Competitive Strategies In The Australian Supermarket Industry

Current state of the Australian Supermarket Industry

The Australian Supermarkets have made the grocery industry in Australia the most competitive in the world. In the centre of this competition are the two giants Woolworths and Coles Myer. These two are predominantly in charge of the market and control over 76% of the entire market. To get a perspective of the influence of these two, we look at the UK where the top 3 giants only control 50% of the market. While in The United States, the big supermarkets control only a mere 25% of the market (James 2016, p. 103). The combined sales of these two giants account for 8% of Australia’s economy. The two have several branches and employ an estimated number of 250,000 workers.

But despite their undisputed control of the market, there still exists bitter rivalry between the two companies. With the introduction, other giants like Aldi and Costco, the annual revenue is projected to increase to 91.6 billion dollars for 50 billion dollars (Gallacher 2011, p. 147). This is projected to happen in less than five years.

The situation for the two already established giants is only getting worse. The introduction of ALDI  and the announcement that Lidl will also target the Australian market has threatened the duopoly created by these two giants (Low 2015, p. 5). When ALDI opened in 2001, Woolworth and Coles attempted to fight back the competition by implementing a cost-reduction method. But the invasion of other giants is going to affect the duopoly as well as shrink the market share capital for other smaller chains or independent retailers (Sutton-Brady, Taylor & Kamvounias 2017, p. 1051). 

The most accurate data on the grocery industry in Australia is gotten from looking the industry dynamics from each state.

This report aims to look at the business strategies applied by some of the giants as well the competitive strategies and the competitive dynamics used to gain an advantage over the competition. How these companies strive to keep up their aggressive expansion amidst intense competition from already existing brands to threats from new brands intending to join.

But despite their undisputed control of the market, there still exists bitter rivalry between the two companies. With the introduction, other giants like Aldi and Costco, the annual revenue is projected to increase to 91.6 billion dollars for 50 billion dollars. This is projected to happen in less than five years. The situation for the two already established giants is only getting worse. The introduction of ALDI  and the announcement that Lidl will also target the Australian market has threatened the duopoly created by these two giants. These companies employ certain competitive strategies in order to keep up their aggressive expansion amidst intense competition from already existing brands to threats from new brands intending to join.  A competitive strategy can be defined as an assortment of how the organisation will contest, a scheme of the organization’s strengths and weaknesses compared to those of its competitors. In addition, it is argued that an organization’s aim is to successfully compete with other organizations.

Competitive strategies in the supermarket industry

Competitive Strategy

Organized strategies are important to organizations in industries that are littered with a variety of choices provided to customers. If an organisation intends to succeed in that kind of an environment, it is crucial for the organisation to classify it triumphs in a basic and convincing way.

A competitive strategy can be defined as an assortment of how the organisation will contest a scheme of the organization’s strengths and weaknesses compared to those of its competitors (Clemons, Goh, Kauffman & Weber 2013, p. 5). For example, a supermarket can select to add to their services a new characteristic offered only in special condition should it determine that it cannot rival with the other supermarkets on prices alone.

An aggressive competitive strategy is a list of activities that are made by an organisation to add on to the competitive advantage of the organisation over its rivals (Spinelli Schelini, Dai Prá Martens & Piscopo 2017, p. 10). Their systems contain the initiatives taken to draw the customers, to be able to take on the weight of the industry sector and to assist secure the industry position of the organisation. But the main intention is to gain an advantage over the competition. This advantage can either be an improved customer loyalty or better services provision than the competitors or both. This is the importance of a competitive strategy.

Importance of marketing competitiveness

There isn’t a specific reason for having or implementing an aggressive competitive strategy. Some argue that the objective of a competitive strategy is to attract customers to always pick a specific chain over the others while other people argue that if an organisation has any kind of competitive advantage then it might be able to provide better service to its customers and showcase prefered characteristics over the competitors.

Marketing competitiveness is the ability to improve endlessly and showcase to customers a preferred quality to competitors (Ni, Chu & Li 2018, p. 391). A supermarket that markets its competitiveness tell customers of its ability to succeed over that of its rivals and thereby, gaining a status with the customer. This helps because the business has an advantage over the competition since it portrays a certain kind of character, status and administration.

What supermarkets do to gain market competitiveness

Customer values- Customer values should be portrayed in the item sold as well as the means used to sell the product (Kaleka & Morgan 2017, p. 25). This helps boost customer loyalty. For example, items today appeal to the feeling of the customer and are sold in a customer friendly environment.

Marketing competitiveness

Establishing a USP- A Unique Selling Proposition is the determining factor of the difference in how one supermarket sells its product from other supermarkets. During the advertising of a product, the advertisers are required to notice this unique angle and major on it to attract the attention of customers.  In the same way, supermarkets with strict competitions often spend their time selling their uniqueness in service delivery since most of them sell the same products.

Customer happiness- Organizations should be focused on making their clients happy, this is the sure way to retain a great number of your customers (Kanuri & McLeod 2016, p. 5117). Most supermarkets achieve this by offering incentives and promotions to their customers as a means to keep them interested.

And finally, supermarkets have been known to take into account those strategies and policies that worked and were productive. This way they can just reuse the same means again to minimize the cost of marketing competitiveness.

For most supermarkets, the above-mentioned methods are the means of gaining an advantage over their competitors and ensure client retention. 

What does it mean to say Competitive advantage?

Competitive advantage can be classified as the added ability of an organisation to give a similar value to its competitors at a lower price or charge higher by providing better qualities than the rival (Maximova 2017, p. 27). Meaning, an organisation can gain an advantage simply by creating a service or product that its customers desire more than that of the competition or simply that it offers its products or services at a reduced price than competitors (VILLAN, da SILVA & Oliveira 2016, p. 34). These services are usually sustainable in the long term.

A quality becomes advantageous by being associated with the industry and is portrayed in a business sector. Competitive advantage can be achieved in three ways- cost initiative, separation and core interests (Bashir & Verma 2017, p. 7).

SWOT Analysis for Australian Supermarkets

How supermarkets achieve competitive advantage

Porter’s Generic Strategies Model

This model connects a company to its competitive advantages and characteristics. Meaning, it helps the organisation determine the customer’s point of preference and item separations (Chung & Kuo 2018, p. 260). This happens in either small business or limited business.

The model uses three different generic procedures.

1. Cost Heading Strategy
2. Differentiation Strategy
3. Focus Strategy.

The above strategies are known as generic strategies and are connected to a specific unit (Chung & Kuo 2018, p. 260). They are mostly applicable in very specific industries or organizations like grocery industry.

Competitive advantage

Fetched Leadership Strategy

This strategy requires an organisation to be able to achieve a specific level of value. The main target for this kind of strategy is expanding markets (Kharabsheh, Jarrar & Simeonova 2015, p. 423). An organisation choose to price same or average industry price in order to gain advantage higher than its competitors or just give the same industry price just to get a piece of the share. 

When it comes to value, the organisation enjoys an advantage when the competitors suffer losses. At this point should the industry demand for the business go down, the organisation that had a lower price would endure for longer.

Separation Strategy

This strategy demands the organisation offer a unique product or service that is new to its customers and is viewed by them as various. The product has to be different from the ones offered by the competition. The slight difference in the quality of the product makes it unique to the customers and allows the organisation to charge higher for the price of this product (Stefanovska & Soluncevski 2015, p. 235). The organisation can achieve this kind of uniqueness through innovation and imagination from a talented group hired by the firm to improve the quality of the product. This strategy even has a chance to expand the business to new markets.

Center Strategy

In this strategy, the organisation focuses on a specific limited area of the market. Given that all the intentions of an organisation are to improve its service delivery, the organisation has to improve on its level of customer loyalty. This mainly achieved by focusing on one section and ensuring the client is satisfied properly. This puts the organisation in a particular status with the client that encourages customer retention and hence loyalty (Rahajeng Widyasih, Sucherly, Kaltum & Komaladewi 2018, p. 7). Supermarkets in Australia are struggling to gain the trust of their customers, they have therefore attempted to relate to their clients in several different ways. For example, diversification, sponsorships, alliances, mergers and cost focus. 

Conclusion

In conclusion, competitive strategic policies are an organization’s means of increasing its economic competitive advantage over that of its competition. It is a known fact that for whatever one present to the table as a commercial item, there will always be a rival for it. The degree of rivalry varies in the commercial capability of the item in question. The supermarkets are Australia are involved in a great deal of competition, each one of them has a business strategy of how to survive the struggle. The key to sustainability is to have a good marketing for competitiveness that resonates with the customers. For organizations, it is important to compete with other organizations and be successful. The best approach to increase your competitiveness is to portray that competitiveness to customers to prove quality over competitors. 

SWOT analysis of Australian Supermarkets

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