Strategic essay: Introduce a new white goods outlet in Sydney

1.0 Exclusive Summary

The purpose of the strategic essay is to introduce a new white goods outlet at Sydney. In order to successfully enter the target market and launch the store, managers need to carefully manage, operate and design appropriate market strategies. With the development of economic globalization, the relationships between the enterprises are becoming closer. And the enterprises are facing increasingly intense competitions with each other. In this rapidly developing society, marketing is more important for enterprises than ever before. Using the appropriate marketing concept to settle the issues between enterprises and customers is the key to success.

This paper chose Sydney as the target location to open a white goods outlet. As the largest city in Australia, Sydney has a population of about 4.4 million spread over 12,000 square kilometers. Sydney is a metropolitan and tourist attraction center which attracts lots of visitors and foreigners from all over the world. The consumer base of Sydney is huge and the demand for high quality appliance and facility large. This paper is a critical analysis which describes the existing market environment and industry information. The paper firstly gave a brief introduction about the local retailing industry. The following part of the paper defined the mission and the marketing objectives of the target white goods outlet and re-emphasis on the Five Forces model. Implementation plan is more explicit which describes the market condition, promotion, distribution, pricing, product and other related areas of launching the new business. Finally, we made some suggestion and recommendation on the marketing strategies. This marketing plan is just preliminary and need adjustments when implemented.

2.0 Introduction

This paper chose Sydney as the target location to open a white goods outlet. As the largest city in Australia, Sydney has a population of about 4.4 million spread over 12,000 square kilometers. Sydney is a metropolitan and tourist attraction center which attracts lots of visitors and foreigners from all over the world. The consumer base of Sydney is huge and the demand for high quality appliance and facility large.

Australia is one of fast developed countries. Australian people are early adopters of new innovations and technologies. White goods and durable appliances are life necessaries of Australians. In the past, electronic appliances are durables. Now, these goods are shifting from analogue televisions to HD digital televisions and from video cassettes to DVDs. People cater to the latest electronic gadgets, especially new models and functions. People's consumer behavior tends to technology-loving attitude, which explains the outstanding performance in high-tech and innovative consumer electronics in Australia in 2008 despite of the global economic downturn. According to Euromonitor's 2009 electronic appliance industry report, there were growing volume sales in all white goods sectors but because of the fiercer price competitions, manufactures had little retail profit margins. Along with the economic recover, the white goods sales in Australia will certainly raising.

Australian people's shopping habit and trends indicate that the market for white goods appliance is very promising. Open a new outlet at Sydney is a wise business decision. According to past records, Australia people would like to spend more on new and innovative electronic appliance. Open a white goods outlet in 2010, when the economy goes better just satisfies people's needs.

3.0 Types of stores in Sydney

As an international metropolis, Sydney is a shopping blissfor local people and travelers. As the key business and pleasure, retailing is an important component of local business and tourism. Sydney has lots of large department stores, malls, and shopping centers which located within several blocks of each other.

Retailing business is very promising in Sydney, such as department store, kiosk, or boutique. Consumers can order products by mail or from direct consumption by manufacturers. As an excellent venue for business activities and tourism, Sydney has a complex shopping network. Here presents a brief introduction to three main shopping malls in Sydney: the Queen Victoria Building, the Strand Arcade and the Skygarden.

The Queen Victoria Building: The Queen Victoria Building (QVB) opened in 1898 to celebrate Queen Victoria's Golden Jubilee. Today, QVB is one of the most impressive examples of Victorian architecture in Sydney. QVB attracts lots of consumers including both local Australians and foreign visitors.

The Strand Arcade: The Stand Arcade is similar to QVB. The Stand Arcade was started in 1892 and destroyed in 1976. Now, it is a place for Australian's top jewel, luxury products, boutiques and top designer labels. The Stand Arcade located at the center of Sydney, extends from the middle of Pitt Street mall through to George Street, the business and shopping center of Sydney.

Skygarden: Skygarden is a mall including shopping, fine food and cuisine, and recreation facility. It provides beautiful and stylish environment. Skygarden is popular among local people and travelers. It is located at business and shopping district, at the center of Sydney.

4.0 Porters five forces model

Five forces model is a widely used method to measure the internal and external factors which affect the development product or industry. Five Forces model was first proposed by Michael Porter who used a framework to show the five forces which influence an industry. This model can help management team to better understand industry construction, context, and rival firms and other factors which impact on the firm's operations. Here presents a graph shows the relationship of the five forces model.

According to Porter, the Five Forces Model depicts on the micro environment of the product. The Five Forces model inflects the internal and external environment of the target industry. Porter's fie forces include the threat of the substitute products, the threat of established rivals, the threat of new entrants, the bargaining power of suppliers and the bargaining power of customers. Here is a graph which clearly presents on the relationship of the five forces:

The following part will explain each part of the Five Forces model regards to the white goods outlet.

4.1 The substitute products

Substitute products refer to similar products from other manufacturers. The threat from substitutes or alternatives exists when prices, quality or other factor change. As more substitute products become available, consumers will have more choices for the same kind of item. This will greatly increase the competition between homogeneous products. Before establishing a white house store in Sydney, managers should carefully analyze the market substitutes. One way to deal with the alternatives is to promote high-tech or innovative products, which can clearly distinguish our products from other suppliers. Substitutes will also have great impacts on industry through prices. When making purchasing decisions, people will carefully compare the prices between similar products. Our white goods store should carefully analyze other store's prices in order to set reasonable prices for our products.

4.2 The threat of established rivals

Benign competition between manufacturers can accelerate the development and update of products. Corporations strive for competitive advantages. Rivalries are common among firms across various industries and greatly affect production costs and profits. Industry concentration and market share are two main indicators to measure the rivalry intensity. Table 1 & 2 shows the sales volume of all consumers electronic in Australia during 2003(2004) to 2008(2007).

The consumer electronic appliance market in Australia is especially fierce. It is like a battlefield for many domestic and multinational giant competitors, such as HP, Nokia, Acer, Apple, Sony, Samsung, Motorola, Dell and etc. Besides these leading suppliers, Australia has many smaller brands like Optima, JBL, Bose and etc. Suppliers and manufacturers occupy different market segments, for example, the market leaders in in-home electronics include HP, Dell, Acer; in portable electronics they include Nokia, Motorola and Samsung; and in in-car electronics market they include Pioneer, Kenwood and Alpine. Before opening the outlet, managers should be aware of the potential and existing rivals. The new outlet should try to think of some new promotion strategies and other methods to secure market share.

Here is a summary of several ways to deal with the threat of established rivals:

Ø Change product prices: The outlet could lower product prices to attract consumers and gain a temporary advantage.

Ø Increase product differentiation: The store implement innovations, new features in manufacturing which could distinguish its product from other competitors.

Ø Diversify the distribution channels: The new store could apply the vertical integration or outsourcing its distribution business to other company. The outlet could choose new distribution methods to increase customer satisfactions and lower the sales costs.

4.3 The threat of new entrants

New entrants to an existing market will certainly bring competitions to the whole industry. According to Principles of Economy, any firm has the right to enter or exit a market. For example, the opening of the white goods outlet will bring competitions to local electronic appliance retailing business. Other stores may want to prevent the entry of the new outlet. In reality, industries who holds high profits and market shares often inhibit other rivals or competitors from entering the market. They will apply barriers to entry to new comers.

Barriers to entry violate the nature of perfect competitive market. Barriers to entry reduce the rate of new firms, which could help other company maintain normal level of profits. There are several forms of barriers to entry:

Ø Government trade barriers: Governments take actions to protect local industry and corporations. For example, government imposes high tariffs on imported goods and high standards to enter domestic market.

Ø Patents: Companies often use patents to protect ideas and knowledge which provide competitive advantages. Companies prevent other from using the techniques which build a barrier to entry.

Ø Organizational Economies of Scale: Manufacturers produce goods and services at the point where unit costs for production are at minimum. This is called minimum efficient scale (MES). Companies use MES to lower production costs which produce barrier for other producers.

4.4 The bargaining power of suppliers

The bargaining power of suppliers refers to the impact that consumers have on suppliers and producers. Monopsony is a market where many producers and suppliers and one buyer. Under this situation, the buyer has a great impact on the price. Here are a few behaviors of powerful buyers:

Ø Concentrated: In this situation, buyers are concentrated and they take significant market share.

Ø Big purchase: Buyers purchase a large quantity of products.

Ø Threat: Buyers have significant integration threat, which can threaten producers and manufacturers.

4.5 The bargaining power of customers

The bargaining power of suppliers refers to the impact that consumers have on suppliers and producers. Monopsony is a market where many producers and suppliers and one buyer. Under this situation, the buyer has a great impact on the price. Here are a few behaviors of powerful buyers:

Ø Concentrated: In this situation, buyers are concentrated and they take significant market share.

Ø Big purchase: Buyers purchase a large quantity of products.

Ø Threat: Buyers have significant integration threat, which can threaten producers and manufacturers.

5.0 The macro environment

Macro environment refers to the external business and economic conditions. The 2009 macro environment of Sydney is greatly affected by the global financial tsunami. Australian local people had less money and savings to spend on white goods. The number of visitors to Sydney also decreased a lot. Economic recession is a threat to the national economy. Economics and market analysts forecasted a slow down in purchasing power partly due to the saturation of the market and the economy turndown. Professionals pointed that the unemployment rate will increase in the next year, which will lead to decrease in disposable income of households and individuals. People are less likely to by products just because of impulses. The slow down of the market will largely depend on the time period of the economic recession.

The macro environment in 2010 will turn better. Open a white goods outlet in Sydney in 2010 will meet the economic recovery. People will return their habits to purchase high-tech and innovative product. A good white goods outlet will attract more consumers and travelers.

6.0 The industry product life cycle

An industry will go through several stages from introduction to growth, maturity and decline. The following table described the current life cycle of new outlet business in Sydney. The life cycle diagram clearly shows the market level of the target industry or product. Manufacturers need to apply succession of strategies as a product or industry goes through its life cycle. The conditions or market variables will change over time and must be identified and managed as it moves through succession of stages. The following form shows the stages of retail industry, according to product, pricing, profit, distribution and promotion.

Introduction

Growth

Maturity

Decline

Product


Pricing


Profit


Distribution


Promotion


As a new white goods store in Sydney, the new outlet is at the beginning of its product life cycle. Everything is new for the outlet. It faced lots of competitions from other competitors. This new store sells white goods or durable electronics, which already occupied a stable market in Australia economy. So for the product part, the outlet is at a mature level. For the beginning of the business, the outlet will launch many promotions such as low price sales, voucher, and coupons. The outlet wanted to use promotion and sales activities to attract more consumers. Product prices of the new outlet will remain relatively low due to the intense competition in the white goods industry. At the initial operation stage, the outlet will not demand high profit. The outlet would like to sacrifice its profit margin to attract customers. So the price and profit life cycle is at beginning. The new outlet will use other stores mature distribution channels. The new store will not explore a new distribution channel because it is expensive and time-consuming. So the distribution is at the mature level. Promotion is one of the most important components of the outlet. Initially, the purpose of the promotion is to attract more consumers. The most common way is to cut prices. So the promotion method or level is at the beginning of the whole product life cycle.

7.0 Strategic development and key trends in Australia white goods industry

According to related researchers and industry report, Australia durable appliance market has five key trends. The paper will illustrate on each trend and its impact and development.

7.1 Higher demand for internet products

Compared to 2-4 megabit per second internet speed, Australians only share 256 kilobit a second. The development of internet infrastructure in 2007 greatly increased Australian people's internet speed. The acceleration of internet speed greatly increased local people's demand for higher quality computer devises and related product. We believe that with the rapid updates of internet techniques and resources, people will buy more electronic product.

7.2 The impact of geographic segmentation changes

According to the researches, Australian people were living under high pressure of debt and mortgage. More and more people choose to live in suburbs and nearby areas. These people choose to drive to work places, downtowns and central business centers (CBD). People need more remote and mobile products to keep touch with the outer world.

7.3 The impact of economic recessions

Similar to the UK, US and Europe, Australia underwent recessions due to global financial turbulence. Australia economy slowed sharply in 2009. The national economic turndown greatly affected people's incentives for new white goods. Along with the global economic recovery, Australian economy will back to normal level. People will increase expenses on appliance and white goods. The future of white goods industry is still promising.

7.4 The impact of environment protection

As one of the fastest climate change countries, Australia exposed great risks of environment protection. Environmentalists are concerned about the climate changes and other side effects. Electronic appliances which have low level of carbon emissions become Australians favorite. With regards to carbon emissions, several lobby groups are unhappy with the government's reduction plans. Green groups have been lobbying for 2020 reduction targets to be set at a minimum of 25 percent. Industry and business said this would be economic suicide, particularly in the current economic climate. Recently the targets are expected to fall somewhere between 5 and 25 percent. Environmental friendly durable appliance will take bigger market share in the future.

7.5 People love to spend on gadgets

As one of the developed countries, Australia is most known for high technologies and innovations, from IT products, to DVD players. Australian people are willing to accept new products rather than resist changes. Australia is also one of the leading countries whose communication technology developed rapidly. Take high technologies for example, Australia is undoubtedly among the world leaders.

Due to the bad performance of Australia economy, people's attitude and willingness to buy new products are decreasing. Higher unemployment and lower income made it hard for households and individuals to spend more money on white goods. According to past market research, Australian people tend to spend money on big appliance. People will begin to buy white goods when economy recovers.

8.0 Conclusion

This strategic marketing plan aims to provide detailed information about the product and marketing strategies. The purpose of the strategic report is to open a new white goods outlet in Sydney. This report drew a big picture of the market information, product introduction, promoting strategies, and future trends. This strategic paper is for analyzing the feasibility of open a new store at Sydney and analyzing the potential opportunities and threats for the market. The Australian white goods industry is very competitive. This paper used Five Force model to understand the internal and external environment of opening a new store. In order to successfully launch the outlet, managers need to carefully analyze the market and make an explicit plan to document and anticipate the future trends of the durable appliances market.

Appendix

Appendix Table 1 Consumer Electronics Company Shares 2003-2007

% retail volume

Company 2003 2004 2005 2006 2007

Hewlett-Packard 9.8 9.2 9.5 9.8 9.9

Australia Pty Ltd

Nokia Australia & New 14.9 13.9 9.4 8.4 7.9

Zealand

Dell Computer Pty Ltd 6.9 6.7 7.3 7.8 7.6

Samsung Electronics 4.0 5.2 6.2 6.4 6.5

Australia Pty Ltd

Motorola Australia Pty 2.5 4.5 6.2 6.8 6.4

Ltd

Acer Computer Australia 3.6 4.2 5.8 6.4 6.4

Apple Computer 1.7 3.5 6.3 5.8 5.8

Australia Pty Ltd

Sony Australia Ltd 5.8 4.8 4.5 4.7 5.2

Pioneer Australia Pty Ltd 2.7 2.7 3.0 3.1 3.0

LG Electronics 2.0 2.5 2.8 2.9 2.9

Australia Pty Ltd

Panasonic Australia Pty 4.6 4.0 3.5 2.7 2.6

Ltd

Sony Ericsson Mobile 3.4 3.7 3.1 2.9 2.6

Communications AB

Canon Australia Ltd 1.1 1.4 1.7 2.0 2.2

Creative Labs Pty Ltd 0.1 1.1 2.1 1.8 1.7

Philips Australia Pty Ltd 1.7 1.8 1.5 1.5 1.6

TEAC Australia 2.4 1.7 1.4 1.4 1.6

Kodak Australia Ltd 0.3 0.8 1.1 1.3 1.5

AsusTek Computer Inc 1.2 1.2 1.3 1.4 1.4

Kenwood Electronics 1.3 1.2 1.1 1.1 1.1

Australia Ltd

Lenovo Group Ltd 0.8 0.6 0.7 0.8 0.8

Olympus Australia Pty Ltd 1.0 0.9 0.6 0.7 0.7

Maxwell Optical 0.7 0.7 0.6 0.6 0.7

Industries Pty Ltd

Sanyo Oceania Pty Ltd 1.0 0.7 0.6 0.6 0.7

Toshiba (Australia) Pty 0.4 0.4 0.5 0.6 0.7

Ltd

Alpine Electronics of 0.7 0.6 0.6 0.6 0.6

Australia Pty Ltd

Fujifilm Australia Pty 0.2 0.3 0.4 0.5 0.5

Ltd

NEC Australia Pty Ltd 0.3 0.3 0.3 0.4 0.5

Palm Inc 0.2 0.3 0.3 0.3 0.4

JVC Australia Ltd 0.7 0.5 0.4 0.4 0.4

CR Kennedy & Co Pty Ltd 0.1 0.3 0.5 0.3 0.3

Woolworths Ltd 0.4 0.3 0.3 0.3 0.3

Casio Computer Co Ltd 0.2 0.2 0.3 0.3 0.3

Clarion Australia Pty Ltd 0.3 0.3 0.3 0.3 0.3

TomTom International BV - - 0.1 0.2 0.3

Palsonic Corp 0.2 0.2 0.2 0.2 0.3

Navman Ltd - - 0.1 0.1 0.2

Eclipse Computing 0.1 0.1 0.1 0.1 0.1

(Australia) Pty Ltd

JB Hi-Fi Ltd - 0.1 0.1 0.1 0.1

Mistral Appliances Pty 0.2 0.2 0.2 0.2 0.1

Ltd

Sansui Electronic Co Ltd 0.2 0.2 0.1 0.2 0.1

Optima Computer 0.2 0.2 0.2 0.2 0.1

Technology

Sharp Corp of Australia 0.2 0.2 0.1 0.1 0.1

Pty Ltd

Standard Communications - - 0.0 0.1 0.1

Pty Ltd

Onkyo Corp 0.2 0.2 0.1 0.1 0.1

VME Systems - 0.0 0.1 0.1 0.1

Yamaha Music Australia 0.2 0.1 0.1 0.1 0.1

Harman International 0.2 0.1 0.1 0.1 0.1

Industries Inc

Bose Pty Ltd 0.1 0.1 0.1 0.1 0.1

Others 21.2 17.6 14.0 12.9 12.9

Total 100.0 100.0 100.0 100.0 100.0

Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 2 Consumer Electronics Brand Shares 2004-2007

% retail volume

Brand Company 2004 2005 2006 2007

HP Hewlett-Packard 7.9 8.1 8.3 8.2

Australia Pty Ltd

Nokia Nokia Australia & New 13.9 9.4 8.4 7.9

Zealand

Dell Dell Computer Pty Ltd 6.7 7.3 7.8 7.6

Samsung Samsung Electronics 5.2 6.2 6.4 6.5

Australia Pty Ltd

Motorola Motorola Australia Pty Ltd 4.5 6.2 6.8 6.4

Acer Acer Computer Australia 4.2 5.8 6.4 6.4

Sony Sony Australia Ltd 4.8 4.5 4.7 5.2

iPod Apple Computer 1.8 4.3 3.6 3.8

Australia Pty Ltd

Pioneer Pioneer Australia Pty Ltd 2.7 3.0 3.1 3.0

LG LG Electronics 2.5 2.8 2.9 2.9

Australia Pty Ltd

Panasonic Panasonic Australia Pty 4.0 3.5 2.7 2.6

Ltd

Sony Ericsson Sony Ericsson Mobile 3.7 3.1 2.9 2.6

Communications AB

Canon Canon Australia Ltd 1.4 1.7 2.0 2.2

Apple Apple Computer 1.7 2.0 2.1 2.1

Australia Pty Ltd

Creative Creative Labs Pty Ltd 1.1 2.1 1.8 1.7

Compaq Hewlett-Packard 1.3 1.4 1.6 1.7

Australia Pty Ltd

Philips Philips Australia Pty Ltd 1.8 1.5 1.5 1.6

TEAC TEAC Australia 1.7 1.4 1.4 1.6

Kodak Kodak Australia Ltd 0.8 1.1 1.3 1.5

Asus AsusTek Computer Inc 1.2 1.3 1.4 1.4

Kenwood Kenwood Electronics 1.2 1.1 1.1 1.1

Australia Ltd

Lenovo Lenovo Group Ltd - 0.7 0.8 0.8

Olympus Olympus Australia Pty Ltd 0.9 0.6 0.7 0.7

Nikon Maxwell Optical 0.7 0.6 0.6 0.7

Industries Pty Ltd

Sanyo Sanyo Oceania Pty Ltd 0.7 0.6 0.6 0.7

Toshiba Toshiba (Australia) Pty 0.4 0.5 0.6 0.7

Ltd

Alpine Alpine Electronics of 0.6 0.6 0.6 0.6

Australia Pty Ltd

FujiFilm Fujifilm Australia Pty Ltd 0.3 0.4 0.5 0.5

NEC NEC Australia Pty Ltd 0.3 0.3 0.4 0.5

Palm Palm Inc 0.3 0.3 0.3 0.4

JVC JVC Australia Ltd 0.5 0.4 0.4 0.4

iRiver CR Kennedy & Co Pty Ltd 0.2 0.3 0.3 0.3

DSE Woolworths Ltd 0.3 0.3 0.3 0.3

Casio Casio Computer Co Ltd 0.2 0.3 0.3 0.3

Clarion Clarion Australia Pty Ltd 0.3 0.3 0.3 0.3

TomTom TomTom International BV - 0.1 0.2 0.3

Palsonic Palsonic Corp 0.2 0.2 0.2 0.3

Navman Navman Ltd - 0.1 0.1 0.2

Eclipse Eclipse Computing 0.1 0.1 0.1 0.1

(Australia) Pty Ltd

Soniq JB Hi-Fi Ltd 0.1 0.1 0.1 0.1

Magnavox Mistral Appliances Pty Ltd 0.2 0.2 0.2 0.1

Sansui Sansui Electronic Co Ltd 0.2 0.1 0.2 0.1

Optima Optima Computer Technology 0.2 0.2 0.2 0.1

Sharp Sharp Corp of Australia 0.2 0.1 0.1 0.1

Pty Ltd

Garmin Standard Communications - 0.0 0.1 0.1

Pty Ltd

Onkyo Onkyo Corp 0.2 0.1 0.1 0.1

SanDisk VME Systems 0.0 0.1 0.1 0.1

Yamaha Yamaha Music Australia 0.1 0.1 0.1 0.1

JBL Harman International 0.1 0.1 0.1 0.1

Industries Inc

Bose Bose Pty Ltd 0.1 0.1 0.1 0.1

Pentax CR Kennedy & Co Pty Ltd 0.1 0.2 0.0 0.0

IBM Lenovo Group Ltd 0.6 - - -

Others 17.6 14.0 12.9 12.9

Total 100.0 100.0 100.0 100.0

Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Reference

Elizabeth Parsons and Pauline Maclaran, 2009, Contemporary Issue in Marketing and Consumer Behaviour, Butterworth-Heineman

P Kotler and SJ Levy, 1969, Broadening the Concept of Marketing, Journal of Marketing, AMA

Kim, C.K and Chung, J. Y, 1997 Brand Popularity, Country Image and Market Share: An Empirical Study, Journal of International Business Studies, 2nd Quarter

Kotler, Philip and Pfoertsch, Waldemar 2006. B2B Brand Management, Prentice-Hall

Philip Kotler, 2006, Marketing Management: Analysis, Planning, and Control, 11th edition, Prentice-Hall

Philip Kotler and Gary Armstrong, 2007, Principles of Marketing, 12th edition, Prentice-Ha

Post, James 2002, Redefining the Corporation: Stakeholder Management and Organizational Wealth, Stanford University Press

Euromonitor International, 2009, Consumer Electronics -Australia

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!