Situational Analysis of Convenience Store

2344 words (9 pages) Business Assignment

23rd Sep 2020 Business Assignment Reference this

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Buc-ee’s is a privately held convenience store chain headquartered in Lake Jackson, Texas with locations throughout the Central region, North region and Gulf Coast of Texas, a few locations in Alabama and planned locations in Florida, Georgia, Tennessee, and the Carolinas (Denham, H., 2019). In the following paper, a situational analysis of Buc-ee’s will be illustrated via the exploration of a general environmental analysis, industry analysis, competitor analysis, and an internal analysis of its human resources and company dynamics. Together, it is hoped that a relatively comprehensive picture of Buc-ee’s and the viability of its various competitive and expansion options will emerge. The firm’s external environment (general environmental, industry, and competitor analyses) will be discussed first, followed by an examination of the firm’s internal environment.

Environmental Analysis

In order to analyze how a company such as Buc-ee’s can survive and potentially grow, one must first analyze the industry of which it is a part and examine the environmental elements which may influence the company’s development and fruition. As far as external, environmental elements are concerned, several factors are of interest. First, it is worth noting that the success of Buc-ee's (and convenience stores along travel corridors in general) is heavily influenced by the degree to which consumers vacation and otherwise engage in long distance road transportation patterns. This, in turn, is influenced by the state of the national economy, unemployment levels, the price of gasoline and other broad economic patterns that influence transportation patterns of this nature---none of which Buc-ee’s can directly control. The recent military activity in the Middle East, for example, caused oil prices (and, consequently, prices at the gas pumps) to rise, and consequent sanctions against Iran are likely to have the same effect. The recession in the 2009 timeframe caused many people to stop vacationing altogether as jobs were lost, the real estate market collapsed, and household disposable income decreased (Borko, S., 2018). Thus, the continuing health of the economy is important to the continuing growth and expansion of Buc-ee’s, which caters to the upscale road traveler. Indeed, Buc-ee’s larger travel stores do not discount gas, do not allow trucks in the gas lanes, and provide other extras for the travelers who desire a cleaner, more comfortable travel stop experience. These convenience and comfort factors, however, become less and less important to travelers as the economy drives gas prices higher and higher; in this circumstance, people travel a lot less, and when they do, they seek gas prices that are lower and easier to absorb under constrained economic conditions.

While we have recently been undergoing a period of economic expansion, Buc-ee’s should have a plan in place if and when a recession should occur; for if this should happen, people will likely travel less in general, and expect lower gasoline prices when they do. Indeed, some studies and industry measures have indicated recent softening in the travel industry (Reid, C., 2019). Under such conditions, Buc-ee’s should be flexible enough to consider other options in its business model in order to allow for continuing expansion and growth.

 Demographic factors also influence the nature of environmental elements that can affect the health and continuing growth of a company. Globally as well as in the United States, the population is aging. While this may initially represent a surge in the road travelers as people retire and enjoy their leisure time, this surge will wane as people age and become less willing or unable to drive long distances. Buc-ee’s must, then, find ways to appeal to younger audiences as well as the older ones who have more time in their schedules to travel. One way in which it has tried to differentiate itself in this regard is by having broad product selections. Some Buc-ee’s locations, for example, devote an entire wall to different Icee flavors, some have seasoned nuts roasted on site, and others have a wide variety of beef jerky selections.

Another environmental element that has the potential to adversely affect Buc-ee’s is the advancement of electric cars and other non-fossil fuel vehicles, which have the potential to reduce or even eliminate the need for gasoline. As long as Buc-ee’s can provide other benefits to stopping at their stations, including high quality homemade food, super clean restrooms, a place to re-charge batteries, and other benefits, this threat to its survival and growth can be averted, however. Travelers will always need a clean, pleasant place to stop.

Industry Analysis

The purpose of an industry analysis is to determine how a particular company compares in focus, capability, and market performance when compared with other firms in the same industry. While general trends are important to examine in this regard, accepted industry ratios are also part of an analysis of this nature, in order to compare the performance of a particular company against the performance of its membership industry at large.

In general, in recent years, the convenience store sector has been doing modestly well in terms of inside store sales, and very well in terms of gasoline sales, due to increased fuel prices and, presumably, a renewed interest in vacationing given then re-established health of the economy and consequent increase in disposable income. Across the industry, for example, inside store sales grew 2.2% in 2018, and fuel sales grew 13.2% (Lindenberg, G., 2018). In 2019, the South and West in particular (where Buc-ee’s is located) have held on to extremely strong convenience store sales in all categories.

As mentioned above, however, there has been recent softening in some of the indices measuring consumer travel demand and performance (Reid, C., 2019). Some indices also indicate a strong likelihood of a recession and consequent impact on travel. This, economic slowdown, however, is unlikely to influence the travel patterns of the affluent and senior travelers, who have more resources to draw from in such circumstances---at least initially. Since Buc-ee’s, then, caters to the upscale traveler, the consequent effects of an economic and travel slowdown should be initially delayed in its effects.

Buc-ee’s could respond to the effects of an economic slowdown by once again allowing semis to use their pumps, lowering the price of gasoline, and offering more budget-oriented items inside the store. By doing so, however, Buc-ee’s risks its brand identification as the kind of place where those extra frills and perks can be counted on.

Competitor Analysis

In a competitor analysis, a company attempts to understand the degree to which it has true competitors in the market, by examining market commonality and resource similarity (Hitt, M. A., Ireland, R. D., & Hoskisson, R. E., 2018). Thus, in this case, market commonality refers to the degree to which markets jointly involve Buc-ee’s and competitor firms. To examine the nature of this dynamic, Buc-ee’s must determine which similar firms participate in its markets, in order to best determine how to best differentiate itself from its competitors. As a part of this differentiation process, Buc-ee’s must also examine the degree to which its intra-market competitors have similar resources and capabilities.

As indicated previously, Buc-ee’s now operates convenience stores in Texas, Florida, and Alabama. An examination of several resources indicates that Buc-ee’s main competitors in this geographical space include 7-Eleven, Circle K and a variety of other smaller chains.

In order to differentiate themselves from these other convenience stores, Buc-ee’s has focused on creating a more upscale, clean, and unique experience for travelers. By comparison, for example, Buc-ee’s stores are famous for their homemade food, extra-clean restrooms, and specialized merchandise.  Some of their stores (i.e., their travel stores) are also comparatively larger in size, with more gas lanes; they also do not allow semis at the gas pumps. Company growth indicates that these differentiation efforts have been successful and have created a strong positive brand for Buc-ee’s. Indeed, they have been so successful in their efforts that many stores have attempted to take advantage of the brand and try and make it or other unique elements of the Buc-ee’s experience their own (Lindenberg, G., 2018). Though none have been successful in their efforts, due to threatened or actual litigation on the part of Buc-ee’s, it does speak to the brand’s success in creating an established, positive name for themselves in a market that is already saturated with stores of a similar nature.

Internal Analysis

After examining a variety of sources, it appears that Buc-ee’s has a loyal set of employees who are dedicated to the company’s mission and overall goals. While the convenience industry is a challenging one in terms of obtaining and retaining high-quality and loyal employees, Buc-ee’s attempts to combat this trend by offering higher than average wages, a good benefits program, scheduling flexibility, and opportunities for internal advancement. Several reviews on Glassdoor and Niche.com, however, have referred to the fact that many Buc-ee’s locations only allow extremely brief breaks for lunch, even with employees who are working long shifts. While this may work in the short run, in the long run, it will work against the goals of Buc-ee’s management, since it is harder for an overworked and taxed employee to remain pleasant to clientele and continually deliver top-notch customer service. Several employees, however, also mentioned the higher pay, scheduling flexibility, and opportunities to move up if desired.

An analysis of Buc-ee’s cost position and competitive viability occurred in earlier sections of this paper. However, in sum, Buc-ee’s has been able to retain a higher price point for its gasoline and other goods because of its other salient characteristics which enable it to stand out from its peers: high quality homemade goods, specialty foods, ultra-clean restrooms, and other features that make Buc-ee’s worth the price.

Summary

Buc-ee’s has been able to establish itself as an outstanding convenience store with a unique personality in a landscape that is fraught with other brand names that have far greater name recognition and national and regional prominence. To attain this type of brand recognition and consumer loyalty in a market that is already saturated with options at lower cost speaks to the high level of marketing and product development acumen at the company. It is a reminder that even in a highly competitive landscape, there is always room for competitors to find fresh, novel and highly valued ways to appeal to customers.

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