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Table of contents

1

Executive Summary

2

Introduction

3

Background

3

Swot Analysis

4

Table of contents

Segmentation, Targeting & Positioning Analysis

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Marketing Mix Analysis

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CSR / Ethics

9

Financial / Pricing Analysis

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Recommendations

12

New Marketing Strategy

12

Conclusion

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References

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Executive Summary

This study presents a market analysis of a multinational retail corporation Metcash Limited, Australia, Australia. Metcash runs large discount superstores and warehouses all across Australia. In order to address this business analysis, report presents the environmental analysis followed by 4P’s of marketing. The report also discusses the financial situation of the company.

Introduction

In the modern corporate world, competition has become not only intense but quite intricate as well. The challenge is not only external but internal as well as companies need to be mindful of their activities all the time and need to monitor them. The perfect execution of a marketing strategy becomes possible when the companies are aware of their strengths and weaknesses. It is inevitable to meet failure in a business environment every once in a while but is important to learn from the weaknesses and devise such a strategy to move ahead that the failures are never repeated. This paper

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discusses marketing strategy by analysing a company called Metcash Limited. It is one of Australia’s leading wholesale distribution companies. The paper looks into the activities of the companies over the last few years and reflects on the strategies it has developed and followed to be profitable over a long term.

Background

Metcash Limited is a company operating in Australia and is currently among the top 25 companies in the ASX200. Much of its income is generated from the sales of groceries, liquor and tobacco products. The company has continued to grow over the years and make its mark in the retail business. As of 2015, the Company employed 6300 people in Australia. The Company has a vast operation which is reported in a consolidated form. The operations can be divided into the following:

Food & Grocery

Australian Liquor Marketers

Hardware & Automotive

This report is focused on the marketing and distribution of food and grocery as this segment forms a chunk of the Company’s operations.

Company’s Vision & Mission

The Company has devised its values on the basis of moral principles of morality and

integrity. The Company’s core values include;

Championing the customer by addressing their needs in the most efficient manner; The passing over of added value to the stakeholders of the Company;

To conduct the operations

in

a responsible

manner and be

personally

accountable for all actions; To empower the people in the demographics of the Company and support

the overall community.

The Company’s vision includes:

To grow the Company’s market and add value which shall be passed over to

the stakeholders; To gain excellence in distribution and merchandising;

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To become

a leading

retailer in

the

country

and

be among the

best

in

consumer satisfaction; To create a productive and congenial work environment.

 

The mission statement of the Company is “…to be the marketing and distribution leader in food and other fast moving consumer goods”.

The Company claims that the following image portrays their working philosophy:

model and

4  To become a leading retailer in the country and be among the best in

SWOT Analysis

This report discusses SWOT Analysis of Metcash foods &groceries. Metcash deals in food and lifestyle retail.

Strength

A vast scale of operation consisting of a great number of supermarkets and convenience division brings a lot of economies of scale;

Support

of

major

distribution

centres

provides

boost

to

the

attractiveness for customers; The Company itself has come to own well-demanded brands;

It operates in the domestic market and knows local consumer preferences;

Employs skilled and experienced workers

 

Weakness

The business has almost no global presence and the business

model is very simple hence easily replicable; The Company’s internal control has some issues and has some

management issues as well;

 

It is difficult to keep track of unexpected costs and expenses;

 

Opportunity

The Company can look

to expand much beyond Australia and

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explore new markets; More business can be attracted through efficient marketing and

advertising;

Venture into the online markets and increase sales;

Threats

Due to easily replicable business model, the Company is likely to be exposed to intense competition in the future;

There are certain risks

related to inflation which can hamper

growth; The problem of immigration has created some problems related to labour in Australia which might affect the Company in the future

as well;

Competitors

Woolworths

Safeway

Big W

Wesfarmers

Cole

Segmentation, Targeting & Positioning Analysis

Segmentation

Metcash Ltd is indulged in the business of dealing with lifestyle and retail. Its slogan is

“Champion of independent retailers”. Most of the items included in the business are day to day items which are always in demand. At the same time, the Company also sells luxury items for which the demand is relatively less. The segmentation of the Company lies in supermarkets.

Geographic segmentation: Since the customer base of the Company hails from

almost parts of the Company, it is quite difficult to segment the market on the basis of geography. Demographic segmentation: The Company also targets all the customers

regardless of their age, gender, religion, occupation or ethnicity. Hence, demographic segmentation would also not be possible. Behavioural segmentation: The Company has a very vast operation and it is not easy, but possible, to keep track of the customers who are loyal. Satisfaction of such customers has to be the top priority.

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Occasional segmentation: Occasional segmentation is also possible since the shopping of groceries is mostly done on certain occasions. One such occasion is

the beginning of the month where salaried customers shop for the whole month. Cultural & Social segmentation: Such segmentation would be inconsistent in

the context of this company since it targets all sorts of customers.

Targeting

The market for groceries is always going to commercially viable because these items are necessities of life. These products cannot be avoided and their utility is so deeply etched into the minds of the customers that they can never go without them. This is why the Company’s focus is likely to continue with this segment and make sure that the

customers get the best products and satisfaction. The occasional segment stands out as a segment to be targeted because it focusses on that time of the month when the salaried customers like to shop. They want to shop for low price and high quality products and they want to be able to trust the products blindly. The Company has to build this trust through effective marketing and advertising about the quality of its products so that the people know of its efforts.

Positioning

As a supplier of high quality groceries, the Company can look to expand its operations

further and supply goods to various independent grocery stores. Since the grocery stores also look to be contain more variety than mere groceries, Metcash must exploit this opportunity and keep on supplying other products as well. Further, it has to take account of its own retail and wholesale operation as well. Hence, the products are positioned on all levels i.e. retail; wholesale and distribution brands.

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Marketing mix analysis

One of the key aspects of marketing is to offer the right product at the right place at the right time. This has become a maxim for the field of marketing and also a basic model for devising a marketing strategy. The analysis through this model is also known as 4P’s analysis because of the following four components each of which is discussed separately:

Product

The first step is to introduce such a product that is going to be demanded by the

customers. In the case of Metcash Ltd, the products range from necessities to luxuries. Since the focus of this paper is dominantly on the groceries, it becomes safe to assume that the customers will continue to demand them in the long term. One important aspect of groceries is that a single retailer can also sell their substitutes and complementary products. This enables the Company to hold a great amount of variety and attend to the preferences of customers with different tastes. This shows that the Company has a clear idea regarding their product.

Place

As mentioned above, the Company has a threefold operation whereby it acts as a retailer, wholesaler and distributor. In addition, sales are made both through traditional stores and through the modern e-commerce strategy. The use of e-commerce helps the company in establishing a worldwide presence which adds to the goodwill. It also helps in informing the consumers about latest offers and the deals the Company offers from time to time. Other services like order tracking also make the online platform a desirable marketplace. The physical dimensions of the Company are also quite

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remarkable as there are easily accessible retail outlets all over the country. These

stores are open 24/7, 7 days a week hence achieving great consumer satisfaction.

Price

Since Metcash is not the only entity of its sort in the country, it has to take certain

measures to keep the customers attracted to their outlets. One such measure is competitive prices. The Company has to make sure that the customers are able to get the products at reasonable prices. Since the prices of most groceries usually hover around a similar range, the market tends to bend towards perfect competition. In such a market, the Company would look towards maintaining a price level that is identical to the competitors. It also becomes difficult to lower prices in such an environment. But in cases where it can lower its prices i.e. products where the brand is owned by the Company, the prices have to be lowered to attract as much customers as possible.

Such tactics also build an image into the minds of the customers that the prices of the Company are low for all products. This would help in grabbing more market share.

Promotion

The lower prices strategy can also be used as a great promotional too as it is bound to

attract customers from all social circles. The Company is operating in an industry where there are certain competitors who have a great foothold and market share. But the Company has also historically been frugal in investing in advertisement. While the competitors usually spend about 2.1% of their budget on advertising, Metcash only spends 1%. It is recommended that the retailer advertise in about 13 circulars per year. Currently, the Company has invested a lot of resources on social media campaigns. The advertising includes circulars, newspaper ads, website publicity, commercials, yellow pages, mass mailers and electronics newsletters.

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CSR / Ethics

Corporate Social Responsibility (CSR) has gained a great deal of significance over the last few years and corporations all around the world have also increased the degree of care in this regard. For a company to be sustainable, it has to be wary of the impact it has on its environment and the society. Profitability is essential but it must not come at the cost of environmental or social harm. The customers also take a lot of interest in the way the products are produced and marketed. CSR also has an impact on the competition in the retail market. Not only do the supermarkets require to behave ethically but they also need their employees to be ethically and environmentally responsible. CSR is defined as the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large (Holmes et al., 2000). Metcash Ltd is greatly wary of its CSR and maintains high standards of ethical business practices. With the increasing popularity of the company, owing to its low prices and quality products, Metcash Ltd is aware of the responsibility that falls on it as a corporation. It takes extra care in making sure that the products are sourced responsibly, retain nutrition, and do not have harmful effects on the environment in their production. The Company also takes into account its own workplace environment and makes sure that there is no discrimination at any level. The Company’s diversity policy is very clear about how it recruits its employees and also outlines the Company’s continued efforts in removing all barriers to diversity within the corporation.

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Financial / Pricing Analysis

10 Financial / Pricing Analysis Source: ASX The above graph shows a comparison between Metcash Ltd

Source: ASX

The above graph shows a comparison between Metcash Ltd and two of its major competitors. For Metcash Ltd, the gap between the earnings multiple which it trades on and the share price growth has been widened more than the competitors. The gap is so wide that it makes Metcash potentially undervalued currently even though it seems to have gained a path towards recovery.

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Yearly Analysis of financial positions of Metcash

Five Year Review

2014

2013

2012

2011

2010

2009

Financial

Performance

 

13,39

Sales ($m)

2

12,977

12,501.10

12,364.00

11,517.40

10,974

Underlying EBITA

406.7

460.4

451.2

438

401.2

371.3

Interest, net ($m)

57.2

61.6

67.6

66.3

49.3

49.8

Underlying profit after tax ($m)

250.1

280.7

262.5

256.2

244.9

225.9

Profit after tax attributable to parent ($m)

169.2

206

 

90

241.4

227.6

202.5

Financial Position

Metcash shareholder equity ($m)

16,254.20

1,335.10

1,442.80

1,377.60

1,279.40

Net tangible assets per share (cents)

(9.5)

(28.1)

19.7

12.5

13.0

Gearing

           

(debt/debt+equity)

(%)

33.2

 

42.6

36.7

35.5

33.5

Share Statistics

Fully paid ordinary

880,704,78

771,345,86

7,689,853,64

765,644,03

764,888,36

shares

6

4

4

1

3

Weighted average

859,742,60

770,441,43

765,178,86

764,843,88

ordinary shares

7

2

767,676,470

5

0

Earnings per share (cents)

24

11.7

31.5

29.7

26.5

Underlying earnings per share (cents)

28.3

32.6

34.1

33.4

32

29.5

Dividends declared per share (cents)

18.5

28.0

28.0

27.0

26.0

24.0

Other statistics

Number of employees (full-time equivalents)

 

5,794.00

 

5,166.00

5,638.00

5,773.00

5,358.00

.5 256.2 244.9 225.9 Profit after tax attributable to parent ($m) 206.0 90.0 241.4 227.6 202.5

It

can

be

seen from

the

above table

that the

Company has increased its

sales

progressively from the year 2009. The major reason has been its involvement in e-

commerce and e-marketing. The advertisement on a large scale has had a positive impact on the sales of the company. Such efforts, if continued with more intensity, would create a path towards excellence for the Company in the long run.

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Recommendations

Metcash Ltd has started to dabble in e-commerce but it seems that it needs to immerse itself more. Its involvement in the online shopping industry helped it in recovering its performance and be profitable in the past. But currently its involvement is still inadequate and it is greatly missing out on excellent opportunities. Making use of special shopping day sprees like Black Friday does not benefit the Company in the same way as they do its competitors. Therefore, the involvement in e-commerce needs to be increased. The Company also needs to invest more in advertising and in getting its name out there in the real sense. By “real sense” it is indicated that the Company shows itself as a provider of high quality products at low prices and is as good, and even better, than its competitors. A timid approach would harm the company while a pro-active and a hands on approach would reap the Company great benefits. The Company needs to expand more and increase its scale of operation in order to make greater use of the economies of scale that are attached with a bigger operation. The opportunities of expansion outside Australia must be exploited as soon as possible so that the Company has similar amount of time available to build its goodwill abroad as do its competitors.

New Marketing Strategy

The new marketing strategy that is actually putting Metcash on a path to recovery is its increased expenditure on advertising. The Company is marketing its enhanced e- commerce platform and making its name in the field. Providing low price products with a promise of high quality are the values to which the Company adheres and these are followed in the –commerce sector as well. The Company also has to look to expand abroad and it can take its first steps in that direction through e-commerce. The idea is to make the Company’s product available online in the countries in which it is logistically possible for it deliver the goods on time. This would help the Company in setting grounds for a more vast operation in these areas. At the same time, the Company will have started creating and building its goodwill

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in the yet unexplored markets. This would also have trickledown effect on the Company’s popularity in Australia.

Conclusion

Metcash Ltd.’s recent dip owes mostly to its own dismal performance. It has been a bit complacent and also a little out of touch with how modern markets are operating. The only concern for the Company right seems to be the recurrent price war with its major competitors and concerns. But it has to be vary of the fact that price wars are not the sole determinants of victors in the markets of today. It has to stay updated with modern commercial practices and the tastes in which customers indulge. Financing through debt bearing instruments is another area where the Company needs to indulge more. Metcash, in respect to these strategic options is already in the process of developing new initiatives by reducing its debts and focusing on quality, service and value. Metcash is on the forefront of innovation by taking advantage of further store renewal opportunities, supply chain transformation and a strategic approach to improved operational efficiencies and continued fund reinvestment in price.

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References

Annual Report 2015, Metcash Ltd. Retrieved 13 Jan 2016 from http://www.metcash.com/wp-

RAPS Retail Industry Environmental Scan, 2014. http://rapstc.com.au/wp-content/uploads/2011/12/Retail- Environmental-Scan-2014.pdf (Accessed Jan 2016)

ABS (Australian Bureau of Statistics), 2014e, Counts of Australian Businesses, Including Entries and Exits, June 2009 to June 2013, April, Canberra.

Deloitte , 2013b, Global Powers of Retailing 2013: Retail Beyond, January, Sydney.

Newell, R. G., Jaffe, A. B., & Stavins, R. N. (2006). The effects of economic and policy incentives on carbon mitigation technologies. Energy Economics,28(5), 563-578.