Globalization has paved the way for the growth in the mobility of financial capital in the international market. This has been inspiring business organizations for expanding their operations in the global markets. Thus, it is very important for organizations to have a global expansion which is one of the strategic plans of most businesses. Expansion of business on an international level is not an easy task for most retail businesses. As per Beamish, a business needs to fulfil many requirements that might be external or internal to the organization so as to pave its way to the international market (Beamish, 2013). The tapping of a global market can be considered as a potential strategy for growth.
The major elements that are necessary for being the preconditions of the global expansion of the businesses are improved technology for communications, opportunities for financing, business maturity in the domestic market, and changing aspects of retailers through acquisition and mergers, and reduced barriers to free trade. Therefore, it is evident that the entrance to the international market should be carried out gradually by following a systematic development and effective performance of the business locally before tapping on a global platform (Cravino & Levchenko, 2016).
This report is going to illustrate the analysis of the proposal regarding the entrance of Kroger into the Australian market for expanding its business. The proposal deals with the concerns regarding the effective entrance into the overseas markets by Kroger.
Kroger is an American retailing company that was founded by Bernard Kroger in Cincinnati, Ohio. In the US, when it comes to revenue, it is the largest chain of supermarkets. It also stands as the second-largest general retailer and the twenty-third largest company in the United States. Kroger also stands as the third-largest company in the world market. The headquarters of the company is situated in downtown Cincinnati. The current market of Kroger is spread in approximately 34 countries in the United States. The store formats include superstores, department stores, supermarkets, 326 jewellery stores and 786 convenience stores. The grocery stores that belong to the brand Kroger are located in the southern and Midwestern United States. It operates around 37 facilities for food manufacturing and processing, along with 2,122 pharmacies and 1360 supermarket fuel centres. The employees of Kroger are represented by the agreements of collective bargaining and most of them are represented by the union of United Food and Commercial Workers. Kroger Marketplace is considered a chain of big box stores. Sears, Kmart, Wal-Mart, Meijer, Albertsons, and Target are the rival chains of this company. Kroger also has his financial service division named Kroger Personal Finance which offers mortgages, branded Visa Cards, home and renter’s insurance, home equity loans, wireless services and protection against identity theft.
The above section has clearly mentioned the widespread of Kroger retail chain in the USA market. It, therefore, serves about 2800 stores in about 35 states. Therefore with its various operations, the company is trying to dip the roots deep by satisfying the customers. In that context, Cavusgil et al said that if the company is planning for expansion in the Australian market then it should go for opting the opening of the food stores. This is because the company’s primary profile is the food stores which store 94% of its sales (Cavusgil et al., 2014).
In addition, Mr Kroger in the US market has decided to enhance its growth by manufacturing the products it sells and in this manner it has 38 food production centre across the US that provides value for the customers as well as improved margins for Kroger. In the Australian market Kroger can also opt for pharmacies, fuel centres, grocery retails as well as convenience stores. Kroger is regularly undergoing innovations which led to the improvisation of the products with growing time. With various manufacturing facilities along with wide distribution centres the company also owns its private transporting services to move the merchandise and supplies among the stores and warehouses. Again the company uses the three-tier distribution networking, dry food, freezer and perishable (Casson, 2013).
Most importantly the company should definitely preserve its core values of honesty, respect, integrity, safety, diversity and inclusion while expanding its business. With proper business principles of services, selection and values Kroger became one of the largest companies in America. And hopefully, by following these values and principles in its operations, the company can successfully expand itself in the Australian market.
Kroger is quite well known renowned grocery vendor across America. With its growth to all the 35 states across the United States, the company is planning for its widest geographic expansion along with the Australian market. Therefore along with proper operational activities, it is also necessary to have a clear and deep understanding of the product mix (Dunning, 2013). This will for a successful expansion in the Australian market.
Therefore the product mix contains the price, product, place, promotion. The product mix is further extended more profuse exploration of resources needed for the growth of the business. The extended portion is the people, physical evidence, and process.
Price: Kroger has a maximum of facilities for its customers. It offers the customers various kinds of products that are manufactured by other companies under the brand name of Kroger. In that case, the company provides the availability of products to the customers with low prices under the Kroger brand that eventually enhances its specifications.
Moreover, the company is also planning for its enhancement in its logistics, distribution, and assortment as well as supplier partnership to establish the business in the Australian market with low prices for the customers. This will definitely attract customers to Kroger (Forsgren & Johanson, 2014).
Product: It has its opening in various wide aspects such as in manufacturing, grocery retail, convenience store and fine jewellery. However, the company divides its section into private, value brand, banner brand. All three divisions provide three different varieties of products (Jenkins, 2013). Therefore the company must go for this categorisation in the stores to be opened in the Australian market. The company has the availability of drugs, merchandise, foods along with petroleum centres. The shop also offers services with personal finance, credit cards or store debit.
Place: In US Kroger has its main office in Ohio and the rest of the places are operated through the opening of the subsidiaries. In that way, Kroger should select such a place in the Australian market for the headquarter which will be convenient by every means
Promotion: It is the most attractive specification because the company is quite well known for its special promotional activities to attract customers. It includes special saving items on a weekly basis that helps in creating a loyal customer base (Meyer & Peng, 2016). In addition, a loyalty card helps in getting various benefits from the company. Moreover, there are offers for the weekly ads savings updates on various products.
People: While expansion the company should take care of efficient employees who will deal efficiently with the customers. The recruitment is done through online applications and also through referrals.
Physical Evidence: The wide distribution of the retail chain in the Australian market is more important as it will make the physical presence of the company in that market strong as it is strong in the US market (Neelankavil, 2015). For that reason, the company must open its subsidiaries and outlets like in the US.
Process: In the whole process the success of Kroger relies upon its emphasis on the customers. They have a strategy of “customer first” that helps the business to grow strongly (Picciotto & Mayne, 2016). By following the values the decision making is properly guided which enhances productivity. This will again help the company in getting success in the Australian market.
Extensive research for the report suggests that it would be convenient and beneficial for Kroger to step into the expansion of its business in the global market by initiating its introduction into the market of Australia. The current situation for the execution of business in Australia is made convenient by the culture of business prevailing in Australia. Australia is uniquely placed to facilitate capitalization of the dynamism of the economy of the developing countries in the world (Sinkovics et al., 2014). It is also no more a surprise that Australia is considered as the best case of business for the regional headquarters for the multinational companies. The modernization of the countries across the globe increases the standard of living. The food resources, minerals and other services of Australia make the place to be high in demand for the companies and investors (Verbeke, 2013).
The involvement of Australia in the Global Financial Crisis has facilitated many companies across the globe to set up their business in the country. Simultaneously, there is constant growth in Australia, especially in the sectors of exports markets which facilitates the expansion of the service sector beyond the reports of the commodity. The income per head of the population of Australia is very high and there is a degree of equality in their incomes. The demand for goods and services is also high in spite of the small population in the country. The stability in the systems of the government will facilitate Kroger to rely on the policies and attitudes of the government and the investments of assets of Kroger in Australia (Wild, Wild & Han, 2014). The processed goods and raw materials of Kroger can be transported through a wide network of road, sea, and rail transport services. Australia also has communication systems that are highly developed. The telephone, postal, telegraph communications are very much organized and overseas communication is very advanced with the Internet and telephone.
The business environment of Kroger is composed of the factors that have effects on the operation, of the company that including the suppliers, customers, industry trends, and competitors, economic, social and technological developments. The macro-environment of Kroger consists of various factors that are required for analyzing the establishment of the company in Australian markets such as political, economic, social, environmental, and legal factors. The analysis of the macro environment is known as PEST analysis. The future environment of operation of Kroger in Australia is analyzed further in the report.
The political factors that would affect the business of Kroger hugely depend on the stability of the Australian government, the type of governance such as democratic, dictatorship, or monarchy, the policies of the economy of the Australian government, diplomatic events and policies of trade with the surrounding countries. Australia is a self-governing and independent nation that makes its own laws, treaties and levies its own taxes (Verbeke, 2013).
The federation of Australia has the powers and responsibilities in its own constitution. Thus, the operation of Kroger business will be under the political rules and regulations of Australia. However, the Foreign Trade Agreement between Australia and the United States established the organizations and businesses aiming to promote closer and better cooperation between both the countries which will facilitate the establishment of the business of Kroger in Australia.
These factors for the business expansion and operation will be influenced by the governmental policies as the major economic decision is been taken by the Australian government. The rate of interest and exchange rates are influenced by Australian economics and inflation, however, the rate may be fixed by the financial governance of Australia (Wild, Wild & Han, 2014). The growing trends of the Australian economy include the employment rate, taxation, and production level of Australia which would support the expansion of Kroger in Australia.
The taste and demands that are variable with the disposable income, fashion and changes in general that can result in both threats and opportunities for Kroger in Australia are considered under the socio-cultural factors.
The attitudes of the people towards the products and services of Kroger, the participation of women and men in the society and the impact of the language over the diffusion of the products of Kroger into the Australian market will affect the business expansion and operation of Kroger in Australia (Verbeke, 2013). The people of Australia are very much open to a variety of products and services. Thus, variation in the market segmentation will facilitate the operation of the business in Australia.
Technology being a very important factor for the competitive advantage of any company will play a very significant role in the expansion and operation of Kroger in Australia. Australia provides a very comprehensive framework of legalities for the protection of technology to business organizations, both domestic and international. Improved technology of Australia will help in the globalization of Kroger beginning in this country (Wild, Wild & Han, 2014).
Before going through expansion it is necessary to go through some main reasons behind the increase in the market share that will help the organization to grow in the Australian market. The keen observation of this study will be a continued consolidation of the supermarket segment. The grocery segments are generally categorized by their low margins and food items are basically vulnerable to fierce price-cutting and competition.
The grocery retailers will be able to win the customers from the new market by offering good quality products through convenience and low price. It will help in gaining customer loyalty (Forsgren & Johanson, 2014). In addition, the customers are also quite free to choose their desirable stores as per their convenience. In that context, these five forces will help in deciding the market fate of the company. By which the company will be prepared to face such hindrances.
While chasing the rivalry among the existing customers the force will be quite strong in the case of Kroger. It is because the company is having a high volume of competitors in the market along with low-profit margins. And due to the competition, there will be the transfer of the profits from the company to its customers. The high value of rivalry within the market is just because the supermarkets compete based upon their service, value, and location (Cravino & Levchenko, 2016).
As per the market condition of Kroger the bargaining power of buyers is quite strong because the company is consisting of standardized products along with a few amount of switching costs.
However, the threat of substitutes in the case of Kroger is medium. It is because of its undifferentiated products along with a low amount of switching costs. Another threat to the substitution is corporate branding.
The threat of the new entry is quite low. It is just because the opening of such a supermarket chain is its high start-ups. Again the food and administration 2011 has added many claws which are also one of the threats for the new entrants.
The supplier power in the case of Kroger is low. It is because the company maintains its promotional discounts, stocking fees and slotting fees that restrict the bargaining power of the suppliers.
The parts that are highlighted in this report focus on the details of the host market, i.e, the Australian market. Kroger is one of the leading retail chains in the US are planning for expansion in the Australian market. Therefore the report has focussed in detail about the macro-environmental factors along with the product mix and operational process of Kroger. This will help the company in gaining success in the Australian market.
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