International Marketing (MRKT 19037)

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form as the top-sheet of your assignment)
Executive summary
(summarize the report in 3-4 paragraphs (in
one page) with a short background, major
findings, and critical suggestions)
Table of contents
(contents with page numbers)
Introduction
(provide a brief background, market
description (i.e., Australia and its discount
chain store industry), and the contribution of
this report to Kmart)
Kmart's International Marketing
Environment
(Analysis and presentation of environmental
forces including economic, financial, social,
cultural, political, legal, technological and
competitive factors affecting Kmart's
operations in Australia. Note: relevant
data/information/figure about Kmart and its
competitors in Australia; and Australia's
market size, purchasing power, disposable
income, market demand, industry supply etc.
would be useful for your report)
Conclusion & future directions
(based on your analysis and findings, you
need to provide future directions and a
conclusion)
References
(use Harvard referencing and citation styles
for (at least) 05 reviewed journal articles, 02
textbooks and 03 Online/Web sources)

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Executive Summary
This report aims to provide an overview of the Australian discount
chain industry, the Australian market and the overall business
environment for the strategic use of the Kmart head office in the US.
Kmart Australia is one of the main discount chain stores operating in
the Australian market today. Opening its first store in 1969, Kmart
has grown exponentially over the years, and a great deal of its
growth has been since 2009 when it focused its pricing strategy on
Every Day Low Pricing instead of regular sales promotions.
The Australian market is broad and diverse, with over 300 ancestries
and a well spread out population. The report demonstrates the
substantial opportunity for growth in the country in the coming
years, and Kmart is well placed to benefit.
The direct competitors for Kmart domestically are Big W, Best &
Less and Target. Each of these are targeting a relatively similar
market, with Big W the store competing with Kmarts value-based
target market. The main international competitor is the US based
Wal-Mart, who are yet to enter into Australia. Wal-Mart should be
anticipated as entering the market at any stage, and steps should
be in place to ensure Kmarts continued growth is not affected.
Due to the strong Australian economy, and a political and legal
system that are well aware of the importance of enabling the ease
of foreign trade as globalism continues to shape how our world
operates into the future, Kmart is in an attractive position.

Table of Contents

Executive Summary...........................................................2
1.0 Introduction................................................................4
2.0 Kmarts International Marketing Environment in Australia
5
2.1 Economic & Financial environment.............................................5
2.2 Political & Legal environment.....................................................6
2.3 Social & Cultural environment....................................................7
2.4 Technological environment.........................................................7
3.0 Conclusion and future directions..................................8
4.0 Reference List.............................................................9

1.0 Introduction
Kmart are the pioneers of discount chain stores in Australia. The
first store opened its doors in 1969 (Chaudhri & Samson, 2000) with
the powerful backup of its parent companies Coles Myer in Australia
and Kresge in the United States (US). The environment in which
Kmart operates in 2013 has changed dramatically compared to
these initial years.
As globalization continually changes the international trading
landscape, analysis such as this should be undertaken frequently to
ensure a thorough understanding of the environment as a whole.
Strategic decisions cannot be made confidently without market
research. Successful companies spend the time researching to
provide the decision-makers the information required to make these
decisions (Burns & Bush 2010, p.31)
Target is a discount chain store that joins Kmart as one of the
companies under the Coles Myer umbrella, which has an estimated
market share of 20% of all retail sales in Australia (Chaudhri &
Samson, 2000) These stores both target slightly different markets,
with Kmart positioning itself towards the value end, Target the more
upmarket brand.
Big W and Best & Less to a lesser extent are the main domestic
competitors for Kmart. With slogans such as Big Ws Australias
Lowest Prices Everyday (Big W, 2013) and Kmarts We make low
prices irresistible (Kmart, 2013) these two main players in the
Australian retail sector monitor each others every movement. Big
W also benefits from the backup of the powerful Woolworths group.
Internationally, Wal-Mart is one to watch. Wal-Mart, which is a huge
discount chain store originating in the US, has stores operating
throughout the world but has not yet entered the Australian market.
Overall Australias market environment is comparably strong when
considering its stable economy, and its income per person which
ranks 13th highest in the world adjusted for purchasing power parity.
(Australian Government, 2013) The outlook predicts continued
growth; hence Kmarts operations in Australia have the ability and
opportunity to grow with it.

2.0 Kmarts International Marketing

Environment in Australia
Following Woolworths lead, who figured out that the only winner of a
price war is the company that has the lowest cost of doing business
(Shoebridge, 2005) Kmart has switched its pricing strategy to Every
Day Low Prices (EDLP) in a way to ensure their customers are
provided ultimate value consistently (Solomon et al, 2011) The
ability to locate stores as close as possible to strategically placed
distribution centres, economies of scale in logistics and purchasing,
as well as shared administration, marketing and financial
departments, all work together to create the chain store advantage
(Ellickson, 2013)
Essentially, these mega companies are re-training consumers to
shop throughout the year, rather than waiting for the promotional
sales at certain times of the year.
Due to this refocus, Kmarts earnings before income and taxes
(EBIT) have grown more than 120% compared to its competitors.
With just a 5.3% share of the potential market, growth is very
achievable. With the opening of six new stores in the 2013 financial
year and refits throughout stores across Australia, (Kmart, 2013)
Kmart is active and aiming high.
The Australian market is broad, and with an average household
spending 8.3% of its weekly income on goods that are offered by
Kmart, or an average of $103 per week, Australia is a lucrative
market with huge potential when you consider the predicted
population on the current day as over 23 million. (Australian Bureau
of Statistics (ABS), 2013)

2.1 Economic & Financial environment

The Australia United States Free Tree Agreement (AUSFTA) has
eliminated tariff barriers and improved relations between the two
countries since 2005 (Kelton, 2013)

Due to macroeconomic circumstances including the Global Financial

Crisis (GFC) and the strong Australian dollar recently, the US has
been the one to benefit from AUSFTA (Kelton, 2013) Of course;
agreements such as these are also politically based with Australia
and the US strong allies in many areas of world matters.
The Australian economy has enjoyed more than 20 years of
uninterrupted growth (see Austrade, 2013; Australian Government,
2013) and consistently ranks in the top 5 of the worlds most
resilient economies (Austrade, 2013) since the GFC.
Australias industry has benefitted from proper management of
fiscal and monetary policy, surviving the effects of globalization
(Chaudhri & Samson, 2000) and in turn benefitting Kmart and the
Coles Myer Group.
With a finance sector that contributes around 8% of Gross Domestic
Product (GDP) (Austrade, 2011 cited by Waring & Lewer, 2013)
Australia is in a strong position. The Australian Government has
stated, continued financial market integration is a priority
(Australian Government, 2013) with a focus on encouraging foreign
investment to ensure its growth continues.
Although this is beneficial for Kmart, it is also attractive to its
competitors such as Wal-Mart. Based in the US, Wal-Mart is yet to
expand into Australia despite having stores in 27 countries (WalMart , 2013) Kmart Australia should keep a wary eye on the
movements of Wal-Mart, especially due to research conducted in the
US showing Kmart is the weaker opponent in the retail sector,
struggling to find their footing (see Ellickson, 2013; Zhu & Singh,
2009; Jia 2008)

2.2 Political & Legal environment

According to the INSEAD 2012 Global Innovation Index, the
regulatory environment in Australia is ranked the worlds best
(Austrade, 2013) Australia recognizes the importance of
globalization and are taking steps to ensure they arent left behind,
by encouraging industries domestically and internationally to better
align the regulatory frameworks and legal aspects of the global
trade environment.
This ties in with the global political environment, with alliances and
agreements such as the agreement on the liberalization of trade
which Australia is co-chairing with the US to support all auspices of
the World Trade Organisation (WTO) (Australian Government, 2013)
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The main focus is to lower costs for businesses and improve

competition and productivity as agreed by the Council of Australian
Governments (COAG) in 2012. (Australian Government, 2013)
An important political and legal aspect is the balance of risk and
return regarding the sourcing of goods from developing countries.
As can be seen in the media release from Guy Russo, the Managing
Director of Kmart Australia (ABC; Russo, 2013) in response to the
tragic Bandladeshi factory collapse controversy from which they
source goods, the topic is a favourite for the media and activist
groups.
As Kmart regularly imports goods from various developing countries,
an in-depth review is necessary to ensure regulations and
compliance is in place to discourage controversy.
With the 2013 Australian election putting most business decisions
on hold until there is a decision and the parties release their
policies, it will be interesting to see whether this will affect the
operations of international trade.

2.3 Social & Cultural environment

Australia is a diverse nation with many different cultures, languages
and traditions. The importance of thoroughly researching and
respecting the local culture in which Kmart operates can be
demonstrated by the Wal-Mart in Mexico controversy. Wal-Mart set
up a store on the site of ancient ruins, performing bribes to modify
council plans along the way. This action has resulted in this WalMart store to be a powerful symbol of globalisms impact on
Mexican culture and commerce (NY Times, 2012)
The simple act of researching the culture prior and respecting local
laws would have prevented this unwelcome publicity for Wal-Mart.
As a nation, Australia has a culture of innovation and has an
individualistic tendency. As the US is also individualistically inclined,
products and promotions are easily adaptable. Nationalism is strong
in both countries; hence little is heard in the press about the Kresge
foundation, as an owner of Kmart compared to the Australian owned
Coles Myer group. Australians have traditionally been sensitive to
imports, however are recently embracing goods from overseas, as it
becomes more of a part of everyday life.
On the social aspect, Kmart markets its support for local
communities effectively, with initiatives such as the Kmart Wishing
Tree appeal. Kmart Australia also has a strong focus on
environmental sustainability, again creating stronger ties within
local communities. Engaging locals such as this encourages
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community acceptance and support, all of which results in stronger

sales and consumer loyalty.

2.4 Technological environment

Although Australia is known as a test bed for new technologies due
to its reputation for early adopters (Byrne, 2004) it has taken until
2012 for Kmart to implement a major overhaul of its IT supply-chain
infrastructure (SupplyChainBrain, 2012) to enable smooth and
identical technology across all of its extensive distribution network.
Michael Fagan, who looks after Kmarts sourcing, has said through
this cloud-based technology their ability to see into the future
increased tremendously, (SupplyChainBrain, 2012) with all stores
executing more efficiently. Through the introduction of this
technology, Kmart Australia is now in a position to compete even
more aggressively in both the domestic and international markets.

3.0 Conclusion and future directions

The Australian economy, financial, political and legal landscapes are
all strong compared with other nations around the world. Kmart
Australia benefits from having its overseas operations based in the
US, both countries having a traditionally stable and supportive
relationship.
The US and Australian markets are shown to be rather similar, in
terms of nationalism, and individualism and cultural diversity.
Because of this, Kmart Australia does not need to modify their
products and promotions extensively in order to suit their domestic
market. Kmart does well in promoting the social and green issues
we face in this century, actively engaging with the local community
in which they operate.
As the Asia-Pacific region continues to boom, Australia is well placed
for growth in the near future. Kmart is already making in-roads
towards further growth, with new stores and store revamps
continually on the go.
The main competitor to keep a close eye on would be the US based
Wal-Mart. This company will be well aware of how well Kmart and
its competitors are performing in the Australian market and it wont
be long before they consider the move down under.

4.0 Reference List

ABC, & Russo, G 2013, Why Kmart Australia will continue to support
Bangladeshi suppliers, viewed 21 August 2013,
http://www.abc.net.au/radionational/linkableblob/4796238/data/whykmartaustralia-will-continue-to-support-bangladeshi-supplie-data.pdf
Austrade, 2013, Why Australia, viewed 23 August 2013,
http://www.austrade.ogv.au/Invest/Why-Australia/Growth
Australian Bureau of Statistics (ABS), 2013, Population Clock,
viewed 12 August 2013,
http://www.abs.gov.au/AUSSTATS/abs@.nsf/Web+Pages/Population+
Clock?opendocument#from-banner=LN
Australian Government 2013, The Outlook for Australia to 2025,
viewed 15 August 2013,
http://asiancentury.dpmc.gov.au/sites/default/files/fact-sheets/4.The-Outlook-for-Australia-to-2025.pdf

Big W 2013, Mission and Values, viewed 22 August 2013,

http://www.bigw.com.au/help/BIGWMissionandvaluesContent#1
Burns, AC & Bush, RF 2010, Marketing Research, 6th edition,
Pearson Education Inc, New Jersey
Byrne, N 2004, Future outlook, Nature, 429, 6991, p.25, Psychology
and Behavioral Sciences Collection, EBSCOhost, viewed 21 August
2013
Chaudhri, V & Samson, D 2000, Coles Myers Chairman Stanley
Wallis on Australias international competitiveness and reform,
Academy of Management Executive, 14, 3 pp.15 18, Business
Source Complete, EBSCOhost, viewed 21 August 2013.
Ellickson, P 2013, Estimating network economies in retail chains: a
revealed preference approach, RAND Journal of Economies (WileyBlackwell), 44, 2, pp. 169 193, Health Business Elite, EBSCOhost,
viewed 21 August 2013.
Jia, P 2008, What happens when Wal-Mart comes to town: an
empirical analysis of the discount retailing industry, Econometrica,
76, 6, pp. 1263 1316, Business Source Complete, EBSCOhost,
viewed 21 August 2013.
Kelton, M 2013, Symposium, Australia-US Economic Relations and
the Regional Balance of Power Australia US Economic Relations
following the 2005 Free Trade Agreement, Australian Journal of
Political Science, 48, 2, pp. 208 220, Academic Search Complete,
EBSCOhost, viewed 21 August 2013.
Kmart 2013, About us, viewed 22 August 2013,
http://www.kmart.com.au/about-kmart
NY Times 2012, Wal-Mart bribes Teotihuacan, viewed 21 August
2013, http://www.nytimes.com/2012/12/18/business/walmart-bribesteotihuacan.html?ref_walmartstoresinc&r=0
Shoebridge, N 2005, Discounted to death, Brw, 27, 16, p.69,
Academic Search Complete, EBSCOhost, viewed 22 August 2013.
Solomon et al 2011, Marketing: real people, real choices, 2nd
edition, p. 340, Pearson Education Australia, Frenchs Forest
SupplyChainBrain 2012, Kmart Australia supply chain goes direct to
the source, viewed 22 August 2013,
http://www.supplychainbrain.com/content/technology-solutions/edicommunication-smledi/single-article-page/article/kmart-australiassupply-chain-goes-direct-to-the-source/

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Wal-Mart, 2013, Where in the world are we, viewed 25 August

2013, http://corporate.walmart.com/our-story/locations
Waring, P & Lewer, J 2013, The global financial crisis, employment
relations and the labour market in Singapore and Australia, Asia
Pacific Business Review,19, 2, pp.217 229, Business Source
Complete, EBSCOhost, viewed 22 August 2013
Zhu, T, Singh, V & Manuszak, M 2009, Market Structure and
Competition in the Retail Discount Industry, Journal of Marketing
Research (JMR), 46, 4, pp. 453 466, Business Source Complete,
EBSCOhost, viewed 21 August 2013

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