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Marketing is an enterprise-wide opportunity for any organisation to understand its customers and the markets they might wish to participate in. Marketing Management is concerned with identifying, entering and developing markets and aligning the organisation's resources to achieve its goals. This subject will introduce students to key ideas, philosophies and theories Charles Sturt University Subject Outline

that make marketing an essential activity in any organisation. Specifically, students will investigate marketing's origins and how marketing can be contextualised in the organisation as a platform to align the organisation's goals with market demand. The subject will also encourage students to investigate and discuss how marketing, contemporary marketing and customer issues can be managed in the current environment.


On successful completion of this subject, you should:
• be able to assess and explain the nature of marketing and marketing management in contemporary organisations;
• be able to find relevant and important information about organisations, their industries and marketplaces from secondary sources;
• be able to evaluate the key marketing aspects of segmentation, targeting and positioning (STP) and be able to analyse an organisation's approach to STP;
• be able to apply the marketing mix and aspects of branding and positioning to a specific target market and be able to evaluate competitors' programs; and
• be able to discover and evaluate how contemporary issues of environment, social media and other technology, society and Corporate Social Responsibility (CSR) might affect marketing. 

Overview of the Woolworths and the Chinese retail industry

The chosen company for this report is Woolworths, which is one of the most popular names in the supermarket industry of Australia. The company despite having a huge popularity in Australia has only witnessed a limited growth in the international markets. Apart from Australia, Woolworths only exist in New Zealand. The main purpose of this report is to identify whether Woolworths could have entry to and whether it can survive in China.

1. A brief description of the industry market and evaluation of current trends in

a. Growth

            In this part of the report, the growth of the retail industry in China will be analysed. As per the IBISWorld report, total revenue from the retail industry in China stood at $196bn (IBISWorld, 2018). The average annual growth was found equal to 5.7% as calculated during 2013-2018 (IBISWorld, 2018). Sun Art Retail Group Ltd., Carrefour China Inc., China Resources Enterprise Limited, and Wal-Mart China were the top contributing retail firms (IBISWorld, 2018).  The number of businesses has also increased by 3.6% over the calculated time period (IBISWorld, 2018). Industry employment during this period has also increased. It is now close to 1,182,836 (IBISWorld, 2018).      

            A brief overview of the industry as shown in the above paragraph just shows that there are emerging opportunities in the Chinese retail sector. It is evident in a fact that the number of businesses in the last few years have increased. It means they had seen brighter business prospects in the country. Since the industry now provides a good employment solution, there should not be too much of issues in finding workers from local population. Additionally, the recent growth of the sector is an indication that different companies from both local and international regions will be attracted to the market. However, the external business environment will come into play, and this might produce both opportunities and challenges to every new and existing business.

It may also enhance the market competition and so, the survival could become tougher in this scenario. Government policy for foreign business will also influence the business. Indeed, a foreign company would require adequate supports of the Chinese government to be able to compete with the local and international firms already operating in the market (Ahi et al., 2017).

b. Profitability 

            Retail sales increased by 8.1% percent in China in November 2018 (Tradingeconomics, 2018). It means consumers’ purchasing capacity have dramatically increased in recent times. According to a report published by Statista, the retail industry in China has emerged as one of the most promising industries (Statista, 2018). In addition, a rising trend of the Chinese GDP will probably remain the same for years to come (Statista, 2018). These all indicate that the retail industry in China is a promising opportunity for Woolworths. However, there is stiff competition in the market as no less than hundred companies compete strongly to each other to sustain and increase their market shares.   

c. Macro environment (PESTLE factor)

            There are some marketers who believe that environmental factors are uncontrollable. However, there are other sets of marketers according to whom environmental forces can be altered by using the economic, psychological, promotional, or political skills. These marketers intend to influence the external environment seeking to analyse market opportunities. They also try to extract benefits, which are relative to costs. They take the political action to influence the environmental forces. However, the limit till which the influence can be made, should also remain known to such marketers. This section will conduct a (Political, Economic, Social, Technological, Environmental, and Legal) PESTLE analysis on the retail industry in China. Moreover, this will help to know the set of opportunities and challenges for a new entrant in China.

Key industry trends in growth and profitability

Political: - Trade regulations in the Chinese retail industry are not that much strict as compared to other industries. The probable reason could be a fact that the industry is not very prestigious to the Chinese government as compared to the heavy industry sector. For example, Carrefour, the French hypermarket was found to have ignored the rules in a few instance. However, the company was not pushed for it. It indicates that China does not want to limit the growth of this industry (Chan & Hui, 2014).

            The government is bringing modernisation to the street markets. The traditional markets are being converted to supermarkets. The main reasons behind such modernisation is to expand the retail market into the Western provinces of China (Sorace & Hurst, 2016).

            China that once largely served as a centrally planned system and had no or limited provision for international trades, is now becoming an open economy. Due to this, the private sectors are booming. Private sectors have also emerged as major player in the international economy. In addition, more foreign companies are entering the market. China’s entrance into the World Trade Organization (WTO) was majorly responsible for removing trade barriers for foreign investors (Hu, 2017). 

Economic: - As stated above in the profitability section, the Chinese GDP will remain the same in the coming future (Statista, 2018). It means the income per capita will also increase. And hence, the purchasing capacity of each person will also get stronger in the future. The fact will definitely have an impact on the retail sector, which has witnessed a booming trend in recent years.

            Taxation can be a burden on companies. Private companies will be needing to pay the corporate income tax. Along with it, a few companies will also have to bear special tax rates. It is for companies those that make investments in some preferred sectors like the Western Provinces (Dai, Maitra & Yu, 2016).

            Finding quality and trusted suppliers will be a key to success in China. Fresh locally grown materials can be obtained from the country provided that quality suppliers are known to companies. Foreign companies may tend to struggle a bit in holding a control on proven suppliers. Local companies may have the edge over the foreign MNEs in regards to dealing with local suppliers. The margin of competition will be influenced from local companies’ capacity to bargain (Guo, He & Li, 2016).

Social: - Foreign companies will have an advantage from country’s population as this will help to generate a huge customer base. With so many cultures and ethnic groups existing in China, it is the place to experiment with products of diverse range. However, some companies might also lack a capability to understand the diverse shopping behaviours of such a large population. In that regard, selling the products could be a challenge (Gang, 2015).

            Chinese customers are very sensitive to their culture. They can accept foreign goods; however, can also reject if they are compelled to do so. It is, therefore, important to understand the preferences for foods and all of Chinese customers. This will help to offer the relevant products (Au, Buhalis & Law, 2014).  

PESTLE analysis of the Chinese retail industry

Technological: - Due to vast land areas, distribution and supply chain operations can suffer. The time of delivery and quality of products both will be in the list of sufferers. Hence, a network of warehouses will be needed at strategic locations (Chen et al., 2014). In addition, distribution needs to be outsourced to strong distribution partners as this will help to gather an extensive local knowledge (Chen et al., 2014).  

Environmental: - A ban on plastics has occurred so many times in China in the past. This can affect the daily operation as expensive bags will replace the plastics to carry the purchased items. Supermarket stores in particular will be forced to support such activities. In such case, there is one way to prevent the cost structure from being affected by a plastic ban. Paid carry bags can help to get rid over of the issue. Customers will need to pay for the carry bags as well. In this way, a plastic ban can be fought with as long as a cost-effective operation is concerned.  

            The Chinese government is now active with recycling programs. The government is doing it with the help of its National and Social Progress Plan. In addition, China is suffering from huge pollution. Private firms, and the local government have failed so far to make an impact with their initiatives to reduce the air pollution.  Some firms have shown resilience to it with their greenhouse emission control plans (Song et al., 2017). Hence, the environmental performance of supermarkets will also be monitored.

However, Woolworths have not been that impressive in Australia in reducing its carbon footprint impact. This fact is also mentioned in the SWOT analysis section. To have an effective operation in China, Woolworths will need to focus a lot on environmental wellbeing. These are using low energy consuming devices in stores, promoting recycling of used products, avoiding wastes of foods and other things, and participating in CSR works.

Legal: - There are a number of government legislation that have a direct impact on foreign companies. These policies have also impacted the major international firms like Wal-Mart (Li & Liu, 2018). The monopoly control of the Chinese government can discourage or limit the entry to the Chinese market. Such controls can affect issuing of license to firms (Li & Liu, 2018).  

2. Major market segments, and primary and secondary target markets for Woolworths

Major Market Segments

            There are many major market segments comprising of provinces and cities. These include but not limited to such as developed provinces like Shanghai, Guangdong, Beijing, Tianjin, and Jiangsu (Han et al., 2016).

Primary and secondary target markets

Primary Target Market

            Primary market would be classified based on demographics such as age, income bracket, gender, generations, celebrities, and so on (Hsu, Liao & Zhao, 2018). Marketers before exploring the market try to evaluate the company’s costs, sales and profits. They also need to evaluate whether they have adequate resources to design an appropriate marketing mix. The strategy still remains the same as customers have ample of options to shop from. They would shop from anywhere else except in a case they do not have many options to shop from. Hence, it is important to offer ample of shopping options to customers to appropriately satisfy the needs and demands of the target market.

Opportunities and challenges for Woolworths in China

            Depending on the market segment and its demographic nature, the selection of products will be made. For example, areas that have a dense population of rich people will be targeted with luxury and fresh items. In addition, the stores will have every essential products that are commonly being sold across the various supermarket stores in China.

Secondary Target Market

            Secondary target market will comprise of customers who have a lower capacity to purchase as compared to the rich income group. These people can become the potential customers, if are supplied with needful products at affordable rates. These are low-income groups, people belonging to ethnic groups, minority groups, migrants, and others.

3. Level of involvement

            Level of involvement can be defined as individuals’ degree of interest in the importance, which he or she places on a product. This can be categorised as high, enduring, low, and situational. High-involvement products are those that become visible to many and are valuable as well. In addition, enduring-involvement is long-term and ongoing. Low-involvement products are those that are less expensive and contain a less amount of associated social risks. Situational-involvement is dynamic and temporary in nature (Pansari & Kumar, 2017).

            In context to Woolworths in China, rich income group will likely have an enduring-involvement provided that they appreciate the products and offers. They at times can also have a high-involvement in case they intend to purchase the luxury items. They may also evolve as having an enduring-involvement if they constantly receive similar quality at attractive rates for the same product line.

4. Nature of competition in the industry and a comparison of SWOT of Woolworths with its main competitors

Nature of competition

Nature of competition can be categorized into several types such as brand competitors, total budget competitors, generic competitors and product competitors. The entire four types of competitors can affect the business; however, brand competitors can affect at large. The type of competitive structure would be “Monopolistic Competition” as there are so many local and foreign competitors in the Chinese retail sector. Hence, there are few or limited barriers to entry the market (Hombert & Matray, 2018).

SWOT of Woolworths

Strengths:

  • Consistent provider of quality and fresh-products
  • Strong brand portfolio
  • Good returns on investment
  • Ability to attract reliable suppliers
  • Strong distribution network
  • Ability to success in new projects
  • Ability to influence the workforce

Weaknesses:

  • The existing business model lacks in innovation-practices
  • Inability to make an appropriate demand forecasting

Opportunities:

  • New markets, such as China
  • Favorable government policy

Threats:

  • Lack of innovation
  • An increased cost of raw materials can affect its profitability
  • Inability to control its carbon footprint impact

(Methner, Hamann & Nilsson, 2015)

A comparison and contrast with strong competitors

            There are many local and international retail brands like Sun Art, Vanguard Group and Wal-Mart. Each of these are different from one another in various respects. Wal-Mart is a globally recognised name for various reasons such as for its efficiency in supply chain operations. It already has a fair amount of experience of operations in China. In addition, Sun Art and Vanguard Group are top local companies leading the retail sector.

They have more abilities as compared to Wal-Mart and other foreign markets in regards to understanding the local culture, and how to manage the marketing and distribution of products. Hence, local retail leaders and the leading foreign companies like Carrefour and Wal-Mart have more competitive structure in the Chinese retail market as compared to a new foreign entrant. In addition, Chinese local firms hold the geographical, cultural, and historical advantages (Liu, 2017).

            Financial difficulties are a concern to operate in Chinese market. In this regard, Woolworths looks better as it has an excellent capability in capital expenditure (Methner, Hamann & Nilsson, 2015). There are opportunities for firms having excellent learning skills and possessing an advanced management capability (Keith et al., 2016). The business model of Woolworths can create troubles as local and foreign retail companies in China are more capable in doing innovation (Keith et al., 2016).

5. Positioning Map

This is an example of a positioning map. The positioning map for Woolworths will be similar to the one in the diagram; however, competitors will vary.

From Low Quality to Generalize: SPAR Group, WuMart Group, WSL Group, Bailian Group, Carrefour, and Yonghui Group.

From Generalize to High Quality: Wal-Mart Group and Vanguard Group.

From High Quality to Specialize: RT-Mart and Sun Art Group.

Conclusion

            To conclude, this can be said that China would be a preferable foreign market for Woolworths. There are opportunities growing in the retail sector in China. The prospect will remain the same over the next few years. China is a country of huge population. This also makes China a potential market for the business. However, political supports will have an impact on the business. The GDP growth is about to stay the same in the coming years. It means customers will have an increased purchasing capacity.

However, Woolworths need to be alert from the local people as they prefer not to be forced for a purchase. Technology will help to smoothen the supply chain operations. Environmental pollution will also affect operations in China. Supermarket brands will be judged for their efficiency in reducing their carbon footprint impact. Tax policy is bit hectic especially for those that make spending in special market segment.

In addition, government policies are by and large more supportive to local business than the foreign. Briefly, this can be said that Woolworths can have an ample of challenge as the company has not been good in international markets. However, China is home to many successful foreign companies like Carrefour and Wal-Mart. The rising opportunities in China should be tried considering that market expansion is a part of international business.

References

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Au, N., Buhalis, D., & Law, R. (2014). Online complaining behavior in mainland China hotels: The perception of Chinese and non-Chinese customers. International Journal of Hospitality & Tourism Administration, 15(3), 248-274.

Chan, C. K. C., & Hui, E. S. I. (2014). The dynamics and dilemma of workplace trade union reform in China: The case of Honda workers’ strike. In Strategies of Multinational Corporations and Social Regulations (pp. 203-217). Springer, Berlin, Heidelberg.

Chen, S., Xu, H., Liu, D., Hu, B., & Wang, H. (2014). A vision of IoT: Applications, challenges, and opportunities with china perspective. IEEE Internet of Things journal, 1(4), 349-359.

Dai, M., Maitra, M., & Yu, M. (2016). Unexceptional exporter performance in China? The role of processing trade. Journal of Development Economics, 121, 177-189.

Gang, C. (2015). Mortuary ritual practices and socio-cultural changes in rural China. The Anthropologist, 19(1), 1-15.

Guo, Q., He, C., & Li, D. (2016). Entrepreneurship in China: The role of localisation and urbanisation economies. Urban Studies, 53(12), 2584-2606.

Han, J., Pang, X., Liao, B., Yao, H., Song, J., & Chen, S. (2016). An authenticity survey of herbal medicines from markets in China using DNA barcoding. Scientific reports, 6, 18723.

Hombert, J., & Matray, A. (2018). Can innovation help US manufacturing firms escape import competition from China?. The Journal of Finance, 73(5), 2003-2039.

Hsu, M., Liao, P. J., & Zhao, M. (2018). Demographic change and long?term growth in China: Past developments and the future challenge of aging. Review of Development Economics, 22(3), 928-952.

Hu, H. (2017). Is China Entering WTO or shijie maoyi zuzhi--a Corpus Study of English Acronyms in Chinese Newspapers. arXiv preprint arXiv:1711.06895.

Ibisworld (2018). Supermarkets. Industry Market Research Reports, Trends, Statistics, Data, Forecasts. [online] Ibisworld.com. Available at: https://www.ibisworld.com/industry-trends/international/china-market-research-reports/wholesale-retail-trade/retail-trade/supermarkets.html [Accessed 23 Dec. 2018].

Keith, N., Unger, J. M., Rauch, A., & Frese, M. (2016). Informal learning and entrepreneurial success: a longitudinal study of deliberate practice among small business owners. Applied Psychology, 65(3), 515-540.

Li, C., & Liu, M. (2018). Overcoming Collective Action Problems Facing Chinese Workers: Lessons from Four Protests against Walmart. ILR Review, 0019793918784516.

Liu, S. (2017). Globalization as boundary-blurring: international and local law firms in China’s corporate law market. In Law and the Market Economy in China (pp. 231-264). Routledge.

Methner, N., Hamann, R., & Nilsson, W. (2015). The Evolution of a Sustainability Leader: The Development of Strategic and Boundary Spanning Organizational Innovation Capabilities in Woolworths. In The Business of Social and Environmental Innovation (pp. 87-104). Springer, Cham.

Pansari, A., & Kumar, V. (2017). Customer engagement: the construct, antecedents, and consequences. Journal of the Academy of Marketing Science, 45(3), 294-311.

Song, C., Wu, L., Xie, Y., He, J., Chen, X., Wang, T., ... & Dai, Q. (2017). Air pollution in China: status and spatiotemporal variations. Environmental pollution, 227, 334-347.

Sorace, C., & Hurst, W. (2016). China’s phantom urbanisation and the pathology of ghost cities. Journal of Contemporary Asia, 46(2), 304-322.

Statista. (2018). Topic: Retail Industry in China. Retrieved from https://www.statista.com/topics/1839/retail-in-china/

Tradingeconomics. (2018). China Retail Sales YoY | 2018 | Data | Chart | Calendar | Forecast | News. Retrieved from https://tradingeconomics.com/china/retail-sales-annual

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