Woolworth’s and Coles’ Competitive Management Strategies

The survival of the company in the industry depends on how the company has strategized itself to meet the uncertain and unanticipated future outcomes. This places the management in a critical position of usually scanning the environment to establish appropriate management strategies.  For comprehensive elaboration of strategic management, this paper uses the case study focuses on the players in the retail industry of Australia. There are many grocery industries in Australia. The groups that dominate the grocery supermarket industry in Australia are Woolworths and Coles. These two groups account for nearly 60 percent of sales of alcohol, 50 percent of sales of petrol as well as 80 per cent of supermarket sales. For a long time, Woolworth and Coles have been in competition. However, the competition between the two giant supermarkets has changed with the entry of the new players in the industry. To over the problem of completion the two companies have used their supermarkets businesses as means of finding a competitive edge over their competitors (Dunne, 2008, p.367).

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Woolworth’s group in 2011 achieved a 5.1 percent increase in earnings. This was gotten from the many enterprises owned by the group. In Australia, there were a total of 840 supermarkets, with an addition of 21 new supermarkets. There were207 stores in New Zealand. The sales from liquor were also high. The 581 petrol stations owned by Woolworths also recorded an increase in sales. Its electronic business reported a 2.1 percent sales increase from 394 stores. Woolworths also operated hotels business and had 282 holdings. In the gambling industry of Australia Woolworths is the leading player and has more poker machines than other groups in the gambling industry (Keith, 2012, p.69).

Coles is a group owned by Wesfarmers. Coles is a major competitor to Woolworths in many aspects. Cole’s group holds Bunning in hard wares, Coles in supermarkets and Kmart in general merchandise. Also, it also has various businesses in chemicals and fertilizers, insurance and resources. Its operations include 785 liquor stores, 741 supermarkets, 620 petrol stations as well as 93 hotels. Coles has more than 100,000 employees. Up to April 2012, Coles has had the best performance for the 11 quarters in the industry and the 2010-2011 financial years had growth of earnings by 21.1 per cent (Lyons, 2007, p.161).

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The competition between Woolworth and Coles has been stiff. This contest intensified when Cole was acquired by Wesfarmers. Previously Woolworths had been the leading player and Coles lagged behind because it was underfunded. This later on changed and Coles has been the leading player for some years. Reducing the petrol incentives for customers caused both players to open more petrol stations. Coles and Woolworth usually are in stiff price competition, and a move by one player regarding pricing is closely watched by the other.

Another importance element of competition is home branded products (Sohal, 2013, p.434). Research indicates that 15- 20 percent of both Coles and Woolworths products are usually home branded. This home branding makes Australia not attractive to suppliers who are branded since their products are being removed from supermarket shelves for in-house brands. One area of competition that is unknown to an average consumer is the acquisition of land. Both players have enough land to be used for development in the future which eliminates other players from areas of growth. The ownership of land guarantees excellent sites for these players where they can carry out high-density development. Other players such as Aldi tend to be locked out, and the managing director of Aldi has claimed laws regarding planning need to be revised to allow other players in.

Players who are small in the industry suffer from the fact that Woolworth and Coles can subsidize their stores which make losses until they become established which cannot be done by the small independent players. Additionally, it is hard for suppliers to deal with these two major players since they bargain hard. Further, due to an emergence of home brand products the supplier’s supply products that compete with its brand.  In Australia, the government has not seen it necessary to control competition for the small players as this would distort competition (Booth and Whelan, 2014, p.1399).

In competitor analysis, a firm known as the Germany’s Aldi is of key significance since it competes with the two major players which are Coles and Woolworths. On the eastern coast of Australia, Germany’s Aldi owns more than 200 grocery stores, and it is growing rapidly. The model used by the company is one that it started in Germany which is a value chain of small cost which features a range of limited good quality products which have reduced the price. Despite its primary business being the sale of groceries, it sells other products. Many of the products in the stores have low prices and the stock in the shelves is usually packaged in boxes to help reduce packaging time. The suppliers are under strict contracts to ensure that they supply the goods promptly. The model used by Aldi is designed to make sure that the products offered are of good value and are attractive to various categories of people (Rahman, 2008, p.541)

Another important group in the supermarket industry of Australia is The Independent Grocers of Australia (IGA). It is an alliance between manufacturers, retailers, and wholesalers. The reason IGA was put together was to strengthen and protect the relationship of the three key players against the chain stores growth. Currently, IGA is the biggest network of voluntary supermarket in the world owning more than 4000 independent stores (Campbell and Chalmers, 2008, p.492).

In analysing the macro environmental factors encountered by the grocery industry in Australia, the Australian Society plays a significant role. In Australia, 20 per cent the wealthiest households account for 62 per cent of total household net worth while the poorest 20 percent account for 1 per cent of total household net worth. Income levels among people in a way show the lifecycle that people are in. People in different lifecycles have different disposable incomes to shop in supermarkets. For instance, a couple with no children may have a significant disposable income and may use this revenue to buy in supermarkets. Another important change in the Australian society has been extensive use of the internet to shop for goods (Jensen and Webster, 2008, p.135).

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