You are required to develop a report proposing a new overseas market which an organisation should enter or alternatively an existing overseas market where significant expansion should be implemented.
Coles is the supermarket retailer company that is serving the Australian customers since 1914. Founder of the company is GJ Coles. It is the second largest supermarket chain in Australia that is serving the customers with range of products with different brands. It is the trusted brand for the Australian customers as it is providing the products to the customers from a very longtime (Buckley, 1989). The aim of its founder and the owner was to serve the customers with the quality products at affordable prices. This is because the company wants to raise the standard of living of the Australian people and wants to see them happy. The company wants to provide all those products to the customers that are generally unaffordable for them at low prices. The company is still running its operations with the same objective. The ownership of the company has transferred to the western Australian public company that is Wesfarmers. When the company shifted its ownership to Wesfarmers, the headquarters of the company has also shifted from Melbourne to Perth. Coles is the organization that serves the customers with offline physical stores as well as with online medium. As of now, Coles is serving only its Australian customers and never thought of going global.
Product mix can be defines as all the lines of the products any company deals with. It involves the product lines, width etc. (Caron Beaton-Wells, 2017). The product range of the company is very vast that includes vegetables, fruits, liquor, meat, seafood, family daily products etc. all these products are provided to the customers in affordable prices so that customers can easily buy the products. The main product lines in which the company deals are groceries, dairy product, baby food products, liquor, bakery products, drink etc. all these range of products describes the product mix of the company.
The supermarket business of the company runs by two brand names that are Coles and BI-LO Brands. Both the brands are linked by the centralized operations team such as finance, administration, marketing etc. the company has used the strategy of converting the BI-LO stores into Coles store, but the results was not as expected. This results in keeping the hold on the conversion. The conversion was made in order to maintain the consistency with respect to the value proposition of the customers (Czinkota, Ronkainen and Moffett, 2011).
Coles serves the market with its liquor products by three store namely, 1st choice liquor, liquor land and Vintage cellars. The numbers of stores operated by the company under the above mentioned names are 39, 621 and 89 respectively.
Overview of operations at Coles
It is the business of the company that deals with fuels with the alliance agreement with Shells. If the customers made the purchase over a certain amount, they received the fuel discounts here at Coles express (Daniels, Radebaugh, Sullivan and Salwan, 2009).
Kmart: Kmart is the retailer store of the company that serves the customers and the market with low prices goods. The range of goods available at these stores is apparels, hardware, leisure goods etc.
Overseas expansion is the term that deals with establishing company’s operation in different country from the home country in order to expand the business. Globalization is the term that is associated with overseas expansion. It is the need of hour for the successful businesses to expansion internationally so that they can compete with the competitive market these days (Davey and Richards, 2013). There can be many reasons for expanding the business to host country. The major reason of going global is to compete with the competitors. This is because the functioning and the strategies of the competitors also affect the functioning of the business. Another reason for going global is to generate more revenue and customers base. As the company expands its business to another country, it enhances the customer base of the company and in turn provides the company with large revenues.
The environmental factors that affect the retail business in Australia can be analyzed by conducting the PORTER’s analysis of Coles in Australia. It provides the information about the industrial factors that affect the functioning of the firm in the country as well as determine the attractiveness of the industry. There are four determinants that are considered in the PORTER’s diamond model of industry analysis. These determinants are factor condition, strategy and rivalry, demand conditions, related and supporting industries. All these factors are discussed below in relation with the supermarket retail industry and Cole’s group of Australia. (Dwivedi, Merrilees, Miller and Herington, 2012).
Factor conditions: Factor conditions can be defined as the condition that is present in the country that can be exploited by the industry. This condition can be availed to facilitate the working and functioning of the company in the industry. The major factor that affects the industry of supermarket in Australia is the challenging financial and economic requirement of the industry (Folsom, Gordon, Spanogle, Fitzgerald and Van Alstine, 2012). It has been identified by that there is so much currency fluctuation in the industry that increase the cost of doing business and thus it is very expensive to perform the business operations in Australia. Another factor I related to saturation of the supermarket industry. Supermarket industry of the country is so much saturated that substitution is very much easy for the people. People are not being loyal to the brands and these results in low switching cost (Keith, 2012).
Need of overseas expansion for a company
Firm’s strategy and rivalry: According to the analysis, it has been identified that most of the companies in Australia are adopting the flat structure. These flat structures of the companies help in operating the business with ease of communication in the processes (Kew and Stredwick, 2005). However, it also reduces the regulation of working environment from the companies. As far as rivalry is concerned, it has been identified that supermarket industry of Australia is facing the duopoly of two firms that is Coles and Woolworths.
The above data suggests that Coles and Woolworth are the leading firms of the supermarket industry in Australia and is highly competitive as there is only 2.5% of difference between the market shares.
Demand conditions: The market demand of supermarket in Australia is high in nature but as case Coles, it has been identified that entry of many of the foreign companies like Aldi is acquiring the market and serving the customers at low prices. This has shifted the interest of Australian customers from Coles to Aldi (Merrilees and Miller, 2001). This is because the company is serving same type of products but at low price.
Related industries: The most related industry for supermarket is the agricultural and manufacturing industries. People these days do not eat wheat but look for bread. So manufacturing industries are directly related to supermarket retail industry and agricultural industry is indirectly related to it (The Sydney Morning Herald, 2017). Both the industries in Australia are supporting the supermarket industry. Coles is doing very well in maintaining relationship with the suppliers.
The above data suggests that suppliers have higher trust in Coles than another company.
There are some other factors that affect the business of the retail industry in Australia. The competitors can be considered as the major environmental factor. Coles face the biggest competition from Woolworths. Woolworth is the company that operates its business in different countries other than Australia and New Zealand. The competition controversy of retail industry is Australia is debatable. Most of the critics have talked about the duopoly of Coles and Woolworth in the market. Both these companies acquire around 70% to 80% of the total retail market in Australia and this violates the competition law of the country (Ibisworld, 2017). Competition policy of Australia states that every company in the industry should have equal opportunity to compete and operates in the market. No company can overpower the market (Griffin and Pustay, 2015). The main reason that suggests that the companies like Coles should expand its business is the supermarket stores that are coming from their origin countries and giving tough competition to the local stores. The biggest example is Aldi. Aldi is the company based at US that is giving tough competition to the leading retail store like Woolworths and Coles. The competitive prices of Aldi forces Coles to cut down its prices. Aldi is giving such a great competition to these big stores because it enhances its expansion rate to a large extent. This suggests that Coles should expand its business to other countries. As the summary of the analysis, the major factors that would be the reason for overseas expansion of Coles are:
- Saturation of the industry in Australia
- High cost of business in Australia
- To face the competition
Macro environment analysis of retail supermarket industry in Australia
India is the developing country and thus acts as the potential market for all the industries. It attractiveness and the potential of the Indian market attracts the investor and also the companies outside India to come and introduce their business here. The major factors that attract the foreign businesses are availability of cheap workforce and developing economy of the country (Johnson, Lenartowicz and Apud, 2006). All the developed countries like US, Australia have saturated markets and there is not scope for the companies to earn more profits and revenues there. Therefore, it is required by the Australian companies such as Coles to look forward and establish their business in developing country like India (Keith, 2012).
Environmental analysis is done in order to analyze the situation of the industry in India. This provides the knowledge about the impact of various environmental factors of the country o the business functioning of retail industry. This information can be used to identify the key factors that make the market of the country attractive for the foreign companies to set up their businesses in India. PORTER’s diamond model has been used to identify the attractiveness of supermarket industry in India:
The major factor condition that supports the industry establishment in India its population growth. Growing population of India results in availability of more labor in the market. This supports the companies to get cheap labor.
The above figure suggests that most of the Indian labor is engaged in agriculture industry that is the most related industry of supermarket. The vast household market of the country facilitates economies of scale and thus attracts the investors to invest in the Indian market (Mortimer, 2016). The last factor that needs to be considered is the infrastructure of the country. The infrastructure so the country is improving with great pace and supports the companies to serve the market with ease. The FDI policies of India also support the companies for international countries to establish their businesses here. This is because it also facilitates India to gain foreign currency investment and revenue.
Demand conditions: High population and growing economic rate of the country suggests that the demand of the consumer is also increasing as the number of consumers are increasing. Increase in urbanization is changing the needs of the people and the customers that are earlier dependent on the local grocery shops are now buying stuffs from the supermarket in the country (Smith, 2004). The market is still too much saturated because there are not such players. Urbanization of the people at this fast pace clearly defines the purchasing power of the people that positively affect the supermarket businesses in India.
Related and supporting industries: It has been identified that most of the Indian grocery stores are located as independent stores, this allow the supermarket to enter into the market to replace these small stores. In case of agriculture, India is considered as the world’s largest producer of fruits, vegetables, spices, milk etc. Also, in terms of retail industry, India has some of the retail chains such as Reliance, Landmark, Aditya Birla group etc. that are serving the customers with their big stores. This balance of retail and local market in India balance the competition in the industry (Pawar and Veer, 2013).
Firm strategy and rivalry: In terms of competitive advantage, India is already serving many foreign companies such as Wal-Mart, gap, Levis, Marks and spencer’s etc. with its cheap labor and low cist productivity. Many of the foreign companies are establishing their businesses in India and china because these are countries that are developing in nature and thus have larger scope of growth. The already established brand of chain such as Reliance, Wal-Mart etc.
Coles is the company that operates in the retail industry and is base at Australia. The company is successfully serving the customers of Australia since 1914 but never thought of going global and establishing the business to other countries. Overseas expansion of the companies is very much essential to withstand in the competitive market as well as to generate revenues (Mortimer, 2016). Retail industry of Australia always remains in controversies and is debatable. This is because the duopoly of Coles and Woolworths in Australia has been vanished by entry of some of the small retailer such as Aldi. Thus, Coles should also expand its business to other countries in order to compete and remain in competition with the market leaders. India is recommended as the country that can serve Coles as the overseas market to set up its business. Analysis if the Indian retail industry suggests that India is a developing economy and facilitates the foreign companies to set up their business (NewsComAu, 2017). The potential of Indian market allow the foreign companies to acquire the resources from here and earn high revenues. This in turn helps the country also to develop its economic conditions by FDI.
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