THE AUSTRALIAN

SUPERMARKET INDUSTRY

Industry 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 cost-based, rather than differentiation-based, factors. The introduction of private-label merchandise is one such cost-reduction initiative. Introduced by Aldi during its market foray in 2001, private-label merchandise evolved to become a popular cost-reduction tactic adopted by the industry’s foremost competitors. Expanding market popularity of privatelabel 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…………..

Macro environmental influences

Reduced consumer sentiment and disposable household income have an effect on supermarket spend. Consequences of the global financial crisis have altered purchasing behaviour, and consumers have now adopted more conservative spending patterns in the face of rising living costs and continued economic uncertainty.⁸……

Porter’s five forces competition framework and the Australian supermarket industry

Many industry conditions influence the level of industry attractiveness, yet Porter’s five forces competition framework suggests industry attractiveness can be determined through application of five interrelated factors: (1) threat of entry, (2) power of buyers, (3) power of suppliers, (3) threat of substitutes and (5) rivalry between established competitors.

Question 1:

Provide a review of the macro environmental factors influencing the Australian supermarket industry.

Question 2:

Carry out a Porter’s five forces competitive analysis and state your conclusion regarding the supermarket industry’s attractiveness to new entrants.

Question 3:

What stage of the industry lifecycle model applies to the Australian Supermarket Industry? Discuss how this influences industry competitiveness.

Question 4:

Which of Porters generic business-level strategies do Coles and Woolworths pursue? What evidence can you locate that supports your answer?

Question 5:

Does the entry of ALDI and Costco into the Australian supermarket industry pose a significant threat to market dominance held by Woolworths and Coles? Explain your reasoning.

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