Strategic Analysis & Recommendations for Australian Supermarkets

This report provides a strategic analysis of the Australian supermarket industry, focusing on key players like Coles, Woolworths, ALDI, and Wesfarmers. It utilizes Porter's Five Forces model to analyze the industry's competitive landscape, including the bargaining power of buyers and suppliers, the threat of new entrants and substitutes, and the intensity of rivalry among existing firms. The analysis reveals that the industry is highly competitive, with Woolworths and Coles dominating the market. The report also touches on the impact of technology, pricing strategies, and the importance of customer satisfaction. Recommendations are provided to help supermarkets achieve higher growth and profitability by focusing on employee and customer satisfaction and adapting to changing market dynamics. Desklib offers this and other solved assignments to aid students in their studies.

Running head: AUSTRALIAN SUPERMARKET INDUSTRY
AUSTRALIAN SUPERMARKET INDUSTRY
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1AUSTRALIAN SUPERMARKET INDUSTRY
Executive Summary:
The report highlights the strategic analysis of the supermarket industry in Australia to achieve
high level of profits in the future. The analysis helps in achieving higher growth of operation.
The main goal of the organization is to satisfy their employees and the customers. There is a
huge competition between the rival companies like Coles, Woolworths, ALDI and Wesfarmers.
Through Porter’s five force model, industry analysis has been made and competitor’s analysis is
obtained of the supermarket industry. Rivalry between the existing competitors in the market is
made and threat of the new entrants and competitors is ascertained. Moreover, recommendation
has also been provided relevant to the industry.

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Table of Contents
Introduction:....................................................................................................................................3
Macro-environmental analysis:.......................................................................................................3
Porter’s five forces:..........................................................................................................................3
Industry Analysis:............................................................................................................................5
Recommendation:............................................................................................................................6
Conclusion:......................................................................................................................................7
References:......................................................................................................................................8

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Introduction:
The supermarket industry in Australia is known for its businesses retailing groceries and
food lines. The firms competing in this chain employ cost-reduction techniques and initiatives.
The competitive advantage of the supermarkets mostly revolves around the cost based factors
instead of the factors that are differentiation-based. The report focuses on the critical analysis of
a firm to know the compete scenario of the supermarket industry in Australia. The supermarket
industry in Australia is classified as a mature industry with a slow growth. The company is one
of the leading players in Australia. The strategic analysis of the supermarkets plays a major role
in evaluating the current business strategy of Woolworths, ALDI, Coles and Wesfarmers. There
are specific economic tools that are used in analyzing the organization’s existing level of
strategic positioning within the industry that includes the analysis of supermarket’s internal and
external environment. The competitive strategic analysis of the industry is made by applying
various crucial strategic tools that includes five force analysis of Porter’s, PESTEL and value
chain analysis. The supermarket industry in Australia is mainly controlled by the main players
that are Woolworths as well as Coles, which altogether have almost 80% of the market shares.
The expanding market popularity offers value for money and comparable quality that grows
from 13.5% of the total sales to 25.5% within the year 2013 (Barrick et al., 2015).
Macro-environmental analysis:
The supermarkets have its own growth strategies as per their operations and growth plans
and the important strategic priorities of the organization include maximizing the value of its
shareholders, maintaining effective track record for the business. The main strategy of the
supermarket industry is to satisfy their customers and employees. the macro environmental
factors of the organization is analyzed through Porter five forces and PESTEL analysis is also
made to determine all the major factors affecting the industry (Brewster, 2017).
Porter’s five forces:
The five forces analytical technique is used to assess the existing position of the overall
industry and the severe techniques that involves all the relevant factors affecting the performance
of the organization. The Supermarket industry of Australia is analyzed with the help of analytical
tool a follows:
Bargaining power of Buyers: the bargaining power of buyers in Australia is very high as
there are various supermarket stores in Australia and the retail industries helps in providing all

4AUSTRALIAN SUPERMARKET INDUSTRY
the basic necessities to its customers. Supermarkets like Coles, ALDI, Woolworth’s and Wes
farmer’s provides wider option for the customers to select, thus increasing the bargaining power
of the buyers. The bargaining powers of buyers are the inherent power that is exercised by the
supermarkets over their suppliers and is the end consumer of the supermarket firms (Chen and
Miller 2015). The buyers’ exercises considerable power over their exchange relationship and the
purchases that are made showcase an adequate portion of the seller’s sales. In the year 2009,
Woolworths engaged itself in backward integration through the acquisition activity. Woolworths
have acquired 25% stakes in an existing Woolworth’s suppliers in Gage Roads. The suppliers
have less option and thus have to yield the supermarket power as these markets accounts to more
than 40 to 60% of the revenues for the food processer in Australia. There are trend among the
major Australian retail supermarket chain that is going at a rapid speed to replace the suppliers
brands with their own (Helfat and Martin, 2015).
Bargaining power of Suppliers: There are various big players in the supermarket industry
that has very high shares in the supermarket industry and is highly concentrated. This leads to
increase the bargaining power of the suppliers. In Australia, the supply chain sectors of the
grocery sectors have experienced a structural powerful shift since the past few years. Since the
year 1970, the market power were traditionally held and managed via statutory marketing
activities. The producer owned corporations were involved to acquire major access to the
financial capital. Similarly majority of successful organizations were acquired by the
international corporations and thus the agenda of the organizations shifted from the increasing
farm-gate returns by delivering bottom line profits to the processes. Moreover, the multinational
manufacturer’s also exercised vital control as the supermarket was unable to operate effectively
without the power brand. The increase in the supermarket dominance over the international and
local suppliers resulted in interference from the Australian Food and Grocery Council and thus
an ombudsman related to supermarket was established (Jackson, Schuler and Jiang, 2014).
Threats of new entrants: the threats of new entrant is generally lower in the supermarket
industry as all the existing firms are so powerful that makes it really impossible for the new
entrants to work in the existing supermarket conditions. Therefore, this also reduces the overall
threats of new industries. Industries that have low entry barriers and better investment returns are
the major attractive targets for the entrants in the organization. The Australian supermarket
industry has further experienced an annual growth rate of 3.4% till the year 2012. The market
that involves with the decreasing revenue is a thereat for new entrants. Moreover, the new
entrant also faces maximum entry barriers. Theses major barriers includes limited sites for
restrictive zoning, development purposes and planning regimes. Though in Australia there are
substantial barrier for the new entrants, two international companies made their mark in the
supermarket industry. ALDI is a German supermarket chain and American mass merchandiser,
Costco has come into the marketplace despite the entry barriers. The returns available from the
retail grocery or Supermarket Company are highly attractive to various foreign countries
(Schnackenberg and Tomlinson, 2016).

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Rivalry among the existing firms: The threat of rivalry is huge in the supermarket
industry of Australia. The competition is fierce between the major competitors of the
organization such as Wesfarmers, Woolworths, Coles and ALDI. The rivalry is existing between
the competitors to gain maximum market share within the market. The retail and grocery
industry comprises of more than 3500 competitors that have a combined profits of $3.3 billion
for $ 83.7 billion sales revenue in the year 2011-12. The supermarket industry of Australia is still
highly concentrated. Coles and Woolworths are the two major dominant competitors that
involved a combination of more than 71 % of shares. Moreover, the concentration has also been
increased by the supermarkets that are combined together to create buying groups like the IGA
networks. The industry further influences the intensity related to the competitive rivalry. Due to
the increase in the number of organizations dominating the industry, the probability of aggressive
competitive tactics. This leads to the commodity based price wars during the year 2011-12. The
supermarket mostly competes according to the changes in price. Customers are highly price
conscious in the recent times; the supermarket rivalry is existed mostly in the form of price wars
(Schnackenberg and Tomlinson, 2016).
Threats of Substitutes: the daily consumption product is very important and the retail
daily consumable products are very high. There are no other major alternatives available to the
customer as a result, the threats of substitution is very low. In the recent times, the customers
want each and every product under one roof to avoid wastage of time. The supermarket chain
offers all the unique products for its customers, those wishes to purchases fresh fruits and various
grocery or households’ items. The convenient stores like 7-Eleven are the various substitutes to
supermarket. These stores though only offer limited items as compared to the major competitors
like Coles, Aldi and Woolworths. These supermarket attempts to acquire larger share of the
convenience market by re-positioning all the earlier convenience store merchandize for being
more accessible and installing self-checkouts. A recent survey displayed the fact that the
consumer nowadays sought more convenience over its price. The data showcased that the
consumer mindset has now shifted to save money instead of shopping around. This trend is now
highly popular in Australia that includes the high – income earners. They are also the main
driving forces that are existing behind all the major convenience stores. The Supermarket
initiated ‘aggressive price campaigns’ to drive the consumer away from all the existing
convenience stores and attracts them towards to the major supermarket (Woolworths.com.au.
2018).
Industry Analysis:
Woolworths and Coles have efficiently used technology to lure their potential customers.
The banking facilities have also found that all these stores have given customers all the facilities
to conduct banking transactions when shopping is being conducted. Strategic alliances with all
the banks also give supermarkets like Woolworths, Wesfarmers and Coles all the ability to
purchase goods that is related to purchase goods with their particular brands of Woolworths. This

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therefore increases the amount of purchases as the consumers are highly influenced to increase
their points at the stores. In addition to this, a reward program helps the clients to gain point at
their stores so that they can make purchases at the other specific stores. Change in technology
leads to the shift in the supply curve. The grocery stores are perfectly competitive market, where
the companies are unable to affect the market prices (Trainor et al., 2014).
The level of competition in the supermarket industry is not considered to be a substantial
contributor to the food prices inflation within Australia. The food prices are considered to be
increased various other factors that includes cost of production, high international demand and
adverse domestic weather condition that leads to high price inflation.
There are various firms that sell similar products and thus the firms are unable to face
substantial cost advantages in the long run. The customers are also able to switch between the
alternative suppliers and the competition that exists is mostly the Australian industries. Perfect
competition exists mostly in the Australian Industries. There is perfect competition within the
industry as the producers mostly sells homogeneous products to various identical customers. The
concept is used as an analytical tool that rarely matches the real market, where organizations are
legitimately able to distinguish itself from its competitors and earn economic profits (Trigeorgis
and Reuer, 2017).
Differentiated products and services reflect the innovation of the products on the seller’s
parts per the preference of the customers. The prices reflected the efficient cost of all the
products and services that are highly evident in the supermarket industry. Woolworths and Coles
continuously monitor the pricing of the competitors and further respond to price matching.
Resources like price matching are also used to reflect the existing demands of the customers.
Competition also increases the efficiency of the supermarkets as the retailers often uses resources
such as price matching to influence the customers away from its competitors with the variations
in price (Wesfarmers.com.au, 2018).
Recommendation:
The strategic analysis of Supermarket industry is carried to obtain the crucial strategies
that were undertaken by the supermarkets in the business environment. The supermarket is
mostly focused towards obtaining higher growth in its operational activities. The growth of the
organization is mostly supported by commitment of the supermarkets towards their employees
and competitors. Australian supermarket industry indicates that factors like varied social
patterns, adverse economic conditions and customers trends affects the growth and strategy of
the supermarkets in a highly negative manner. The internal environment also impact the growth
potential of the organizations and various recommendations are considered to be highly essential.
The supermarkets like Woolworths and Coles should aim at continuous innovation and

7AUSTRALIAN SUPERMARKET INDUSTRY
performance strategy. The consumer preferences and social trends should show dynamism that
should be efficiently addressed by considering all the strategies of higher growth levels. The
supermarket should also look forward to provide training and development mechanism to its
customers by enhancing their support from skilled employees.
Conclusion:
The Australian supermarket industry has experienced competitive duopoly between Coles
and Woolworths. The price war on several items are also seen like, bread, fruits and vegetables.
Price war on such items leads the product on becoming loss-leaders as the product is sold at par
or below cost. In addition to this Coles launched their down campaign by reducing the prices for
more than 6000 products on an average. Woolworths also initiated its own campaign better
known as ‘price knockdown’, which results in increasing the sales by 4.7%. Disposable
household income and decrease in consumer sentiments affects the profit of the organization thus
it can be concluded that the price war between the significant is rising at a rapid rate within the
supermarket. Coles, ALDI and Woolworths in all over Australia include wide varieties of its
private labeled differentiated products and have expanded their market.

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References:
Barrick, M.R., Thurgood, G.R., Smith, T.A. and Courtright, S.H., 2015. Collective
organizational engagement: Linking motivational antecedents, strategic implementation, and
firm performance. Academy of Management journal, 58(1), pp.111-135.
Brewster, C., 2017. The integration of human resource management and corporate strategy.
In Policy and practice in European human resource management (pp. 22-35). Routledge.
Chen, M.J. and Miller, D., 2015. Reconceptualizing competitive dynamics: A multidimensional
framework. Strategic Management Journal, 36(5), pp.758-775.
Coles.com.au. 2018. Coles Supermarkets. [online] Available at: https://www.coles.com.au/
[Accessed 20 Apr. 2018].
Helfat, C.E. and Martin, J.A., 2015. Dynamic managerial capabilities: Review and assessment of
managerial impact on strategic change. Journal of Management, 41(5), pp.1281-1312.
Jackson, S.E., Schuler, R.S. and Jiang, K., 2014. An aspirational framework for strategic human
resource management. The Academy of Management Annals, 8(1), pp.1-56.
Schnackenberg, A.K. and Tomlinson, E.C., 2016. Organizational transparency: A new
perspective on managing trust in organization-stakeholder relationships. Journal of
Management, 42(7), pp.1784-1810.
Trainor, K.J., Andzulis, J.M., Rapp, A. and Agnihotri, R., 2014. Social media technology usage
and customer relationship performance: A capabilities-based examination of social
CRM. Journal of Business Research, 67(6), pp.1201-1208.
Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic
Management Journal, 38(1), pp.42-63.
Wesfarmers.com.au. 2018. Home. [online] Wesfarmers.com.au. Available at:
http://www.wesfarmers.com.au/ [Accessed 20 Apr. 2018].

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Woolworths.com.au. 2018. {{metaController.metaData.title}}. [online] Available at:
https://www.woolworths.com.au/ [Accessed 20 Apr. 2018].