Industry Environment Analysis Report - Australian Retail Industry

This report provides a detailed analysis of the Australian retail industry. It begins with an introduction to the sector and its importance in the Australian economy, highlighting the role of retailers in satisfying consumer demands. The report then examines the industry's dominant features, including its contribution to the country's GDP, growth trends, and segmentation based on product categories, market dynamics, and distribution channels. Furthermore, the analysis addresses issues of concern within the broad macro-environment, applying the PESTEL framework to assess the political, economic, social, technological, environmental, and legal factors impacting retail operations. The report also includes a Porter’s Five Forces analysis to evaluate the competitive forces within the industry, including the threat of new entrants, the bargaining power of suppliers and buyers. The analysis concludes with key findings and implications for the Australian retail sector.

Running head: INDUSTRY ENVIRONMENT ANALYSIS
INDUSTRY ENVIRONMENT ANALYSIS
Name of the Student
Name of the University
Author Note

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Table of Contents
1. Introduction................................................................................................................2
2. Industry dominant features.........................................................................................2
3. Issues of concern in broad macro-environment.........................................................4
4. Porter’s Five Forces analysis.....................................................................................8
5. Final analysis and questions.....................................................................................10
References....................................................................................................................12
6. Appendices...............................................................................................................15
Appendix 1...............................................................................................................15
Appendix 2...............................................................................................................15
Appendix 3...............................................................................................................16
Appendix 4...............................................................................................................16

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1. Introduction
Retail can be defined as the process that is based on the ways by which consumer
goods and the services are sold to consumers with the help of different distribution channels
that are available in the industry. The retailers are able to satisfy the demands which are
identified with the help of efficient supply chain of the company. Retailer is a term that is
applied in order to identify a service provider who aims at filling small orders that are
provided by huge number of individuals (Barros, Hernangómez & Martin-Cruz, 2016).
The analysis that will made in the report will be based on the Australian retail
industry. The high levels of competitiveness that exist in the industry will be analysed in the
report in detail. The ways by which external environment based factors are able to affect the
operations of organizations in Australian retail industry is an important part of the analysis
that will made in the report.
2. Industry dominant features
The retail industry of Australia is able to play the most important role in the economy
of the country. This sector has been watched closely by the analysts in order to understand
the ways by which the organizations are able to react to the levels of competition. The
domestic levels of consumption in the industry are a major part of the influence that the
organizations have on the GDP of the country (Biscaia et al., 2017).

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Figure 1 – Retail trade levels
Source – (Mordorintelligence.com., 2019)
The data based on Australian retail industry has been analysed by an organization
named “illion”. The failure rates of the organizations in retail industry can have a negative
impact on the ways by which the sector can grow in the future. The retail based sector of the
country has been fighting to gain the confidence and loyalty of the customers in an effective
manner. The sales in retail sector had been effective in the middle part of the year, however,

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the performance has shown a huge drop in the last part of the year. The growth of
consumption levels in retail industry has a major impact on the ways by which the sector has
been able to affect the economy of the country (Craik, 2015).
The value of Australian retail industry is expected to increase at Twenty Billion US
Dollars by the year 2024. The growth rates of the industry were expected to be more than 6%
in the next few years. The sector has been segmented based on the category of products,
dynamics of the market and the distribution channel. Australia can be considered to be one of
the most urbanized societies in entire world. Around 24 million people live in different areas
like, Melbourne, Brisbane, Perth and Adelaide and in some of the smaller cities as well
(Ibisworld.com.au., 2019). The per capita based GDP of the country has also been quite high
and value is around 50,000 US Dollars. The retail sector has been able to show positive levels
of growth in the last few years and increase in wages has been significantly low. The future
operations of retail sector are dependent on the disruptive forces which exist in the industry
which include, changes in the spending based patterns of the consumers and levels of influx
of the foreign organizations which mainly focus on the new approaches that are based on
retailing (Ibisworld.com.au., 2019).
3. Issues of concern in broad macro-environment
The operations of retail industry in Australia are vast and have been able to include an
important part of the entire population of the country. The implementation of modern
technologies has been helpful for the company to survive after the economic downturn that
has taken place in the last few years. The PESTEL framework can be used in the order to
analyse the macro-environment based factors that have an impact on the operations of
different organizations in the industry (Daspit et al., 2017).

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 Political factors – The policies that are developed by the government of
Australia have a major impact on the retail stores. The buying habits of the
consumers, international trade based laws have an impact on the retail
industry. The regulations developed by the government are based on the three
major departments the legislature department, executive department and
judiciary department. The investments made in the Australian retail industry
have been quite effective for the organizations that are already operating in the
industry. The legal framework of the country is highly transparent and
efficient and has a positive impact on business organizations that are a part of
the country (Devin & Richards, 2018). Australia has developed a position of a
significant market for different global organizations in Asia-Pacific based
region. The economy of Australia has been successful in depicting growth and
developing a stable business and political environment as well. The
environment in Australian retail industry and sophisticated market is quite
effective for the purpose of driving technology and innovation levels. The
physical retail based stores need to take into consideration different political
regulations in order to operate profitably in the industry. Australia is able to
provide great opportunities related to opportunities to retail organizations
(Durand, Grant & Madsen, 2017).
 Economic factors – The growth of population and rise in income levels is a
factor that has an impact on the retail industry. The demand for products that
are offered by different retail organizations have increased. Commercial
properties are offered at lower prices in Australia and the high levels cost-
competitiveness have been able to attract the global organizations in the
country. The foreign organizations have started the using Australia as for

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setting up their headquarters. Australia has been able to emerge as a low cost
base for the operations of organizations in the developed nations (Dyer et al.,
2015). The rates of currency exchange against dollars and euros are highly
favourable in nature. The economic condition of Australia is stable and the
growth of GDP of the country have been able to affect the retail industry in a
positive manner. The low rates of unemployment in the country are considered
to be major factors that have been able to affect the operations of different
retail industries in the country (Frynas & Mellahi, 2015).
 Social factors – The preferences of consumers are major social factors which
affect the organizations in Australian retail industry. The retailers in Australia
thereby need to be analyse the social trends in an effective manner in order to
provide the desired products to consumers. The advertisements which are
designed by the retail organizations have to be targeted towards the customers
with the help of proper identification of their buying trends (Liu, Margaritis &
Qiao, 2016).
 Technological factors – The technological factors are able to play a key role
in the ways by which organizations in Australian retail industry are able to
develop the services and products. Research and development that is
conducted by the organizations in retail industry are able to affect the ways by
which organizations can target the customers. The technological
advancements in Australia are supported by the government and funds are
provided for the purpose of research and development (Mandal, 2016). The
retail industry in Australia has also started implementing many different
technologies in the processes in order to attract the customers towards the
services and products that are offered to them. Different technologies that are

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being implemented by the organizations mainly include, point of sales system,
use of iPads to replace the cash registers. The physical retail stores are able to
compete with the online organizations with the help of proper implementation
of technologies (Meagher & Goodwin, 2015).
 Environmental factors – The changes that have taken place in weather
systems and the climate need to be considered by the retail organizations in
Australia. The Environment Protection Act of 1974 has been established in
order to ensure that the procedures which are implemented by the
organizations can be analysed by the government in an effective manner
(Nayeem & Casidy, 2015). The retail shops that offer food products need to
consider environmental factors in order to develop the operations in an
effective manner. The effects of the operations of organizations on the external
environment are considered to be a major part of the environmental factors.
The stores of different retail organizations also need to follow different
environmental laws in order to operate sustainably in the industry (Price,
2016).
 Legal factors – The legislative conditions need to be fulfilled by the
organizations in order to maintain their operations for a long time. The legal
conditions are considered to be important for the policies that are developed
by the retail organizations. The international laws and regulations need to be
considered by the multinational or global retail organizations for continuing
their operations in the industry. The contractual factors and other major
international regulations that are an important part of operations of Australian
retail organizations need to be considered in an effective manner (Rees, Smith

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& Hall, 2016). The credentials of the overseas buyers and partners also needs
to be taken into consideration by the Australian retail organizations.
4. Porter’s Five Forces analysis
The Porter’s Five Forces model can be used in order to analyse the retail industry of
Australia and the ways by which different market forces are able to affect the levels of
profitability of different organizations in the industry. The framework based on Porter’s five
forces is considered to be helpful for the organizations to take different strategic decisions in
an easier manner. The competitive advantage that can be developed by the organizations or
an industry as a whole can be analysed in detail with the help of this framework (Smith &
Teicher, 2017). Threats of the new entrants – The entry of new organizations in the
Australian retail industry is able to increase the levels of innovation and
competition. The organizations need to compete with the help of lower prices
or reduction of costs based on production as well. The value propositions that
are offered to the customers are also able to play a key role in the ways by
which organizations in the industry are able to operate in the retail industry
(Taylor, 2016). The challenges based on entry of new organizations in the
Australia retail industry are quite high as the development of business
operations in the industry is quite easy. Power - High
 Bargaining power of the suppliers – The suppliers in Australian retail
industry also play a major role in the development of prices for different
products that are offered by the consumers. A dominant position is thereby
formed by the suppliers who are a part of the Australian retail industry. The
high power of suppliers has a major impact on the ways by which the

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organizations are able to decide the levels of prices for products that are
offered to the consumers. Development of an efficient supply chain and
dedicated group of suppliers is important for the organizations in competitive
retail industry of Australia (von Bonsdorff et al., 2015). The prices of raw
materials are able to affect the ultimate prices of the services and products of
the organization. Power - High
 Bargaining power of the buyers – The buyers in retail industry of Australia
are highly demanding in nature. They expect to bed provided with the best of
products at lowest possible prices. This is able to put immense levels of
pressure on the operations of the organization in the industry. The product
prices are also affected in a huge manner by the bargaining power of the
buyers or consumers in the industry (Mordorintelligence.com., 2019). The
base of customers that is developed by the organizations in the industry need
to be high in order to reduce their power. Rapid levels of innovations are also
required by the organizations in order to maintain the effective customer base
in the industry for a longer period of time. The new and innovative products
will play a major role in reducing the bargaining based power of the buyers or
consumers (Mordorintelligence.com., 2019). Power - High
 Threats from the substitute products – The services or products that are
offered by different organizations in the retail industry of Australia are able to
meet the demands and needs of consumers. These threats are more relevant for
the organizations that based only on the products that are offered by them. On
the other hand, the service based organizations in retail industry of Australia
do not have to face these threats (Liu, Margaritis & Qiao, 2016). The services

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that are provided by service retail based organizations are able to distinguish
them from their competitors in a huge manner.
 Rivalry among existing players – The Australian retail industry is highly
competitive in nature. The levels of competition and rivalry among the
different retail organizations in Australia are also high. The two major
organizations that have been able to capture 80% of the total retail market
based shares are Coles and Woolworths. The two organizations provide
aggressive competition to each other based on the prices of the products. The
price wars between the two major organizations in Australian retail
organizations are aggressive in nature and are able to affect the products and
services that are offered to the consumers (Dobbs, 2014). The development of
sustainable differentiation is provided with utmost importance by the two
organizations which are a major part of the industry. The long term based
profitability of the organizations are affected in a negative manner by the price
based rivalries that exist between the major global organizations in the
industry. The proper collaboration with competitors is also able to play a key
role in the ways by which rivalry levels in the industry can be faced in an
effective way. The negative effects of competition can be reduced with the
help of innovation and differentiation in the products that are offered to the
consumers (Dobbs, 2014).
5. Final analysis and questions
The external industry based forces are able to affect the retail industry of Australia in
a huge manner. The levels of rivalry among the organizations in Australian retail industry are
intense in nature. The forces in the industry can be interrelated with each other with the help
of proper processes that are able to shape the industry. The most critical forces that are a part

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of the industry and are able to affect the operations of different retail organizations are the
buyers and the suppliers. The regulations that are developed by the government and
environmental effects of the operations can have a major impact on the ways by which retail
organizations in the country can operate. The major success factors of the industry are related
to the growth of the economic condition of Australia. The economic growth and cost
effective property prices are considered to be highly important for the future operations of
Australian retail industry. The retail industry of Australia is highly attractive in nature and is
able to provide major levels of opportunities to the organizations which plan to enter the
industry. The number of stars that can be provided to retail industry of Australia on a five-
point scale is 4.