Competitive Strategy for Coles and Woolworths: An Analysis

This report provides an in-depth analysis of the competitive strategies employed by Coles and Woolworths in the Australian retail market, with a specific focus on the impact of Aldi's entry. It examines the competitive dynamics within the industry, highlighting the pricing strategies of Aldi and identifying the challenges faced by Coles and Woolworths in maintaining their market position. The report delves into Porter's Generic Competitive Strategies, specifically cost leadership and differentiation, to evaluate the approaches of each company. It explores the issues of customer retention and the strategies Aldi uses to gain market share. The report concludes with recommendations for Coles and Woolworths to regain their competitive advantage in the face of these challenges.

Running Head: COMPETITIVE STRATEGY FOR COLES AND WOOLWORTHS
Competitive Strategy for Coles and Woolworth
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1COMPETITIVE STRATEGY FOR COLES AND WOOLWORTHS
Executive Summary
The aim of the study is to understand and discuss competitive dynamics, of Aldi Coles and
Woolworths. The pricing strategies of Aldi has clearly been stated and the loopholes prevailing
in Coles and Woolworths have been identified. The strategies and the policies that Aldi is using
to capture the market, which it has in the shortest time span has also been discussed. The threats
that the strategies of Aldi has casted in the competitors of the retail industry of Australia has
been discusses. The recommendation section has also been stated in the report to help Coles and
Woolworths gain its market position.

2COMPETITIVE STRATEGY FOR COLES AND WOOLWORTHS
Table of Contents
Introduction......................................................................................................................................3
Identification of the issues in Coles and Woolworths.....................................................................4
Competitive Dynamics....................................................................................................................4
Theories of Strategy Development..............................................................................................5
Porter’s Generic Competitive Strategies.................................................................................5
Recommendation...........................................................................................................................10
Conclusion.....................................................................................................................................11
Reference List................................................................................................................................12

3COMPETITIVE STRATEGY FOR COLES AND WOOLWORTHS
Introduction
The competitive behavior of the two popular retail companies of Australia have been
discussed in the study, which are Coles and Woolworths. The two companies are counted
amongst the top 20 retail companies existing in Australia. The other competitors existing in the
industry experience difficulty in earning their revenue because both Coles and Woolworths have
a huge and strong client base, and the clients tend to maintain their loyalty towards the country
(Colesgroup.com.au 2019). The strategies that the company has applied proved to be efficient for
the companies in growing there client base over the years (Woolworthsgroup.com.au 2019). In
recent times both, the companies have a huge challenge and threat that has entered in the market,
which is a German based company named Aldi. The company has planted better strategies,
which is attracting more customers towards the company.
Coles is a wing of Wesfarmers, the Western Australian cooperative that has achieved
success, it is the owner of Coles, and Bunnings this company mainly deals with products used for
renovating the houses. The company also owns 223 warehouse stores and 63 small stores; it has
almost employed 205000 employees in their company. Woolworths is also a company that not
only deals with retail business but also has 527 liquor shops. The company operates 873 stores of
Woolworths the company also has 327 other licensed business (Woolworthsgroup.com.au 2019).
The purpose of the study is to identify the issues that are prevalent in the company and the
competitive strategies that both the companied uses in order to sustain the intense competition
that they are experiencing in the recent times (Woolworthsholdings.co.za 2019). The study will
elaborately discuss the competitive dynamics of Coles, Woolworths and Aldi, the pricing
strategy that Aldi uses, which becomes a disadvantage for Coles and Woolworths will be
discusses in the report.

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5COMPETITIVE STRATEGY FOR COLES AND WOOLWORTHS
Identification of the issues in Coles and Woolworths
There are certain loopholes that Coles and Woolworths are facing in retaining their
customers because the Aldi Company has applied its strategy, which is very effective and the
customers both the two biggest retail companies are losing its client base. Aldi provides quality
grocery items in the lowest price possible to its customers which Coles and Woolworths has not
yet been able to implement. Aldi has also has various other strategies related to pricing schemes
that they are planning to implement and this can also cast a threat on the business of Coles and
Woolworths. Aldi Company also has adequate and appropriate promotional strategies that makes
the customers aware about the offers and products that they are launching in the market (Grilli et
al. 2017). The pricing strategies of the Coles and Woolworths are not that flexible like Aldi as
they take products from the suppliers and provide to the customers, which increases the prices of
the products that they provide to the customers (JAIN 2013). Aldi is a new entrant in the retail
industry of Australia and the strategy that it has applied is successful because the company has
its own production house and thus they provide products to the customers in low process as no
inventory or various other cost be not levied on the products. Thus, the following strategies will
explain the individual policies and schemes that the companies utilizes in order to retain their
customers.
Competitive Dynamics
The competition in the retail industry of Australia is very intense and the competition
amongst Coles, Woolworths and Aldi have grabbed the attention of the customers. The price
range that Aldi has launched in the market has casted serious threats on the businesses of both
Coles and Woolworths. The pricing strategy of Aldi has a deep impact on the customer base of

6COMPETITIVE STRATEGY FOR COLES AND WOOLWORTHS
the two popular retail companies of Australia (Chen and Miller 2015). Aldi is a new entrant in
the retail industry of Australia and the strategy that it has applied is successful because the
company has its own production house and thus they provide products to the customers in low
process as no inventory or various other cost be not levied on the products (Johnson 2016.).
Whereas, Coles and Woolworths take their products from suppliers and then provide to their
customers which brings an increase in the pricing of the products (Yang and Meyer 2015).
Theories of Strategy Development
Porter’s Generic Competitive Strategies
Source:
The competition in any industry is very intense and challenging especially for the new
entrants, hence the new entrants have to do a wide study to understand the market condition. The
position of any company can be evaluated through its revenue generation, more revenue
generation implies the sustainability of the company and low revenue generation implies a threat
in the existence of the company in the industry (Menon and Yao 2017). Porter’s theory on
competitive market will help Coles, Woolworths and Aldi to understand their position in the

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industry and the competition between themselves. The theory includes differentiation, cost
leadership and focus, which is further divided into differentiation focus and cost focus (Lakka et
al 2013).
Cost Leadership
In this, Porter mentions that the companies’ tries to reduce production cost of their
products and the manufacturing of the products are done in a strategic way so that they do not
have much products for storing in storehouse. The companies also trend to keep their selling
price very reasonable for the customers to afford (Tanwar, 2013). Aldi is the company that has
implemented the cost leadership strategy in the core of their management. They believe in the
ideology of providing quality grocery items in the minimum process they can provide to the
customers (Dobbs 2014). They have wide products that are very limited, which includes both
products of suppliers and the company have their home production where the produce products,
which not only includes grocery items but also all types of items that will serve the requirements
of the customers such as males, females and children. Since Aldi has its own production house it
can allow the products to be sold in affordable prices, the customers is benefitted through this
strategy as they can meet their requirements also in very low process (Brandes, D. and Brandes,
N., 2015). The company produces its own products it does not has to pay the inventory cost, and
the do not have to pay to suppliers as well. Exchanging of products from the suppliers makes the
company pay huge amounts to them, which also increases the prices of the products hence, the
company is an advantage in this domain, as they do not exchange that much of products from the
suppliers and can keep the prices of the products low (Dälken 2014). This scheme brings an
advantage to the company as they can retain their loyal customers, attract the clients of the rival
companies, and increase the annual turnover to a great scale. Aldi also deducts the non-essential

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costs and the company is almost 25% cheaper than its competitors provide to the customers
(Brandes and Brandes 2015)The company has developed almost 350 stores and they are have
also planned to expand their business in western and eastern Australia. The company believes in
an ideology that people residing in any part of the country has the right to avail themselves the
best and quality grocery products in the lowest prices. Aldi has applied this scheme in the core of
their management because this will help them tie good relations with the suppliers. Aldi is
planning to reduce their carbon footprint to maximize their energy efficiency and recycle the
waste materials in proper methods so that they can preserve their energy and make maximum
utilization out of it. In order to deduce the prices of the products the company has to take the
consent of the suppliers as they also have some profit share in the products. Coles and
Woolworths are not properly maintaining the strategy of cost leadership, which is reducing their
revenue generation and the customers are not showing their loyalty towards the companies. This
occurs more because both the companies do not have their own production companies or houses,
the products that they provide to the customers are taken from the suppliers and thus they
companies cannot reduce or cut the non-essential cost and this leads in making the products of
this company expensive than compared to the products of Aldi. Coles had to face many threats in
implementing the strategy that Aldi has been utilizing. The biggest disadvantage for Coles is that
the products that they provide to the customers are compared with Aldi since the prices of the
products of Coles are high the customers of the company tends to shift to Aldi. Yet the company
has planned that if they cannot beat Aldi in terms of prices then the company will focus on
superior and fresh products, appealing range of products and concentrate on innovation. The
company is planning to retain their customers by providing more and more products and create a
concept that low priced products will have minimal quality and hence they will provide the

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customers high quality grocery items with diversified range and satisfy the customers. The
company has clearly understood the strategies of Aldi, and they know that they can provide
cheap products because they have their own products, which can sell in minimal amount and
Coles have recognized its loopholes hence; they planned to concentrate more on the innovation
of the products. Woolworths have understood the wider picture of the supermarkets (Banker
Mashruwala and Tripathy 2014). They have understood that customers are keen in shopping
wherever and whenever they want hence, mobile technology is one such strategy that the
company has determined of planting in its management and make the customers enjoy their
services whenever they want. The company has understood the need for them to examine and
value the preferences of the company. They have also understood that the customers want to
visit the stores effortlessly and seamlessly between virtual and physical stress hence, the
company is giving efforts to maintain the products available in both their online and physical
stores. Woolworths is also utilizing grater and big budgets, which other competitors are facing
difficulty in coping up. Yet the strategies that Aldi is utilizing has hampered the business of
Woolworths and they are trying to retain the customers and maintain their loyalty.
Differentiation
This point clearly describes that the company must produce unique and desirable services
and products for the customers, as this will help them earn and targeted revenue. Aldi is lacking
in following this strategy as the company has products of their home brands about they do not
have any scope for diversified products they implement products of limited stock in which they
have mainly their own brand products hence; the customers do not get an opportunity in
choosing amongst wide variety of product. Yet the company does not compromise on the quality
of their products and no customers has ever complained about the quality they have only been

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dissatisfied due to that the customers tend to grow dissatisfaction. The company also has many
promotional strategies that makes customers aware about the services that they provide. The do
their marketing in newspapers and they circulate catalogues where they clearly states offers on
their products, which attracts good number of customers (Parras 2013). This somewhere
dissatisfies the customers, whereas Coles and Woolworths have wide variety of products and
they have many options for the customers to choose amongst the products. They tend to develop
their outlets where there are more customers. The company also prioritize on the quality of the
products and the services, which to some extent justifies the process that are levied on the
products. Coles is also facing difficulty in catering the preference of the customers in terms of
low priced products but they also provide wide variety of products to the customers. Since Aldi
does not have diversified product range, the company also cannot provide unique services to the
customers, which is again an advantage for Coles and Woolworths (Wrigley and Lowe 2014.).
Limitation in the product range makes the customers restrict in enjoying products from different
companies. The lack in unique range of products in Aldi makes the customers feel monotonous
with the same products that they provide in the company. The customers are keener in enjoying
different and various kinds of products.

11COMPETITIVE STRATEGY FOR COLES AND WOOLWORTHS
Recommendation
The loopholes that are prevailing in Coles and Woolworths have to be met hence the
following recommendation for the two companies have been stated below:
 Woolworths must have more staffs on the floor so that they can attend the customers and
this will make the clients feel valued. The staffs can also convince the customers in
making the purchase by displaying the advantages of the products.
 The customer service should be sufficient and the companies satisfy their customers in
terms of proper guidance and management.
 Coles and Woolworths have planned of simplifying the supply chain in order to build and
good relation with the suppliers so that they can provide the products to the companies at
low prices.
 Coles must have effective marketing strategy; the company can e-mail the catalogues to
their customer database.
 The Company must plan to circulate customized weekly special to their customers
making them aware about the new product range that they are planning to launch.
 Coles and Woolworths have planned of implementing diversified range of products with
variety of uniqueness in it.
 Coles and Woolworths must plant effective communication with their suppliers so that
they can deliver fresh food to the customers.
 The pricing strategy of Coles Woolworths has to be improved and effective so that the
customers cannot get attracted to the rival companies.
 Both the companies must lower down the costs of the products that they are taking from
the suppliers, so that they can provide the products at very low prices.

12COMPETITIVE STRATEGY FOR COLES AND WOOLWORTHS
Conclusion
The can be further concluded that the competition in the retail industry have grown
intensely. Aldi has successfully captured the market and now they are gaining a huge client base.
Coles and Woolworths are trying to cope up to the competition theoretical concepts on
competitive dynamics have been stated to show the issues or the loopholes that are still existing
in the management for the company. Aldi’s pricing strategies have casted a big threat on the
business of Coles and Woolworths, which has been elaborately explained. The Cost leadership
and Differentiation concepts of Porter’s have been revealed and thus the prevailing issues in
Coles and Woolworths have been identified with the help of the two concepts of Porter’s generic
theory. The report finally discloses that loopholes in Coles and Woolworths have ineffective
pricing strategies, which Aldi has. The recommendations also have been stated in the report to
help Coles and Woolworths bridge the loopholes in their company.

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