The Central Business District of Melbourne - Research Paper Example

INTERNATIONAL STRATEGIC MANAGEMENT Table of Contents Introduction 3 Type of Stores in CBD 4 Porter’s Five Factor Model 6 PEST Analysis 10 SWOT Analysis 13 Industry Life Cycle 15 Strategic Plan 16 Recommendations 17 Conclusions 19 References 20 Bibliography 22 Introduction The number of Asians at Australia is on the rise. Citizens from various Asian countries like Japan, Korea, Malaysia, India and China are visiting Australia like never before. The purpose of such visit includes professional commitments, advanced studies as well as tours and travels. As the number of Asians increase, the demand for quality Asian dishes and drinks are also on the increase. Keeping the factors into consideration, the idea of launching a retail food outlet at the Chinatown of the Central Business District of Melbourne seems very positive. The Central Business District is the business hub of the city, Melbourne. It has the top outlets of fashion, lifestyle, eateries as well as the financial institutions. To cater to the needs of the Asian nationals working and visiting CBD, the venue is very apt for the upcoming store. Also, it is expected that the tourists (especially Asians) visiting Melbourne would visit Chinatown. With the offerings of world class food products and the ethnic ambience along with the right blend of human capital and the technological alignments, the proposed shop has very high probability of success. Type of Stores in CBD Central Business District is the prime location of business of the Australian metropolitan city, Melbourne. The place is similar to the city centers of the number of the big metros of the world geography. The difference with city centre and the central business district is that city centers are essentially located at the centre positions geographically where as the central business districts can also be located at the downtown. The area known as the Central Business District of Melbourne is the area between the Latrobe Street and the Victoria Street along with the Central Business District Grid. It is known as the financial and the business hub of the city Melbourne and houses lot many retail, financial, legal, recreational, tourists and the entertainment facilities an most of which operates twenty-four hours a day and seven days a week. The figures state that the population of CBD has grown double in the last eight years (City of Melbourne. n.d.). Central Business District comprises of whole lot of variety of stores. The visitors and consumers have a days worth of shopping pleasure ensured at CBD. The district includes Jurlique, the beauty brand through organic methods. Also, it has the Swish retailers e.g. Calibre. The chocolate shop, Max Brenner Chocolate and the beer outlet, the Three Degrees Bar add glory to the district. The district also home the fashion bigwigs like Christensen Copenhagen, Wayne Cooper and Paablo Nevada (Melbourne Shopping, n.d.). Along with other segments, Central Business Districts has number grocery and food stores with in its vicinity. Beacon Cove Food Store, Wing Cheong Chinatown, North Melbourne Food-way, Great Eastern Grocery Centre are some of the leading names. With the ever increasing customer base of Asians at Melbourne, the grocery cum drinks outlet can be a major success if it can provide foods like buble tea and bamboo shoots for the lovers of Chinese drinks or furufuru shaker and bilk for Japanese. To the non residents of Thailand the outlet can offer coconut cream/milk and gek huey i.e. chrysanthemum juice. (Asian Foods, n.d.). Porter’s Five Factor Model The strategic analysis of the proposed retail outlet can be assessed with the help of Porter’s Five Factor Model. To get more specific view over the subject, the 6th factor can be associated with the five traditional factors. The five factors or the five forces model as described by Porter is discussed as below: 1) Risk of threat of new entrants 2) Risk of threat of substitute products 3) Bargaining power of buyers 4) Bargaining power of suppliers 5) Rivalry among established firms (Research Directory, n.d.). Risk of threat of new entrants – Today the private market operates on the principles of perfect competition. The market is the price maker and the business firms are the price takers. As a result if the industry is booming and is found profitable, new companies are sure to penetrate the segment. The grocery outlet would be having absolute cost advantage over the future entrants as they would operate in the industry for a fairly longer period. To overcome the hazard, the outlet should try to lay control over the different factors of production like labour, material, equipment and management skills. Also, as the outlet would be older than the new entrants, it should be able to leverage itself with low rates of interest for funds. The consumers should be tapped in such a way that if they would like to switch the company and would have wished to opt for any of the new entrants, they could be charged with high switching charge. This can be done by charging them in advance at once for a longer period and could be classified among premium, regular and other classes and can be discounted on their visits. If the consumer switches the brand i.e. the outlet, he would miss out the advantage. Risk of threat of substitute products – The substitute products are said to be those products that pose a threat to the varieties offered by the food outlet but are not the same foods. In this case, the propose food outlet is planning to offer Asian drinks products to cater to the needs of the Asian nationals or the lovers of Asian drinks. The substitute products of such an outlet are those that offers food product but not that of Asian in nature i.e. may be Australian or Continental or European. This is a major threat for the prescribed food outlet because the number of customers of Asian food and drinks in Australia would definitely be less compared to other Asian countries. With such a compressed customer base, again many of the target group customers might get diverted towards the Australian foods as they get inclined with the Australian culture. Bargaining power of buyers – The power of buyers of the company depends upon many factors. If it is found that buyers are concentrated that is there are less number of buyers with considerable market share, buyers are assumed to be powerful. Even if a few numbers of buyers are found to purchase significant amount of quantity, same set of logic applies. Bargaining powers of buyers are presumed to be weak if there exist significant switching costs (it means if products are not standardised i.e. consumers cannot easily switch to other products). Also if there are many buyers, the bargaining power of buyers is less. Bargaining power of suppliers – Like the bargaining powers of the buyers, the five factor model of competitive forces of Porter also stresses upon the bargaining power of the suppliers. Suppliers always would like to dictate the newly established retail outlet. The suppliers would like to get the price as they ask for the inputs. Else, they might reduce the level of raw materials. So, the onus lies on the retail outlet to keep the bargaining power of the suppliers low. To keep the bargaining powers of the suppliers low, the outlet should have a fairly large supplier base. It should not depend on a particular supplier too much. Also, the grocery outlet itself should grow big enough so that the suppliers would have the urge to get associated with the outlet and in the process the power of their bargaining can be kept low. Rivalry among established firms – This is the fifth factor of the Five Forces deciphered by Porter to analyse the external environment. In fact, all the previous four factors contribute toward the fifth factor. It is the rivalry among similar firms within the same industry. More intense the rivalry, it is found that more is the drainage of the profitability. Rivalry among the firms happen because of certain reasons like if many of the firms are of similar size in the industry. Also, it might become an important factor if the economy is facing a slow down. The fact that the customer base of Asian foods is very concentrated at Australia and there are already existing retail outlets providing similar kind of products are going to be a major challenge as those rival firms are not going to forego their hard earned market share. The Sixth Factor – Traditionally the model of Porter had five factors to analyse the external environment of any company. But to have a focused result, the sixth factor can also be incorporated to the analysis. The sixth factor can be termed as the complimentary goods factor. As the prescribed outlet has a very well defined target base of customers, the shop can also offer them with certain gift items and other theme related goods like those have direct connection with the customers’ ethnicity. The target customers, who are away from home, can be lured to the shop with those items which hold high heritage value at their land. The sixth factor also might include other essential factors for the external environment like that of government. The retail outlet should follow the local laws and should not get into conflict with the local governments. Also, it should be able to add value to the lives of the common citizens of Australia, apart from their target customers and be able to inculcate the Australian culture. In such way, the food outlet can take the benefit of word of mouth of the locals. The outlet, in order to promote themselves, can organize festivals based on the food items of particular Asian nation and can rotate the scheme. PEST Analysis PEST analysis is concerned with the analysis of the external environment of any company. The four factors concerned with the PEST analysis of any company are as follows: 1) Political – The political factor of the analysis is the foremost one. It comprises of the factors like legislation, government policies, pressure groups, government terms and change. 2) Economic – The economic factor comprises of the economy situation in the home country as well as at the global structure. It also includes the interest rate and the exchange rates, specific industry factors and taxation issues and many others. 3) Social – Social factors are concerned with the consumer attitudes, social opinions, ethnic factors, brand loyalty, general perceptions and the ethical issues in broad perspective. 4) Technological – Generally, the technological factor comprises of the recent technological development, potential innovation, improved communication, continuous research and development (PEST Market Tools, n.d.). The analysis of the above mentioned factors with respect to the proposed food outlet is undermined below: Political – Australia like many of other Asian nations was also a colony of the British Empire. It was in the year 1901 that the six states decided to federate and form Australia. Though Australia was under the British regime, the country has a written constitution unlike the British. The six states of the nation follow both the state law as well as the federal law. The government of Australia is quite stable. The government is selected through franchisee at regular intervals. There are four major political parties at Australia namely Australian Labour Party (social democratic party), Liberal Party (party of centre right), National Party of Australia (conservative party that represents rural interests) and the Australian Greens, a left wing and an environmentalist party (DFAT, n.d.). With stable political environment and proper functioning of democracy in place, the retail outlet has no such major threat from the political functionaries. The shop must have the government in its side so that it can take the benefits. Economic – Since 1980s, Australia has changed its economic stance from being regulated, highly protected, bit of like a closed economy to open and internationally competitive and export dependant economy. Today, 72% of the Australian gross domestic product is dependant upon the service sector (Global Edge, n.d.). Australian economy is one of the strongest economies of the world. And with the opening up of it, the barriers of the trade have also diminished. The outlet should have a certain amount of debt capital so that it can take the benefit of tax shield with in the law of the land. The factor that the chosen venue of the business is the central business district also would help the company with economies of scale as it is the most happening centre of the town. Social – Socially, Australia is a very vibrant country with the median age of just above 37 years. People love to hang around together. The fact that the target group of customers is that of students, tourists and professionals from other Asian nations, the importance of social factor have utmost importance. The shop should get itself registered with Australian Retailers’ Association, the body of retailers that has been operating for last 105 years. The sector in Australia employs 1.5 million people and is a $ 292 billion industry (ARA, n.d.). Registering with such an association would help the outlet to get the best of available talents with in the industry and also boost confidence among locals. Technological – The retail outlet should keep no stones unturned to align itself with the latest available technology. The grocery outlet should have continuous research and development in place both in the sectors of drinks as well as customer convenience. The shop might offer Wi-Fi enabled environment so that the busy professionals can enjoy the food as well as work on their assignments. SWOT Analysis The study and the analysis of the internal environment (Five Factor Model of Porter) and the external environment (PEST Analysis) assist to decide and work on the SWOT (Strength, Weakness, Opportunity and Threat) of the food outlet. SWOT is a very helpful technique to understand the scopes and challenges of a small and medium scale business. The strength includes the core competencies, the experience and the unique selling propositions. The weakness deals with the challenges that the outlet faces. The opportunity is described by the benefits and niches that the outlet gets with respect to the industry. The threat talks about the negative trends of the industry and the steps initiated by the competitors (Boje, D. n.d.). It is discussed as below: Strength – The strength of the food outlet should something which can also be termed as its unique selling proposition. The fact that it would cater to a very specific, well defined target group of customers with slightly different type of food products from other food outlets of Melbourne can be referred as its strength. Weakness – The drinks outlet is to offer the consumers with Asian beverages. It should be acknowledged that the consumer base of such Asians is quite less. If the locals do not accept the food products or the shop, it might prove fatal for the outlet. If the outlet plans to export some of the drinks items from the original lands, it might get damaged as drinks are perishable items. Opportunity – Though the population of Asian nationals are less in Australia but the underlying fact remains that it is fast increasing. As the nation of Australia is nearer to most of the Asian countries and also cheaper compared to other first world countries, the popularity of Australia is fast increasing. Also, the location of Central Business District of Melbourne would be the perfect place as the venue of the food outlet as the shop would have the opportunity to cater large number of consumers and enjoy the economies of scale. Threats – The threat of the drinks outlet is the changing nature of the taste and preferences of the customers. Also, it is found that many of the food outlets (like that of Laguna QV, Central Grocery, Mini Mart, Wing Cheong Trading & Co, Great Eastern Food Centre) catering similar kind of drinks products to the same target group of customers already exist in the vicinity of the Melbourne CBD also pose threat to the proposed outlet. Industry Life Cycle The industry life cycle comprises of five stages namely entrepreneurial, growth, maturity, shake-out and the decline. The entrepreneurial stage is the stage of commencement when the firm or the industry decides over the modus-operandi. The strategic decisions like to form joint venture, the formalities of obtaining the license and to comply with other legal factors are sorted in this stage. The next stage is that of the growth stage. The industry can be referred into this stage as the market of the industry goes on increasing and more and more of firms enter into the industry. The Asian grocery industry in Australia is in its growth stage. The ever increasing number of Asians in to the country and the springing up of new food and drinks outlets every now and then, it can be surely said to be into the growth stage. The next stage is that of shake-out stage. Here the industry faces the shakes and the movements of the economy and strive to align themselves with those. The life of the industry is said to have entered into the maturity stage when there is a sustainable market for the players of the industry but the scope of growth of new market is almost nil. It is the stage that comes after the shake-out stage. Once in this stage, it would be prudent for the drinks outlet to diversify into other similar products apart from drinks. Once the maturity stage is over, the declining stage of the industry commences. This stage is marked with stark fall with the industrial market demand. This would place when the demand for the Asian foods fall in the Australian market. But the study suggests there is no such fear in the near future. Even if the nationals from other Asian countries stop visiting Australia, the industry should inculcate the habit of having Asian foods among the local citizens and thereby avoid the decline stage. Yet if the problem of declining market persists, the industry would have no other option but to put its shutter down. Strategic Plan In the recent past, Australia and particularly Melbourne has come up as a major destination of tourism and the advanced studies. The popularity is on rise among the Asian nationals. The idea of launching a food and grocery shop at Melbourne seems to have bright future prospects. And what better position else then the Central Business District of the city! To open the business of grocery shop at the Central Business District of Melbourne, it should get approval from the requisite departments of the government. The shop can ideally be opened as partnership among two-three persons. The management should try to have network with suppliers. To enjoy the privilege of local economies of scale it should also get registered with the local chamber of commerce. The grocery outlet can outweigh the threat of the new entrants by creating brand equity for itself. The drinks it intends to sale must be fresh and proper measures should be taken to keep those free from germs. The retail outlet should strive to keep the bargaining power of buyers at the lower level. To do so, the set up can prioritise on customised foods products. The outlet should also try and increase the number of consumers to lessen the bargaining power of the consumers. To compete with the similar business shops, the grocery food and the drinks outlet should resort to more of advertisements and promotional means. The shop can provide sponsorships to the Asian programmes and functions in Australia. In order to attract more customers, the grocery shop would try to develop core competencies in a few particular drinks at the outset. It should also take the benefit of technology and should provide for easy payment options. At the entrepreneurial stage, the nitty-gritty’s of the management have to be resolved. The compliance with the law and formation of the partnership would be looked into. When in the growth stage, the grocery outlet should strive to expand along the product line (from drinks to other food items) as well as in different geographical locations (in different cities). Next, at the shake out stage, the grocery should try and hold its core competencies. In this stage many competitors might face the burnt and collapse. The drinks outlet should take the advantage if so happens. The maturity stage is said to happen when there is no more rising demand of the product. In such case, the retail outlet should diversify in to other relevant markets like gifts based on Asian heritage and other Asian food products to exist in the market. The last stage is known as the decline stage. In this stage, the demand of the product goes down for one reason or the other. The grocery shop should then bank upon the diversified products and move on from its basic business. Recommendations The decision to open retail food outlet is definitely a feasible idea to access the largely untapped market of Asian food products. The venue of Central Business District is also apt. The upcoming retail outlet is to be the initiative of non-experienced persons, so it would be important to have the best of talents available from the similar industry to have greater access to the functionalities of the outlet. The retail food outlet should emphasise on the quality of the foods it produces. Being a new entrant to the industry, the quality of the foods would matter immensely. The shop must strive to make the ambience of the outlet look ethnic with respect to the heritages of various Asian nations. It would help them to attract the tourists, professionals and other persons from those countries as it would appeal to them with the culture. The human capital should be used wisely and they must have fair idea about the culture of the foreign countries and could be able to greet the target group according to their tradition. This would lead to the development of repeat customers for the food outlet. The food outlet should have well researched schemes of promotion and publicity. The activities of doing so should ideally cross the geographical barriers of Australia and reach to the land of the target customers. The retail food outlet should also have tie-ups with the large hotel chains and with tour and travel operators. As the nationals from many Asian countries visit Australia for touring, they can be brought to the outlet in between such tours which can be mutually beneficial. The visitors would feel home, away from their land, at the outlet and there could be sharing of profit in between the tour operator or the hotel chain and the outlet. In addition to all these steps, the outlet should also provide due importance to the technological innovation. For the purpose, it can have inter-net enabled environment. Also, it should accept debit and credit cards of many financial institutions of Asian countries so that the customers do not face any problem. Conclusions The retail food outlet has a very bright future at the Central Business District of Melbourne. The analysis of external environment shows that the proposed outlet would be part of a booming industry. Other thing remaining the same, if the outlet can provide quality food in comparatively cheaper prices, it can do wonders. The outlet should also diversify into other related sectors like gift items based on the heritage of other nations. The food outlet can think of optimising its venue being the most happening place of the city of Melbourne, the Central Business District. The place of the outlet ensures that it is regularly visited by people from various backgrounds. The retail outlet, with proper selection of the right candidate at the right time and with proper promotional measures can definitely expect to make it big in the near future. References ARA, No Date. About Us. Australian Retailers Association. [Online]. 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