MGT510: Strategic Analysis of Coles Supermarket Australia

This journal post analyzes the competitive landscape of the Australian retail supermarket industry, focusing on Coles Supermarket. The analysis utilizes Porter's Five Forces model to evaluate the bargaining power of buyers and suppliers, threats of new entrants and substitutes, and competitive rivalry. The study highlights the increasing competition due to the expansion of ALDI, the pressure from Woolworths, and the impact of Amazon. It examines the bargaining power of suppliers, the low threat of new entrants due to high barriers, and the high threat of substitutes due to competition from ALDI and Amazon. The analysis concludes that the supermarket industry in Australia is highly competitive, especially for Coles, due to the expansion of international food chains. The journal post is structured with an introduction, competitive analysis, and conclusion, along with references.

Strategic Management
Journal Post 2
Student Name
Institute and Affiliation
1

Table of Contents
Introduction:....................................................................................................................................3
Competitive analysis:.......................................................................................................................3
Conclusion:......................................................................................................................................4
References:......................................................................................................................................5
2

Introduction:
The retail supermarkets industry is fiercely competitive in Australia. It is due to the rapid
expansion of ALDI in last five years. ALDI has forced the supermarket giants of Australia Coles
and Woolworths to reduce their product prices to expand product ranges in private level to
compete. On the other hand, smaller chains of supermarkets like Foodworks have been
struggling to compete. Woolworths is much focused on the Australian food division.
Performance of Coles in the 2016-17 was very weak compared to other years (Ibisworld.com.au,
2018). The organisation has been facing too much pressure from Woolworths and ALDI. Present
research is focused on Coles Supermarket Australia. The researcher in present research will
analyse the competitive analysis of the supermarket industry of Australia through Porter’s five
forces model.
Competitive analysis:
Australian retail supermarket industry is highly competitive and thus there are several
competitiveness. Through the use of Porter’s five forces analysis, the researcher will try to
evaluate the competitive advantage of Coles along with Australian supermarket industry. Porter’s
five forces are bargaining power of the buyers, bargaining power of the suppliers, threats of new
entrants, threats of substitutes and competitive rivalry.
3

Figure 1: Porter’s five forces model
(Source: Porter, 2008)
Bargaining power of the buyers: Bargaining power of the buyers is higher in the supermarket
industry of Australia. Hence, Coles supermarket has been facing huge challenges to meet the
customer’s needs due to the expansion Amazon and ALDI. Customers in modern days are going
for the products which are in lower price as they have several options.
Bargaining power of the suppliers: Suppliers have the main power on negotiating cost of the
raw materials. Coles suppliers are thus more powerful. There are several power shifts in food
supply chains. Coles has brand food suppliers and fresh produce suppliers. Thus Coles
supermarket also has been experiencing huge suppliers bargaining power.
Threats of New entrants: Australian Supermarket industry has been presenting good return in
investment. The environment is very challenging and there is the most significant barriers for the
potential entrants. Thus threats of new entrants are low.
Threats of substitutes: Australian supermarket has been started ‘one stop shop’ for the
customers who wish to buy bulk of fresh vegetables and fruits. Due to huge market competition
for ALDI and Amazon, threats of substitute’s products are high.
Competitive Rivalry: Supermarket industry of Australia is very competitive. Recent research
shows that major players like Woolworths, Coles, ALDI and Metcash have faced 0.6 percent
decline in the year 2016-17. Research also shows the market shares of Woolworths are 37.2%,
Coles 30.3%, ALDI 9.2% and Metcash 7.4% (Retail World Magazine, 2018). Hence, this
statistics shows that there is high competitive rivalry.
Conclusion:
The analysis helps to derive that supermarket industry in Australia has been gaining
competitiveness due to the expansion of new international food chains or supermarkets. Hence,
there is high competitive rivalry for Coles and for the whole Australian supermarket industry.
4

References:
Ibisworld.com.au. 2018. Supermarkets and Grocery Stores – Australia Industry Report |
IBISWorld. [online] Available at: https://www.ibisworld.com.au/industry-trends/market-
research-reports/retail-trade/food-retailing/supermarkets-grocery-stores.html [Accessed 4
Dec. 2018].
Porter, M.E., 2008. The five competitive forces that shape strategy. Harvard business
review, 86(1), pp.78-93.
Retail World Magazine. 2018. The state of supermarkets and grocery industry - Retail World
Magazine. [online] Available at: https://www.retailworldmagazine.com.au/state-
supermarkets-grocery-industry/ [Accessed 4 Dec. 2018].
5