Competitive Strategy of Australian Supermarkets

The report analyzes the competitive strategy of Australian supermarkets, including Woolworths, Coles, IGA, and Aldi. It evaluates their business, corporate, acquisitions, international, and cooperative strategies, and provides recommendations for future growth plans.

Running head: COMPETITIVE STRATEGY OF AUSTRALIAN SUPERMARKETS
COMPETITIVE STRATEGY OF AUSTRALIAN SUPERMARKETS
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Executive Summary
The report is focused on analyzing the various market conditions that are present concerning
Australian Supermarkets and the subsequent strategies used by businesses operating in the
sector. A case study on existing supermarket giants of the country Woolworth, Coles, IGA
group and the emerging foreign venture Aldi has been essentially considered in the study.
The study has been brought forward through the critical evaluation of the business, corporate,
acquisitions, international and cooperative strategies of all the concerned organizations. The
implications of the study have pointed towards an emerging competitive environment
concerning the Australian supermarkets that is more diverse and complex than previous
competitive conditions.

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Table of Contents
Introduction................................................................................................................................3
Business Strategy.......................................................................................................................3
Corporate Strategy.....................................................................................................................4
Acquisitions and Structure.........................................................................................................5
International Strategy.................................................................................................................7
Cooperative Strategy..................................................................................................................8
Conclusions and Recommendations..........................................................................................9
References................................................................................................................................10

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Introduction
The report concerns the extensive analysis of the present and emerging market
competition aspects with regards to the grocery and supermarket sector of Australia. The
country’s supermarket sector has been greatly controlled by established brands such as
Woolworths and Coles. However, recently there has been the emergence of foreign brands
like the German based Aldi that are providing serious competition to these two established
supermarket brands. Moreover, the Independent Grocers of Australia are also experiencing
positive growth in the market which means that the competitive environment is bound to get
tougher for Coles and Woolworths (Pulker et al. 2018). Thus, it has become much important
that the various strategies to effectively approach the competitive environment are planned
and implemented by all the major corporate enterprises in the supermarket sector. The
different strategic aspects and their relation with the market competition need to be
essentially analyzed towards understanding their significance. It will help towards increasing
the market potential and the productivity of all the concerned organizations.
Business Strategy
Forming effective business strategies are important goals for all business enterprises.
Due to the large number of products that are offered to the customers in regards to the
supermarket and groceries sector, it becomes even more important to form strong business
strategies. Essentially business strategies are formed in order to realize long term business
goals and objectives. It is much important that Coles and Woolworths treat long term
business objectives on a priority basis in an increasingly competitive market environment
(Govender 2017). It is more important for newer companies like Aldi and emerging forces
like IGA that effective strategies are formed in order to pose greater challenges towards the

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market dominance of the already established supermarket enterprises (Jarvis 2016). The most
important aspects to be considered are effective focusing, product differentiation and
leadership in cost.
The supermarket sector depends greatly on the revenue earned from the grocery
segment. Naturally all the three companies should treat their groceries segmentation with
utmost importance. Woolworths have been effective in maintaining a long running
competitive edge over their closest rivals Coles through their product differentiation focusing
on fresh food. Coles however have been able to tackle the competition of Woolworths
through their cheap groceries campaign (Chakraborty 2018). IGA on the other hand have
greater advantages in remoter markets. Aldi, a relatively new enterprise is known for the
cheap groceries they provide. However, as of now the company cannot be said to be a major
threat to the dominance of the Woolworths and Coles (Das Nair and Dube 2017). This is
mainly because their business strategies have not been effective considering the great
locations that the two largest companies are mostly placed in. In regards to cost effectiveness
all the companies that are being discussed have close competition. However, due to the fact
that the companies like Woolworths and Coles cover a much larger area and greater visibility,
both the IGA group and Aldi remain largely limited in the scope of their business (Singh-
Peterson et al. 2016). The product differentiation is better considering Woolworths and Cole.
The companies offer a wide range of products and the stiff competition between them help
them to continuously upgrade their offerings.
Corporate Strategy
Corporate strategies are mainly based on the effectiveness of the corporate framework
of an organization. It is mostly focused towards achieving positive diversification in the
corporate situation. Hence, it becomes much important for organizations working in the

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supermarket sector to have optimal corporate strategies. This is mainly due to the diverse
range of products that these companies provide the customers. Woolworths and Coles both
have pre-existing growth oriented corporate strategies. Emerging supermarket enterprises
such as Aldi and IGA need better more effective growth strategies (Arup, Beaton-Wells and
Paul-Taylor 2017). This will help them to reduce the otherwise long time it can take for them
to get closer to the other two supermarket giants of the country. It is important that the two
lesser influential companies of the market IGA and Aldi take systematic and organized
strategies towards improving their corporate positions.
Considering the case of the Woolworths and Coles it can be said that Coles has a
better corporate strategy in place. This is mainly because Coles is part of the larger enterprise
of Wesfarmers, a company that is greatly diverse in its corporate operations (Grimmer 2018).
Additionally, apart from growth strategy the two larger companies have to focus more on
stability of their corporate functions. This will ensure that they can have a better advantage
over the emerging competitors in the future if consistent stability is maintained. Supermarket
companies such as IGA definitely need to take effective corporate strategies aimed towards
the renewal of their market approach. The company is already taking important steps towards
re-structuring their corporate position. Newer market players such as Aldi need to have strong
growth strategies that need to be based on separate phases of achieving specific phase
oriented goals and objectives (Crawford et al. 2017). As larger corporate enterprises
Woolworths and Coles have a huge advantage over IGA and Aldi and smaller companies.
Their corporate positions are much greater and diversified. This may mean that it can take a
long time for the other companies to get closer to the two top market players.

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Acquisitions and Structure
The two larger companies already have a strong position with regards to their
structure and acquisition functions. Coles is a subsidiary of the much larger retailing giants
Wesfarmers, also known as the Western Australian Cooperative. Wesfarmers have a total of
223 store warehouses, more than 60 small stores and 150 office equipment stores (Sanin
2015). Coles as a subsidiary itself runs 750 supermarkets, 92 hotels and more than 600 fuel
and smaller stores across the country (Mortimer and Grimmer 2018). Wesfarmers employ
more than 200 thousand people and have been greatly successful towards ensuring the
structural efficiency of Coles (Grimmer 2018). Woolworths are also strong rivals of Coles.
The company effectively runs 873 supermarkets across the country and around 527 liquor
and 327 other shops (Sanin 2015). Both the companies have also made essential partnerships
with renowned personalities of the food industry. Woolworths partnering with celebrity chef
Jamie Oliver and Coles partnering with Chef Heston Blumenthal have enhanced their
competitive operations (Lewis and Huber 2015).
Companies like Woolworths also focus towards making effective localized
acquisitions that will help them to establish strong market positions in the local markets. For
example- the company was able to acquire the local and profitable business of the Mallam
family in the North Coast of New South Wales after legal complications of the family with
the local council. However, there was significant hostility from the locals after this decision
but Woolworths were able to emerge victorious through their perseverance and patience. The
IGA or Independent Grocers Association of Australia has a different structure to that of the
larger companies (Ghalebeigi 2015). It is owned by Metcash however the different stores
have various independent owners. The company essentially operates with different names in
different Australian regions. Aldi was a German cheap groceries brand that started operating
in Australia in 2001. The company now has more than 350 stores and many more under

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process of being opened across Australia. It is also a worldwide firm with 7 thousand stores
globally. The growth of Aldi has been in the regions that were traditional strongholds of IGA.
Thus, Aldi is a greater threat to IGA than either Woolworths or Coles.
International Strategy
International strategies are important aspect for all the companies that are being
discussed. The supermarket sector has gone largely global with Australian firms exporting
large number of their product offerings from abroad. The two biggest supermarket enterprises
of the country Woolworths and Coles are much ahead of the other companies when it comes
of international strategies (Sanin 2015). It is important to consider that the international
strategies of the two companies are both focused towards international expansion and export
oriented strategies to consolidate their positions concerning the domestic market. The supply
chains of Woolworths, Coles, IGA and Aldi are based on globally sourced supplies (Methner,
Hamann and Nilsson 2015). Hence, it is important for the companies to maintain effective
relationships with their global partners. Woolworths are Coles being much larger given the
scope of their inventory management functions have to establish and maintain stronger
relationships with their global partners. Aldi is an international brand and have to maintain
strong multinational relationships in order to grow as a company.
Generally, it has been seen that Australian supermarkets often tend to follow the UK
based supermarkets. This influences their strategies both internationally and domestically.
Many prominent UK based business strategists have been successfully hired by both Coles
and Woolworths to ensure better productivity. The international strategy of both Coles and
Woolworths are based on ensuring effective partnerships with local retailers. This provides
them with advantageous positions of introducing themselves through an already established

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domestic brand in a given country (Methner, Hamann and Nilsson 2015). The international
strategy of Coles is in line with the international expansion strategies formed by the
Wesfarmers, their parent organization. Wesfarmers are investing towards gaining effective
market expertise of the most profitable business propositions internationally. Aldi already has
a good international strategy in place due to their worldwide business functions. However,
IGA is not in an effective position for international expansion and is more focused towards
consolidating their position in the Australian market (Sanin 2015). International strategies can
help all the companies to develop better supply chain operations. The international
partnerships will ensure effective flow of globally routed supplies.
Cooperative Strategy
The supermarket industry of Australia is based on inventory management functions.
In order to ensure better inventory management it is much important that all the companies
develop cooperative relationships with suppliers. All the top companies working in the
supermarket sector of Australia are equally matched in their ability to source their suppliers
directly from the producers. The producers are mostly local farmers as all of the mentioned
supermarkets have relative expertise in selling grocery items (Soosay et al. 2016.). The
cooperative strategies of established market giants like Woolworths and Coles are better as
they have been effectively operating in the groceries sector for a long time. The two
companies have better and wider supplier networks and have established profitable
relationships with farmer’s cooperatives. However, the only problem that can affect the
industry in general in the future is the fact that the suppliers are getting squeezed due to the
great competition for supplies in the supermarket sector. Coles is run by Wesfarmers, who

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have strong expertise in sourcing farm produce and is in a more advantageous position
concerning their cooperative strategy.
It is important to understand that Aldi as an emerging supermarket enterprise in the
Australian market has been able to witness significant growth over the years. They have been
able to establish strong cooperation with the local producers in order to consolidate their
positions in the low level markets. Aldi’s presence has emerged as a strong threat for IGA.
However, with regards to Coles and Woolworths, the cooperative strategies in place are much
more deep rooted than any other supermarket or groceries chain (Price 2016). Both
Woolworths and Coles have long established direct relationships with farmers. This helps
them to have better interactions with the farmers and this in turn helps them to offer better
produce to their customers.
Conclusions and Recommendations
It is highly recommended that all the companies employ better strategies towards
developing a better future growth plan. It is important for the dominating companies like
Coles and Woolworths that they devise strategies that judiciously consider any future issue
that may give better competitive advantage to the smaller companies. The smaller companies
such as Aldi and IGA are recommended to focus towards developing bold market strategies
that can help them to reach a formidable position of competing with the established
companies. There should also be proper government intervention to stop the squeezing of
supply chain functions in the market that might end in unfavourable future conditions.
Conclusively, the Australian supermarket sector is dominated by a few companies that
have long established and effective market strategies. It is important that newer companies
judiciously consider the competitive factors present in the market before taking essential
steps towards ensuring growth and profitability. The future of competition in the market is

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bound to grow as firms like Aldi can provide even tougher challenge to the dominant
supermarkets in the future. The changing customer preferences and greater empowerment of
customers due to online connectivity can increase their influence over the competitive
environment of the supermarket sector.
References
Arup, C., Beaton-Wells, C. and Paul-Taylor, J., 2017. Regulating supermarkets: The
competition for space. UNSWLJ, 40, p.1035.
Chakraborty, R., 2018. Do Retailers Manipulate Prices to Favour Private Label over Brands?.
Crawford, B., Byun, R., Mitchell, E., Thompson, S., Jalaludin, B. and Torvaldsen, S., 2017.
Socioeconomic differences in the cost, availability and quality of healthy food in Sydney.
Australian and New Zealand journal of public health, 41(6), pp.567-571.
Das Nair, R. and Dube, S., 2017. Growth and strategies of large, lead firms-Supermarkets.
Ghalebeigi, A., 2015. Option Contracts for Supermarket Fruit Supply Chains: Theory and
Practice (Doctoral dissertation, Victoria University).
Govender, S., 2017. How social media can be used to engage and interact with consumers in
the retail industry: an analysis on Woolworths' online strategies (Doctoral dissertation, The
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and ethical consumption. Food, Culture & Society, 18(2), pp.289-307.
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