Market Analysis of Woolworths Supermarket Industry in Australia

This report provides a comprehensive analysis of the macro and micro environment of the supermarket industry in Australia, with a focus on Woolworths. It also discusses different types of customer segmentation used by the company.

Research Project
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Executive Summary
Market analysis is the procedure of analysing the market so that appropriate strategies can
be frame to attain growth and success. Supermarket industry is the rapidly growing sector in
Australia and Woolworths is the leading supermarket group. Macro and micro environment
analysis assist in determining the impacts that the factors of business environment have upon
operations of company. Different types of segmentation help in segmenting the market based on
specific characteristics and aspects.
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Contents
Executive Summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
Analysis of macro environment...................................................................................................4
Analysis of micro environment...................................................................................................6
Customer segmentation...............................................................................................................7
CONCLUSION................................................................................................................................8
REFERENECS..............................................................................................................................10
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INTRODUCTION
Market analysis can be stated as a process of assessing the attractiveness and dynamics of
market within the particular industry. It provides information about the competitors, customers,
industries and other variables of market (Shtal, and et. al., 2018). Macro environment can be
stated as the surroundings which consists of several extrinsic factors that influence the decision
making of an organisation in supermarkets industry and have influence upon its performance.
Organizations which use customer segmentation perform their operations under the fact that each
customer is distinct and their marketing efforts will be served better if the target particular group
of people with the message relevant to them and encourage them to buy (Machado, and et. al.,
2017). The supermarket industry of Australia is dominated through two large national
organisations including Woolworths group and Coles group. In this report, Woolworths group is
taken into consideration which is one of the leading chain of grocery stores and supermarket
founded in year 1924. This report covers information about macro and micro environment of
Australian supermarket industry along with the types of segmentation that supermarket
organisation use.
MAIN BODY
Analysis of macro environment
The macro environment of supermarket industry in Australia can be analyses through
PESTLE analysis tool which consists of 6 external factors that affect the businesses in the
industry like Woolworths. These factors in relation to supermarket industry are as follows:
Political factor: It involves the forces which are imposed by government on organizations
in supermarket industry in Australia. It involves government policies, foreign policies, trade
restrictions, political stability, environment laws etc. Australia is a highly politically stable
country and the rate of corruption is less in the industry. The political situation shapes the
environment of business, which provides organizations like Woolworths with an opportunity to
grow. Due to political stability in the country, trading partner and foreign investors show their
interest towards carrying out activities associated with business and trading which provide
benefits to the organisation operating in supermarket industry of Australia (PESTLE Analysis of
Woolworths, 2016).
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Economic factors: These factors influence an economy as a whole that impacts on
operations of businesses in supermarket industry. It involves factors like tax rates, employment
rate, inflation rate, interest rate, growth rate, wage rate etc. The gross domestic product of
Australia was 1871.51 billion in year 2019 and due to outbreak of corona virus, there is downfall
seen in the economy of the country (Australia – Economy At A Glance, 2020). Apart from this,
because of slowdown in economic activity all over the world due to spread of corona virus
pandemic, the unemployment rate is also very high impact on the operations and activities of
business supermarkets industry. There is decrease in disposable income of people in Australia to
which the demand of products decreases. All this has hit the operations of businesses like
Woolworths massively and has majorly influence the overall sales of company.
Social factors: It involves different culture and social factors that impacts the buying and
consumption behavior of people regarding different services and goods. The supermarket
industry of Australia is influence by the preferences of consumer. Australian people prefer more
to purchase sustainable and environmental friendly products and services. In order to fulfill the
needs of consumers, Woolworths has altered its strategies through moving to different products
with green. Apart from this, the trend of having healthy and organic food is very prevalent in the
Australian market. So, it would be beneficial for company in supermarket industry to offer
customers with organic products in order to satisfy their needs. However, company has taken
different sustainability initiatives in order to deal with the changes in cultural and social
environment which provides it with the opportunity to attain sustainability in market (Feimi,
Kume, and Pulaj, 2016).
Technology factors: Changes in technology and technological advancement are the forces
which involved in it. There are several technological occur in the supermarket industry of
Australia. Use of high end technology assistant improving the shopping experience of people in
the supermarket industry. Using technologies like self-checkout machines, green refrigeration
technology SAP based merchandising platform etc. proves to be beneficial for the organisation
dealing in supermarket industry of Australia. However, use of obsolete technology may impact
on the operations of business and experience of consumers. So, in order to enjoy exponential
growth, the organisation like Woolworths need to stay updated with the technological changes
takes place in the market and execute them within the business.
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Legal factors: In supermarket industry, employee management regulations, recruitment
legislation and taxation policies part of legal framework of country. Organizations operating in
supermarket industry need to compliance with all these legislations in order to run their business
operations effectively and efficiently within the Australian market (Priporas, and et. al., 2019).
Apart from this, food licensing requirements are also crucial for the business to comply with.
Noncompliance of these legislations influence the working of organisation like Woolworths in
industry. However, formulation of new regulations by the Australian government also influence
on the working of organisation.
Environmental factors: It involves ecological forces which impacts survival, growth and
operations of the businesses operating in supermarket industry of Australia. The concern of
people towards the society is increasing continuously which has impact different initiatives taken
by organizations in the sector. In relation to Woolworths, numerous environment sustainability
initiatives have been adopted by the company to shift the practices of business towards circular
economy. It also ensures that the commodities which are environmentally sustainable are
sourced from suppliers. The company utilize reduced carbon refrigeration system that have
around 75% less potential of global warming in comparison to conventional systems (PESTLE
Analysis of Woolworths, 2020). This provides an opportunity to organisation to run its business
sustainably in the market. However, formulation of different environmental laws through
Australian government may influence the operations and activities of business.
Analysis of micro environment
The micro environment can be referred as the operating environment of company and the
forces influence the strategies, performance and decision making of business. It consists of
several factors including customers, market intermediaries, suppliers, competitors, company and
public. The micro environment analysis in relation to Woolworths is provided below:
Customers: They are considered as the king of market and contribute highly in growth and
success of company. The main purpose of organizations to operate their business is to satisfy the
needs of consumers and earn high amount of profits. This can be possible by providing high
quality goods and services to people at best prices and satisfy them. Woolworths adopt various
measures to respond to dynamic needs of consumers. It responds to feedbacks of customers very
seriously and is popular for its everyday reward loyalty program for consumers (Rogus, and et.
al., 2018).
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Suppliers: The company is in committed partnership that suppliers so as to develop
committed and long term relationship with them. This partnership of company with its suppliers
is beneficial for both. It also introduced speak up service within company where corruption,
fraud, product or people safety risk, breach of law, secret commission etc. can be report by
partners which in turn leads to value delivery to consumers in terms of goods and services.
Market intermediaries: They are the very important part of business as they directly
influence how business works. The main motive of company render customers with fresh
produce and for this, it come up with the practice 'free if not fresh'. This can be achieved with the
help of intermediaries. They make the company able to provide products to the customers timely.
With the help of intermediaries, Woolworths have many intermediaries in its distribution channel
with the help of which the products reach to consumers (Gichiri, 2020).
Competitors: There are various competitors available in the supermarket industry of
Australia who give tough competition to Woolworths. Although, the company has accomplished
a lot of rivalry advantage in the sector, still is facing competitive threat because of high demand
of products of Amazon in retail market. For example: In order to compete with the online giant
Amazon, Woolworths open its dark stores as a strategy so as to compete with Amazon
(Woolworths' secret strategy to beat Amazon, 2017). The operations of business are also
impacted in the retail sector by rivalry from international players. However, in retail products,
the company has acquired large market share and enjoy competitive advantage in market.
Company: The company has skilled and competent human resource, financial resource and
high innovative capabilities which leads it towards success in the Australian market. The
marketers of the company required to work in harmony with other departments to develop
customer relationships and value. For instance: All the departments of Woolworths work in
coordination and cooperation with each other to accomplish the organizational goals. Apart from
this, the company has adopted technological innovations in providing services to customers
which help it in satisfying them by providing them with high quality services.
Public: Public can be defined as the people or any group who has interest in company and
impact on the ability to achieve the objectives. The well-known example of public includes
consumer protection groups, local people, environmentalist and media persons. They all impact
on the supermarket industry of Australia. It is the responsibility of organisation to satisfy needs
of people along with customer and competitors. It is the way which has huge impact on
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wellbeing of organisation. Creation of goodwill among the people will help the supermarket
organisation like Woolworth to get favorable response. Organizations put their primary energy in
managing their relationship with distributor, suppliers and customers in an effective way
(Ballestar, Grau-Carles, and Sainz, 2018). The overall success of the company relies on the way
public in society view the activity of company. So, it is very necessary for the supermarket
organisation like Woolworths to monitor the public and get understanding about their opinions
and needs in order to dealing with them constructively.
Customer segmentation
Customer segmentation can be defined as a practice in which organisation divide its
customer base into groups which are same in particular ways related to marketing like interest,
gender, spending habits and age. There are four types of segmentation which the organisation
consider while segmenting the market. These includes geographic, psychographic, behavioral
and demographic segmentation.
Demographic segmentation: it is the most common type of segmentation which is used by
almost all the organisation. In this, the aspects considered by organisation to divide its market
includes age, occupation, education, marital status, ethnicity, gender, generation, income etc.
Geographic segmentation: in the segmentation type, customers are grouped by region,
state, country, market size or climate. The company requires to tailor its messages to different
geographic segments by keeping in mind the domestic weather or culture. Modifying the
marketing messages and offerings for distinct geographic segments help organisation in
supermarket industry of Australia to render greater value to customers as well as encourage them
to buy (Ballestar, Grau-Carles, and Sainz, 2018).
Behavioral segmentation: In this, the market is divided on the basis of the way consumers
interact with brand. It involves aspects like usage, occasion, thought process, buying behavior
etc. The organisation need to know about the actions of consumers in order to offer them with
the products and services which satisfy their needs.
Psychographic segmentation: in this, the market is divided on the basis of factors which
are related to the characteristics and personality of consumers. The dimensions considered in this
type of segmentation includes personality traits, lifestyle, motivations, values, attitudes, interest,
priorities, conscious and subconscious beliefs, psychological influences etc.
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In relation to the organisation in supermarket industry of Australia like Woolworths,
demographic segmentation is the most appropriate type of segmentation in which company
divide its market on the basis of income level. As the company is offering high quality products
to customers at convenient locations and in great price values, the segmentation is the most
appropriate one for the firm. The people who have high disposable incomes buy groceries if they
meant convenience and better quality (An, and et. al., 2018). This type of segmentation allow
company optimise its marketing strategy, improve products and services and developed long
lasting relationships with customers which will help in generating high revenues and attaining
sustainability in the market.
CONCLUSION
As per the above discussion, it can be concluded that in order to grow and get success in
market, it is very necessary for the organisation to perform micro and macro environment
analysis as this helps in analysing the factors which influence on activities and operations of
business. Apart from this, proper analysis of market will help company in developing appropriate
strategy that leads it towards attaining strong position in the market. Customers are the main part
of organisation who highly contribute in its success. Different types of segmentation include
psychographic, geographic, behavioural and demographic on the basis of which organisation
segment its markets and offer products accordingly.
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REFERENECS
Books and Journals
An, J., and et. al., 2018. Customer segmentation using online platforms: isolating behavioral and
demographic segments for persona creation via aggregated user data. Social Network
Analysis and Mining, 8(1), p.54.
Ballestar, M.T., Grau-Carles, P. and Sainz, J., 2018. Customer segmentation in e-commerce:
Applications to the cashback business model. Journal of Business Research, 88, pp.407-
414.
Feimi, D., Kume, V. and Pulaj, E., 2016. Macro environment and innovation in service sector.
The evidence from Albanian context. European Journal of Sustainable
Development, 5(2), pp.137-137.
Gichiri, M.W., 2020. The Influence of Micro Environment Factors on Marketing Mix Strategy: A
Case of Retail Businesses within Shopping Malls in Nairobi (Doctoral dissertation,
United States International University-Africa).
Machado, P.P., and et. al., 2017. Price and convenience: The influence of supermarkets on
consumption of ultra-processed foods and beverages in Brazil. Appetite, 116, pp.381-388.
Priporas, C.V., and et. al., 2019. The impact of the macro-environment on consumer scepticism
towards cause-related marketing. International Marketing Review.
Rogus, S., and et. al., 2018. Measuring micro-level effects of a new supermarket: do residents
within 0.5 mile have improved dietary behaviors?. Journal of the Academy of Nutrition
and Dietetics, 118(6), pp.1037-1046.
Shtal, T., and et. al., 2018. Methods of analysis of the external environment of business
activities.
Online
PESTLE Analysis of Woolworths, 2016. [Online]. Available through:
<https://freepestelanalysis.com/pestle-pestel-analysis-of-woolworths/>
Australia – Economy at A Glance, 2020. [Online]. Available through:
<https://www.marketresearchreports.com/market-research-reports-inc/australia-pestle-
analysis-macroeconomic-trends-market-research-report>
PESTLE Analysis of Woolworths, 2020. [Online]. Available through:
<https://www.swotandpestle.com/woolworths-limited/>
Woolworths' secret strategy to beat Amazon, 2017. [Online]. Available through:
<https://www.dailymail.co.uk/news/article-5112681/Woolworths-opens-dark-stores-
compete-Amazon.html>
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