HI6006 - Analyzing Competitive Strategy in Australian Supermarkets

This case study examines the competitive strategies employed by major players in the Australian supermarket industry, namely Woolworths, Coles, and Aldi. It begins by outlining the competitive rivalry and the impact of Aldi's entry into the Australian market, challenging the long-standing duopoly of Woolworths and Coles. The analysis includes an external environmental scan, considering political-legal, demographic, economic, technological, and global factors influencing the grocery sector. The study highlights the absence of duopoly regulations, the concentration of population in urban coastal areas, favorable economic conditions with declining unemployment, increasing online shopping trends, and global sourcing opportunities. Ultimately, the case concludes that Coles and Woolworths have significant opportunities for growth and profitability in the Australian market due to these favorable conditions, despite the increasing competition.

COMPETITIVE STRATEGY 1
Competitive Strategy
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COMPETITIVE STRATEGY 2
Competitive Strategy
Introduction
The factor of the competitive rivalry has a great impact in determining the ability of a
firm to operate profitably. Besides, competitive pressures may manifest themselves in different
ways in the market such as advertising wars, competition based on price and new products. The
rivalry may tighten when an enterprise identifies an opportunity to grow its market or feels
pushed by a competitor (Omsa, Abdullah & Jamali, 2017, p. 10). Such is the case of
Woolworths, Coles, and Aldi. For many years, Woolworths and Coles have led the Australian
retail business. Although there has been stiff competition between them, they were seriously
challenged by the entry of Aldi into the Australian market. As at 2017, Aldi’s market share was
90 billion Dollars, and this has continued to grow, creating fears that it may dominate the
Australian market, thanks to its low-cost strategy. However, Woolworths and Coles have clear
corporate structures and a pool of loyal customers in Australia which may give Aldi a difficult
time dominating the market.
External Analysis: General Environment for Groceries
Political-legal
Fortunately, there are no government laws in Australia controlling duopoly as at the
moment (Keith, 2012, p. 48). Although MGA (Master grocers Australia) has been calling for the
change in competition laws to abolish duopoly, the government has made no attempts to execute
such changes. Consequently, this has given an opportunity for Coles and Woolworths to own 80
percent of the Australian market. The two companies also benefit from close competition, active
interaction, simplicity and competition in pricing.
Demographic

COMPETITIVE STRATEGY 3
The Australian population is majorly clustered along the coastline. Moreover, in each of
the country’s states over 50 percent of the population and some cases up to 80 percent live in
urban areas, this provides a large customer base for the two companies (Keith, 2012, p. 50).
Also, the income inequality in Australia is very high with 90 percent of Australians earning very
high incomes and only ten percent earning poor incomes. Therefore a majority of the population
has a stable purchasing power. Coles and Woolworths may use this as an opportunity to continue
increasing their sales.
Economic
The economic conditions in Australia are relatively favorable. There has been a
continuous decrease in the rates of unemployment throughout the country for the past ten years
(Keith, 2012, p. 52). This impacts positively on consumer spending, which may give Coles and
Woolworths an opportunity to increase their sales levels. The rate of inflation has also declined
during the past two years, making it easy for consumers to spend more because of high
purchasing powers.
Technology
A study conducted by Addis (2016, p. 6) uncovered that as of April 2011, more than 62
percent of Australian consumers purchased products online because of convenience and
affordability. Technology has been on the increase in Australia with many businesses selling
their products through online shopping portals and social media pages. This is an opportunity
that must be taken by the two companies to remain competitive.
Global

COMPETITIVE STRATEGY 4
Coles and Woolworths have an opportunity to source their products globally. Such will
help in reducing costs, enabling access to new technology and accessing superior products. It
will also help them to focus on their core activities and mobilize more capital for investment.
Conclusion
Coles and Woolworths have great opportunities to increase their sales revenues in
Australia. Australia has favorable economic conditions, low unemployment levels, and a large
population of rich people and competition laws that permit a duopoly. Therefore, with the robust
market and online shopping, Coles and Woolworths have no significant threats to their ability to
operate profitably.

COMPETITIVE STRATEGY 5
References
Addis, J., 2016. Retail sector wrap: One Opportunity and Plenty of Worries. Equity, 30(3), p.6.
Keith, S., 2012. Coles, Woolworths and the Local. Locale: The Australasian-Pacific Journal of
Regional Food Studies, 2, pp.47-81.
Omsa, S., Abdullah, I.H. and Jamali, H., 2017. Five Competitive Forces Model and the
Implementation of Porter’s Generic Strategies to Gain Firm Performances. Pp. 10-16