Competition in the Australian Market for Groceries
Introduction
Competition in the markets is good indication that the retailers and other type of sellers are competitive and aware in participating in the implication market. However, the growing popularity of one particular products or store makes the rivalry heightened that might lead in reducing the consumer, instead of having them. Too much competition can also leads to serious damage that will end in losing the foreseeable income.
The Australian Market
One of the basic strategies of the organization is to promote the business worldwide, and dominating each country can be only successful through the use expansion strategy. This is the same method applied by the Costco Wholesale Corp, which is identified to be the No. 1 U.S. retail warehouse club, and its attempt to bring a new level of competition to the Australian grocery market as it scouts out store locations in Melbourne and Sydney. Costco, whose U.S. warehouses sell everything from groceries to big-screen TVs, diamond rings and coffins to customers who pay annual membership fees in order to shop, plans to open similar large-format stores of around 15,000 square meters. Based on the company’s assessment, the Australian market is lacking of completion, therefore as part of formulating the strategies, the company will run at an operation where they will deliver the efficiencies of scale selling merchandise in bulk. Costco is one of three foreign companies trying to expand in Australia's grocery market, which is dominated by Woolworths Ltd with 770 supermarkets and conglomerate Wesfarmers' Coles chain, with 740 supermarkets.
Costco and the Related Market Initiatives
Costco has been doing well in the weak U.S. retail environment as cash-strapped shoppers look for lower-priced food packaged in bulk and other goods. And because of the great locations we have looked at, Sydney and Melbourne, the company is confident to have a smooth market entry. During the year of 2008, Woolworths and Coles have around 80 percent of the packaged grocery market of Australia. The third player is Metcash, which supplies independent IGA supermarkets. The other two international grocers, privately owned Aldi and Franklins, owned by South Africa's Pick 'n Pay Stores Ltd, have complained in submissions to the competition regulator that it is difficult to gain access to shopping centre sites because of landlord agreements with the two big players that discourage rivals from existing malls.
Because of the identified place in Australian market, Costco hopes to open its first Australian store and aims to bring a lot of value to the market, I am certain of that. In addition, the stores will also sell fresh food. Currently, Costco has an established presence in several countries outside the United States, including the UK, Japan, and Mexico. Based on the view of an analyst, the Costco's slim margins and low-cost structure will make it highly competitive on pricing with local grocers and specialty retailers, including furniture stores and hardware chain Bunnings which is owned by Wesfarmers. However, it is still preparing the stores to open up in year 2011. The success of the store in the Australian market is said to be based on the bulk grocery retail strategies that they might provide.
Analysis and Conclusion
Based on the information provided, the retail grocery market in Australia is lack of competition that is why Costco aims to join in the Australian market. There are many reason on why the competition is not perfect is that the Australian market is costly. Meaning, the firms that can only participate are the organizations that are internationally competing. Due to the high prices paid by the retailers and suppliers, the Australian market became part of the assessment of the government. Therefore, the power of the buyer or the market power in being able to demand lower prices for inputs and reduced terms and conditions from its suppliers compared to that firm’s competitors is losing.
References:
Australian Competition and Consumer Commission (2002) Report to the Senate by the Australian Competition and Consumer Commission on prices paid to suppliers by retailers in the Australian grocery industry [Online] Available at: http://www.accc.gov.au [Accessed 14 October 2010].
Thieberger, V., (2008) Costco Eyes Entry into Cozy Australian Market [Online] Available at: http://www.reuters.com/article/ [Accessed 14 October 2010]
0 comments:
Post a Comment