The Grocery Market in Australia - Case Study Example

Name: Professor: Subject: Date: Introduction Australia is among the world leaders in the grocery market that is concentrated (Schubert et al. 3). Both Coles and Woolworths have had the commanding power in terms of supermarket sales of 80% of all petrol retailers. Moreover, the two supermarkets dominate 60% of retail of alcohol and 40% of Australia's retail. Woolworth supermarket is the largest chain of supermarkets across Australia, operating 872 chain stores in Australia (Sagi et al. 101). In order to provide superior services, value, range, and convenience, the supermarket has employed 111,000 staffs in distribution centers, stores, and support offices. The supermarket, growers, as well as farmers work hand in hand. This aims at ensuring that customers are getting products that are of high quality (Kalling, Thomas, 35). The percentages of the fresh meat and the fresh vegetables and fruits that the supermarket sources directly from the farmers are 100% and 96% respectively. Aldi supermarket operates over 215 across the eastern coast of Australia. Aldi owns majority of store’s brands. About 80% of products found in Aldi stores are Australian made. There is criticism of Aldi's parent company in Germany regarding sweatshop labor use, exploitation of workers and concerns over supply of palm oil. Investigate and analyze the industry using Porter's Competitive Forces Model Porter's competitive forces model of analysis is a process used to analyze competition levels within a business and industry development of the strategy (Sagi et al. 101). Aldi supermarket is a Germany company is a company that is famous for offering superior products at low prices. The company joined the market of Australia in the year 2001, and by the year 2004, it achieved 2.5% share of the market. Though there is balancing of both threats and opportunities to an extent, the analysis of the industry demonstrates that the grocery industries that are existing is becoming less profitable. This is because there is intensified competition among market shareholders, and the customers' bargaining power has intensified. Every firm has adopted low cost and high-quality strategy. So far, Woolworth as well as Cole supermarket have captured over two third of the share of the market (Schubert et al. 23). The area of operation of Aldi supermarket is grocery. As the population increases, there is likely increase in demand as the future draws. Apart from that, the government of Australia is encouraging innovations and businesses to Australian market and repeatedly looks towards increasing the level of competition. By June 2004, the turnover of the retail reached $189 billion (Schubert et al. 57). The growth per year was 8%. This would attract new competitors. The porter's competitive forces model of analysis entails: High buyer’s bargaining power The grocery industry attracts almost every individual, as there is relatively high demand for groceries (Schubert et al. 3). Most products of grocery nature are standardized and undifferentiated. Because of this, there is a threat by the buyers if they participate backward into industry of sellers. A failure by a supermarket to gratify a customer means that they are likely to change to another supermarket, as the involved switching cost is not high (Sagi et al. 101). Low supplier’s bargaining power The best way of maintaining a competitive edge amongst the chain stores in Australia is improving products quality and decreasing price. The focus of competitive firms costs reduction. As a result, the suppliers bargaining power is considered as being low. A-part from that, many supermarkets in Australian market has come up with strategies aimed at improving efficiency as well as reducing costs. Woolworths for instance EDLP ("everyday low price") strategy has facilitated cost reduction for most of the national brands, and this is by pushing companies to reduce their prices. High substitute products threat Large-scale shopping malls and supermarkets poses as a threat to retailing stores since the power of bargaining of the supermarket is higher than that of retail shops. The focus of supermarkets is not just national brands, but also home brands for rates that are cheaper as substitutes. High rivalry intensity among competitors The competition in the supermarket industry remains high as each competitor tries provides products that are of good quality at small prices. The potential of new entries into the industry The fresh avenues to maximize profits lure new entrants, consequently, will gain market share that will build up rivalry. Large supermarkets that sprout periodically exhibit such rivalry. Business responses to these forces and strategies to develop competitive advantage (CA) and sustainable competitive advantage (SCA) Consumers have a tendency of buying goods in the supermarket than other retail shops, as the prices are lower (Ward, Robin, and Randall, 37). If the prices of buying are down at levels that are unsustainable, there will be drying up of supplies with time, and as a result, both retail and buying prices rises. There is development of profit owned branding across Australia. Own brands ensure that supermarkets are serious competitors to goods that bear the brand. Many supermarkets claims that their choice brands makes more customers to buy their products. The grocery market in Australia is a leader in the world. Large integrated competitors that offer goods of a wide range as well as services dominate the market (Kalling & Thomas 15). Customers, on their part face increasing competition of the market as well as diversity loss and competition that is true. Many suppliers, smaller competitors, manufacturers, customers as well as other groups have field complaints regarding effective duopoly exhibited by supermarkets. Today, both Coles and Woolworths supermarkets has 80% of Australia’s market share. Various strategies have contributed to this tremendous growth. They include green sites acquisition, anti-competitive covenants development, and independent supermarkets’ creeping acquisition. In addition, the three supermarkets have also increased the number of marketing stores across Australia. In 1990s, Woolworth supermarket for instance, adopted an approach by the name and quote "whole of the stomach", as a way of expressing its market share. The vertical integration of several other services for instance, freight and banking services occurred because of growth of market share of the three supermarkets namely Woolworth, Coles, and Aldi. Several strategies can find use in the supermarket in developing sustainable competitive advantage. One of the strategies is that of saturation. Major supermarkets have the tendency of saturating the local market with several supermarkets/ liquor stores. This aims at ensuring that the competitors are out of the market. Scheme of shopper docket is one of the strategies that the supermarkets develop to dominate the market (Rahman, Hakikur, 27). This means that grocery purchases can earn discounts from an outlet that is specialized for purchases of motor fuel. This strategy aims at ensuring that consumers are willingly purchasing the major supermarkets’ products as well as buy fuel from the service stations specified where there can be claiming of credit. Investigation of ICTs and identify new ICTs that assist businesses gain CA or SCA Today, the rate of competition in business has increased tremendously (Kalling, Thomas, 13). Because of that, strategies of competitiveness are necessary to distinguish the supermarket from other market competitors. In addition, supermarkets sell their products at a much lower prices than retails which are none supermarkets (Schubert et al, 46). Innovation strategy helps companies gain competitive advantage by coming up with unique products in the market. The country witnesses tight competition thus, unless the products are of high quality and prices are competitive, there is high chance that you will not be outstanding. The current environment of business undergoes fast changes due to ICT use (Rahman & Hakikur 33). Recently, competition among supermarkets across the nation of Australia has made many of these chains embrace ICT wholeheartedly. The emergency of internet has brought several changes in business operation. The three supermarkets have websites through which they post the products they are selling. In addition, social media is also present in the supermarket industries as a marketing strategy (Rahman & Hakikur 27). There is growing the number of users around the globe, and many businesses use them to expand the market share and maintain their competitive nature. Globalization impact has coerced supermarkets to adopt ICT (Vietor & Richard, 32). Increasing dynamic competition means that supermarkets too should embrace technology to become global. Many supermarket businesses are becoming agile due to increasing competition. In order to solve this problem, the use of ICT becomes essential, as it is through this that high performance as well as products that are customer oriented occurs (Vietor & Richard, 32). Supermarket managers use ICT to plan, control, and organize as well as administering staffs. The adoption of ICT by various supermarkets will transform the operations of the business by ensuring that there is rapid, efficient, as well as reliable exchange of information. The availability of a large segment of the market in social media can be one of the strategies that the company employs top enhance its services. In addition, the three supermarkets have posted their various products on the internet (Kalling, Thomas. 13). Works cited Kalling, Thomas. "Erp Systems and the Strategic Management Processes That Lead to Competitive Advantage." Information Resources Management Journal. 16.4 (2003): 46-67. Print. Rahman, Hakikur. "Innovation in Learning and Rise of the Internet." (2014). Print. Sagi, John, Elias Carayannis, Subhashish Dasgupta, and Gary Thomas. "Ict and Business in the New Economy." (2008). Print. Schubert, Petra, Susan P. Williams, and Ralf P. Woelfle. "Sustainable Competitive Advantage in E-Commerce and the Role of the Enterprise System." (2013). Print. Vietor, Richard H. K. Contrived Competition: Regulation and Deregulation in America. Cambridge, Mass: Belknap Press of Harvard University Press, 1994. Print. Ward, Robin, and Richard Randall. "Competitive Advantage in the New Business Venture: the Role of Social Networks." The Evaluation of Entrepreneurial Projects and Profiles / Paola Dubini (editor). (n.d.). Print. Read More