Industry overview and characteristics

FIND A SOLUTION AT Academic Writers Bay

CASE STUDY 4 THE AUSTRALIAN SUPERMARKET INDUSTRYPaul Evans, University of MelbourneIndustry overview and characteristics The Australian supermarket industry, defined as businesses retailing groceries and food lines, is classified as a mature industry. Organisations competing in mature industries employ aggressive cost-reduction initiatives, with competitive advantage evolving from .4-, =i cost-based, rather than differentiation-based, factors. • E.7 ! The introduction of private-label merchandise is one • 3 sLtAt:711 • such cost-reduction initiative. Introduced by Aldi during its market foray in 2001, private-label mer-chandise evolved to become a popular cost-reduction tactic adopted by the industry’s foremost competi-r, tors. Expanding market popularity of private-label merchandise (products manufactured and sold under a retailer’s own brand) offers comparable quality and value for money, growing from 13.5 per cent of total supermarket sales in 2007-08 to 25.5 per cent in 2012-13.1 Slowing industry growth is a common character-istic of mature industries.2 The Australian supermarket t. industry achieved average annual industry growth of 3.4 per cent between 2007 and 2012, and forecasted growth is estimated to reduce to 2.4 per cent per annum between 2012 and 2017, esca-lating cost-based competition.3 Continued offerings of private-label merchandise is fore-seeable, and so product-based price wars are inevitable. The Australian supermarket industry — essentially a competitive duopoly between Woolworths and Coles, comprising a collective market share of over 70 per cent4 — is no stranger to product-based price wars. By targeting everyday household commodity items (e.g. milk, bread, fruit and vegetables), with the intent to book sales revenue, aggressive price wars have erupted between Woolworths and Coles. However, price wars on items, such as milk and bread, lead to products becoming ‘loss-leaders’ — that is, products sold at or below cost. Loss leaders are designed to increase store foot traffic and stimu-late sales, not necessarily of commodity products, but of more profitable product lines, during a supermarket visits In addition, to both private-label merchandise and price wars, Coles launched its ‘down, down’ campaign in January 2011, reducing the prices of over 6000 products by an average of 10 per cent.6 In a similar approach, Woolworths launched its ‘price knockdown’ campaign, resulting in increased sales of 4.7 per cent for the year to June 2011. According to former Woolworths CEO Michael Luscombe, ‘a number of initiatives contributed to this result including customer acceptance of the new 2015 store format and overall price competitiveness with our price knockdown campaign The following analysis of the Australian supermarket industry will examine the macro environmental trends influencing industry competitiveness and explore industry con-ditions, viewed through Porter’s five forces competition framework.
Scanned with CamScanner

Order from Academic Writers Bay
Best Custom Essay Writing Services