Indian Market for Food Retail Sector - Essay Example

?654458 – Master Order 654458 Total Price: $30   Messages:   2 total  Style:  Chicago  Language Style:   Not a native speaker  Grade:   n/a  Pages:  5  Sources:   8  Introduction Woolworths, an Australia based organization, is one of the foremost names in the food retailing industry in Oceania. Operating since early 1920s, Woolworths has carved a niche not only in the Australia but has also extended its operations to New Zealand as well (Woolworths 2012). With the mission of being the “Fresh food people” to Australia, the organization has indeed lived up to their vision and, thus, has been successful in becoming a household name for fresh food within Australia and New Zealand. Essentially a service sector organization, Woolworths purchases its goods mostly from Australian farmers and since most purchases are domestic, their products are fresh. The report would focus on how such a successful firm can enter the Indian markets given that there is currently a retail boom in India as well (Ramaswamy and Namakumari 2009, 105). Since Woolworths is into fresh food, it is imperative that procuring the food items from Australia and shipping the same to India would not make sense. Thus, the best option to avail is to procure it from the Indian farmers and sell it in the same country, though the model they should follow has to be reviewed thoroughly in order to make a fitment between the demands of the Indian market and what Woolworths would like to offer. In the case of Woolworths, since the primary product offering is fresh food items as well as processed food, it is obvious that the basic requirement is not technological or even manufacturing plants but a sound infrastructure that would ensure strong linkages with the markets – both of the farmers who are to supply the produce on a regular basis as well as the customers who are to buy the same. However, the main focus of Woolworths should be on value addition to those products. The report would focus on the macro environmental factors that are likely to come into play if Woolworths were to expand into the Indian retail markets. Thus, the report would start with the PESTL analysis and then move on to the specifics of the firm by doing a SWOT analysis of Woolworths. Having done these two analyses, the recommendations, whatever suitable for Woolworths, would be made in order to make the expansion project a success. PESTL Analysis The first analysis that should be performed is the PESTEL Analysis, which is defined as amalgamation of various macro-environmental forces that drive the organization’s performance and comprises the political, economic, sociological, technological, ecological and legal forces (Viardot 2004). Furthermore, “it assists companies in the selection of attractive markets and the appropriate entry mode” (Aubert and Frigstad 2007). Political India is typically a politically stable nation that has been trying to attract FDI, and more so in retail. This should prove to be an advantage so far as the political environment of Woolworths in India is concerned (Krafft and Mantrala 2010, 130). Even Asian countries like India and China have slowly opened their doors to globalization, thereby welcoming conglomerates like Woolworths. In the wake of globalization, regulation and tax policies and FDI policies are to be relaxed considerably and even China and India have deregulated and delicensed various products making it further congenial for Woolworths to operate. However, various quarters of the political sector has exhibited stiff resistance to FDI in retail and especially multi brand retail (Datt 2008, 178). It is clear that since the government is keen on investment in FDI, thus the environment would work to the benefit of Woolworths in India. Legal The legal environment of Woolworths in India again points out to some of the encouraging features of increased investment in FDI on the part of the government as well as other legalities that may have to be fulfilled while opening retail outlets in India. The working age and other conditions are in parity with most other countries and child labour is banned in India. However, the regulatory framework is very structured along with the taxation system that imposes VAT on sales of products and the rate of taxation is also not very high. Economic Revelation that emerging economies like India would not be able to record a growth rate in GDP of over 8% (Bhupta 2011) seem to further put question marks on how well will the plans for expansion of Woolworths go with the macro environment they play in. Woolworths should be cautious and think of ways of staying unharmed from the adversities of an economic downturn by being proactive in responding to market changes but not being aggressive in entering new markets, especially India, too fast. Investment decisions should be taken keeping adverse fallouts and bail plans in hand including exit policies from such markets. Socio-Cultural The socio-cultural dimensions of the products offered by Woolworths are mixed. While India is a nation that is still conservative and thus individualism is only lately seeping in, so collectivism prevails. India being a socially inequitable nation, the power distance is moderately high. The uncertainty avoidance level of India is relatively low given that most people are not as upright and straightforward as are of some other nations like Germany. India has a relatively high long term orientation given its socio cultural milieu. Technological Technological changes are also well received by Woolworths and the report suggests that the organization continually changes or upgrades its technology in order to better serve the customers. An inclination towards keeping up with the technological changes in the environment in the wake of the age of information technology and an ICT (information and communication technologies) savvy populace (Woolworths 2012). SWOT Analysis SWOT analysis helps to summarize the key environmental issues and the strategic capabilities of an organization that are most likely to impact strategy development (Johnson, Scholes, and Whittington 2005, 102). Strengths Woolworths’ greatest strength is its inimitable brand equity Already established mechanism, high street malls and outlets across the continent of Oceania, wide range of established products and individual brands as well as labels Weaknesses The biggest weakness of Woolworths is that though the brand is a household name in Australia and New Zealand, it is not popular in other nations. Since brand awareness is not there outside Oceania, thus the firm has to start from scratch. Many players – both national and international – have already entered the market and have captured sizeable portions of the market, thereby making Woolworths’ expansion plans vulnerable in comparison to the existing standardized businesses these players have set up. Opportunities Opportunities are abound in the global retail sector. However, the biggest emerging markets are in Asia where various players like M&S have already started entering and thus, Woolworths should think of expanding their presence and consolidating the base in these nations. Only India has an estimated retail market of around 450 billion dollars. China and India are the two nations exhibiting the highest rates in GDP growth and the population of both the nations combined is more than 25% of the overall population of the world (The Economist, April, 15, 2011). Proper studies should be performed before entering these markets since though these markets are thriving and have immense potential due to the rising purchasing power of the middle class, Woolworths may have to “glocalise” in order to better suit the requirements of these markets (Joshi 2005, 22). Threats Since industry rivalry is high in the retail sector, so threats of price cuts and other competitive mechanisms that may ensue are high. Smaller players with lower investments and operating costs would focus on delivering the same products at a lesser price, thereby intensifying the competition in various segments, majorly in emerging markets. Global markets are likely to affect the performance of Woolworths and bearish markets may dampen their growth endeavors. Eyeing a good market, suppliers may also integrate vertically to come in direct contact with the customers, at least in some niche markets, thereby threatening lower sales for Woolworths. Recommendations As is evident from the PESTL as well as the SWOT analyses, India has a thriving market for food retail sector. Though players have already started cluttering the markets, the markets are also expanding. Thus, Woolworths should think of entering the Indian markets and think of positioning themselves as one that offers fresh food along with various benefits that the competitors do not offer. Moreover, brand awareness and new market development should be done meticulously by engaging in various marketing strategies. Promotional campaigns and advertisements should be invested in along with regular positioning exercises so that the distinct position of Woolworths should bring in the urban market segments to their stores. Reference List Aubert, A.E., and A.K. Frigstad. 2007. Strategic Analysis of Statoil’s International Competitiveness, 20. Bergen: Norwegian School of Economics and Business Administration. Bhupta, M. 2011. “Low Growth: The New Normal.” Business Standard. http://www.business-standard.com/india/news/low-growthnew-normal/455726/ Datt, Ruddar. 2008. Growth, Poverty and Equity: Story of India’s Economic Development. New Delhi: Deep and Deep Publications. Johnson, G., K. Scholes, and R. Whittington. 2005. Exploring Corporate Strategy: Text and Cases. Europe: Prentice Hall. Joshi, R.M. 2005. International Marketing. New Delhi: Oxford University Press. Krafft, Manfred, and Murali K. Mantrala. 2010. Retailing in the 21st Century: Current and Future Trends. Heidelberg: Springer Ramaswamy, V., and S. Namakumari. 2009. Marketing Management: Global Perspective Indian Context. New Delhi: MacMillan The Economist. 2011. India Outpaces China: Winning the Growth World Cup. Hong Kong: The Economist. http://www.economist.com/blogs/freeexchange/2011/04/india_outpaces_china Viardot, E. 2004. Successful Marketing Strategy for High-Tech Firms, Volume 5. MA: Artech House, Inc. Woolworths. 2012. http://www.woolworths.com.au/wps/wcm/connect/Website/Woolworths/About+Us/Our-Story/ Read More