Discuss about the Strategic Analysis of Retail Industry Theory.
The report helps in analysing the Porter’s Five Forces Analysis of the entire retail industry. The retail industry includes different kind of supermarkets along with other fashion stores in the entire economy wherein the analysis of the Porter’s Five Forces will help in understanding the macro environmental factors that can be rival or threat to the different firms.
The main aim and purpose of the report is to identify the different kind of analysis of the usage of the Porter’s Five Forces Model analysis in an effectual manner. The five forces have to be analysed effectually wherein the different kind of competition in the business of the entire retail industry effectually. Proper ascertainment is required to be done in such a manner that will help the company in solving the complexities in an effectual manner.
Porter’s Five Forces Analysis helps in drawing the economics of the industrial organization wherein it helps in determining the different kind of intensity that is competitive in nature along with analysis of the entire retail industry in terms of the entire profitability as well. The five forces analysis is one of the most essential tool that helps in understanding the forces to shape the competition within the entire industry (E. Dobbs 2014).
Porter’s Five Forces Model has been developed in the year 1979 wherein it was developed by Michael E Porter of Harvard Business School wherein it was seen that it was the simple kind of business model that helps in evaluating the position along with strength of the business organizations. The strategic analysts often utilize the five forces model as this will help them in becoming more profitable in nature and improve the weaknesses and make them their opportunities as well.
The five forces analysis help in consisting of the different forces that include bargaining power of the suppliers, bargaining power of the buyers, threat of the new entrants, threat of the substitutes product along with services along with rivalry among the competitors in the market as well. The retail industry needs to apply the Porter’s Five Forces Analysis wherein it will help the companies in the market to understand the competition they will be receiving from the different other competitors in the competitive market. The supplier power, competitive kind of rivalry along with other competitors in the market. Five Forces analysis is the model wherein it is designed in the form of the industry basis as this will help in developing the different competitive strategies effectively.
The Porter’s Five Forces Model is essential in nature in the entire retail sector as this will help in understanding the following in an effectual manner:
The Porter’s Five Forces analysis is used by for the purpose of analysing an industry where the organization has its operations. This helps in determining the competitiveness of the market and the profitability of the business organizations operating in the industry. This framework will be used in the report to analyse the external environment of the Australian retail industry. The retail industry in Australia has continued to maintain particular momentum of growth from the last few years. The key factors that are related to the growth of the Australian industry are the economic growth of the country, the rising purchasing power of the consumers and the rising population in the country (Aguinis, Edwards and Bradley 2017). The retail industry of the country is expected to grow at 2% within the years 2013 to 2018. The growth rate of the Australian industry of retail is considered to be quite low as compared to the other developed countries. The market of Australia is quite flexible in nature and sudden rise and the sudden downfall of growth is quite common in the market. The total size of the Australian retail market has amounted to 122 US Dollars in the year 2013. The low rates of interest have however given much relief to the retail sectors of the country (Bansal and DesJardine 2014).The retail sector of the country is driven with the help of the rise that has occurred in the disposable income, the increase in consumer confidence and the increase that has been depicted in the number of high net worth individuals. The retail industry of the country has started growing due to the increase in the various factors that have been mentioned earlier.
The retail industry of Australia has seen the largest growth in a long time in the year 2017. Four of the world’s most famous retailers are now operating in Australia. More than 30 of the biggest retailers in the world have their operations in Australia. The number of retailers has increased in the year 2017. The new retailers who have become a major part of the Australian retail industry are, The TJX Companies Inc., the John Lewis and Debenhams and Decathlon which is a French retail organization. The entry of international retailers in Australia are increasing every year, which is driven by the strong economic growth of the country and increase in demands of consumers. The international retailers have brought many differentiating factors in the Australian market which are related to the design of the stores and the experience that they provide to the customers (Barrick et al. 2015). The entry of more international players in the Australian market is expected in the coming years as well. The US based retailers who have entered the country have posed threats towards to the local Australian retailers with the help of innovative store design and customer service related facilities. However, it has been noted that the Australian retailers are also trying to fight in this situation by innovating their stores and increasing the number of flagship stores. The giant Australian retailers like Wesfarmers and Woolworths are competing against each other to acquire the topmost position in the industry (Brewster 2017).
The rank that is held by Australia in the list of countries where the largest retailers operate is quite high even though the population of the country has been low. The list of the largest retailers in the world has included many Australian companies from the last few years. The Global Powers of Retailing report has concluded that the revenues generated by the Australian organizations have been increasing each year. The largest retail based organizations of the country are mainly Woolworths and Wesfarmers Ltd. Australia however cannot be considered to be the largest retail industry in the world. The low population of the country is a major reason behind the position that Australia holds in comparison to the other developed countries in the world. The retail industry of Australia plays an important role in the Australian economy (Camisón and Villar-López 2014). The major trends that are related to the Australian retail industry are, longer hours of sales, the few number of boutiques that are owned individually, more self-service of consumers rather than assistance provided by the company executives. The advancements in technology have also led to the decrease of labour and the productivity has also increased. The number of hypermarkets have increased and private label brands have increased showing further increase in the profits.
The foreign retail organizations have shown huge growth in the Australian market due to stable growth that has been shown by the Australian economy and GDP of the country. The retail industry has become a major driving force and is playing a vital role in the economy of Australia. The online retail industry has been another major reason behind the growth of the Australian retail sector. The isolated geography of the country is however posing major challenges towards the Australian retail industry (Chen and Miller 2015).
The retail sector of the country will be further analysed based on the Porter’s Five Forces Framework. This will be helpful in analysing the profitability of the industry and the future growth related prospects.
Power of suppliers – The suppliers are the most important parts of the retail business organizations. The number of suppliers required by the company depends on the inventory size of the various different organizations. The suppliers get in contact with the company through the various channels which are mainly the sales representatives. The retail organizations in Australia are also divided into different groups based on their size and levels of operations. The suppliers of the Australian retail organizations are divided into four different categories which are mainly, the manufacturers, the distributors, the independent craftspeople and the import related sources. The retailers in Australia purchase products with the help of the salespeople and the independent representatives of the different companies (Clegg, Kornberger and Pitsis 2015). The prices of these products are also determined by the organization depending on the locations of the manufacturing companies. The distributors of the companies are also known as wholesalers who buy the products in large quantities from the suppliers and then provide them to the companies. The unique or exclusive creations or products are provided to the organizations by these people. The Australian retail organizations like Wesfarmers and Woolworths are known in the industry for having strong distribution and supply related network which have helped them in increasing their revenues and profitability (Cornelissen and Werner 2014). The suppliers act as the most important part of the entire business related operations of the retail organizations in Australia. The power of the suppliers in the Australian retail sector is not high as the large organizations have huge number of suppliers to choose from. This enables the retail organizations to decide the prices that will be charged for the various products. The organizations have different types of suppliers based on the product categories that are supplied by them. The suppliers therefore play a significant role in the operations and the profitability of the retail organizations in Australia (Cusumano, Kahl and Suarez 2015).
Power of the buyers – The consumers or buyers are the most important of the business organizations belonging to any sector. The companies in the retail industry need to analyse the types of buyers before they formulate specific strategies to address the needs of these buyers. The organizations therefore need to understand the potential buyers and their needs are treated in the particular ways by which they behave. The market segments of the various industries comprise of different types of buyers which include, innovators, excessive traditionalist, late majority, early majority and adopters. The innovators are mainly a group of the early buyers who stay updated about the various changes that are taking place in the industries. The adopters are those who set an example for the other buyers in the particular market segment. The early majority are those people who are slow in adopting a product (Daspit et al. 2017). The late majority are group of consumers who purchase the products later in the life cycle. The excessive traditionalists are those who become buyers at the last stage of the products. The organizations belonging to the Australian retail sector consists of consumers belonging all these types of groups. The changes that have occurred in the global trends have further caused changes in the types of consumers in the Australian food retail industry. The consumer related trends of Australia have changed due to the changes that have occurred in the preferences of the consumers related to the health related products. The increase in demand for organic products have forced the retail food suppliers to offer more fresh products to the consumers (Fitzroy, Hulbert and O’Shannassy 2016). The demands of the consumers have also increased related to the ready-to-cook and convenient food products. The aging population has affected the packaging of the retail products. The items are packed in such a way so that it is lightweight in nature. Australia is considered to be one of the most cosmopolitan communities in the entire world. The diverse culture of the country also affects the consumer preferences. The retail organizations therefore need to take care of the different choices of the consumers before they form their product offerings. The social changes that have occurred in Australia are major reasons behind the changes that have occurred in the consumer preferences. The consumers are quite powerful in the retail industry of Australia. The preferences of the consumers affect the product portfolio that is made by the retail organizations in Australia. The bargaining power of the buyers in Australia are therefore high and the retail organizations need to take care of this factor before formulating strategies (Helfat and Martin 2015).
Threats related to the new entrants – The new entrants in the Australian retail sector have been increasing since the last few years. The new organizations further innovation in the retail industry. The innovative and new ways bring many changes in the retail sector of Australia which include, strategy related to lower pricing, reduction of the costs and providing the new value propositions to consumers. The companies in this industry further need to formulate strategies to face the competition that is related to the products and services that they offer. The organizations need to build barriers so that they can guard the competitive edge over the other organizations. The retail organizations in the Australian industry need to further increase their operations by building more capacities and investing in the research and development related activities (Hill, Jones and Schilling 2014). This will be helpful for the companies to maintain their positions in the industry in an effective manner. The threats of new entries in the market is high as the economy of Australia has shown huge growth in the recent times which has further attracted more organizations towards the retail sector of the country. The booming economy of the country has therefore been able to increase the levels of competition in the Australian retail market. The retail sector of the country is dynamic in nature and this has been able to accommodate many new organizations in the country. The retail organizations therefore have to be alert so that they are able to face the threats whenever a new player enters the market (Jarzabkowski and Kaplan 2015).
Threats related to substitutes – The Australian retail industry has many huge organizations like, Aldi, Big W, Bunnings Warehouse, Chemist Warehouse, Cotton On, Dan Murphy’s, David Jones, EB Games, Harvey Norman, Ikea, JB Hi Fi, Kmart Australia, Myer, Officeworks, Spotlight, Supercheap Auto, Target, The Good Guys, Toys ‘R’ Us and Woolworths. The presence of so many large retailers have further increased the competition in the Australian retail market. The consumers have substitutes of the different products and services that they wish to buy. The retail organizations need to formulate unique strategies and product offerings so that they are able to attract more consumers as compared to the other organizations in the industry (Johnston and Marshall 2016). The various organizations need to face huge threats that are related to the availability of substitutes of the services and products. This threat can be mitigated by the organizations with the help of unique product offerings. The organizations in the retail sector of the country have become more service oriented rather being product oriented. The organizations have to further understand the needs of the consumers so that they are able to offer the services and products accordingly. The threats of substitutes are therefore quite high in the Australian retail sector as there are many organizations which offer similar products (Kozlenkova, Samaha and Palmatier 2014).
Rivalry among the competitors – The levels of rivalry that exist in the within the organizations in the Australian retail industry is also quite high. The existing players in the retail market provide tough competition to each other as they offer similar services and products to the consumers. This is a major reason behind the high levels of competition in the market. The food and the fashion retail markets of Australia are the most competitive in nature. The changing preferences of the consumers and the changes that take in the technologies that are used by the companies are affect the operations of the organizations. The changes that have occurred in the Australian society have further changed the types of products that are demanded by the consumers (Lin and Wu 2014). The organizations further need to formulate strategies to step into the competition and try to change its operations accordingly. The threats of rivalry in Australian retail sector is high as the companies are continuously competing with each other to gain their positions in the market.
The Australian retail industry has gone through many changes in the various years of its operations. The changes that have occurred in the external environment have affected the operations of the various retail organizations operating in the industry. The retail organizations, whether they are operating in the food sector, the fashion sector or any other industrial sector has been making many changes in their strategies due to the changes that have occurred in the preferences of the customers. The consumers have always been the main focus of all the organizations which operate in the retail sector. The retailers are further changing strategies so that they are able to operate profitably in the market (Men and Stacks 2014). The Australian retail sector has faced slow growth in the previous years of its operations due to the low population levels of the country. However, the industry has shown sudden growth after the increase that has been shown by the GDP of the country. The Porter’s five forces analysis has shown that the Australian retail industry and the organizations operating in this industry are facing issues due to the increase in the competitors and high levels of rivalry. The organizations are trying to mitigate the issues with the help of various innovative service and product related strategies (Schnackenberg and Tomlinson 2016). The retailers are changing the strategies to sustain their operations in the fast changing industry. The Australian retailers are now focussing on the costs and are trying to build an environment which is tough in nature. The fundamental strategic shifts are the major issue that are being faced by the online and the offline retailers as well. The strategists have further noted a general unease with the multiple retailers in the industry due to the changes in the external operating environment. The retail industry of Australia has been contributing a lot to the economy of the country. However, the sector is still lagging behind the others in terms of generating revenues and boosting the economy of the country (Slater 2015). The offline retailers have a lot of room to improve their operations and they take lessons from the American retailers to improve their customer service related operations. The stores of the Australian retailers have chances and potential to improve a lot in their customer services and other aspects as well. The stores therefore need to think beyond the basic levels of services that are provided by them to the customers. The high levels of rents that are charged by the landlords of the stores has been major issue for the retailers in the country. The vacancy of the stores has depicted the intensity of the problem related to high rent that is faced by the store owners (Trigeorgis and Reuer 2017). The online retail stores of the country are also facing major issues due to the dominance of American giants like Amazon. The high levels of customer service that is provided by Amazon has been a major threat to the online and the offline retailers of Australia. This issue can be solved by the entry of Amazon in the Australian market which can be a major source of sales boost in the Australian retail industry. The ways that need to be implemented by the Australian retailers to leverage the benefits that have been gained by the company online is another major challenge that will be faced by the retailers in the future (Van Essen, Otten and Carberry 2015).
The online business will be successful in exploiting the potential of internet for the purpose of serving the niche group of consumers. The entry of online retailers in the Australian industry will help in the increase of sales in the retail sector. mCommerce or mobile commerce is another booming area which can help in boosting the growth of Australian retail sector. The high levels of penetration of smartphones in Australia will be helpful for the successful operations of the retail sector (Pantano 2014). The improvement that can take place in the physical delivery of goods bought online is another major factor that will be helpful in boosting the growth of the Australian retail sector. The future of the retail of Australia is quite encouraging and it has huge potential to grow and contribute to the economy of the country. This will further be helpful for the country to attract foreign organizations and investments in the country. The high GDP growth rate of Australia is a factor that can be the most helpful for Australian retail sector to increase its revenues (Moatti et al. 2015).
Conclusion
Therefore, it can be concluded that the porter’s five forces model has to be used by the different companies in the retail sector as this will be helping the companies in gaining profit along with competitive advantage. The five forces analysis has been applied by the companies in such a manner that this will provide proper adequate kind of strategies and opportunities to succeed in the market with implementation of the effective kind of analysis. The five forces model has helped them in expanding the limit in the particular industry and create aggressive procedures efficiently.
Furthermore, it can be seen that there are different kind of threats along with different kind of rivalries among the competitors in the entire retail industry that is causing huge issues to deliver the different kind of services to customers. However, with the implementation of Porter’s Five Forces Analysis, it can be seen that the different firms are able to gain competitive advantage and profit in the entire market, however there are proper implementation of the strategies in such a manner that will help the company in solving the issues effectively and earn huge amount of revenues and profit in the market as well.
Lastly, it can be seen that the companies in the entire retail industry has to implement the five forces analysis in such manner that will help them in understanding the threat from substitutes and other new entrants and solve such issues with implementation of the analysis effectually to gain competitive advantage.
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