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Supermarket Retail Industry Of Australia

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Question:

Discuss about the new business in the supermarket retail Industry of Australia.
 
 

Answer:

Introduction:

This is the report that discusses about the new business in the supermarket retail industry of Australia. The new business is a supermarket that needs to serve the Australians with its wide range of products. The first two stores of the company in Australia are to be located at Canberra. This is because it is the capital and provides a large market to the company. The main focus of the company is to sell the ready to eat products to the customers who are very busy in their life and do not have time to cook.

Organization structure:

Organization structure of the organization suggests that how the information flows in the organization and how the work is being coordinated by different layers of the employment. As far as the supermarket business is considered, it has been analysed that the supermarket is launching at a high scale businesses thus the organization structure would be little complex. Functional organization structure is the best suited approach that can be used for this supermarket (Jones & Jones, 2010). This is because this is the structure that allows dividing the departments according to their functions.

This is the simple structure that can be followed by the business in order to frame the hierarchy and the structure of the organization.

 

External environment analysis:

To analyse the external environment of the company, it is required to analyse certain factors of the industry. These factors are analysed by conducting the PESTLE analysis.

Political factors: as far as the supermarket industry in Australia is concerned, it has been analysed that it is duopolistic in nature. Woolworth and Coles are the biggest players in the industry. Government has taken up many initiatives to supress their leadership and allowing the new players to enter the market. This helps the new business to enter the market by the support of the Australian government (Wild, Wild & Han, 2014).

Economic factors: Due to the economic downturn in the country, the spending power of the people in Australia is decreasing and thus affecting the businesses like supermarket. The people are also moving towards the small retail shop to save their money. This may affect the new business as it will be difficult to penetrate the market at first with such a condition.

Social factors: as far as the social factors are considered, it has been identified that needs of the customers are changing daily (Grant, 2016). As the customers are not brand loyal in the case of supermarket industry, the company can only attract them by offering different discounts.

Technological factors: technology is changing now and then. The new inventions in the technological sector allow the companies in the supermarket industry to ease down their processes. The latest technology that is very common to be used by the supermarkets these days is RFID technology (Dwivedi, Merrilees, Miller & Herington, 2012).

Legal factors: the basic legal requirements for the retail sector are the taxation policies and the employee management regulations (Teece, 2010). The quality of the food available in the retail store is also needs to be in accordance with the food regulatory standards and should be licensed as well.

Environmental factors: As far as the environment concern of the retail supermarket industry is considered, it has been analysed that this industry should use environment friendly processes in their business so that they do not harm the environment at larger scale (Kumar, 2008).  3R’s of environment can be used to save the environment such as reuse, recycle and reduce. The sustainable practices of the organization includes, using good quality food, being ethical in their practices, using less sound machineries etc.

 

Internal analysis:

PORTER’s 5 forces: It is the analysis that helps in understanding the industry from inside. This is because it discusses about the factors such as competition, bargaining power of buyers and suppliers, new entrants and substitutes (Vella, Gountas & Walker, 2009). This aloes the new business to make their strategies accordingly:

Threat of rivalry: HIGH

As discussed that the Australian supermarket industry is under the leadership of two big players that are Woolworth and Coles, thus the new companies may face high competition from these two companies. Even the new international companies such as Aldi are also giving tough competition to the local brands.

Threat of new entrants: LOW

Retail supermarket industry is the industry that requires big amount of capital to enter. Thus, this becomes the large obstacle for the companies to enter this industry. This suggests that the competition from the new entrants is very low for the companies in the retail industry (Robbins, Judge & Campbell, 2010).

Threat of substitute: HIGH

The companies in supermarket industry get indirect competition from the small retailer and thus they act as the substitute for the supermarket. The small retail stores are also providing wide variety of the products to the customers and thus it is very important for the supermarket to attract the customers with new offers and deals.

Bargaining power of suppliers: MODERATE

As far as the bargaining power of the suppliers is considered, it has been analysed that it is moderate in nature. For the companies like Woolworth and Coles, the bargaining power of supplier in low because the suppliers have very less options to sell their products and Woolworth and Coles are the biggest players who buy from all the suppliers (Freeman, 2010). But, for the new companies it can be moderate or high because the suppliers have the option of Woolworth and Coles with them so they may bargain for the prices with the companies.

 

Bargaining power of buyers: HIGH

The Government of Australia has removed the barriers for the entry for new companies in the supermarket industry. So, the competition has increased and thus the price flexibility at the same time increases. There is one more reason for the high bargaining power of the buyers is the availability of substitutes and the low switching cost (Hill, Jones & Schilling, 2014).

Risk analysis:

When any new business is introduced in the market, it has to face many risks. Some risks are related to market and some are reacted to the company itself. Following are some of the risk that can be faced by the company entering the industry of retail sector in Australia:

Market risk

Operational risk

Causes: As the industry of retail sector is saturated in Australia thus it generates and develops the market risk for the new company. This is because most of the share of this industry or the market is covered by the big players like Woolworth and Coles

Mitigation:

Using penetration pricing strategy to enter and penetrate into the market.

Serving the customers with fewer products in large volume.

 

Causes: Sourcing the products and distributing the same requires high cost of the company. Any carelessness by the distributors or the suppliers may affect the business of the company and incurred a large amount of cost.

Mitigation:

Forecasting should be used by market analysis to know about the demand.

Sourcing the similar products from different countries so that nay calamity at one county cannot stop the business.

political risk

Financial risk

Causes: the causes of political risks are the policies that are imposed by the government of Australia. The subsidies and the 10% GST on the tax results in unstable political environment for the industry. Export taxes may raise the concern that needs to be considered by the company.

Mitigation:

It is required to maintain the good relationship with the other countries so that there would be no issues at the time of exporting (Wheelen & Hunger, 2011). Paying taxes at the right time is required so that the government could not take any legal action.

Causes: the major cause of financial risks for the company is the risk of interest rate fluctuations and risk related to overseas countries.

Mitigation:

Entering into the legal contract with the other countries helps in reducing the financial risks.

Practices to enhance organizational performance:

The following practices can be used by the business to enhance its performance:

  1. Lean production: It is the technique that can helps in reducing the cost of production by eliminating the activities that are not adding nay value to the products process or the products.
  2. JIT technique: It is the technique that helps in enhancing the prices of distribution and inventory. Just in Tim technique suggests that the products should be ordered only when they are required so that inventory does not need to be managed.
  3. Effective sales staff: In case of products companies, the sales staffs play a major role in the business performance. Effective and efficient sales staff helps in selling the products effectively.

Most important organization functions:

The most important functions of a supermarket business are marketing and sales, retail, production and manufacturing.

Marketing and sales: t is the function that allows the organization to make the people aware of the products and the brand as well as to make actual sale of the products.

 


Manufacturing and production: Most of the products need to be manufactured or acquired from different sources.

Retail: It is the most important function of the supermarket. This allows the company to sell the products of different brands to the customers. The supermarket acts as the mediator between the company and the customers.

Conclusion:

It has been concluded from the report that to enter the industry of retail in Australia, it is required to have a great knowledge about the market. This is because it is the most competitive and started industry and thus the new company has to make many efforts in establishing its business in the market. Though, the Australian government is supporting the new business in Australia but reaching the position of Woolworth and Coles is still very tough.

 

References:

Dwivedi, A., Merrilees, B., Miller, D., & Herington, C. (2012). Brand, value and relationship equities and loyalty-intentions in the Australian supermarket industry. Journal of Retailing and Consumer Services, 19(5), 526-536.

Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge university press.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Jones, G. R., & Jones, G. R. (2010). Organizational theory, design, and change.

Khatri, Y., & Collins, R. (2007). Impact and status of HACCP in the Australian meat industry. British Food Journal, 109(5), 343-354.

Kumar, S. (2008). A study of the supermarket industry and its growing logistics capabilities. International Journal of Retail & Distribution Management, 36(3), 192-211.

Robbins, S. P., Judge, T., & Campbell, T. T. (2010). Organizational behaviour. Financial Times Prentice Hall.

Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2), 172-194.

Vella, P. J., Gountas, J., & Walker, R. (2009). Employee perspectives of service quality in the supermarket sector. Journal of Services marketing, 23(6), 407-421.

Wheelen, T. L., & Hunger, J. D. (2011). Concepts in strategic management and business policy. Pearson Education India.

Wild, J. J., Wild, K. L., & Han, J. C. (2014). International business. Pearson Education Limited

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