Market share of Woolworths and Coles
Question:
Discuss about the Strategic Management of Australian Supermarket for Woolworths.
The industry of Australian supermarkets has been dominated by two major organizations namely, Woolworths and Coles which together gain around 72.5% of the total share of the supermarket industry. Another major supermarket that is growing with an aggressive nature in the industry is Aldi. The supermarket industry of Australia is considered to be highly competitive in nature. The entry of the new organization named Aldi in the market has further increased the competition in the industry. The supermarket based industry of Australia is highly concentrated and is based mainly on the growth of the various organizations which operate in the market (Hill, Jones and Schilling, 2014). The entry of online retail based organizations have further increased the competition in the Australian supermarkets industry.
The analysis is mainly based on the case study which is related to the two major supermarkets of Australia namely, Coles and Woolworths. Further, the threat that has posed towards the organizations from the entry of another major supermarket named Aldi. The external environment and the other factors related to the organizations will be analysed in the report in detail.
The PESTLE framework can be used for the macro-environmental analysis of the Australian supermarket analysis. The needs and the demands of the consumers can be fulfilled easily with the help of the various retail stores that operate in the country. The political condition of Australia affects the business environment up to a large extent. The government policies can be helpful in providing growth related opportunities to the organizations. The economic factors which include recession and rates of unemployment are also important factors which affect the operations of the supermarkets (Steinbach et al., 2017). The buying behaviour and demands of the consumers are affected by the economic condition of the country. The customers of the supermarket industry are the most important factors which affect the profitability and revenues. The social status of the consumers affect their choices related to the products that they wish to purchase from the supermarkets. The changes that occur in the society affect the purchase related decisions that are taken by consumers (Wheelen et al., 2017). The advancement of technologies affects the ways by which the supermarkets operate and make proper use of advance methods. The various innovations that have taken place in the supermarkets include the self-service checkouts and the formation of service oriented architecture of the organizations. The ways by which he operations of the supermarkets affect the environment have impact on the sales as well (Meyer, Neck and Meeks, 2017). The recycling related activities and the reduction of waste also impact the revenues of the supermarkets like Coles and Woolworths. The supermarkets of Australia are now facing some major challenges which include the wider situation and the changing demands of the customers. The firms in the supermarket industry of Australia have to immense competition from the entry of the new organization named Aldi. The issue related to customer service needs to be solved by the organizations in the Australian supermarket industry (Morschett, Schramm-Klein and Zentes, 2015).
Competition from Aldi
The life cycle of the products consists of four major stages which are, introduction, growth, maturity and decline. The supermarket industry of Australia is in the maturity stage where the sales are high, however, the growth has slowed down due to the increase in competition in the market. The organizations thereby need to take steps to increase their growth so that they do not reach the decline stage (Trigeorgis and Reuer, 2017).
Bargaining related power of the buyers – The power of the buyers related to bargaining is high in the Australian retail industry. This force has become more powerful due to the increase in the number of supermarkets in Australia. The consumers have many options to select from and this has also increased the power of buyers.
Bargaining related power of the suppliers – The bargaining related power of the suppliers is moderate in the Australian supermarket industry. The high concentration of organizations in the industry which further includes some big players have kept the power of the suppliers to a lower level (Brewster, 2017).
Threats related to the new entrants – The entry of new players in the Australian retail industry has been made tough by the big players in the market. This thereby reduces the threat that is posed by the entry of new organizations in the Australian super market.
Rivalry among the existing firms – The threats related to rivalry among the organizations in the Australian supermarket industry is high. The major players in the supermarket industry like, Woolworths, Coles, Asda and Wesfarmers is high as they are continuously competing with each other for larger share in the market (Helfat and Martin, 2015).
Threats related to the substitutes – The retail products that are offered in the supermarkets in Australia is high in demand. These products are used by the consumers on a daily basis and they are loyal to the supermarkets. This decreases the threat related to substitutes in the Australian supermarket industry (Schnackenberg and Tomlinson, 2016).
The organizations which have been dominating the Australian supermarket industry are, Woolworths and Coles. Woolworths is considered to be the biggest chain supermarkets in Australia. The operations of Woolworths lie on the huge team of 115,000 employees with more than 900 stores all over Australia. The major goal of Woolworths has been to supply the fresh products direct to the consumers. Coles on the other hand is another consumer and retail chain which has its operations in Australia. The company is now running its operations in Australia under its parent organization. Wesfarmers which is a large conglomerate in Australia. The Australian supermarket industry has seen huge competition among the two largest players who have been trying to constantly improve the operations of the company and increase their customer base (Woolworths.com.au., 2018). These two large organizations are now being challenged by the entry of Aldi in the Australian market. Woolworths has become largest retailer in Australia after facing tough competition from the operations and profitability of Coles. The organization is a part of Wesfarmers which is a large conglomerate in Australia. Coles also has its operations in many other businesses which include, Bunning, which is a retailer of household products, Officeworks, Kmart and many more. Woolworths outperformed the profitability of Coles in the industry and this situation changed when the company was acquired by Wesfarmers (Coles.com.au., 2018).
External factors affecting the industry
The levels of competition are quite high between the two organizations, namely, Coles and Woolworths. The competition among these two organizations has often turned hostile. The strategy that had been implemented by the firms related to their pricing related policies and the other moves are quite different from each other. The strategy of Woolworths that was implemented in the year 1980 after the company lacked in sales as compared Woolworths was related to becoming the fresh food people (Woolworths.com.au., 2018). The organizations have been constantly competing with each other with respect to the strategies that they are formulating to increase their revenues. As has been discussed in the Porter’s Five Forces analysis, the levels of competition in the Australian supermarket is high. This has been further increased by the entry of a new competitor named Aldi (Aldi.com.au., 2018).
The strategy that has been implemented by Woolworths has the five major priorities that are discussed below,
- Building the culture of the stores and the customers.
- Generating the momentum in the sales of food that is sustainable in nature.
- Evolving the drinks related business of the organizations so that the customers can be provided with more value and convenience.
- The empowerment of the various portfolio businesses of the organization so that they are able to provide value to the shareholders (Chen and Miller, 2015).
- The organization is also aiming towards becoming a lean retailer with the help of systems excellence and end-to-end process.
Woolworths has been able to implement these strategies in a successful manner so that they operate successfully in the business environment (Barrick et al., 2015).
The strategy that has been implemented by Coles to create its customer base in the Australian supermarket industry is related to provide the real value to the customers. The company aims at lowering the process of the products every week and further improve the quality by producing and delivering a shopping experience which can be better in each day of the week. The strategy further assists the company to build relationships with the customers which are long-term in nature. The strategies that were formulated by Coles have failed in many occasions which has led to the loss of sales of the organization (Jackson, Schuler and Jiang, 2014).
The entry of a new player in the Australian supermarket industry has further challenged the strategies of the major players Woolworths and Coles which were already competing fiercely against each other. Aldi had entered into the Australian market in the year 2001 and expanded its operations in the country quite fast. The organization already has more than 350 stores and is planning for expansion in the other parts of Australia with the help of 120 more stores. Aldi is a multinational retail organization of German origin and has more than 7000 stores in about 21 countries. The organization was able to challenge the products that were offered by organizations like Coles and Woolworths (Adams et al., 2016). Aldi had started producing various kinds of products which include the home products, groceries and other everyday based products as well.
Conclusion
The report can be concluded by stating that the Australian supermarket industry is highly competitive in nature. The major players in this market has been restricting the entry of other small firms in the country. These two organizations are namely Woolworths and Coles. The companies are however being provided huge competition by the new entry in the industry named Aldi. The competition in the market has become much more intense on nature and This has affected the revenues of the major retail organizations in the country. The challenges that are being faced by the organizations thereby need to be addressed so that the revenues and market position of Woolworths and Coles can be maintained.
- Woolworths and Coles need to formulate strategies that are effective in nature.
- The two organizations need to improve their customer service related operations so that the customer base can be increased and the loyal customers can be maintained as well.
- The style of the stores of both the companies need to be improved so that it is convenient for the customers.
- Woolworths has been using the strategy related to the focus that is placed on the preferences of the specific customers. This has enabled the company to understand the needs of the consumers. This strategy can also be implemented by the other organizations in the Australian supermarket industry.
- The retail organizations also need to implement the e-commerce related strategies to compete with the online retailers like Amazon.
References
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Woolworths.com.au. (2018). Woolworths.com.au. [online] Available at: https://www.woolworths.com.au/ [Accessed 20 Apr. 2018].
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