Quality Competition And Market Segmentation Essay

Question:

Discuss about the Quality Competition and Market Segmentation.

Answer:

Introduction

Marketing is the key that determines the success of the business organization. By effective marketing, the business organizations are able to create a unique image in the eye of the customers as well as stand out from the competitors. The marketing and management strategies developed and implemented by the business organizations ensure growth, profitability, targeting, segmentation and positioning. Effective marketing ensures growth in business, customers and profit for the business organizations (Armstrong et al., 2015).

This report introduces Woolworths, an Australian retail chain by briefly describing the industry of the organization and analysing the current trends. Additionally, the report also investigates the major market segments of Woolworths and discussing the involvement of primary market segment in decision-making. The report also evaluates the strengths and weakness of Woolworths and compare with the main competitor Coles. Lastly, the report also develops a position map in order to determine the position of the company in the market.

Industry trends

Woolworths is a leading supermarket in Australia established in 1924 and covers almost 80% of the Australian market. Woolworths mostly deals with selling groceries but also sells beauty products, households, pet products and stationery items. It has over 1000 stores in Australia with 968 supermarkets and 19 convenience stores. The report suggests that Woolworths has confirmed sales growth in the industry by 4.7% thereby, estimating $9.63 billion in the beginning of 2017. The requirement of the groceries and fast food has risen drastically in the Australian market due to which the sales have grown to $36.37 billion over the year (Arli et al., 2013). The management of the Woolworths is satisfied with the overall sales growth of the company but aim towards building the progress in order to maintain their growth and profitability. It has been seen that Woolworths has been growing continuously since 2010 and has 37% of Australia’s supermarket whereas Coles has only 31% of Australian market share. It has also been seen that Woolworths has bounced back with $1.5 billion profit in the Australian supermarkets and has become the star of the profit (Kang & Gray, 2013). The company has also opened more convenience stores for the Australian market thereby, ensuring growth and profitability in the Australian market.

The PESTLE analysis of retail in Australia is stated below:

Political: The political conditions of a country largely determine the success or failure of an organization. The retail industry in Australia has maintained its momentum since decades as the country has undergone several developments in terms of society and the economy. The political condition of Australia highly affects the retail industry in the country. A stable political environment is essential for any organization or industry to bloom in a country. The changes in the policies of the Government highly impacts the organizations present in the country (Sutton-Brady Kamvounias & Taylor, 2015). The retail industry in Australia has witnessed excellent growth in the past few years as a result of an increase in the population of the country as well as due to the increase in the purchasing power of the Australians. The policies developed by the Federal Government in Australia largely determine the success or failure of the retail sector in Australia.

Economic: The economic condition of a country largely determines the success or failure of the organizations in the country. The price of the property is higher in Australia as compared to the income levels of the population of Australia. This has resulted in the increase in the price of rental properties (Bailey et al., 2015). As a result, a large portion of the income earned by the Australians is spent on rent. Australia has witnessed a decline in the economic market conditions, which has adversely impacted the retail industry in the country. The fluctuations in the rates of currency exchange also impact the retail industry in Australia. The weak position of the Australian dollar has adversely affected the retail industry in Australia.

Social: The social factors have a huge impact on the industries located in a country. Australia comprises of mainly three social classes namely working class, upper class and the middle class. This social stratification highly affects the retail industry in Australia. The change in the social trends largely affects the retail industry in Australia. The success or failure of an organization highly depends upon the manner in which the organizations initiate target market segmentation. The changes in the tastes and preferences of the target audience determine the success of an organization (Brotchie et al., 2017). The Australians nowadays prefer purchasing goods and services from the organizations that are socially responsible and are involved in some kind of social activities. Therefore, the retail organizations that initiate social activities are likely to be more successful in Australia.

Technological: The technology plays a vital role in determining the success or failure of an organization. The retail industry is largely affected by the technology and technological advancements help the organizations to improve their efficiency and achieve economies of scale. Technology helps the organizations to provide better quality products and services to the customers at lower prices (Balaji & Roy, 2017). Australia is a developed country and is well- equipped with the latest technologies, which has helped the retail industry to obtain the latest technologies easily for improving their operations. The application of technology has enabled the retail sector in the country to improve its operations and continue successful operation of the businesses.

Environmental: The environmental condition of a country highly affects the functioning of a business in a country. The organizations can be successful in long- run only when its business activities do not harm the environment (Nepal, Menezes & Jamasb, 2014). The retail industry in Australia has adversely affected the environmental conditions in Australia, which has indirectly affected the profitability and performance of the retail sector in the country.

Legal: The legal factors involve the legal environment of a country in which an organization operates. The legal changes affect the costs incurred by the organizations along with the demand for a product or service. The carbon tax implemented in Australia has largely affected the retail industry in Australia (Davidov, 2014). The regulatory bodies in Australia such as the Australian Competition and Consumer Commission and several others have affected the business activities of the retail industry in Australia. The legal regulatory bodies keep a check on the activities of the organizations in order to ensure that the organizations follow a fair policy while conducting the business. The strict regulatory bodies have negatively affected the retail sector in Australia.

Market segments overall

Market segmentation provides an opportunity for Woolworths to divide and segment the customers based on their needs and wants. As commented by Wilkinson (2013), segmenting the customers allows the business organizations to categorise the customer needs, demands and develop marketing strategies accordingly. Primary and secondary are the major market segments of Woolworth in Australia. As mentioned by Braun (2016), primary target market allows the business organizations to believe will give the best chance to sell their product. Thus, based on the type of industry and organization, the primary target market for Woolworths are the people with higher income and people with the standard living measure. According to the current economic condition of Australia, a vast majority of the people falls into the group with higher income. Setting the primary market segment allows Woolworth to develop a business strategy accordingly to the demands and needs of the customers in terms of price and quality of the product.

As commented by Deakin (2013), the secondary target segment of the business organization is the second most important section of customers that companies prefer to target for additional profits. Thus, these sections of customers are expected to have less money and less product demand. Thus, the secondary target market for Woolworths include the customers with lower income and the growing section of black middle class people. Woolworths expect that the people with low income and the growing black middle class will shop from the retail stores in the coming years due to better income opportunities. In addition, Woolworths can develop their business and pricing strategy in such a way in the coming years so that the people with low income and the growing black middle class are able to shop. Thus, setting the primary and secondary target market segments is essential for Woolworths, as allowed the company to develop their marketing and business strategy for attracting more customers, expanding business and maximizing their revenue.

Primary segment and decision-making

Primary market segment highly influences the decision-making process of the business organizations. This is because the business organizations develop business strategies such as price, quality of the product; marketing based on the demands, expectations and needs of the primary customers. Thus, it is essential for the business organizations to consider the demands and needs of the primary market segment for their business (Weinstein & Cahill, 2014). It is essential for Woolworths to consider the demands, needs and expectations of the primary market segment, that is, people with higher income and standard living. This is because considering the demands and needs of the primary market segment will help Woolworths to develop products according to them. As a result, Woolworths will be able to attract the majority of the customers and satisfy them by fulfilling their needs (Ashton, Maguire & Spilsbury, 2016).

On the other hand, considering the demands and needs of the primary market segment is essential for Woolworths, as this segment will result in the majority of the sale for the company. Thus, Woolworths need to ensure that the demands of the primary market segment are fulfilled by maintaining the quality of the product, the price of the product and the type of the product launched for the customers (Dey, Lahiri & Zhang, 2014). Additionally, considering and fulfilling the aim of the primary market segment of Woolworths will also help the company in gaining competitive advantage and stand out from the major competitors in the Australian market.

Competition

The Australian market highlights pure competition in the retail sector that has a homogenous range of products. The number of retail supermarkets in Australia includes:

  • Wesfarmers
  • Metcash
  • Coles
  • Costco
  • Lidl
  • Aidl
  • Star Mart

From the aforementioned list, it can be said that the Australian market has pure competition with several retail supermarkets dealing with similar products thereby, providing endless and pre competition. One of the major competitor Woolworths in the Australian market is Coles.

The SWOT analysis of Woolworths includes:

Strength

· One of the oldest companies to introduce model retail trade

· With more than 968 retail outlets and 19 convenience stores

· Strong brand name

· Sales products manufactured by the company

Weakness

· Negligible global presence

· Failed to gain competitive advantage

· Late entry to online marketing

· Extended length of offers on products

Opportunities

· Using electronic media for advertising

· Comparatively low price to the competitors

· Extending channels for customers

· Adopting multi-option retail to cope up with changing needs

Threats

· Higher and aggressive competition

· Increased cost of raw materials

· Economic recession

· Political intervention

From the above analysis, it can be said that Woolworths has a more competitive advantage compared to Coles in the Australian market.

Strengths: Woolworths is one of the oldest companies that have introduced the model of retail trade in Australia. The company has more retail outlets throughout Australia compared to Coles. Thus, the majority of the Australian population prefers Woolworths than Coles due to the higher brand presence and brand name. Additionally, Woolworth’s sales sole manufactured products in terms of vegetables and fruits that are not done by the sole competitor Coles in the Australian market. These strengths helped Woolworths in gaining a competitive advantage over Coles (Dos Santos, Svensson & Padin, 2013).

Weaknesses: The weakness that determines the position of Woolworths from Coles includes the negligible presence of the brand or the company at a global platform. Coles has the worldwide recognition that has helped the company in gaining better competitive advantage both in the national and in the international market. Additionally, Woolworths opted for digital marketing much lately compared to Coles (Fernie & Sparks, 2014). As a result, Coles succeeded in capturing large Australian market compared to Woolworths. Another drawback of Woolworths that affected its position compared to Coles is the extended length of offers on the products. Coles provide offers for limited and short period thereby, engaging the customers effectively. Extended offers by Woolworth's results hamper the customers’ willingness to shop from the supermarket (Corkery, Mikalsen & Allan, 2017).

Opportunities: Woolworths has better opportunities compared to Coles, as the company uses electronic or digital media for advertising their products and offers. As a result, in a huge market like Australia, Woolworths is able to reach out to a wide range of customers thereby, increasing their sales and business. The use of digital media by Coles is limited that hampered them in capturing the Australian market recently. Considering the huge competition in the current market, Woolworths has kept less price of the products compared to Coles (Flax, Bick & Abratt, 2016).

Threats: The major threat for Woolworths in the Australian market is the fierce and aggressive competition with the competitors such as Coles. Additionally, increased cost of raw materials, economic recession and political intervention are the potential threats that Woolworths encounter compared to Coles in order sustain in the Australian market (Zarkada-Fraser & Fraser, 2015).

Positioning map for Woolworths

Figure 1: Market Positioning of Woolworths

(Source: Gong et al., 2013)

From the position mapping of Woolworths, it can be said that the company is categorised under high quality and high price. This is because the primary target markets of the company are people with higher income and people with standard living style. The primary target markets have high and stable income that has helped the company in maintaining this position in the position mapping. Based on the demands and the income of the primary customers, the Woolworths have to maintain a standard price and quality of the product. This is because the primary target segments of Woolworths are the segment that the company will sell their majority of the products and incur profit.

Conclusion

In this report, it can be concluded that Woolworths is one of oldest and most successful retail chain in the Australian market. Since its establishment, the company has grown drastically in the Australian market with an estimated 1000 retail outlets all over the country. From the various market reports, it has been seen that Woolworths have maximised their growth and profitability over the years. From the nature of the company and its products, peopled with higher income and people with standard living style are the primary target market of Woolworths. Thus, the position mapping of the company is categorized under high quality and high price. The company needs to develop their business, product and pricing strategy based on the demand and expectations of the primary market segment, as the company will sell the majority of the product to this segment. Woolworths has selected the people with low income and growing middle class black community, as the company predicts growing customers and sales from the secondary target market.

References

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