much).

Both Media Mark & Saturn offer similar features to customers, which are mostly represented on the chart below:
(Source: IBM white paper - "Deeper Customer Insight," which I wrote about several times before)

Some differences are perhaps that Saturn was most often located within another Metro Group-owned store, called Galeria Kaufhof, though I think they are changing that strategy in Germany, and certainly in the Netherlands, where they are stand-alone. Media Markt, as far as I know, has always been stand-alone. Both facilities are rather large, offer parking-facilities, and are usually located within the city (though in Rotterdam, Media Markt takes a more prominent place). And prices, promotions, and brands, while similar, differ in certain areas.

From this, I think it's safe to conclude that market-saturation is a clear goal of Metro-Group. By giving customers not one, but two large options, with separate deals to be had, at separate locations, etc., it appeals to an implicit customer-demand, that of choice, and takes attention away from other, "lesser," and certainly not Metro Group-owned choices.

Something else that is interesting, is mentioned on both companies' websites. Both chains are very decentralised in their management-structure. Every store acts as a self-sufficient enterprise, co-owned by each director, who, with his/her team, is responsible for how the store is run, and ultimately, how successful it is. Kind of sounds like a franchise.

So, I can only conclude that the internal competition paradigm is very much similar to that of Sony's, to force individual stores to perform better.

I think it's an interesting strategy and clearly Metro-Group is the winner here. How this plays out for individual stores and their share-holding directors is uncertain and clearly depends on the skill-level of store-management and the level of support given by their parent-company.


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