Kaufland: Analyzing Australian Market for Strategic Expansion

This report provides a comprehensive strategic analysis of Kaufland's potential entry into the Australian retail market. It begins with an executive summary and an introduction outlining the scope of the report. The analysis includes a SWOT analysis, examining Kaufland's strengths, weaknesses, opportunities, and threats. A PESTLE analysis assesses the political, economic, social, technological, legal, and environmental factors influencing Kaufland's prospects. Porter's Five Forces model is used to evaluate the competitive landscape, including the threats of new entrants, substitution, and the bargaining power of suppliers and buyers. A value chain analysis identifies Kaufland's primary and supportive activities, highlighting its operational capabilities. The VIRO framework is applied to assess Kaufland's sustainable competitive advantage. The report concludes with strategic evaluations and recommendations, considering Kaufland's capacity to succeed in the Australian market. The report utilizes these strategic tools to assess the company's potential for success in the Australian market.

Running Head: Kaufland
Kaufland
Report
System04104
5/2/2019

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Executive Summary
Kaufland is one of the famous grocery retail stores in Germany, which is looking for
starting its business in the Australian retail market. The low pricing strategy of Kaufland and
better political and economic support from Australian government can help Kaufland to enter
in the Australian market, but a large number of competitors and lack in technology can be
termed as the major obstacle to enter in the Australian market. As people in Australia are
very price sensitive and switch quickly to other alternative options, the strategy of low
pricing might be effective in Australia for Kaufland, despite being its financial problem.
Although, the company has strong financial support from its parent company Schwarz Group
and it helps Kaufland to enter the Australian market. Apart from this, the attraction of people
towards online shopping of grocery products also provides an opportunity for the company to
expand its business and enhance its market share in the Australian retail market.

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Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
SWOT Analysis of Kaufland.....................................................................................................3
PESTLE of Kaufland.................................................................................................................4
Porter’s Five Forces of Kaufland...............................................................................................5
Value Chain Analysis of Kaufland............................................................................................6
VIRO Framework.......................................................................................................................7
Identify Kaufland’s Strengths and Weakness............................................................................7
Strategic Evaluation and Recommendation...............................................................................8
Conclusion..................................................................................................................................8

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Introduction
Kaufland is a famous grocery retail market in Germany. Kaufland is a part of Schwarz
Group, which also owns Lidi and Hanadleshof. Kaufland was founded in Neckarsulm
(Germany) in 1984 and now it has more than 1300 stores with 150,000 employees across
seven European countries (Kaufland, 2019). This report presents a strategic report on
Kaufland and provides various analysis and evaluation of the company that helps in its entry
into Australia. The present report discusses the external environment of Australia and
identifies various threats and opportunities for Kaufland in the country. Further, the report
also discusses the strength and weakness of the Kaufland retail chain in the form of SWOT
analysis. Overall, this report helps to understand how Kaufland establishes itself in Australia
and what are the opportunities and threats for the company in future Australian retail market
(DW.com, 2018).
Kaufland is a chain of grocery retail stores in ‘Lifestyle and Retail sector' and the USP
of the company is ‘Quality within cost'. The company's tagline is "Where quality costs less."
Kaufland targets middle-class people and households by providing a number of varieties of
products within the low prices. It targets those customers and individual who are looking for
daily needs grocery stocks and visit frequently in stores (Kaufland, 2019).
SWOT Analysis of Kaufland
SWOT analysis helps to understand the Company's external and internal
environmental factors that show its capabilities to operate its business operations. SWOT
stands for Strength, Weakness (Internal factors or capabilities of the organisation), and
Opportunities and Threats (External factors of the organisation).
Strength: Kaufland covers more than 1300 stores in seven European countries and it
is one of the largest grocery retail chains in Germany. The company strategy is to provide
quality products to its consumers within low prices and offers a variety of choices of
products. The company is a brand name in European country including Germany and Poland
and it acquires various small stores that enhance its brand image in the country. The company
has more than 150,000 employees and has a strong financial position in various markets
where it operates its business.

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Weakness: The Company has to face strong competition in the market in European
countries, which means that Kaufland has limited market share in European countries. The
number of stores is very limited and in urban areas, which means it is not accessible for every
customer.
Opportunities: The Australia government is encouraging hypermarket installation in
Australia even though there are much retail supply chain such as Coles, Woolworths, Aldi,
etc. are already established in the Australian retail market. The Australian people are now
looking for buying the best quality products at less cost. The number of middle-class families
in Australia is also large, so it can help Kaufland in spreading its market because it targets
middle-class customers.
Threats: There are already so many grocery retail stores operating the business in
Australia. Coles, Woolworths, and Aldi almost dominating in Australian retail stores.
Therefore, maintaining a low margin in Australia might be tough for the Kaufland. The
Australian retail stores are charging their own prices, which is already very low. Therefore,
maintaining the low pricing strategy in Australia is not effective rather company should focus
on its quality and price (Schmid, Dauth, Kotulla, & Orban, 2018).
Therefore, it can be said that Kaufland will have to face strong competition in
Australia from existing retail players. However, Aldi, which is already a German retail,
company, positioning itself in the Australian retail market. To apply its strategy of high-
quality products within low prices, the company needs high financial capital help from its
parent company Schwartz Group to implement its plan in Australia.
PESTLE of Kaufland
PESTLE Stands for Political, Economic, Social, Technological, Environmental, and
Legal factors that determine the business environment of a Company. PESTLE analysis of
Kaufland is as follow:
Political: The operation of Kaufland retail is mainly in Germany, Poland, Slovakia,
etc. High level of conflict and vulnerability are the only problem for a retail form to operate
its business in other countries. The European and Australian countries are free from any
major political and international conflict in present days. Thus, the threat to Kaufland’s
operation in Australia is war, which probability is almost zero. Apart from this, the

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relationship between Australia and Germany also supports the entry of Kaufland in Australia
(Koehn, 2016).
Economical: The rising inflation rate in the grocery market in Australia is a major
problem for Kaufland. As Kaufland is a cheaper market and offers very low prices for quality
products, it will favourable for the customers as they will be seeking to find cheap and best
products. The overall demand for grocery products is rising by 3.8% per year; it shows that
the demand for its products will be rise with the future expanded market. The rise of inflation
in the country will force people to buy grocery products more and more instead of eating
things in restaurants and hotels (Daily Record, 2017).
Social: The Kaufland pays a better salary to its employees and staffs. It means higher
wages for employees and staffs helps them to raise their living standards and they can afford
better food, clothes, and can fulfil their basic needs. It will definitely benefit the society and
people who will work in Kaufland. Kaufland also donates money for child and girl education
and spend lots of money as CSR activities. This will help to improve the life standard of
Australian children and girls as well.
Technological: In Australia, other retail players in the market use the best technology
to provide better assistance to their customers. They provide the best customer experience
and self-service checkouts to their customers. Kaufland will have to work on these
technological aspects as they are lacking in implementing advanced technology in their
stores. Kaufland has to focus on providing quick and smart services to its customers.
Environmental: Kaufland should focus on purchasing products from local suppliers,
producers, and farmers. It helps to maintain sustainability in local areas and it also helps
those local farmers who work hard in their farmers.
Legal: Kaufland was in sometimes in news for its poor quality products and content
of food products related issue. The Australian government is very strict about it and they
impose a very heavy penalty on the company. Therefore, Kaufland should focus on the legal
aspects related to the quality and content of products.
Porter’s Five Forces of Kaufland
Porter's five-force model includes five factors that help to understand the current
situation of the company. These factors are as follow:

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Threats of New Entrants: Threats of new entrants in grocery retail stores is very
high. New entrants in the market easily copy the strategy of old market players and
implement some better strategy. Apart from this, some global competitors like Wal-Mart,
Tesco, and L90idl looking for starting a business in the Australian retail market. Therefore,
Kaufland should ready to face heavy competition in the Australian market, as it will be rise
after the entry of new players (Price, 2016).
Threats of Substitution: Almost all competitors offer similar product and variety in
their retail stores. As switching cost is low in the Australian market, if the customer will not
satisfied with the products, he/she will easily jump on other alternative products and
substitutes (Spiteri, Olstad, & Woods, 2018). Australian customers are very price sensitive,
thus a small change in the price of similar products will tend to switch other competitors in
the market. Although Kaufland focuses on low price and quality products, it has a slight
advantage over others (Ashraf, Razzaque, & Thongpapanl, 2016).
Bargaining Power of Supplier: There are numbers of suppliers of grocery products
who offer similar product and service in Australia, thus it can be said that the bargaining
power of suppliers is little low in the grocery market. Therefore, Kaufland could go those
suppliers having the cheapest price and quality product and services.
Bargaining Power of Buyers: As there are numbers of buyers and the number of the
alternative product are available in the Australian retail and grocery market, thus the
bargaining power of buyers can be considered as moderate in the Australian market.
However, people are very price-oriented in the Australian retail market; Kaufland will have
an advantage over it with "cheapest price and low-cost strategy” (Madar, 2018).
Competitive Rivalry: It can be considered as very high in the Australian market as
there are numbers of retail market players in Australia. They offer a very low-cost price for
their products and services and give strong competition to new entrants in the market. As
products, strategies, and pricing strategy is almost similar in the market, Kaufland could face
higher competition in the market (O'Connor, 2017).
Therefore, we can say that Kaufland will have to face high competition and high level
of threats from new entrants and substitution products. While the bargaining power of
supplier is low and bargaining, the power of buyers is moderate.

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Porter’s Five Forces Intensity
Threats of New Entrants High
Threats of Substitution High
Bargaining Power of Supplier Low
Bargaining Power of Buyers Moderate
Competitive Rivalry High
Value Chain Analysis of Kaufland
Value chain analysis was first given by Michel Porter. Value chain analysis helps to
describe the activities of a company, relates them with other competitor’s strength and
weakness. The company includes primary activities and supportive activities.
(Source: Kovachki & Marinov, 2018)
Primary activities: Its primary activities are directly connected with producers and
manufacturers of products. It purchases its products from farmers, local producers, and
manufacturers. The primary activities also include inbound and outbound logistics work,

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marketing or sales and services of products. Kaufland also provides various technical and
financial support to its suppliers and even it does advance payments for orders as well. This
helps the producers, suppliers, and farmers to maintain a good relationship with Kaufland
(Guimarães, 2016).
Supportive activities: The supportive activities involve the procurement of goods,
technology development, HR management, and managing the stores and infrastructure in
different places. The supportive activities enhance the activeness and efficiency of business
operations of Kaufland.
Kaufland also differentiates itself from other competitors in terms of its superiority in
business operations and its strategy. The value chain activities are almost similar to other
competitors in the Australian grocery market. Therefore, it is easy for Kaufland to establish
itself in the Australian grocery market. The key capability of Kaufland is that it provides the
best quality products at cheap prices. It is the key strategy of Kaufland that it gives more
worth to its customers within the price range (Mortimer, Fazal e Hasan, Andrews, & Martin,
2016).
VIRO Framework
VIRO framework helps to understand that the Kaufland can sustain a competitive
advantage. Competitive advantage in business is important for establishing the business and
attracting customers. Applying the VIRO frameworks to Kaufland, we can analyse that the
low pricing strategy and better quality products can help it to establish in the Australian
grocery market. Due to the low-cost offering, it can easily attract customers. The growth rate
of Kaufland is better than other retail stores and it cannot be imitated. The brand image of
Kaufland can also help it to establish in the Australian grocery market (Tench, 2016).
Capability Rare Valuable Not able to be imitated Organizational support
Low-cost Pricing Yes Yes Yes Yes
Fast Growth Rate Yes Yes Yes Yes

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Brand Image Yes Yes Yes Yes
Identify Kaufland’s Strengths and Weakness
Kaufland’s strategies of offering quality products to its customer on low prices and
provide excellent services to its customers are the major strengths of the Company. This
strength can help the company to establish itself among a large number of competitors in
Australia. Apart from this, the brand image of the company also helps it to make a place in
the Australian retail market. The company has strong financial support from its parent
company Schwarz Group. These strengths of Kaufland can help the company to establish
itself as a giant grocery retail company in Australia (Carlson, Cass, & Ahrholdt, 2015).
Strategic Evaluation and Recommendation
The resource-based view of the organisation is exploring the competencies and
resources of the organisation. The key focus of Kaufland to provide low-priced quality
products, quick customer services, and high productive staffs, which are paid higher salary
and wages in compared to other competitors, are the major key factors that give strategic
advantage to Kaufland over other competitors. The Kaufland should also focus on uncluttered
grocery shopping experiences and should try to alter consumer psychology to enhance the
sale and maximise profit (Greeblat, 2019).
However, there are following recommendations for Kaufland to enter in the
Australian grocery and retail market: The Kaufland should focus and technological
advancement and should enter in the online market. Consumers are now searching everything
online and it is a major concern for Kaufland. It can target a wide range of customers through
the online market. The online divergent of Kaufland helps to decrease overall operational cost
and expanding its business through online retailing. Kaufland should not copy the strategy of
other market players and should implement its low-cost strategy in Australia as well (Martin,
Mortimer, & Andrews, 2015).
Conclusion
In conclusion, Kaufland Retail Company can employ a wide range of strategic
methods to launch its business in the Australian retail market. Offering low prices product

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with the best quality is the key strength of Kaufland and it sets Kaufland apart from other
competitors in Australia. As people in Australia are more price-sensitive and switches
immediately to other alternatives, it has a chance to target the Australian retail customers
with its low-pricing strategy. Although, Kaufland is lacking in technological advancement, so
it should focus on implementing the latest technology in the retail stores that give better
customer experience and services to customers. Kaufland should also focus on providing its
services through the online retail market because now people have very limited time and they
search for everything online.

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