Comparative Market Analysis of Woolworths and Wesfarmers (ECO600)

This report undertakes a comparative market analysis of Woolworths and Wesfarmers, two prominent Australian retail giants. The study delves into their competitive landscapes, scrutinizing their market strategies, growth objectives, and pricing mechanisms. The introduction establishes the context, highlighting the role of business consultants in evaluating company performance. The discussion section thoroughly examines the competition and market strategies employed by both companies, focusing on their revenue generation, market share, and responses to competitive pressures from rivals like Aldi. It further explores growth strategies, including internet retailing and customer relationship management. The analysis extends to pricing and non-price strategies, such as equilibrium market pricing and marketing tactics, to attract consumers. The report also presents an overview of the GDP trends for both companies. The conclusion summarizes the key findings, providing a comprehensive assessment of the competitive dynamics within the Australian retail sector and offering insights into the future growth opportunities for Woolworths and Wesfarmers.

Running head: ECONOMICS AND FINANCE FOR BUSINESS
Economics and Finance for Business
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Abstract
The aim of this paper is to compare the market analysis of two Australian companies namely,
Woolworths and Wesfarmers who have a successive competition among each other due to sale of
almost similar products. They follow the same pricing strategy and differ in marketing and non-
pricing strategies. The growth objectives are different in the two firms which marks the
differentiation of the growth structure and market capitalization.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................4
Competition and Market Strategies.............................................................................................4
Growth Strategies........................................................................................................................6
Pricing and Non-price Strategies.................................................................................................9
Conclusion.....................................................................................................................................12
Reference List................................................................................................................................14

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Introduction
Business consultants are engaged in the task of marketing, human resource management,
accounting, finance and management of businesses. They collect data and information about the
strengths, weakness of companies and interpret which company works best. It recommend
business solutions and activities that can enhance the growth of businesses (Hoffman & Babb,
2016). In order to do a market research and compare their growth pattern, two Australian
Companies namely, Wesfarmers and Woolworths are chosen for this paper (Spillan & Ling,
2015).
Wesfarmers Limited is reputed as the biggest Australian retail industry which is bound in
the production coal mining, chemicals, industrial products and fertilizers, mainly in Australia and
New Zealand (Kilroy & Schneider, 2015). It is commonly called as Coles and has a market
capitalization of 44.259 billion with the current revenue being 27 million dollars. It has
diversified its business operations in liquor, department stores, home appliances, office supplies,
supermarkets, hotels and convenient stores with about 220,000 employees (Mann, 2018). It is
one of the largest companies in Australia with a shareholder base of approximately 5000,000 and
satisfies the needs of customers by provision of commodities on a competitive structure.
Woolworths popularly known as Woolies, is the second largest retail industry in
Australia which specializes in the sale of liquor, hospitality, home appliances, health and beauty
products, stationary items in general merchandise or online websites or supermarkets. It has an
approximate of 205,000 employees with the total revenue of 60 million (LIVINGSTON, 2017).
Both Woolworths and Wesfarmers operates its business in the retail sector, sells same products
and fights for the similar customers. The aim of this paper is to estimate the growth of

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Woolworths and Wesfarmers and analyze which company has better growth opportunities in the
future.
Discussion
Competition and Market Strategies
The generation of revenue and profits for Woolworths and Wesfarmers is from the
distribution of similar products mostly in the same areas. They are the two most leading
industries in Australia who have a domination in the retail market (Berning, 2014). They have
extensive competition between each other even as result of lack in real competition instead of
having other firms in the retail industry and is endangered with leading profit margins and
dominating market power. The competitive market structure has been found in grocery and food
sector (Akbar & Ahsan, 2014). The competition has gone up due to the opening of a new stores
and shifting their area of focus towards efficiency gains with the least amount of investment.
Each firm wants to produce the good at a lower production cost and supply bigger units
of the product. However, higher revenues is hard to gather and there is limited possibility of the
management’s strategy of marginal growth with respect to passing efficiency gains onto
consumers (Zorbas et al., 2019). In any business, risks from similar competitors or outward
sources are common. They are receiving threats not only from each other but also from Aldi
who is currently gaining the market share with the expansion of independent retailer’s expense in
new places and operates with a much lower price. The two biggest companies have had a quality
growth in the past years due to its effective business operations (Moriarty et al., 2014).
Woolworths have profoundly stayed ahead of its competitors due to market domination in
terms of increased sales. However, in opposition to the rising sales of Woolworths, Wesfarmers
started discounting the prices aggressively and ultimately succeeded in gaining the supreme

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position in 2016. Woolworths had made a significant level of investment for lowing its market
price and continue to compete with Coles (Borel-Saladin, 2018). The average price of
Woolworths went down by 2.1 percent during the last financial year. Woolworths received a fall
in revenues in the hardware business due to its underperformance and responded by closing the
hardware business, focused more on the Australian food sector (Grudnoff et al., 2016). The
supermarket business resulted in the gain of market share for Woolworths in 2016 and 2017. The
trend continued for about a year.
The average price of Wesfarmers reduced about 2 percent during the onset of 2018 itself,
whereas prices remained steady at Woolies over that period (Kilroy & Schneider, 2016).
However, profit margins are expected to fall due to huge investment in lowering the cost.
Woolies decided to sale more health revealed goods as they have a huge demand. Both Coles and
Woolworths have improved their online business due the repeated threats giant super markets
such as Amazon (Mortimer, 2016).
The success of the two big companies are due to unique market strategies to attract more
consumers and increase the brand value of the company. The marketing strategies are dependent
on the needs of the customers. Wesfarmers believes in keeping unique name, features, quality,
service, variation and product design in order to meet the competitive market outcomes.
Wesfarmers aims to satisfy consumer demands by providing them with quality products and
service (Pinto, Knights & Hine, 2015). The market strategies of Wesfarmers are as follows:
 It always seeks for new opportunities and expand its area of operation in new places by
efficient working and responds to the expectations of people in which the company
operates.

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 Wesfarmers strongly emphasizes in the provision of a good work culture and work
environment for the employees to raise the supply and productivity of the company.
 Acting with honesty and integrity while making a deal inside as well as outside of the
company (Scott & Walker, 2018).
 It motivates both employees and customers by giving them with rewards and free gifts for
providing advancing opportunities.
Strategic planning are one of the efficient requirements for the growth of businesses so as to
make the company, the first preference of the consumers among all the well renowned brands
(Roberts et al., 2015). Woolworths has the following marketing strategies which has helped them
to succeed in their business operations:
 Develop a quality relationship between customers and the team by store led culture.
 To implement a new operating model along with different shared services that would
enhance the quality of products where the support team checks the work condition by
spending a week at the retail stores (Knox, 2015).
 Provision of new techniques where the customers can share their feedback to the support
office.
 Generate optimum level of sales by responding to customer feedbacks and serve the good
as the customers want.
 To build a multi-dimensional structure with quality services, quality products, low price
and in-store experience in order to retain the customer satisfaction (Pidduck et al., 2019).
Growth Strategies
Strategies that help the firm in attaining their long-term growth objectives with efficient
allocation of goods are known as the growth strategies. The retail industry is accelerating at a

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high speed with positive returns from the net investment (Akbar & Ahsan, 2014). There are large
number of firms who are opening up their business in the retail sector providing substitute goods.
Wesfarmers has extracted higher revenues and market domination by making the product at a
relatively low price (Cavagnino, 2019). Internet retailing has concentrated the retail sector. It is
hard to find any free time in today’s busy schedule consumers mostly depends on internet
retailing as it is faster, easier with the facility to choose from multiple websites (Roberts et al.,
2015). People relies on internet for the purchase of the product as there is no sign for slowing
down of internet operations in the near future. It tries to maintain a good relation with customers
and upgrade their reputation in the field of ethical practices (Cavallo, 2017). It listens to the
concerns of both employees and clients to each that they are satisfied and happy with the work
culture and product service because employees and clients make up the organization. The
employees must feel motivated to work and stay to the company for longer time periods (Mann,
2018).
The company aims to give the shareholders a satisfactory level of returns which is
delivered by the rising demand of customers due to cheaper price (Methner, Hamann & Nilsson,
2015). The company also aims to remove or lower the gap between high and low income earners,
by giving them equal opportunities. It is responsible for bringing about environmental and social
development by producing the best quality products at a cheaper price. It does not keep any
information lag and focuses on keeping the necessity information relating to the product (Booth
& Coveney, 2015).
The growth strategy for Woolworths is due to introduction of a new operating model
known as the Lean Retail which was thought to deliver a decrease in cost to more than 500
million dollars along with improvised service, better convenience, lower prices and a

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commitment towards new innovation (Cavagnino, 2019). The model was focused on three
positive areas such as huge investments in the multi-faceted and seamless offer, remodeling the
cost structure towards a minimum inflation environment with the positioning of real dollar costs
to fuel the sale of goods, increasing the market share with improved efficiency. Revenues of
Woolworths were marked by the sale of liquors and food with an increase of 2.3 percent in GDP
figures, although the sake of petrol led to a fall in GDP percent to 1.2 (Sun & Huo, 2019). Price
has a much bigger role to play in the market for ensuring that they are not beaten by Wesfarmers
in terms of price which instigates the reasons for rivalry among Wesfarmers and Woolworths
(Lim et al., 2016). However, customers are expecting a greater usage of technology with
innovative techniques to buy the product and make their shopping enjoyable. The key initiative
by Woolworths is in the maintenance of customer satisfaction with their approach to attain
growth outcomes by seeking efficiency in consumers. However, Wesfarmers work by taking into
consideration the priorities and needs of both customers and employees (Humayun, 2016).
Figure 1: Trend in the percentage change of GDP of Woolworths in the past 5 years
Source: (Wardle & Chang, 2015)

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Figure 1: Trend in the GDP change of Wesfarmers in the last 5 years
Source: (Wardle & Chang, 2015)
From the above graph, it evident that the GDP showed a rising trend in both the
companies. Only the percentage change in growth has been different according to the change in
market outcomes in the successive years. At the end of 2014, the GDP of Wesfarmers was below
Woolies. In the next period, GDP started going down at a constant rate till the middle of 2016
(Glass et al., 2018). In the contrary, The GDP rate remained same for few months which started
going up at a small rate till the end of 2017, after which it stated accelerating at a good rate.
From the onset of2017 till the middle of 2019, Wesfarmers had a steady increase in GDP value
of about 38.97 units (Scholtz, 2014). However, for Woolworths, the current value of GDP is
36.32 units showing a slowdown in the rate of growth from 2017 to 2019 (Ngwakwe, 2017).
Pricing and Non-price Strategies
The pricing strategies consists of the equilibrium market price, bulk buy discounts, limit
pricing, credit terms and payment periods where an individual firm tries to get hold of the
marked by keeping low price or mechanism ism that will drive more customers from its price
structure. A non-price strategy consists of any strategy which is not related to the price (Stanton,

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2016). A non-price strategy does not mean that the firm cannot have a low price, it means that
prices cannot be very low and quality or quantity marks the profitability of businesses. A low
price raises consumer demand as they can now buy more quantity of the commodity at the
existing market price. Thus, quantity demanded and price have a negative relation with other. In
other words, low prices increases the purchasing power of the people which reflects as a rise in
the aggregate consumer demand (Hambur & La Cava, 2018).
The pricing strategies of Wesfarmers and Woolworths is to appease consumers by
keeping a low price with low cost structures. Wesfarmers have been successful in keeping a price
lower than Woolworths and grabbed a percentage share of their customers (Kilroy & Schneider,
2016). Woolworths responded by promoting the products in latest and innovative techniques
which attracted customers. Pricing strategies have helped the firms to retain super normal profits
from their initial investment. Wesfarmers lowered the shelf prices on 4100 commodities in order
to regain the customer trust and promote about its low price against Woolworths (Kotler et al.,
2015). These products were basically staples which are necessary goods where demand does not
go up with respect to low prices. However, Wesfarmers has been slower in responding to their
investment of about 1.5 billion dollar. Currently, Wesfarmers have already invested about 195
million dollar of cost savings which negatively affected the profit margins (Das Nair & Dube,
2017).
Scores according to in-store execution and value
Features Wesfarmer
s
Woolworth
s
Quality 6.9 6.9
Value for money 7 7.1
Pricing strategy 6.5 7.1
In-store staff caliber 6.5 6.7
Store presentation 6.8 7.1

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On-shelf availability 6.9 7
Table 1: The score board of Woolworths and Wesfarmers for the execution of in-store value
From the above table, it can be said the performance of Woolworths is better than that of
Wesfarmers. The biggest challenges faced by Wesfarmers is during 2007 when the downfall in
business activities and the decrease in the aggregate demand lowered the company’s revenue.
Coles have planned to accustom its growth strategy towards the creation of loyalty program and
sustainable relationship with the retailers and customers. It will improve its content in fresh
foods in new packaged containers and put more focus in the supply chain management programs
to march up to bigger revenue and profit margins.
As the non-price strategies, the two most leading firms are engaged in the quality and
services of the products. Price is not the only factor that can drive bigger sales, although a lower
price attracts new buyers. For maintaining the customers so that they can stay loyal to the
respective firms, firms need to give a good service of the product with detailed description along
with quality products.
When sale of Coles feel abruptly, it acknowledged by investing a portion for lowering
costs and the other portion in the renovation of store, online services and modernize the same
store sales growth pattern. A price strategy is not essential for achieving the long term growth
features because production costs are generally higher which pauses a great on the level of
supply and the suppliers.
Woolworths have performed amazingly before 2007 when the financial crises shook the global
economy and the budgetary emergency have been contrasted with Wesfarmers. The productivity
and execution of the Wesfarmers detoriated significantly (Glass & Gliozzo, 2018). This pattern