Future Of The Australian Super Market Industry: Volatile Sector Essay

Question:

Discuss about the Future of the Australian Super Market Industry for Volatile Sector.

Answer:

Introduction

The supermarket industry in Australia is one the most volatile sector in the country. High competitiveness and the dynamic environment in maintaining business make it more unstable for the companies to sustain. Besides this, immense pressure of the customers and their shifting behaviour also pose a great threat for the retail supermarket industry of Australia (Knox 2015). In this regards, it cannot be overestimated by stating that the supermarket industry is considered to be one of the profitable sector for Australian finance. An annual revenue turnover at the rate of $102bn and a bulk of people of more than 3 lakh are employed in the retail industry provides a great deal of opportunity for the industry to get flourished further (state of the industry 2017). Therefore, the purpose of this report is to analyze the future possibilities of the retail supermarket industry in Australia. In course of the discussion, uses of marketing models like five forces model, life cycle strategy further render a clear depiction of the condition of Australian supermarket industry.

Discussion

The discussion regarding the future scope of retail and supermarket industry of Australia, has been supported by the understanding of external or macro environment of the industry and put emphasis on the marketing strategies that should be implemented in order to eradicate any kind of constraints.

Macro Environmental analysis

The macro environmental analysis, also known as PESTEL analysis, is a mechanism with a number of external variables like political, economic, social, technological, environmental and legal factors.

Political

Obesity and other health related risk factors are increasing in a rapid pace in Australia which can lead towards death and disability in Australia. In response to combat this threat the Australian Federal Government was going to take necessary steps by introducing a National food plan in 2009 (Baker et al. 2017). In fact, a national food policy program was initiated by the public health sector which compelled the supermarkets to maintain quality of foods. Legislations and regulations related to the quality of food are very strict in Australia that the supermarket giants also have no power to influence the decision of the government. Besides this, safety in workplace, prevention of exploitation and employee benefits is also come under the supervision of the government (legislation.gov.au 2018).

Economic

The recent status of the Australian economy proves that it can be beneficial for the supermarket industry in a long run. In fact, the industry is expected to expand 2.2% in 2017-18 (Crothers 2017). Moreover, the supermarket and grocery sector occupies the Australian economy with 62% shares (Singh-Peterson 2015). It can also be argued that Australia has one of the highest GDP in the world with an amount of US$ 1.3 trillion in 2016 (Lewis 2017). Therefore, with an influx of economic stability it is possible for the supermarket industries to retain their business in Australia.

Social

he social atmosphere is highly dubious in Australia in terms of the relationship between the customers and the supermarket industry. In response to that it can be argued that the customers’ behaviour and preference determine the success of Australian retail sector. The leading supermarket companies like Woolworths and Coles have a long time competition in order to sell products at a cheap price. The reason behind such strategies is influenced by the customers strongly (Cascio 2018).

Technological

Introducing the online facilities is one of the key marketing strategies for the leading supermarket companies in Australian retail sector. Supplemented by the consumer behaviour the introduction of online purchasing facilities can help the retail and grocery market of Australia to make a better future (Muzellec, Ronteau and Lambkin 2015).

Environmental

Due to the change in climate in the Australian regions the government puts pressure on the food supply chain industry to maintain the quality of foods. This is related to the food insecurity which is resulted by the impact of climatic change all over the Australian region. In response to this, giant supermarket companies in Australia such as Coles and Woolworths publish non-regulatory certification on food suppliers in order to protect their brand image (Richards and Devin 2016).

Legal

In this regards, a series of regulations and legal restrictions the food supply chain industry of Australia has to follow. The Australian government imposes regulations on quality of production as well as on private business activities. Zero tolerance in exploitation and safety in workplace are the focal point of the government. Besides this, acts like competition and consumer regulation, 2015 is also played a pivotal role in business activity across Australia (Price 2016).

Life cycle strategy

Life cycle is referred as a model which is being used in the business progress of a company or of an industry. The cycle represents the inception of the industry and its journey to the present day and also reflects the future of the industry.

The food supply chain industry has begun its journey with the foundation of Coles supermarket in 1914. It can be argued that before the establishment of Coles the retailing industry in Australia was existed but not in a booming nature. Subsequently, Woolworths opened its first outlet in 1924 and thus the never ending competition between the two rival companies has been started. Amidst of this, the entry of Aldi in 2001 posed a serious threat to the very monopoly of Coles and Woolworths. However, in 2007 Coles was outnumbered by Woolworths. In response to this, Metcash also started to expand their market capitalisation since 2011 (Tamm 2015).

In this regards, the external environment is very much facilitated the nature of the retail industry in Australia. During the early phase of Coles the pressure of rivalry was not very much. However, in course of time with the expansion in food supply chain market, a strong competitiveness encircled the sector. In addition to this, the stakeholders in terms of government regulations and sustainability perturb the very nature of the supermarket industry in Australia (Carey et al. 2016).

5 forces analysis

Competitive rivalry- The supermarket industry of Australia is full of competition and dominance. It can be viewed that the major competition is circled between Coles and Woolworths. In this context, both of these two rival companies are often change their business strategies in order to maximize customers. Despite of their intense enmity in recent times companies like Aldi comes into prominence where Woolworths faces severe challenge from the Aldi which is going to take its position (Richards and Devin 2016).

Bargaining power of the suppliers- Suppliers are considered to be a major stake holders for the Australian supermarket industry. The food supply chain retailers are mostly depending on their suppliers. As a result of that, there is a possible trend of dominance among the suppliers. However, in reality, supermarket giants like Coles and Woolworths are capitalised 70 to 80% of the Australian market. Therefore, the power of the suppliers becomes futile in compare to the monopoly of Australian retail giants (Klindzic, Knezevic and Maric 2016).

Bargaining power of the customers- In Australia, due to their dominance over the market supermarket giants like Woolworths and Coles are supposed to take advantages over customers. Instead of this, the buyers have enjoyed more power. The reason behind this transformation of power is that the Australian government formulates a number of strict regulations for the food supply chain industry so that they are unable to treat customers as granted. For an instance, the Competition and Consumer Act, 2010 is entitled to monitor activities regarding the supermarkets and will take adequate steps if the code of conduct has been violated (Corones 2015).

Threat of new entrants- It can be argued that the supermarket industry is pretty much secured for the big companies. In the context of Coles and Woolworths, all the associated companies are subordinated to them. In addition to this, Coles has a good relationship with global retail giants such as ASDA. Therefore, by analysing the recent status of the company it can undoubtedly be advocated that Coles is ruling the Australian supermarket industry and free from any tough competition (Tamm et al. 2015).

Threat of substitute products- The supermarket chains are accompanied with a number of products, so that it is nearly impossible to replace it. Nevertheless, with the advent of digitization and the technological advancement can help to introduce an alternative way of shopping. In other words, using software and applications most of the companies are now tried to expand their customer base virtually (Tamm et al. 2015).

Therefore, it can be forecasted that there is a possible opportunity for the supermarket industry in Australia to retain their business activity in the upcoming future. In fact, the customer attractions play a pivotal role in this regards where the company can manipulate the customer needs and expand its market capitalisation.

Company analysis

Customers are considered to be of the major stakeholders regarding the supermarket industry of Australia. In response to that, the strategic planning of the supermarket organisations has put focus on building a good customer relationship. In fact, the companies are tried to create better communication with the customers. Indeed, the government interference and regulations also put pressure on the companies to follow a good customer service facility. Besides, focusing on the customer service management, it is also the role of the companies to keep the corporate sustainability ratio high. Sustainability terms of providing healthy foods, preventing the growing tendency of obesity among Australians by banning high fat and cholesterol ridden products as well as take a matured step towards reshaping a better world can be highly beneficial marketing strategy for the companies. Political stability and economic booming give the necessary support for retaining the market orientation of Australian super market industry. Furthermore, the keenness to preserve a good relationship with the customers is considered to be the core competency of supermarket industry of Australia. In addition to this a more matured step towards the environment will facilitate a better future for the industry.

Competitor analysis

A series of threats are posing threats to the steady development of the supermarket industry of Australia. Firstly, the government interference in business activities affects the business dynamic of the industry. It should not be practised in a regular basis; otherwise the industry will not be able to grow up independently. Then the global economic crisis can added up more problems regarding the market orientation of the Australian super market industry. In addition to this, the high intensity of competitiveness makes the situation worse for food supply chain industry across Australia. Besides this, there is always a rising bargaining power of the customers which is seemed to be an obstacle for the developing supermarket industry. It is always be good for a healthy business environment where the private companies and the consumers share equal power to influence the industry. Therefore, it will be great for the retailing industry in Australia to resolve these problems and make the nature of business environment more beneficial for the associated companies.

Strategy analysis

The business dynamic has been entered into the age of digitization. Digital mechanism is now considered to be the most effective tool in relation to the strategic business orientation. Therefore, it is imperative to step towards technology. In this context, creating a relationship with technology is very simple and direct for the supermarket industry of Australia. The supermarket giants should use digital marketing as an effective tool of customer maximization (Tamm et al. 2015). In fact, it can be argued that utilizing digital apps and software can save time for the customers as well. The consumers can choose their products in a matter of time by sorting it out in phone. Hence, the significance of implementing digital mechanism in the course of expanding the market capitalisation is seemed to be effective and rational for the supermarket industry of Australia.

Conclusion

The report puts a great deal of emphasis on the macro environment of Australian supermarket industry and at the same time analyses the role of competitiveness inside the sector. In response to that the role of digitization can help to bring more relaxation in the work pressure of the industry and make it more appreciable to the consumers. Therefore, it can be concluded that despite having a number of threats the future of the supermarket industry is safe in Australia and now it is going towards maximizing its market orientation.

Reference

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Crothers, L. 2017. Retail Food Sector Report 2017. Global Agricultural Information Network, pp.1-22.

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