Business dissertation introduction example
The ultimate goal of an organisation is to maximise the shareholders’ returns by enlarging their market share through selling more products also expand market segments (De Wit and Meyer, 2004). Strategy is a long term direction to maintain an organisation to stay forefront in the globalisation of an industry (Johnson and Scholes, 1999). Corporate strategy is concerned with organisation overall purpose and scope to meet the expectations of shareholders and add value to the operating business within organisation (Johnson and Scholes, 1999). The objective of corporate strategy evolved from merely staying ahead competitors to synergy business units by optimum utilisation organisation’s resources and expansion (Lynch, 2000). As the result, organisation must continuously seek new and improved ways to attract customers globally ahead their competitors (Solomon et. al., 2009).
Porter’s five competitive forces model discussed the bargaining power of buyers, the bargaining power of suppliers, the rivalry among existing competitors, the threat of substitute products and the threat of new entrants has control and influence to any industry (Ogawara et. al., 2003; Porter, 1998), grocery retailing is not in exception.
The bargaining power of buyers in the grocery retailing is strong, especially in metropolitan areas where the numbers of grocery retailers and hypermarkets are widely available. Unlike services by subscription which engaged customer a period of time, the switching cost for consumers to change grocery stores is low. Consumers can decide which stores to shop easily. Product information and price are advertised in the media such as local newspapers and leaflets which ease buyers to compare before shopping. Grocery shopping habit is changing, consumers usually check and compare products among hypermarkets prior they decide where to shop. Unfavourably, the bargaining power of suppliers is relatively low due to the volume purchased by hypermarkets commonly in bulk, i.e. hypermarket can demand manufacturers to produce their own private label at quantity discount (Ogawara et. al., 2003).
Rivalry among existing competitors is rather strong. The grocery industry is characterised as a high competition with an average of one to two percent thin profit margins (Delaney-Klinger et. al., 2003), at the same time dealing with highly perishable such as meats and fishes and fragile products such as cheese etc (Turban et. al., 2008). Several reputable grocers such as Giant, Carrefour and Mydin have been scrambling for the same markets through price cut to sustain their position in the market as price leaders. Recently, news reported that Mydin had raised Ringgit Malaysia 1.4 billion for its expansion plan to set up additional 14 hypermarkets in the next three years (Leong, 2011). Traditional grocery retailers have entered the online market in the anticipation that the convenience of online shopping and home delivery as one fulfilment alternative that will make grocery a profitable to grocery retailers and a complementary market channel to consumers (Lim et. al., 2009).
The barrier of entry to establish large scale hypermarkets is high in Malaysia as the initial cost to establish a hypermarket premises and provide free parking facilities is high. Abundance of convenience stores like 7 eleven which operates 24/7 and food speciality supermarket i.e. Jaya Grocer and Cold Storage which focuses to provide premium grade of grocery products to consumers normally located at high density housing areas such as apartment and condominium is the threat of substitute to grocery retailer like Tesco stores. On the other hand, the initial cost to establish a small scale grocery shop in neighbourhood is considered low, some outskirt areas consumers still opt to purchase grocery products from grocery shops near their houses.
In view of the forces becoming strong, transaction volume become a key to profitability at the same time improves bargaining power towards suppliers in the low margin industry. For all these reasons, grocery retailers see the need of extending their supply chain for grocery retailing to face the challenge at the same time differentiates themselves from their competitors. Technology affects competitive advantage if it has a significant role in determining relative cost position or differentiation (Porter, 1998). E-commerce increases the barrier of entry and insulates from substitutes yet improves profitability in any industry (Porter, 1998). Online grocery shopping acts as an alternative to high investment physical stores building and restricted zoning (Morganosky and Cude, 2002) at the same time reduces expenses on sales associates to achieve more cost effectiveness (Solomon et. al., 2009). Grocery retailers can reach huge number of customers through online grocery retailing channel which served as an additional channel to increase sales volume, particular customers which limited by geographic and mobility constraints (Solomon et. al., 2009; Turban et. al., 2008).
In the beginning, internet provides information and facilitates communication between retailers and customers (Miyazaki and Fernandez, 2001). Friedman (2006) reveals the world is flat in today fiercely competitive global marketplace. The internet is a global phenomenon, making both time and distance irrelevant to business exchanges between retailers and consumers (Friedman, 2006; Grunert and Ramus, 2005; Guriting and Ndubisi, 2006; Kurnia and Chien, 2003). Online businesses started to emerge in the mid-1990s when technical savvy organisations responded to the opportunities and challenge posed by the internet websites to serve their customers from homes, i.e. internet banking (Doherty and Ellis-Chadwick, 2010; Morganosky and Cude, 2000). Business-to-customer (B2C) online commerce is the online exchange between organisation (Retailers) and individual consumers (Solomon et. al., 2009). Falling prices of personal computers and laptops makes online shopping a more easy option for the majority populations (Hernandez et. al, 2011). The scenario consequently contributes to the rapid increase in online grocery shopping dispersion, particular broadband penetration rises (Hernandez et. al., 2011; Kilby, 2006) and decrease of broadband charges (The Star, 2011).
Online shopping is the exchange between retailers and consumers via the internet (Picot-Coupey et. al., 2009). It unites the new technologies and the new behavioural patterns into new way of shopping or acceptance allows retailers to supply product information and offer sales directly to its targeted and existing customers through electronic means (Suki et. al., 2008). Online shopping has grown significantly since mid 1990s (Doherty and Ellis-Chadwick, 2010). Online shopping is moving rapidly from a hobby to most of consumers’ lives (Doherty and Ellis-Chadwick, 2010). Online shopping channel acts as a value added technology which believes will attract more customers at the same time retain the existing customers (Porter, 1998; Solomon, 2009). Nonetheless, online shopping is a double sword edge tool in grocery business as it allows grocery retailers to reach more customer segments however it also increase the business exposure and market transparency as all the information, especially competing price is published on the website whereby there is no restriction on access includes competitors (Pechtl, 2003; Solomon, 2009).
Internet helps to promote products and services in a wider reach and flexible channel (Doherty and Ellis-Chadwick, 2010) includes grocery products, i.e., www.peapod.com, www.sainsburystoyou.com and www.tesco.com. The earliest grocery retailers offered home delivery services begin in the United States followed by supermarket shopping through internet to the late 1980s (Kurnia and Chien, 2003; Morganosky and Cude, 2000). The involvement of internet consumer shopping grocery over internet rose from 6 percent to 14 percent (Nielsen, 2008). Online grocery shopping is predicted to continue growing into the future could potentially remodel the commercial world thus dominance in global markets (Doherty and Ellis-Chadwick, 2010). It is noticeable that one of the most successful online shopping website, Amazon.com had started its recent foray into online grocery shopping to attract customers increase more frequent visits to their websites (Turban et. al., 2008). In business strategy, online grocery shopping can be used as a defensive strategy to avoid pure online grocery retailers from pinching the existing market share (Turban et. al., 2008). In addition, online shopping channel also increases organisation’s brand recognition and reputation by maintaining an internet presence (Turban et. al., 2008).
Everyone eats and need to purchase food products hence grocery industry in operated in a fragmented and highly competitive environment but huge market (Delaney-Klinger et. al., 2003). There is an increasing number of consumers accepted online shopping for grocery products. In Japan, traditional grocery retailers have been challenged by a wave of internet grocery retailer since 1996, online grocery shopping has become the latest delivery channel (Ogawara et. al., 2003). Similarly in South Korea, 99 percent of internet users shopped online (Suki et. al., 2008) and online grocery shopping consists of 50 percent of the online shopper populations (Asia Pacific Digital Marketing Yearbook, 2009).
Malaysia population reaches 28.3 million in 2010 (Department of Statistics Malaysia, 2010). The highest population is the central region - Selangor, which recorded 5.1 million populations with 4.5 million who lives in urban areas. There were 1.7 million who live in the metropolitan - Kuala Lumpur (Department of Statistics Malaysia, 2010). Malaysia ranked No. 3 in Asia online shopping with the average online spending amount of USD2,000 in the past 12 months (Lim, 2011). Increasing urbanisation and changing lifestyles such as dual income families and singles in Malaysia central region have contributed higher acceptance of online grocery shopping. This statistic has triggered some smaller scale grocery retailers to establish grocery website to serve online shoppers segment. There are three examples, www.virgrocery.com, www.khas.com.my and www.delivery2u.com.my which offer consumer online grocery shopping in Malaysia.