Essay: Competitive Strategy In Retail Industry Of Australia.

Write a report on one of the following 5 cases, highlighting key aspects of competitive strategy:

1. Sydney Symphony Orchestra (Case 1)
2. The Movie Exhibition Industry (Case 8)
3. Australian Supermarkets (Case 3)
4. Carlsberg (Case 9)
5. IKEA India (Case 10)

This paper focuses on the key aspects of competitive strategy of the retail organizations of Australia given in the case study. An acquisition is defined as the process by which an organization purchases the ownership stakes of another company. The structure on which the sale of the company is dependent is known as acquisition structure. The paper will also and evaluate how the concept of acquisition and structure can be applied to these aspects. Furthermore, it will also evaluate how these concepts can be applied to improve the organizational performance and increase their market share.    

The political and legal factors of Australia plays an important role in acquisition strategy of an organization (Bastos et al., 2016). Due to the stable political and legal factors of the country, the economic factors of the country is equally stable. Companies like Woolworths, Coles, Aldi, etc. exercise huge influence over the market. The economic factors of the country provide a continued growth opportunity for the companies operating in the market. The consumers use technology to buy products from the companies. Coles and Woolworths both exert an unusual amount of influence over the market of Australia. On the international level, the supply chains of the organizations also play a significant role in acquisition strategy of an organization (Long et al., 2014).  These factors allow an organization to increase its flexibility and adapt to the existing market conditions. Organizations with flexible structure can adapt to the political factors of the country and they can develop a suitable business plan and increase their business volumes.  The external factors increase the market share and revenue of these companies. Revenue and market share of an organization plays an influential role in deciding their acquisition strategy (Wang, 2017). This motivates the organizations to form an acquisition deal with other companies to further increase their market share. 

The external factors of the country provide a supportive environment for these organizations to develop these strategies. It increases the capacity of an organization and increases their market share. The distribution networks will be more developed thus increasing the profitability of the organization. Organizations can acquire other organizations with similar products to reduce their production costs. It will also increase the profitability of both these organizations (Burke, 2017). It can also increase the market share of these organizations. Increase in the market shares exerts a positive effect on the organizational structure. Organizations with more market share are encouraged to have a flexible organization, thus enabling them to adapt to the market situations of the country.  Ability to adapt to the market situations allows the organization to further increase their market share and their reputation in the market.  Application of acquisition strategy of an organization enables to distribute their products in the market, using the more developed supply chains of the owner company.

Industry Analysis

The level of rivalry among the retail organizations of Australia is pretty intense, especially, Aldi is increasing the level of rivalry furthermore. According to Porter’s five forces model, the bargaining power of suppliers is less and the bargaining power of customers is high. Threats of new entrants and substitute products are less in the market, thus enabling the large organizations to increase their influence over the market (Brunsson and Olsen, 2018). These factors have an influential role in developing the organizational structure and their acquisition strategy.  Applying acquisition, an organization can develop a new range of products and reduce their production costs. If the suppliers of these organizations tend to have a greater deal of power over the organization, these organizations can acquire their suppliers to decrease the amount of their power. The rivalry among the organizations can be affected to a significant extent by the acquisition strategy of an organization.

For example, large organizations Like Woolworths develops an acquisition deal with smaller Australian retail companies like Aldi to increase the level of barrier in the market for new organizations to enter the retail markets of Australia. Woolworth bins battle for the David Jones having an offer of A$2.15bn (Ft.com, 2018). The deal effectively scuppers a $3bn proposed merger among the firms David Jones and Myer that reflected in the public attention in late January. They can develop new products as well, which can increase the market share of the company (Ericsson et al., 2018). Acquisition strategies of an organization can play a significant role in decreasing the threat of being substituted by new products.  Acquisition improves the level of production of an organization, thus affecting the level of competition within the market.  These five factors have a significant effect on the structure of the organizations. The organizations who can adapt themselves to the market situation can increase the quality of their products in the market. Increase in the quality of their products will also drive the level of competition within the market.  Therefore, it can be said that the acquisition strategy of an organization depends to a great deal on the five forces of the market and vice versa.   

Competition within retail supermarkets of Australia is pretty intense, as the organizations operating within it are always employing strategies to stay ahead of their competition. These organizations use their resources to develop competitive strategies to remain ahead of their competitors. Woolworths and Coles use their resources to increase their sales and discredit the products of each other (Shafritz et al., 2015). They use competitive marketing strategies to market their product all over Australia. However, Aldi is another company who is operating in the same market with a lesser number of products, most of which belongs to the home-brand products. For example, Wesfarmers acquired the respective Coles group Ltd for the amount of $19.3 billion as making the biggest takeover in Australia (Group, 2018). This acquisition made three new division as Coles, Kmart and target while few others firms joined them. Woolworths can develop acquisition deal with small organizations like Aldi, to expand their market into a completely new market which is the home-brand markets. The products of both Woolworths and Coles are similar and their competitive strategies give them a unique advantage in the market. Applying acquisition, they can venture into a new market category and develop products according to the demands of the new market segment.

Competitors

Another retail group known as IGA group can be a competitor to these organizations. However, it does not have any significant influence on the market like the other brands (Barth, 2018). The level of competition within the market plays an influential role in the organizational structure. Increase in the level of competition prompts an organization to adapt their organizational structure according to the demands of the market. The flexible organizational structure allows the organization to adapt to the market situations and increase the level of performance according to these situations (Madsen and Walker, 2015). Therefore, it can be said that level of competition do have a significant effect on the acquisition process and structure of an organization. Conversely, it can also be said that application of acquisition strategy has a significant effect on the level of competition in the markets of Australia.  The acquisition allows the organization to improve the level of performance thus driving the competition within the market.   

The main players of the retail market of Australia, which are Woolworths and Coles, have similar products in the market. Brand awareness of both these stores is similar and they have their stores in many locations, and they have a similar amount of financial and other resources (Morgan and Strong, 2015). Aldi does not have the same amount of resources, so they provide products which are priced at low values. Application of acquisition will allow the small companies of the market to develop better quality products with the help of the owner company. For example, Aldi can access to better resources if large organizations form an acquisition deal with them. They can use the resources of the owner company to develop and distribute their products. The level of performance of these organizations will increase due to the application of acquisition strategy. The organizations can use the resources of larger organizations to promote their products within the market (Larsen et al., 2017). The large organizations can also benefit from the application of acquisition strategy. The organizations can expand their business volume and diversify the quality of their products. These organizations can also develop a flexible organizational structure and adjust to the situations of the market.  Thus they can control the quality of their products and profitability by adjusting to the situations of the market.

The main purpose of acquisition of an organization is to increase their capability and diversify the range of their products.  The major organizations in Australia's retail market are Woolworths and Coles, along with Aldi in the market. Applying acquisition, the organizations can increase the range of their capabilities. For example, Aldi can increase the range of their capabilities by merging with large organizations like Coles and Woolworths. It can also be said, that Coles and Woolworths can also increase their brand image by developing an acquisition deal with Aldi. These organizations can increase their market share and overall revenue by applying acquisition strategy, they will also be able to maintain the competitive advantage within the market with the help of these strategies. The organizations will be able to market their products in the market and reach millions of target customers with the help of these strategies (Grant, 2016). They will be able to determine the prices of their products and increase the level of customer satisfaction. Increase in the capabilities can also create a significant influence on the structure of the organization.

Resources

The flexibility of the organization structure increases, thus enabling them to adapt to the changes in market situations and survive during the fluctuations. The organizations can promote their products in a better way with the help of acquisition strategy (Wheelen et al., 2017).  They will be able to increase the competitive advantage in the market by applying acquisition methods. Both Coles and Woolworths have similar capabilities in the market, which enables them to maintain their position in the market. Aldi and IGA do not have these capabilities, which hampers their growth. Due to an acquisition an organizational structure changes. A flow of communication increases with the organization and it affects the decision making capability of a firm.  Acquisition can increase the level of the performance of an organization, thus it also increases their productivity.  The capability to quickly respond to the strategies of the competitor increases with the help of acquisition. It also increases the flexibility of the organizational structure thus allowing them to improve their level of performance and build their brand image in the market in an innovative way.   

The large retail companies in Australia, like Woolworths, Coles etc. have employed competitive strategies to promote their products in the market. These strategies have enabled them to increase their competitive advantage in the market. Their competitive strategies have allowed them to have a significant amount of power in the retail market of the country. They have employed the strategy of low-cost differentiation in the market (Rothaermel, 2015). Thus the power of borrowers over the organization is diminished and the organization can control the market to a significant extent. These strategies enable them to use their resources in an influential way. These strategies have a significant influence on the structure of the organization. The organizations have a flexible structure which enables them to adapt to the market situations of the country. They can develop a strategy to market their products of both ranges, high cost, and low cost.

However, the competition in the low-cost product market is high, thus it can affect the profit of these organizations. The giant merchants of the retail market of Australia have decided to develop much smaller store to compete in the smaller market with Aldi and IGA stores. Application of acquisition can result in an increase in the market share of the organization in the retail market (Belleflamme and Peitz, 2015). These acquisitions can enable the organizations to increase their revenue and decrease the potential revenue of other companies in the market.  The capacity of developing competitive strategy increases due to the application of acquisition. The structure of an organization due to the acquisition, as more people comes together and it increases the complexity of the organizational structure (Sagwa et al., 2015). The product distribution of the company and their reputation increases due to the acquisition. Thus it can be seen, that acquisition can actually improve the organizational structure.                         

Conclusion 

The paper concludes that acquisition and organizational structure have a significant role in increasing the competitiveness of an organization.  It can increase the efficiency and effectiveness of the performance of the organization. it also allows the organization to increase their market share and profitability and maintain the competitive advantage in the market.  However, it can be seen that an organization develops their acquisition deal by carefully evaluating their external factors, conducting industry analysis and evaluating the competitive strategies of their competitors.  The organizations can develop a better competitive strategy with the help of acquisition. The acquisition also improves the performance of the firms by improving the organizational structure. 

References 

Barth, J.A., 2018. Influencing Purchasing Positioning–Deriving a Model Based on External Factors. Development, 3(1), pp.11-16.

Bastos, P., Monteiro, N.P. and Straume, O.R., 2016. Foreign acquisition and internal organization. NIPE Working Papers Series, (NIPE WP 05/2016).

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