Market analysis

Table of Content

Executive summary

1 Introduction

2 Environment analysis
2.1 Macro environment
2.1.1 Economy
2.1.2 Demographic, sociological, and cultural influences
2.1.2.1 Urbanization
2.1.2.2 Convenience
2.1.2.3 Food consumption trends
2.1.3 Political and legal
2.1.4 Technological
2.1.5 Natural environment

3 Industry analysis
3.1 Industry review
3.1.1 Major players
3.1.2 Geographic segmentation
3.1.3 Industry size
3.1.4 Product life cycle
3.2 Customer Identification
3.2.1.1 Customer Profile
3.2.1.2 Costumer needs
3.2.2 Supplier relationship and distribution channel
3.2.3 Supply chain
3.2.4 Selling chain

4 Competition analysis
4.1 Direct competition
4.2 Indirect competition
4.3 Opportunities and Threats

5 Critical success factors

6 Summary

7 Conclusion

8 References

9 Appendixes
Appendix 1: Type of business:
Appendix 2: Customer profile of online grocery shoppers
Appendix 3: Selling chain – process of acquiring orders
Appendix 4: Partner network

List of Figures:

Figure 2.1: External forces

Figure 3.1: Product life cycle

Figure 5.1: Porter’s five forces

List of tables:

Table 3.1: Costumer segments

Table 3.1: Differentiation from Competitors

Table 4.1: Opportunities and Threats

Executive summary

This market analysis is prepared to learn about the specific methodologies required to conduct a sound market analysis for a self-selected market segment. For this purpose, a hypothetical virtual business that serves as a gathering place for Australian breakfast or fresh bread lovers and bakeries has been created. To prove the profitably of this potential opportunity, influencing factors within the Australian baking industry as well as the ecommerce industry are researched.

According to Cravens (2000), it is essential to gain an understanding of the market to become market driven. Therefore, the first part of this analysis is often referred to as the PEST analysis, which identifies the external factors that influence the baking and ecommerce industry and thus change the size and composition of the market overtime.

The second part is concerned with obtaining internal information about the baking and ecommerce industry, its customers, suppliers, and direct and indirect competitors. The assessment of both the internal and external forces that drive the market, lead to the definition of the critical success factors for this virtual venture. A summary of the findings is then given through Porter’s model of market profitability to potentially serve as the basis for developing a market driven strategy for the virtual opportunity. Despite the high thread of substitute products, it is believed that the trend towards more convenience will make this business successful. With respect to the analysis provided and given that business partners are willing to cooperate, this business concept is considered a sound investment.

1 Introduction

This market analysis is prepared to research relevant aspects of the Australian baking industry as well as its online shopping environment to justify the profitability of an individually created hypothetical eBusiness model. A simple customer focused eBusiness model design will serve as the reference point to analyse a specific market segment. Although all industries are subject to external trends that affect their businesses over time, the rapid rise of the Internet unlocked innovation that created even new market spaces. Without analysing and sensing markets and competition, companies are faced with a future disadvantage (Cravens 2000). Many of the emerging businesses in this new market environment started without having taken the necessary market research to justify that there actually is a market and therefore often failed. Therefore, before pursuing the opportunity to challenge the traditional retail model of a bakery, this report will serve to develop the necessary market knowledge to become market oriented and to then stay in business.

Starting with the description of the environmental influences like government actions, social change, economic shifts, technology, and other factors that alter buyers’ needs and wants for baked goods, a detailed research on Australia’s baking industry including its size, growth, and composition, its typical marketing practices as well as the anticipated industry changes will be provided. To identify the business’ strengths & weaknesses, a study of direct and indirect competition will then be followed by the reflection on critical success factors for the hypothetical virtual business to respond to the so far unsatisfied customer desire to have fresh bread daily delivered for breakfast. A description of the background of this emodel idea as well as its type and purpose is given in Appendix 1 and serves as a reference throughout the report.

2 Environment analysis

According to Reed (1999) market analysis and synthesis are a vital part in the logical flow of the strategic marketing planning process. To determine the capabilities required of an organization to compete within its underlying external environment, it is important to consider both its macro as well as its industry environment. The ultimate aim is to provide a broad situation analysis also known as SWOT analysis.

2.1 Macro environment

Due to the rate of change that takes place in the market, trends in the following can present a number of opportunities and threats:

(1) Economy
(2) Demographic, sociological, and cultural influences
(3) Political and legal aspects
(4) Technology
(5) Natural environment.

The next paragraphs give a modified PEST analysis of the macro environment and its effects on the breakfast delivery service. Since the breakfast delivery business will be initiated in Melbourne, Australia’s macro environment will be looked upon. Although acknowledging that significant market variations are apparent even within a country, a country can still be characterized through its same political and social issues as well as its overall technological trends or green practices. Figure 2.1 illustrates the PEST model applied to the breakfast delivery service.

Figure 2.1: External forces

illustration not visible in this excerpt

2.1.1 Economy

The global economy plays a big role in any consumer industry, and Australia’s economy has also been moderately affected by the financial tumults of the past years. How severely these economic ups and downs affect a country’s baking industry depends on consumers’ perceptions and uses of bakery foods (IBIS World Pty Ltd 2003).

Expenditure on food is correlated to real household disposable income and the price of food relative to other consumption expenditure. Generally, when real household disposable income declines, there is a slowing in the rate of growth of expenditure on food. During period of low disposable income, consumers are more likely to purchase only basic products from supermarkets or grocery stores and do without the luxury items a bakery offers. In the current low inflation environment, bakeries have to control their costs and search for efficiencies, because it will be increasingly difficult to pass on price increases to cover inefficiencies (Alberry, R 2002). Even confronted with overall negative economic trends, it is still believed that there will exist sufficient demand for the timesaving and convenient breakfast delivery service.

According to the Australian Bureau of Statistics (ABS) Household Expenditure Survey, in the period from 1993-94 to 1998-99, the average household weekly expenditure on goods and services increased from $602 to $699. Part of this 16% increase can be attributed to inflation - over the five years since the previous survey, the price of goods and services rose by 10%. Over the same period, average weekly household income increased by 22% and the average household size was unchanged at 2.6 people. In 1998-99, total expenditure on food and non-alcoholic beverages accounted for $127 per week or 18.1 percent of total weekly expenditure (Australian Bureau of Statistics 2002).

2.1.2 Demographic, sociological, and cultural influences

Demographic, sociological, and cultural aspects are assessed to determine the significance of population changes on the nature of the customers and their purchase behaviour. Several common denominators such as the change in food consumption patterns link the Australian baking industry (Bread Research Institute Australia Limited 2002). The underlying purchase behaviour towards online shopping will be covered within the technological environment.

2.1.2.1 Urbanization

The transition from a rural state to a more urban one resulted in the emergence of convenience foods. With more women entering the workforce and consumers in general leading busier lifestyles, mini bread loaves, snack foods, and bite-size versions of biscuits and crackers are just some of the bakery items repackaged to respond to the high demand of single-served goods. Along the same line, ready-made meals provide an attractive feature to the rising number of dual-income families (Sosland Publishing Co 2002).

2.1.2.2 Convenience

Although craft bakers still dominate Australia’s baking industries, market research consistently shows that convenience is important to a customers' selection of a particular store. This trend toward convenience is propelling the development of in-store bakeries and quick-serve establishments. Eighty percent of shoppers live within 3 km of the bakery they most often use and 79 percent use a motor vehicle to reach it (Australian Bureau of Statistics 2002).

2.1.2.3 Food consumption trends

Per capita consumption of bread is at a relatively high level, so that baked goods contributed the greatest amount to the mean food intake for men (26%) and women (23%) aged over 18 (Australian Bureau of Statistics 2002). Australians favour bread as a fresh, frequently unpackaged, product. In many cases, lower prices for artisanal bread, as compared to the commercial, wrapped loaf, are credited with gaining consumer preference. At the same time though, attention is called to the rising number of "two paycheck" families, where a working wife, without the time for shopping, begins to favour grocery stores and packaged bread. Another implication is a barely measurable shift away from bread toward savories and various snack products (Retailer's bakery association 2002).

Local bakers are constantly challenged to provide consumers with innovative, flavourful, premium, even exotic, bakery products. Recent product development initiatives ranged from fiber-enriched square white bread loaves to Italian focaccia bread to Middle Eastern flatbreads, not to mention the mixed grain, seeded and sliced varieties. Yet, Australian bakers must strike a balance between the new and exciting and the tried-and-true because even with the greater interest in innovative products, consumers still want traditional bakery items such as sliced white bread. In fact, market research from Retail World showed that the white bread segment alone grew almost 8% in 2000 (Sosland Publishing Co 2002).

2.1.3 Political and legal

Political and legal environment are assessed to determine if there are any proposed laws that may be introduced with the potential to change demand. New product innovations such as bioengineered or genetically modified wheat products are subject to legally mandatory government filings. Therefore, government interference and influence is predicted, but not considered to affect the success of the online breakfast delivery service. This holds also truth for further food labelling laws that although affecting the baking industry in general will only have minor effects on the breakfast delivery service.

On the other hand, the key trend for a stricter and more controlled Internet environment will surely impact the virtual business. This trend is believed to favour this venture though, because as the Internet is subject to tighter controls, consumers might feel safer with regards to online purchases. Government concerns about the security of epayment methods for example gave rise to technological developments in terms of improved privacy technology and authentication techniques, which increased the acceptance of online money transfer.

2.1.4 Technological

The technological arena is assessed to determine and anticipate technological change that will affect customers and production methods. Although the baking industry is constantly faced with innovative machinery developments to improve production efficiency for baked goods, this new technology and its potential cost reductions are not considered to heavily influence the profitability of the breakfast delivery service.

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