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In this report strategic analysis of macro (external) business environment of Australia has been discussed considering the retail trade industry. This report focuses on impact on the external business environment and technological advancement. In this regard, the PESTLE Analysis of Australia external business environment has been conducted for achieving the objective of the study. Based on the findings of the report, it can be highlighted that technology plays a crucial role in the development of retail industry. However, despite the fact advancement of technology is disrupting the business of retail in Australia. Thus, it becomes essential to analyse the external environment and implement necessary strategies so that the retail sector can experience significant in the coming years. Based on the PESTLE framework, it can be highlighted that the political and economic condition of the Australia is stable for the growth and development of retail trade industry. However, considering the technological factor it can be stated that with the technological improvement people are more interested to purchase online rather than visiting the physical store that can be a negative point in case competition is high. Therefore, it is vital to ensure use of new technology in the retail sector to retain the customers and gain new customers as well.
The Australian retail sector is facing significant challenges due to the structural shift. This shift indicates introduction of new advanced technology in retail that in turn is transforming the way in which people purchase products both online as well as offline. Globalization has increased competition in the retail sector that affects the performance of business. To retain the position of business in competition, it is the responsibility of the top management to design strategies based on new technology which helps business to operate successfully in the market (Kraja & Osmani, 2015). It is very complex task for the retailers to understand the new technologies and analyse the new trends that impacts the business. In this regard, it is crucial for the management to understand the environment in which business operates. This is mainly because the environment impacts the progress of the business in the long run. The retail industry needs to understand these technologies so that business can be managed along with keeping a balance between the supply and demand. The external (macro) business environment is ever changing and thus beyond the control of managers. Thus, it this regard it becomes essential for the top management to understand and analyse the external environment periodically so that business can compete successfully in the market (Kraja & Osmani, 2015; Singapore Institute of Management, 2013). The report focuses on understanding the driving factor of the Australia retail industry. In this regard, the PESTLE framework has been used to analyse the macro environment of Australia and how it affects the current business operations in Australia.
2.1. Technology- The Driving Factor of Australian Retail Industry
Australia is considered among the most urbanized societies of this global world. In Australia, approximately 90% of the people are living in the urban areas. In the past few years, the retail sector in Australia has experienced significant growth despite no increase in wages and increasing household debts. The low rate of interests and rise in the household credits has significantly impacted the spending pattern of the Australian consumers. The retail industry in Australia is dependent on two factors that is the change in consumer preferences and impact of the foreign companies doing retail business in the country. The retail industry in Australia is facing disruptions as the involvement of the foreign companies has changed the market and consumer preferences as well. In addition, the advancement technology has also influenced the consumer preferences (Mordor Intelligence, 2019). The increased use of internet has helped in developing business where anybody can easily become a retailer. In Australia, three out of every four individual owe smart phones. This has given the power to the consumers to purchase online. The increased use of mobile and internet facility is accelerating the change. Thus, the retailers are required to implement change in their strategies so that can retain relation with the buyers (Banks, 2014). According to the report of Deloitte (2017), it has been stated that unlike the US and UK market, the impact of online marketing has not yet influenced Australia. In the context of retail market, George Freney of tech company highlighted that retailers in Australia still needs to understand the online platform so that customer buying journey can be improved. Additionally, the survey conducted by Australian Retailers Association revealed that only 50% of retailers are using the electronic mode of payments in the offline stores (Bushell-Embling, 2019). From this it can be understood that the retail industry is Australia has not fully embraced the technological transformation. Thus, it becomes essential for the top management of the retail business to study the external environment and the need to implement the latest technology for the continuous growth of the retail sector.
PESTLE Framework to Diagnose Macro Factors Affecting Current Business Operating Condition within Australia
PESTLE is an analytical tool that is used to study the external (macro) business environment. These factors enable the top management of the organization to take necessary business operating decisions successfully. The political factors are the policies and regulations designed by the government that has to be followed by the retail trade industry of Australia. However, political instability can lead to reduced sales. The stable GDP growth rate of Australia i.e 3.% in September 2020 indicates that Australia has stable economic condition and the growth rate is higher than the other OCED nations (The World Bank, 2020). Thus, there is low risk for a retail business to invest in Australia (Market Research Reports, 2020; Lucintel, 2012). In the past few decades, consumers have become more aware using internet and thus their products needs have changed. With the improved lifestyle, the people of Australia are demanding more quality products with good packaging. Thus, these changes have impacted the customer services provided by the retail industry. The use of digital technology in the retail industry has increased competition. Online retail has experienced significant growth in the past few years. In this regard, number of visits at the supermarket and grocery stores has reduced as the customers prefer purchasing online products at their own convenience. For the long term profitability of the retail industry, it is vital to operate environmentally. This has required the supermarkets and grocery stores to implement environmental friendly packaging of products and thus contributing in the waste management in Australia. Lastly, the legal actor also impacts the business operations. For instance, any change in the existing laws can impact the company’s actions thus it can costs to the company in case development of new system for improving customers services (Frue, 2019; David, n.d.).
Analysing the Positive and Negative Impacts That External Environment (Macro) Of Australia Has On the Retail Trade Industry (Supermarket and Grocery Stores)
During the period 2001-2011, Australia has experienced positive economic growth. Despite recession, the Australian economy has huge scope for the growth of different industries for instance manufacturing, retail trade, mining and finance among others. The political environment of the country is stable that makes it most suitable destination for investment. However, despite the fact the political factor impacts the performance of supermarket and grocery stores in Australia. For instance, the competition policy of federal government restricts Woolworths to participate in retail competition. Thus, there is market dominance and less struggles in industry and low performance of the independent stores. Despite the stable economic condition Australia faces challenges. For instance, the decline in market condition of Australia and New Zealand impacts the performance of Woolworths supermarket. Besides, the social factor also impacts the performance of retail industry in Australia. With the change in lifestyle, the consumer need is growing. Thus, the supermarket and grocery stores need to implement societal initiatives to have significant impact on the customers. The technological factor has enabled improving the quality of services provided by the retail industry. For instance, Woolworths use the green refrigeration technology to offer quality products to customers (Bowen, 2020; David, n.d; Fern Fort University, n.d.). Apart from these, the environmental factor also poses threat to the retail industry. This is because of the issues related to waste reduction, materials used in packaging, and use of plastic bags in the supermarkets. Moreover, law has both positive and negative impact on the retail industry. The positive side is that it helps in controlling the price by minimising the illegal trafficking of products. On the other hand, it has negative impact as it can financially cost to the retailers to adhere with the clauses of labour law and thus unable to offer products to customers at low price (Fern Fort University, n.d.).
Based on the above discussion, it can be highlighted that technology (macro) has been the driving force behind the Australian Retail industry. The analysis of secondary sources has revealed that the retail sector in Australia is mostly influenced by impact of foreign companies and consumer preferences. From the PESTLE framework it has been clear that technology factor has significantly impacted consumer preferences. The power of online purchase has increased among the consumers due to increased use of internet that is easily available in smart phones. However, the report also highlights that the online market in Australia is less developed as compared to US and UK. Therefore, it becomes vital for the retailers in Australia to understand the importance of implementing technology in business. The example of Woolworths in Australia shows how the company has implemented technology in order to provide quality products to people. Furthermore, based on other macro factors i.e economic Australia has good scope for retail business due to stable financial condition of the economy.
Based on the external environment analysis, it is evident that in Australia the customers of retail industry have started to prefer online shopping with the advancement of digital technology. In this regard, for the success of the retail industry it becomes vital for the industry to keep in track the needs of the customers so that they can be attracted to continue their purchase. For the long term success of retail in Australia, it is vital for the companies to implement tech-fueled business strategy that would focus more on digital over the physical. For the success of retailer, it is vital to ensure good customer experience. Thus, the retail companies need to effectively execute digital transformation. This is because technology impacts the shopping behaviour of the customers. In this regard, digital marketing can be used by the retailers that directly enable them to connect with the potential customers (Bayern, 2018).
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