Strategic Management: Analyzing Coles and Woolworths Case Study

This case study examines the strategic management of Coles and Woolworths in the Australian supermarket industry, focusing on their competitive dynamics, particularly in response to the entry of Aldi. It analyzes the macro environment using PESTLE, assesses competitive rivalry using Porter's Five Forces, and provides a company analysis of Coles, Wesfarmers, and Aldi. The report highlights the challenges faced by Coles and Woolworths in maintaining market share, adapting to changing consumer preferences, and competing on price and innovation. It also discusses the strategic initiatives undertaken by each company to address these challenges and improve their competitive positioning. The study concludes by emphasizing the importance of continuous evaluation and adaptation in the face of evolving market conditions.

Running head: STRATEGIC MANAGEMENT
Report on the case study of Coles and Woolworths
Name of the student:
Name of the university:
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Executive summary
The present connotation of the market is competitive. Therefore, in order to secure the
market position, the companies and organizations need to develop strategies for coming out
with something creative and innovative. Reviewing the past performance is crucial for brands
like Aldi, Coles and Woolworths in terms of upgrading the standards and quality of the
business. This review would result in innovative strategies. Evaluation of these strategies
would help in assessing its effectiveness, appropriateness and feasibility in terms of
overpowering the contemporary brands. Here, the aim needs to be gaining large scale
customer satisfaction rather than grabbing the hot seat. Consistency in the evaluation would
help in the achievement of infrastructural development, which would lead towards the
penetration towards foreign markets.

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Table of contents
Introduction....................................................................................................................3
Macro environmental analysis.......................................................................................3
Political......................................................................................................................3
Economic....................................................................................................................4
Social..........................................................................................................................4
Technological.............................................................................................................4
Environmental............................................................................................................5
Legal...........................................................................................................................5
Life cycle stage...............................................................................................................5
Introduction................................................................................................................5
Growth........................................................................................................................5
Maturity......................................................................................................................5
Decline.......................................................................................................................6
Competitive rivalry........................................................................................................6
Supplier power...........................................................................................................6
Buyer power...............................................................................................................6
Threat of substitution.................................................................................................6
Threat of New Entry...................................................................................................7
Company analysis..........................................................................................................7

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Coles...........................................................................................................................7
Wesfarmers.................................................................................................................8
Aldi.............................................................................................................................8
Competitor analysis........................................................................................................9
Strategy analysis.............................................................................................................9
Conclusion....................................................................................................................10
References and bibliography........................................................................................12

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Introduction
The scenario in strategic management of supermarket started changing when Coles
went under the ownership of Wesfarmers. This case is being given o analyze because in the
past few years, then scenario has been undergoing a change. With the arrival of Aldi to the
Australian market, Coles and Woolworths started losing the competition. Prior to the
entrance of Aldi, there was always a very tough competition going on between the two
supermarkets. They kept on carrying a very good and in depth analysis about the needs and
demands of their customers and upgraded themselves accordingly (Hill et al. 2014).
The challenges that they are mainly facing is to give the customers the extra
additional facilities that are mainly being given by Aldi. The condition of Woolworths seems
to be in a great danger. This is because they have been facing a huge problem since the huge
performance by Coles and this has further been decreased by the entry of Aldi . Aldi is giving
its products to the customers at a very low price and also is giving hug discounts whereas the
range at Coles and Woolworths is quite high. Aldi basically knows how to provide the
customers something more than what they actually want (Aldi.us 2018). They know the
goods and services that will be greatly liked by the customers and will be sold like hot cakes.
So, they offer both the low prices and also responsible and sustainable business.
Macro environmental analysis
The macro environmental analysis can be done by using the PESTLE analysis tool
Political
Both Woolworth and Coles face the governmental pressure because of the duopolistic
nature of their markets. Aldi however does not have a chance of war as it has its stores
mainly located in parts of China, Europe and USA and all these regions are now free from

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conflicts (Aldi.us 2018). However as it is a German based company, it might pose some
major threats to the future operations of Aldi in UK, since Britain has decided to leave EU,
there can be a threat on the future operations of European firms in UK.
Economic
The effect of Bretix has been in favor of Aldi. The value of pounds decreased and the
customers mainly have turned towards the discounted products. Aldi provides the customers
with the most reasonable and discounted price. Apart from that, they also work towards the
reduction of carbon footprint and providing the customers with sustainable products.
Woolworths however must prepare for the entry of the new firms as the regulations are
easing. The bargaining powers of the customers have reduced in case of Coles (Coles.com.au
2018). The Australian customers spend less on these products as they get variety of products
at a lower price in Aldi.
Social
As Aldi has really pays a huge attention on the social aspects like providing ski
equipment, bike gears, bike cycles which are eco friendly and are also helping in the
reduction of the carbon footprint, Coles also has started paying due importance on that by
helping to work on cancer treatment for young and children. So, they are trying to develop
good relation with the buyers and suppliers. Woolworths on the other hand has poor relations
with suppliers (Woolworths.com.au 2018).
Technological
Woolworths is making use of SAP based methods for improving their services. Coles
is also trying its level best to improve technologically so that the customers get the online
payment and shipping facilities. Using of cloud infrastructure has also been started. Aldi has
the Aldi app that helps the customers to use the facilities in a better and fast way.

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Environmental
Aldi takes the products mainly from the local farmers so that they can have a good
source of income. Woolworths is trying to improve its energy efficiency. Coles is trying to
use the eco friendly supermarkets (Woolworths.com.au 2018).
Legal
There is a strict mandatory code that is being used by Coles. Aldi also has been
facing many legal scandals. Strict mandatory codes are to be incorporated.
Life cycle stage
Introduction
Coles and Woolworths are the two most popular and giant supermarkets of Australia.
They operate as the largest supermarket in Australia providing the best quality fruits and
vegetables to the consumers. They are among the 20 of the biggest retail supermarkets of the
world and they have a strong dominance over the domestic market of the towns and the
suburbs of Australia (Zuzul and Helfat 2016).
Growth
Coles is part of Wesfarmers that is one the largest and the most successful brands of
Australia. Coles itself has the ownership over 750 full service supermarkets. However this
supermarket Coles was outnumbered in performance by Woolworths about a decade ago.
Maturity
In 2015 205000 employees are appointed by Wesfarmers that generated huge revenue
of about 62 billion Australian Dollars. Woolworths also is more than just a supermarket and it
has 873 supermarkets and about 527 liquor shops as well. Both Woolworths and Coles

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matured in their operations and had a monopoly power in the market (Engert, Rauter and
Baumgartner 2016).
Decline
In 2016 the Woolworths master hardware malfunction was a big scandal that had put
about 7000 jobs at risk and left the newly set up stores unoccupied. After the entrance of Aldi
in the year 2001, there is a huge decline in the working of Coles and Woolworths.
Porter’s five forces
Competitive rivalry
Woolworths and Coles both are facing a very competition by Aldi. So, in order to
match up to the standards they have to work on the customer services that are provided by
Aldi (Aldi.us 2018).
Supplier power
Aldi chooses the suppliers mainly from the local market so it is possible that they can
get huge alternative options and can also get the products at the cheapest possible price.
Woolworths on the other hand needs to work in improving their relationships with their
suppliers.
Buyer power
Woolworths and Coles can face a high bargaining power by their customers as their
products are at a higher price. Aldi already provides a variety of products and also t a much
lower cost.
Threat of substitution
Aldi has strengthened its position by providing customers with a wide variety of
products. So, the customers will not look for any other alternatives. However customers

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switch over to Aldi from Coles and Woolworths as the range of products is high in those two.
So, the threat of substitution is higher in case of Woolworths and Coles (Sakas, Vlachos and
Nasiopoulos 2014).
Threat of New Entry
Woolworths and Coles have been ruling the retail market of Australia previously but
they were threatened by the entry of Aldi. So, now they must take proper measures to give a
tough competition to Aldi. However the entry of any new smaller firms is unlikely.
Company analysis
Coles
Coles and Woolworths occupy a greater share in the Australian market. According to
the statistics, it is 80%. Emergence of brand like Aldi has acted as a threat of substitutes for
both the brands. Both the brands are retails, whose presence has aggravated the complexities
of Coles and Woolworths in terms of enhancing the efficiency in the business activities. This
strains their process of competitive advantage (Coles.com.au 2018). The period of 2016 was
the greatest challenge for Coles and Woolworths, as Aldi achieved greater competitive
advantage. Both the brands possess skilled and efficient personnel, who are flexible enough
towards the enhancing the productivity.
Coles indulges in partnership with Wesfarmers for the execution of the business
activities. As a matter of specification, Coles owns 223 warehouse stores and 63 small stores
The operations manager is in charge of tracking the operations of the supermarkets. In 2015,
Wesfarmers employed 205000 people. The outcome of this was generation of 62 billion
Australian dollars. When Wesfarmers overpowered Coles, all of the strategies proves

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negative. Wesfarmers personnel acquired the resources of the Coles in spite of possessing
enough resources to reveal their retail empire (Coles.com.au 2018).
During the leadership of new team leader Ian McLeod, Coles encountered A$17
billion turnovers. This is the comparative calculation with A$37 billion of Woolworths.
Gaining monetary support from Wesfarmers enabled Coles to upgrade the standards and
quality of the store services. The major drive behind this is the introduction of Tesco
handbook displaying the business. Spontaneous approach of the personnel was beneficial in
terms of progressing into the path of competitive advantage. Monetary benefits to Coles was
from Wesfarmers was assistance in terms of engaging the employees towards the business
activities (Coles.com.au 2018).
Wesfarmers
The scope and arena of the Woolworth is diversified. All total, there are 873
supermarkets including the Grocery shop of Thomas Dux. This includes liquor outlets, which
possess license from the statutory bodies of law. In early 2016, Woolworths revealed their
master hardware chain. This chain shunned the plan for adopting the necessary
improvements. As a matter of specification, this resulted in the loss of A$ 1 billion revenue
and 7000 jobs. The reason behind this was the attempt towards achieving quick expansion
without rational approach (Woolworths.com.au 2018). Escalation in the wages becomes
difficult in terms of coping up with the operational cost of the new development stores. The
immediate outcome of this was the vacant stores.
Aldi
2001 saw the entrance of Aldi in the Australian market. There are over 350 stores,
some of which are settled in the southern and western Australian. It is a German based
company, with an annual income of US$80 billion. The initial stages consist of the provision

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of quality services at cheap rates, reflecting its emergence as a retailer. This aligns with the
mission of the company, that is, to serve the customers, irrespective of their location. Tie ups
and contracts with the suppliers helps in exporting high volume of goods to the neighboring
countries. Limited range of packing is one of the weaknesses, which disrupts the purchasing
power of the customers (Aldi.us 2018).
Competitor analysis
Competition between Coles and Woolworths is intense. The differences like in the
ways and means adopted for carrying out the business activities. One of this is the setting of
the process of the products. 1980 was the era when Coles overpowered Woolworths for
emerging as the brand serving fresh foods to the customers. The tenure of the strategy was
short lived, as Coles copied it for gaining the support of the customers. Again Woolworths
overpowered Coles through the strategy of selling the goods at a cheap rate. This was the
stage when Coles experienced collapse in the market position (Coles.com.au 2018). Supply
chain reduces the intensity of competition between the two supermarkets. Another area of
similarity is the attempt to expand the scope and arena of the business. Entry of Aldi was a
surprise for Coles and Woolworths.
Strategy analysis
Aldi developed a strategy to attract the customers through the lower prices. This
would be convincing and appealing for them in terms of trying out the innovative products.
Understanding the intensity of the strategy, Woolworths introduced mobile services for
reaching to numerous customers at a single time. They realized the benefits of evaluating the
undertaken strategies for reaching to the specific needs and demands of the customers
(Woolworths.com.au 2018).

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Currently, Woolworths has added to the working hours. Along with this, it has
reduced the price of the products for targeting the middle class customers. This has resulted
in the achievement of A$125 million as profit. Coles and Aldi are aware of this strategy.
Woolworths needs to be praised for considering the customer focus groups for gaining
awareness regarding their specific tastes and preferences. This would help in bringing
noticeable changes within the quality and standards of business. Typical examples of this are
big trolleys, bigger grocery bags, self checking areas, better packaging techniques among
others (Woolworths.com.au 2018).
Coles has planned to establish convenience stores for the customers. This would
simply the supply chain, enhancing the stability in the relationship with the customers. Upon
discovering that 30% of the customers fail to buy fresh foods, Coles personnel have planned
to improve the quality of the food items. Apps have helped the personnel in gaining the
feedback of the customers regarding the provided services. Typical example of this is Flybuy,
which awards points, discounts and offers to the customers for availing services. Interesting
fact is the personalized weekly special emails, which informs the customers about the
discounts, offers and schemes (Coles.com.au 2018).
Plans are being made for developing unique foods which would be of high quality and
based on the instructions of celebrity chef Heston. The suppliers would be indulged in 7 day
cycle contract, within which they have to supply the orders. Major focus here would be on
maintaining the freshness of the orders.
Conclusion
This report emerges successful in providing an insight into the strategic management
of Coles, Woolworths and Aldi. An insight into these companies makes the readers aware of
their current strategic position in the Australian market. Macro environment analysis helps in

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gaining awareness towards the steps taken by these companies for venturing into the foreign
markets. Herein lays the appropriateness of the company analysis, which assesses the
capability, skills and competencies needed for expanding the scope and arena of the business.
Competitor analysis is crucial in terms of achieving understanding regarding the ability of
these companies in terms of dealing with the external forces exerted by the contemporary
brands. Strategy analysis is the recommendation for these brands in terms of securing the
market position and achieves customer satisfaction.

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References and bibliography
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Coles.com.au (2018). About us. Available at: https://www.coles.com.au/ [Accessed on: 20th
April 2018]
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Sakas, D., Vlachos, D. and Nasiopoulos, D., 2014. Modelling strategic management for the
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Woolworths.com.au (2018). About us. Available at: https://www.woolworths.com.au/
[Accessed on: 20th April 2018]
Zuzul, T. and Helfat, C., 2016. Capability lifecycle. The Palgrave Encyclopedia of Strategic
Management, pp.1-5.