Strategic Management of Coles and Woolworth in Australian Supermarket Industry

This report provides a strategic analysis of the Australian supermarket industry with a focus on Coles and Woolworth. It includes Pestle and Porter analysis, product life cycle, VRIO analysis, competitor analysis, and strategy analysis. Recommendations and future predictions are also discussed.

Running Head: Strategic Management
Strategic Management
Coles and Woolworth

1
Strategic Management
Contents
Introduction.................................................................................................................................................2
Macro Environment Analysis.......................................................................................................................2
Industry Analysis..........................................................................................................................................3
Product Life Cycle....................................................................................................................................3
Porter’s Analysis......................................................................................................................................4
Company Analysis........................................................................................................................................5
Resource and Capabilities........................................................................................................................5
Core Competencies.................................................................................................................................6
Competitor Analysis....................................................................................................................................6
VRIO Analysis...............................................................................................................................................6
Strategy Analysis.........................................................................................................................................7
Recommendation........................................................................................................................................8
Future Prediction.........................................................................................................................................8
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9

2
Strategic Management
Introduction
The supermarket industry of Australia can be defined as the business that retails groceries and
food lines. This type of industry is already characterized as mature industry. Coles and
Woolworth in Australia, both are one of the leading companies that cover almost 80% of the
market as compared to the other supermarkets. Slowing of the industry growth is one of the very
common features of the mature industry. This industry has achieved the average Industry growth
per year of 3.2 percent in between the years 2007 to 2012 and the future growth is estimated to
be reducing a little to 2.9 percent till 2020 (World, 2018).
Macro Environment Analysis
The Pestle analysis of the supermarket industry is as follows:
Political Factors: The nature of this industry is duopolistic as there are multiple companies which
are into this industry like Woolworth and Coles. There is a lot of competition when there is
existence of too many companies in the same industry. Hence, the rules of the government have
very strict regulations for the duopolistic nature of the industry (Kolios, 2013).
Economical Factors: People in Australia spend fewer amounts on the supermarkets for buying
the groceries and other things and this impact the economy of the country. The Australian
government has eased the regulations on the retail industry and that makes the new entrants
come to the markets and the competition increases (Kozlinskis, 2016).
Social Factors: Coles maintains very healthy and effective relationships with the community on
the whole. It works with the NGO too for cancer people. On the other hand, Woolworth’s
relations are very bad with the suppliers.
Technological Factors: Both the companies use good technology factors for the betterment of
their own self as well as the industry. For Example: Woolworth has started using the SAP based
merchandising system for improving the efficiency while Coles have increased the number of

3
Strategic Management
customers who uses internet facilities. They also give self check out facilities. Cloud infra is also
being used by Coles.
Legal Factors: Both the companies have a battle with the Australian Competition and Consumer
Commission. There is a recommendation for the strict codes by NFF (Gupta, 2013).
Environmental Factors: This industry has to use products which are sustainable as well as they
should not create any harm to the environment. The supermarkets should be eco friendly. The
carbon initiatives are incepted by Woolworth as well there are investments done for the efficient
usage of energy to that a good environment can be maintained without any pollution and dirt
(Rastogi, 2016).
Industry Analysis
Product Life Cycle
Introduction: Coles was the very first super market in Australia which was founded in Melbourne
in the year 1960. Later in the picture came Woolworth and Aldi named companies which also
made its mark in this industry. Since Cole came into existence, it has taken over the markets
since then. That is how all these companies were in the introduction phase.
Growth: Since the years 2004 till 2012, the industry was in the growing phase. Companies like
Coles, Woolworth, West farmers etc all have grown since then. The reason of their growing was
because the creation of the malls and the idea of super markets were at boom at that point of
time.
Maturity: This stage of the product life cycle displays the point from where the companies or the
industries face downfall in terms of the sales. Now since it is the case of Supermarkets and not
one company, the industry kept on growing in good terms but because of the more new entrants
like Aldi which is a German brand, Coles and Woolworth had to face serious issues. While there
was still competition going on between Coles and Woolworth as well.

4
Strategic Management
Decline: In the year 2017, there was a major crisis that the supermarket industry had to face in
terms of the sales. Be it any company, the industry was on the whole down. However, it was just
a phase of the industry that it faced. Recently, in 2018, there is again the boom of the
supermarket industry in terms of sales and Coles and Woolworth, particularly are doing good.
Hence, it can be said that the industry on the whole was always in the maturity stage of the
product life cycle.
Figure 1: Supermarket Grocery Prediction in 2017-18.
Source: (Foods, 2018).
Porter’s Analysis
Power of Buyers: The buyers have the reasonable power on the exchange relations when in the
total purchases made displays the portion of the sales of sellers. All the super markets are very
powerful buyers when they display or pose an integration threat. However, it is agreed upon that
there is a trend within the huge and main Australian retail supermarkets to replace their suppliers
increasingly with their own.
Power of Suppliers: The suppliers conventionally hold the power of the market since 1970’sand
it was exercised via statutory marketing authorities and producer owned cooperation’s as they
were required to gain the capital. The manufacturers exercised vital control since all

5
Strategic Management
supermarkets never wished to become powerful brands as there was a consumer demand for
them (Tehrani, 2014).
Threat of Substitutes: In today’s world, convenience is the most important thing for the
customers, the supermarkets offer a lot of one stop shop for the people who desires to buy wide
range of fruits and vegetables at the same time. The stores like 7-eleven are actually the
substitute of the supermarkets when the convenience perspective is thought of and in addition to
that, they also offer a wide range of stocked items if compared with the companies like Coles and
Woolworth (Ibis, 2018).
Rivalry between Competitors: The supermarket industry is quite big as compared to the other
industries but the total number of competitors is 3500 and more. The combined profits are of
$3.3 billion on $83 billion revenue of sales in the year 2011 to 2012. Still the Australian
supermarket industry has 80% of the acquirement of the companies like Woolworth and Coles.
These are the two main competitors in the market (Omsa et al., 2017).
Threat of New Entry: The industries that display good investment returns and those who have
lower entry barriers are actually the probable entrants. The industry experiences reasonable
amount of growth of 3.4 percent since 2012. The forecasts are estimated that the average growth
annually would diminish to 2.4 percent till 2020 (Indiatsy, 2014).
The attractiveness of the industry is still maintained in people as people look forward to buy
most of their stuff from one stop and what better can be an option if not supermarkets.
Company Analysis
Resource and Capabilities
The resources of the industry or the company can be tangible, intangible as well as Human
resources. Supermarkets are so many in number that they can easily resource many people who
seek to earn for a living (Tuan, 2009). The outlets that the total number of supermarkets has are
known as the tangible resources. Intangible could easily be the investment that is done on the
supermarkets and that is a lot of cost investment in supermarkets per annum. The humans are the

6
Strategic Management
most important asset in the resourcing as they need jobs and supermarkets are the ones that can
provide them with so many jobs. Many people can earn their living with getting jobs in
supermarkets (Ismail et al., 2012).
The capabilities of the company or industry can easily be identified by just seeing the industries
approach toward the customers. The industry should have the capability to identify the needs of
the companies as well as to fulfill the requirements of the customers by keeping lower prices. In
this respect, Coles outstands the most as it started with the strategies of lowering the prices for
the customer satisfaction. Hence the industry has the capability of the providing the customer
satisfaction as well as fulfilling the needs of the companies as well (Galavan, 2015).
Core Competencies
There are approximately 3500 supermarkets in Australia and many more are building or coming
as new entrants. The core competencies should be able to fulfill these criteria of providing the
customers the wide variety of markets. This is clearly a positive sign for the supermarkets as the
customer literally has a wide variety to choose from. The core competencies of Australian
supermarkets are good as they provide a good amount of their contribution to the benefits of the
customers (Agha, 2012).
Competitor Analysis
Going back to the porter’s five forces, as it is mentioned above that 7-Eleven type of
convenience based stores are the threats of the supermarkets as they provide the wide variety of
the stocked up products which supermarkets doesn’t (Czepiel, 2012).
VRIO Analysis
NAME Value Rare Imitate Organization Sustainable
competitive

7
Strategic Management
advantages
Capabilities Resources
Tangible Intangible
Operation
Variety of
Groceries to
choose from
Resourcing
in huge
number
Cloud
Technology
Inbound Research and
development
Innovation
Dyson ideas,
Creative
ideas, and
knowledge
✔ ✔ ✔ ✔ Yes
Outbound Distribution
management
Customer
Relations ✔ ✔ ❌ ✔ No
Marketing
and sales
Sales
management
Sales
strategies
Multiple
Distribution
Outlets
✔ ✔ ❌ ✔
No
After sale
services
Customer
service Nothing Goodwill
Source: (Cardeal & António, 2012).
Strategy Analysis
As far as Coles and Woolworth are concerned, they both almost apply similar strategies in terms
of attracting the customers and they both are always in the competition with each other. While at
the same time, there are some super markets who apply very high prices on the products like
Aldi (German brand). But then these types of supermarkets also provide high discounts to the
customers from time to time (Enders, 2013).
Both Coles and Woolworth apply the sustainable advantage strategy for a short period but the
strategy of Aldi in terms of the prices is for the long term. On the whole if the supermarkets are

8
Strategic Management
taken into picture, then all companies apply some strategies to sustain in this big market. In all
the super markets top the charts in any type of industry when it comes to the sales and revenue
(Isoherranen, 2012).
Recommendation
As per the supermarkets are concerned, the industry should just provide variety of stocked
products and that is how they will remove the threat that all the supermarkets have from 7-
Eleven type of convenience stores. As far as the customers are concerned, they want to buy
everything from one place these days as they respect time and effort too. Hence, providing
everything at one place will definitely help the supermarket industry in growing even further.
Future Prediction
The prediction of the supermarket industry is reasonably good as there are many supermarkets
that provide a large amount of variety already and the major economy is based on those 3500
stores of supermarkets. If, as per the recommendation, the super markets provide the huge
number of stocked up products too, then no industry would be able to beat this industry in terms
of sales and revenue.
Conclusion
This report focuses on the industry strategic analysis of the super markets. While Coles and
Woolworth are the major industries that take over 80 percent of the market in super market
industry, there are other companies like Aldi and West Farmers who have a good amount of
shares in the generation of the revenue of the Australian economy. This report holds the Pestle
and the porter analysis of the supermarket industry. Also the product life cycle is mentioned as
this industry started to grow since Coles established itself in Melbourne, Australia in 1960. The
VRIO analysis is also shown with the help of the table with the discussion of the core
competencies and resourcing and capabilities and in the end the strategy analysis is also

9
Strategic Management
discussed in terms of the companies like Coles and Woolworth. There are some
recommendations given in the report with the future prediction of this industry.

10
Strategic Management
References
Agha, S., 2012. Effect of Core Competence on Competitive Advantage and Organizational
Performance. International Journal of Business and Management , 7(1).
Cardeal, N. & António, N., 2012. Valuable, rare, inimitable resources and organization (VRIO)
resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to
competitiveadvantage? African Journal of Business Management, 6(37).
Czepiel, J.A., 2012. Competitor Analysis. [Online] Available at:
http://pages.stern.nyu.edu/~jczepiel/Publications/CompetitorAnalysis.pdf [Accessed 6 August
2018].
Enders, A., 2013. Towards an integrated perspective of strategy: The value-process framework.
Journal of Strategy and Management, 2(1), pp. 76 - 96.
Foods, A., 2018. Australian Supermarkets Bounce Back. [Online] Available at:
http://www.ausfoodnews.com.au/2018/02/21/australian-supermarkets-bounce-back.html
[Accessed 6 August 2018].
Galavan, R.J., 2015. Understanding Resources, Competences, and Capabilities in EU Common
Security and Defence Policy. [Online] Available at:
http://www.ieceu-project.com/wp-content/uploads/2016/02/Galavan%20-%20Understanding
%20Capabilities%20(IECEU).pdf [Accessed 6 August 2018].
Gupta, A., 2013. Environment & PEST Analysis: An Approach to External Business
Environment. International Journal of Modern Social Sciences, 2(1), pp.34-43.
Ibis, 2018. Supermarkets and Grocery Stores - Australia Market Research Report. [Online]
Available at: https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/
food-retailing/supermarkets-grocery-stores.html [Accessed 6 August 2018].
Indiatsy, C.M., 2014. The Application of Porter’s Five Forces Model on Organization
Performance: A Case of Cooperative Bank of Kenya Ltd. European Journal of Business and

11
Strategic Management
Management , 6(16).
Ismail, A.I., Rose, R.C. & Uli, J., 2012. THE RELATIONSHIP BETWEEN
ORGANISATIONAL RESOURCES, CAPABILITIES, SYSTEMS AND COMPETITIVE
ADVANTAGE. Asian Academy of Management Journal, 17(1), pp.151-73.
Isoherranen, V., 2012. STRATEGY ANALYSIS FRAMEWORKS FOR STRATEGY
ORIENTATION AND FOCUS. [Online] Available at:
http://jultika.oulu.fi/files/isbn9789514297885.pdf [Accessed 6 August 2018].
Kolios, A.J., 2013. Political, Economic, Social, Technology, Legal and Environmental
(PESTLE) Approach for Risk Identification of the Tidal Industry in the United Kingdom.
Energies , 6(10).
Kozlinskis, V., 2016. GROWING INSTABILITY OF THE SOCIO-ECONOMIC SYSTEM.
Journal of Business Management, 11.
Omsa, S., Abdullah, I.H. & Jamali, H., 2017. Five Competitive Forces Model and the
Implementation of Porter’s Generic Strategies to Gain Firm Performances. Science Journal of
Business and Management, 5(1), pp.9-16.
Rastogi, N., 2016. PESTLE TECHNIQUE – A TOOL TO IDENTIFY EXTERNAL RISKS IN
CONSTRUCTION PROJECTS. International Research Journal of Engineering and Technology,
3(1).
Tehrani, M.B., 2014. Evaluation Strategy Michael Porter's five forces model of the competitive
environment on the dairy industry. American Journal of Engineering Research , 3(5), pp.80-85.
Tuan, N.P., 2009. Resources, Organizational Capabilities And Performance: Some Empirical
Evidence From Vietnam’s Supporting Industries.. International Review of Business Research
Papers , 5(4), pp.219-31.
World, R., 2018. The state of supermarkets and grocery industry. [Online] Available at:
https://www.retailworldmagazine.com.au/state-supermarkets-grocery-industry/ [Accessed 6
August 2018].

12
Strategic Management