MGT704: Global Business Management - Market View Analysis Report

This report examines the challenges and opportunities an Australian retail company faces when expanding into a new market segment. It employs a market-based view analysis, utilizing Porter's Five Forces Model and VRIO Analysis to assess the competitive landscape and internal resources. The report analyzes threats of new entrants, supplier and buyer power, substitute product threats, and existing competitor rivalry. It also applies the VRIO framework to evaluate the value, rareness, imitability, and organizational aspects of the company's resources. The analysis provides insights into strategic decisions, resource allocation, and competitive advantage in the context of global business expansion, offering a framework for understanding market dynamics and reducing risks associated with international ventures. The report concludes by emphasizing the importance of thorough research and analysis before entering a new market.

Running Head: GLOBAL BUSINESS MANAGEMENT 1
Global Business Management
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Executive Summary
The report highlights what threats and competition an Australian retail company can face when it
enters into a new market segment. There are various things that have to be studied and monitored
before planning an expansion for operational activities. In this report the market based view
analysis is performed by applying the frameworks of Porter’s Five Force Model and VRIO
Analysis in details. These concepts will educate and aware the company regarding the resources
and opportunities available in the target market.

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Contents
Introduction.................................................................................................................................................4
Michael Porter’s Five Forces Framework................................................................................................4
1. Threats of New Entrants..............................................................................................................4
2. Bargaining power of Suppliers....................................................................................................4
3. Bargaining power of buyers.........................................................................................................5
4. Threat from substitute products...................................................................................................5
5. Rivalry among the existing competitors.......................................................................................6
VRIO Analysis........................................................................................................................................7
1. Value...........................................................................................................................................7
2. Rareness.......................................................................................................................................7
3. Imitability....................................................................................................................................7
4. Organization................................................................................................................................7
Bibliography................................................................................................................................................9
Appendices................................................................................................................................................10

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Introduction
The report highlights market based views concepts and theories that the retail industries should
implement in order to expand their business operations in foreign markets. In this report
Australia is the domestic country and retail sector has been selected to analyze and identify
market views for expansion. Porter’s Five Force Model and VRIO Analysis are explained to
show the challenges faced by retail sector when they plan for expansion into a foreign market.
This framework will also assist in developing knowledge about expansion strategy.
Michael Porter’s Five Forces Framework
Porter’s Model is a holistic concept that helps retail industries to analyze their competitors and
make strategic decisions to reduce such challenges (Porter, 2017). This can be explained by
defining Woolworth’s analysis for food and staples retailing sector.
1. Threats of New Entrants
New entrants are often considered to be more innovative and have the capacity to bring new
ideas for conducting business activities; this generally puts Woolworth into a pressure. The retail
sector has to reduce the price of the product, reduce the cost and also provide the new
propositions to value the customers (Roy, 2011)
How the retail industries can tackle this problem
 By introducing new products and services at the time of launching its existence in the
new market segment, this will attract new customers and the old customers will be more
loyal to the company.
 The retail company should build economies of scale in order to reduce its fixed cost.
2. Bargaining power of Suppliers
Each and every retail company in Australia purchases their materials from different suppliers.
The suppliers of retail sector are in dominant position as they have the capacity to decrease the
profit margins the company. The suppliers are powerful and can access the bargaining power,
thereby earning a higher rate from the retail firms.

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How the retailers can tackle this situation
 By establishing effective supply chain with a number of buyers and not purchasing the
materials from a single supplier (Roy, 2011)
 By being innovative with new product designs, like using different types of materials, so
that if the price of the material is increased by one supplier; the retailer can shift to
another supplier
3. Bargaining power of buyers
Buyers have different desires and requirements. But almost everyone aims at getting the best
product at the minimum price. This puts a lot of pressure on the retailers while planning their
long term profitability.
How retailers can solve this issue
 The customer base must be large, so that it will reduce the bargaining power of the
purchaser. And also it will bring an opportunity for the retailers to increase its sales and
manufacturing process.
 Introducing innovative products because the customers often seek offers and discounts on
the old products (Deeb, 2016)
 The new product will help the company to lessen the defection of customers who are
already loyal to the company
4. Threat from substitute products
When the availability of a substitute product increases, the retail sector starts suffering.
Customers will buy products that have a lower price and offer the same satisfaction. Either the
company needs to launch a differentiated product or keep the price low in case of homogeneous
product. This can be explained with an example; Woolworth’s major competitor is Coles as it is
also engaged in offering similar types of retail products. Customers switch to the company that
offers lower price and a better quality.

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How this problem can be tackled
 By launching those products that the customers need, rather than focusing on what is the
customer purchasing
 By enhancing the switching expenditures
5. Rivalry among the existing competitors
The overall profitability depends upon the rivalry with the existing competitors. If any retail
sector is already doing well in the new market, it is strictly not advisable to expand in that market
or a country. The existing company has loyal customers and builds relationship with the
customers. It will be extremely difficult for the new retail company to be successful in this type
of market condition.
Solution to this problem
 By launching sustainable differentiated products
 For better competition it is advisable to build scale
 Collaboration with the existing competitors can work as a strategy to increase the market
share
By applying these strategies, a retail company can plan its expansion to the new selected foreign
market.

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VRIO Analysis
Another important market based framework that can identify measures to implement expansion
strategy is VRIO Analysis. This analysis gives relevant information about the company’s
resources and a deep understanding about the competitive advantage and weaknesses of the
company (Rafiq, 2014). It is explained by analysis the following factors of a retail company:
1. Value
This step demands the retail company to analyze the cost of the resources in the foreign market
and to check its availability.
2. Rareness
How rare is the resources in the targeted market, if it is very rare than the cost of raw material
will certainly increase. Therefore, it will not be a profitable move for the retail company to start
its operations there.
3. Imitability
This analyses checks whether the required resources can be imitated or not (Kim, 2015)
4. Organization
It is essential to determine the respective arrangement of the resources that the company will
need to start its business operations. It needs a process to check that is the resources supported by
the company’s existing operations arrangement, or it needs to be change. Implementing such
change process will add too much operational cost for the company (Frynas, 2015).
Therefore, performing VRIO Analysis will make the retail company alert and informed about
resource availability and reduce uncertainties and risk in the new market.

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Conclusion
This report can be concluded by stating that when an Australian retail company aims at starting
its retail operations in a new market or foreign market, it has to undergo a few research and
analysis by applying the Porter’s Five Model and VRIO Analysis. These two frameworks will
provide a detail knowledge and information about the availability and facilities that the company
avails in the new market. Applying this concept in viewing the market will reduce the global
pressure for any retail company.

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Bibliography
B2U, 2016. Porter’s Five Forces. [Online]
Available at: https://www.business-to-you.com/porters-five-forces/
[Accessed 6 8 2019].
B2U, 2016. VRIO: From Firm Resources to Competitive Advantage. [Online]
Available at: https://www.business-to-you.com/vrio-from-firm-resources-to-competitive-
advantage/
[Accessed 6 8 2019].
Deeb, Z., 2016. International expansion process for SMEs. A strategic analysis of the oil field
supply and services company "Benood". Munich: GRIN Verlag.
Frynas, J. G., 2015. Global Strategic Management. Oxfordshire: Oxford University Press.
Kim, W. C., 2015. Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market
Space and Make the Competition Irrelevant. Boston: Harvard Business Review Press.
Porter, M. E., 2017. Competitive Strategy: Techniques for Analyzing Industries and Competitors.
California: CreateSpace Independent Publishing Platform.
Rafiq, M., 2014. Principles of Retailing. London: Macmillan International Higher Education.
Roy, D., 2011. Strategic Foresight and Porter's Five Forces. Munich: GRIN Verlag.

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Appendices
Porter’s Five Force Model (B2U, 2016)
VRIO Analysis for Retail Sector (B2U, 2016)

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