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VBE 1005 Introduction To Marketing
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VBE 1005 Introduction To Marketing
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Course Code: VBE 1005
University: Victoria University
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Country: Australia
Questions:
1. Analyse how the key elements of the marketing environment currently affect a business;2. Compare fundamental theories of consumer behaviour and begin to contrast how they influence marketing activities3. Examine the practical implications of marketing matrix, core marketing theory including marketing empirical generalisations, the Double Jeopardy and Duplication of Purchase laws4. Investigate basic marketing problems in general business situations and effectively identify potential solutions and target markets.5. Formulate basic marketing objectives, develop and implement marketing mix strategies to address marketing problems,6. Demonstrate the role of the marketer and the marketer’s contribution to the direction of the organisation;and7. Demonstrate the development of key fundamental academic and professional skills required for further study and the workforce
Answer:
Introduction
The supermarket and grocery industry in Australia has grown over the past five years with a recent annual revenue of 102.3 billion dollars in the 2017-2018 financial year. This growth and development has been contributed to the growth in demand for grocery products by consumers in the industry. IGA, Coles, Woolworths, and Aldi are the major firms in the market whose rivalry has ensured an increase in quality goods are low and affordable prices. It is expected that Lidl the sister to Aldi may enter the market probably before the end of the 2018-2019 financial year however possible scenarios outcomes will be discussed in this presentation to depict a clear perspective of the outcomes and effects it will have in the overall industry
The Key External Drivers
Consumer sentiment index- Through a financial perspective, consumers are able to generally perceive the current state of an economy in the country. The consumption of products is generally higher when the consumer sentiment is high. The next slide illustrates the current consumer sentiment index in the country this year. The consumer sentiment jumped at its highest levels in July due to propelled by stronger confidence levels towards the economic outlook such as the tax cuts by the federal government which increased consumer buying power in the supermarket and grocery industry. However the consumer sentiments tumbled three point in September but significantly recovered by a point due to the increase in household budget pressure and mortgage rates interest which has which has depicted family finances to be noticeably weaker which has led to consumers adopting a decidedly risk-averse stance about their finances and preferring retailers that offer quality goods at low prices such as Aldi
Increase in demand of takeaway food services cafes and restaurant . The demand for cafes, restaurant, and takeaway food services has increased over the past five years and have become a strong rival for the supermarket and grocery industry. The number of people having meals in their home is decreasing as they prefer to eat outside in cafes and restaurants which have also focused on providing healthy products in a society that there is increased health consciousness (Jurgilevich et al. 2017,p 61). The Australian working class which is essential in revenue generation for the industry prefer easting outside due to an effective time saving of having to eat prepared food than buying grocery products and cooking them at home. This growing trend is deemed to be stable and will continue to rise in the coming years which may pose a threat to the supermarket and grocery industry success
Population- The Australian population grew by 1.7% in 2017 which is also expected to increase by 1.4% by the end of 2018. A constant growth in population is good for the industry since it provides a basis for revenue generation, growth, and development of the firms in the industry. The demand for goods will generally increase forcing supermarkets to expand to other regions so as to increase the market share in the long run. However, this will increase competition as new rivals will be attracted by the market potential and enter it. A good example is Lidl the sister to Aldi is sent to enter the market which will greatly affect the current major players Woolworths and Coles which will consequently lead to the provision of quality and variety of products at low prices which the Austrian population will benefit tremendously
Current performance and performance Ratio
Current performance- the industry seems to be performing at a steady rate with an annual increase of 1.6% over the past five years with a recent annual revenue of 102.3 billion dollars in the 2017-2018 financial year. This growth and development has been contributed to the growth in demand for grocery products by consumers in the industry. However, the entry of Aldi supermarket has initiated a strong price war in the industry especially between the largest industry players Woolworths and Coles which have forced them to change the strategy in order to avoid losing the market share to Aldi. Australians have benefited in the price wars where the entry of Aldi led to the provision of quality goods at low prices all over the country. The much-awaited entry of Lidl the sister to Aldi will spearhead Aldi and Lidl to acquiring the largest market share in the coming years which will further lead to increased quality goods at low prices. Additionally, it will play a major role in countering the growth in demand for takeaway services and restaurant in affecting the annual revenue generation of the supermarket and grocery industry
The increase in price wars over the years due to the entry of Aldi in the market which has forced Coles and Woolworth to reduce the prices of goods in order to remain irrelevant in the market. Moreover, this has affected their profitability ratio intensely since they have limited control over their suppliers who determine the price of their goods. However, Aldi has a higher control over their suppliers as they acquire goods directly from selected suppliers and pack them in their brands offering lower prices affecting the industry at large scale. This has resulted in firms focusing on maintaining their market share through increasing their product differentiation and less on the profits they make consequently affecting and reducing the profitability ratios over the years which is expected to continue at low significant rates as shown in the figure below. This has benefited the consumers in the industry as they get to enjoy quality product service delivery at commendable prices. However, the entry of entry of Lidl in the market is expected to reduce the profitability ratio as a similar approach and strategy employed by Aldi could be used to dominate the market in the foreseeable future.
The Industry Outlook
According to the 2018 latest Ibis world report the table below represents the current market share of the 2017-2018 financial year. Woolworths and Coles are the largest players in the industry with more than half of the market share, however, the remarkable performance of Aldi has affected the revenue generation and market share over the years due to the increased rivalry initiated in the market. The expected entry of Lidl in the market may tumble Woolworths and Coles markets share in the next five years since a similar strategic approach used by Aldi is also expected to employed by the sister firm. This will increase the market share of both Aldi and Lidl reducing the over 50% market share enjoyed by the two major supermarkets.
According to IBIS World (2018), The industry has seen an annual growth of 3 % in the last five years reaching a current annual revenue of 102.3 billion dollars accumulating a profit of 5.4 billion dollars despite the total amount of wages accumulating to 10.7bn dollars. It is expected that the industry will continue to grow with 1.6% annually in the next five years and possible 2%-2.5% due to the entry of Lidl which is set to increase the annual revenue generation by providing a limited range of own branded products at extremely low prices which will be significant in volatile consumer sentiment index due to increase in mortgage rates which have noticeably depicted the family finances to be noticeably weak and which has led to consumers adopting a decidedly risk-averse stance about their finances and preferring retailers that offer quality goods at low prices
According to IBIS World (2018), below is a key statistics snapshot of the Supermarkets and Grocery Stores industry revenue expectation in Australia (2018-24) which is expected to fluctuate over the years and increase by an average of 1.6%-2% per annum .however the demand for restaurants for and takeaway services expected to affect the development between( 2021-2023) which may possibly affect the revenue generation. A different scenario might play out due to the entry of Lidl which may contribute to the possible countering the effect of increased demand for takeaway services by initiating the general increase in quality product service delivery to the industry consumers stabilizing and significantly increasing revenue generation than projected
The Basis of Competition
The entry of Aldi in the market has initiated strong competition over the past five years where Woolworths and Coles having fight hard to main ting the market share and prevent loss of consumers to Aldi. This is significantly due to the ability of Aldi to control the supplier power by selecting suitable suppliers who are able to provide quality goods at low prices, acquiring the goods directly from them and repackaging the goods into their brand, therefore, eliminating the middlemen reducing the prices of goods (Bailey et al.2015). This has resulted in other players to reduce their prices to all over the country in order to maintain the significance in the market. However, Woolworth and Coles are already losing the battle to Aldi since they have no control over their suppliers which makes it harder for them to reduce the price of goods lower that Aldi (Aldi 2018). This has changed their competitive strategy by focusing on product differentiation where consumers are given maximum choices available. Consumers who preferer premium products are able to choose different brands which are priced higher while consumers who are looking for quality products offered at low prices are able to make choices on the different brands available. This essentially assists Woolworths and Coles in countering the competitive advantage that Aldi has on them where Aldi focuses on prices over product differentiation (O’Connor 2017). However, the possible entry of Lidl in the market may not affect the competitive advantage employed by Woolworths and Coles since the retailer employs a similar strategy to Aldi by offering a limited range of own branded products at extremely low prices.How3ver they projection towards quality products at low prices may reduce the consumers from rival retailers who do not preferer premium products.
Conclusion
The paper has depicted the state of the Australian industry. Woolworths and Coles are the largest players in the industry with more than half of the market share, however, the entry remarkable performance of Aldi has improved product service delivery and reduced prices of good to consumers Additionally this rivalry may contribute to the annual expected growth of 1.6 % in the next five years. However, the rising concern on the increase in demand for taking away food services is set to affect the revenue generation as the trend is growing. However, the entry of Lidl may counter this concern offering limited branded products at extremely low prices. Its entry is also set to reduce the over 50% market share enjoyed by Woolworths and Coles especially due to consumers who preferer low priced products propelled by increase in mortgage loans and budget pressures, however as discussed the use of product differentiation by the major players will go along way in countering the Aldi and Lidl in the coming years.
References
Bailey, J., Price, R., Pyman, A. and Parker, J., 2015. Union power in retail: Contrasting cases in Australia and New Zealand. New Zealand Journal of Employment Relations, 40(1), p.1.
IBIS World 2018, Supermarkets and Grocery Stores – Australia Market Research Report, viewed 20 September 2018 https://www.ibisworld.com.au/media/2018/02/23/checkout-update-q1-2018-ibisworld-reveals-the-state-of-play-in-the-supermarkets-and-grocery-stores-industry
Jurgilevich, A., Birge, T., Kentala-Lehtonen, J., Korhonen-Kurki, K., Pietikäinen, J., Saikku, L. and Schösler, H., 2016. Transition towards circular economy in the food system. Sustainability, 8(1), p.69.
O’Connor, T., 2017. Unlocking retail supply chain value. MHD Supply Chain Solutions, 47(1), p.40. Wan, L. (2018).
Australia’s changing grocery landscape is good for consumers but is it bad for business? viewed 20September2018 https://www.foodnavigator-asia.com/Article/2018/06/04/Australia-s-changing-grocery-landscape-is-good-for-consumers-but-is-it-bad-for-business
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