Developing Strategies for the Supermarket Industry in Australia

The report discusses the impact of macro-environmental factors on the supermarket industry in Australia. It includes PESTLE analysis, Porter's five forces, key success factors, and future prospects of the industry. The report concludes that the industry is highly competitive and the future trends depend on online markets.

RUNNING HEAD: STRATEGIES 0
DEVELOPING STRATEGIES

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Table of Contents
Introduction:...............................................................................................................................................1
Pestle analysis:............................................................................................................................................2
Porter’s five forces:.....................................................................................................................................4
Key success factors in the industry:.............................................................................................................6
Conclusion:..................................................................................................................................................6
References:..................................................................................................................................................7
Appendix:....................................................................................................................................................8
Introduction:
The supermarket industry is one of the most violently competitive industries in Australia. The
industry is experiencing great and consistent growth in the past few years. Change in the
consumer demands and the sentiments of the customers result in trading conditions of the
supermarket and the retail sector in Australia. Over the last decade, the shopping habits of the
people in Australia as well as in all over the world are changing. Most of the shopping is done in
supermarket these days avoiding shopping at the local market or the independent outlets. As far
as the statistics are concerned, it has been analysed that the country earns around $102bn from
the supermarket industry and employees 362,102 people in this industry (Biddle, 2016).
The above figure clearly describes the major players in the industry along with their market
share. As per the data, it has been analysed that Woolworths is the company that has largest
market share in the industry with 33.6% and its biggest competitor is Wesfarmers that has around
29.3% of the market share.

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Pestle analysis:
Political factors: As far as the political environment is considered, it has been analysed that the
supermarket industry in Australia is very much affected by the political framework of the
company. The authorities like Australia competition and consumer commission, the trade
practices Act and the foreign investment review board control the working and operations of
supermarkets in Australia (Dwivedi, et al. 2012). The government has also impacted on the
controlling the competition in the industry.
Economic factors:
As far as the economic factors are considered, it has been analysed that the fluctuations in the
currency of the country and higher cost of doing business makes it really difficult for the
companies in retail industry to operate smoothly (Grimmer, L. (2018).
Social factors:
Social factors obviously affect the way supermarket operates in the country. It has been realised
that societal concerns, lifestyle and changes in the life of the people affect the way they purchase.
The supermarket companies also have to make changes in the type of products offered as per the
preferences of the people. The Australian customers prefer to purchase the low diet food these
days.
Technological factors:
Australia is considered as one of the leading technology focused country and focused in research
and development so that it can make the technology as its cutting edge. It has its impact on the
supermarket industry in the way the companies serve the market such as online billing system,
barcode system, e-payments etc. These technologies make the supermarket industry more
automated in nature.
Legal factors:
In terms of legal factors, it has been realised that Competition Act passed by the Australian
government is the act that affected the all over supermarket industry in Australia. This act was

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passed because of the duopoly of Coles-Woolworths in the industry so that the other players like
Aldi and Lidl can also make their places in the industry.
Environmental factors:
There are various laws in terms of protecting the customers and the environment in Australia so
that the business in the country would not exploit the resources available. The Australian
Consumer Law provides the regulation on unfair contract terms, consumer right guarantees,
products safety laws etc (Huang, Zhu & Pan, 2017).
It has been analysed that the trends in the above discussed factors affect the supermarket industry
in Australia for future as well. The political and the legal norms of the country support the
industry but in economic terms, it may have faced some issues because of the instability in the
economy.
Porter’s five forces:
Porter’s five forces can help in providing the awareness about the structure of the industry in the
country. Below is the analysis of supermarket retail industry of Australia:
Bargaining power of buyers: HIGH
Bargaining power of the buyers in this case is very high. This is because of the homogeneity of
the products served by the companies as well as the low switching cost for the customers.it has
been realised that high competition amongst the companies like Woolworth, Coles. Aldi etc. the
purchasing power always remaining the hands of the buyers.
Bargaining power of suppliers: VARIABLE
It has been analysed that the bargaining power of suppliers depends on the brand name of the
supermarket company. For example, the Coca Cola brand that is very popular in Australia has
the power in their hands for supplying the products (Insch & Florek, 2009).

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Threat of substitutes: HIGH
There are number of substitutes for the supermarket chain or the company. This is because it
operates in many products categories as those product categories may have their exclusive stores
well. Other than food sector, if the clothing sector is considered, the stores of ZARA, GAP etc.
can attain the market share and provide the customers with great varieties.
Threat of rivalry: HIGH
The supermarket industry in Australia operates with the duopoly of Coles and Woolworth but the
rise of new companies in the market such as Aldi and Lidl are giving great competition to the
companies in the Australian supermarket products.
Threat of new entrants: LOW
Supermarket industry is Australia is very competitive and large. Entering such industry is very
tough as it required high capital to enter. Thus the threat of new entrants is low but the already
existing international companies provide the threat to the Australian local supermarket chains.
Other than these online stores are also affecting the market share (Knox, 2015).
Future prospects:
As per the above analysis, it has been realised that the future of supermarket industry is stable for
few year but the interest of people in buying online may affect the future of the supermarket
industry in negative way. Although the online grocery shopping contributes only 3% of the total
online shopping but the supermarket stores are not only about grocery selling and have more
products categories to offer the market and the online sale of those products is increasing day by
day.
Key success factors in the industry:
As per the above analysis, it has been identified that the supermarket industry has a secured
future if it makes investment in online servings to the people (Kumar, 2008). Thus there are
several key success factors of this industry in Australia. Some of them are:

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High competition: as discussed that the industry is highly competitive in nature thus making is
very attractive. It has been analysed that the supermarket industry in Australia is very attractive
because of the tough competition and thus large opportunities for the companies to earn
revenues.
Convenience: the convenience that the supermarket stores provide the customers is at a high
level. This convenience makes this industry very opportunistic. The future of the industry is not
at all in dark because the servings and the offerings at the supermarket stores are convenient
enough for the customers to purchase their daily items under one roof (Richards, et al. 2013).
Price wars results in low prices: it has been analysed that the price wars between the largest
players in the industry resulted in lower prices and these low prices of the products attract the
customers to male their purchase from the supermarkets in the country. Tough competition in the
industry not let the players to charge high from the customers and thus low priced offering by the
supermarkets helps the industry to be very attractive in the market (Richards, et al. 2012).
Variety: It has been realised that it is the tendency of the customer to approach the place that
provides them with great variety of the products. It has been analysed that supermarket provides
various variety and brands to the customers for buying the single product thus the customers can
make the comparison and the buy the products wisely.
Research and development: it has been analysed that if the comparison is made between the
supermarket and the single store, it is generally suggested that supermarket store have more
potential to make changes in their processes as per the latest technology and other factors of the
market. Even the supermarket companies used to invest a lot in research and development so that
they can avail more and more market share.
Stability: it has been analysed from the above discussion that threats of new entrants is very low
in this industry. This is because this industry is the capital intensive industry and it becomes very
difficult for the companies to invest such a large capital in a single go. Competing with the
already existing firms become even more difficult as the already existing companies earns the
brand name with time and efforts. Thus, companies in this industry are very stable.

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Conclusion:
The report concludes that supermarket industry is Australia is highly competitive in nature. It has
been realised from the above discussion that the macro environmental factors such as political,
legal, economical etc. have great impact on the operations of supermarket industry. The
competition Act released by the Australian government has the major impact on in bringing
down the duopoly of Coles and Woolworths in the industry. The later part of the report that
focuses on porter’s five forces suggests that the future trends in the industry is basically depends
on the online market as people are moving towards the online purchasing rather than offline
stores. As far as the success factors of the company are considered, it has been analysed that
convenience, low process, high competition and great variety attracts the customers to make
purchase from the supermarkets.
References:
Biddle, I. 2016. The Wesfarmers/Woolworths duopoly war: The Bunnings vs. Masters
battle. Busidate, 24(3), 3.
Dwivedi, A., Merrilees, B., Miller, D., and Herington, C. 2012. Brand, value and relationship
equities and loyalty-intentions in the Australian supermarket industry. Journal of Retailing and
Consumer Services, 19(5), 526-536.
Grimmer, L. 2018. Why Aussie Farmers Direct couldn’t compete with Coles and Woolworths:
Interview with Alana Mitchelson.
Huang, W., Zhu, H., & Pan, Y. 2017. How relationship marketing tactics affect customer
satisfaction: Evidence of supermarket industry.
Insch, A., & Florek, M. 2009. Prevalence of country of origin associations on the supermarket
shelf. International Journal of Retail & Distribution Management, 37(5), 453-471.
Knox, M. 2015. Supermarket monsters: The price of Coles and Woolworths' dominance (Vol. 6).
Black Inc..

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Kumar, S. 2008. A study of the supermarket industry and its growing logistics
capabilities. International Journal of Retail & Distribution Management, 36(3), 192-211.
Richards, C., Bjørkhaug, H., Lawrence, G., & Hickman, E. 2013. Retailer-driven agricultural
restructuring—Australia, the UK and Norway in comparison. Agriculture and Human
Values, 30(2), 235-245.
Richards, C., Lawrence, G., Loong, M., & Burch, D. 2012. A toothless chihuahua? The
Australian Competition and Consumer Commission, neoliberalism and supermarket power in
Australia. Rural Society, 21(3), 250-263.
Appendix:
1. PESTLE analysis: this analysis helps in analysing the impact of external factors on the
industry or the company:
Factors Impact
Political  Stable political environment
 Support imports
 Supports competition
Economic  Fluctuation in currency
 High cost of doing business
Social  Change in lifestyle
 Demands of healthy food
Technological  Online billing
 E-retailing
Legal  Competition Act
 Legal regulatory
Environmental  Environment Protection
 Customer rights
 Unfair contract terms

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2. Porter’s Five Forces:
This is the model that helps in analysing attractiveness of the industry by examining the
impact of various factors on the industry and the companies operating in the same.
Bargaining power
of buyers:
HIGH
Threat of
substitutes:
LOW
Threat of new
entrants:
LOW
Bargaining power
of suppliers:
LOW to
MODERATE
Threat of
rivalry:
HIGH