Kaufland's Strategic Market Entry into Australian Retail: A Report

This report provides a strategic analysis of Kaufland's market entry into the Australian retail sector. It examines Kaufland's ambition to open stores across Australia, targeting key locations to capture market share. The report employs the Hambrick and Frederickson's Strategy Diamond model to evaluate Kaufland's approach, considering aspects like arena, vehicles, differentiators, staging, and economic logic. The analysis reveals Kaufland's adoption of a Greenfield investment strategy and its potential to disrupt the existing market. The report highlights the company's strengths, potential challenges, and offers recommendations, emphasizing the importance of doorstep delivery, infrastructure development, and effective promotional strategies. The conclusion underscores the importance of strategic market entry and the potential for Kaufland to become a major player in the Australian retail landscape.

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Executive Summary
The paper evaluates the market expansion strategies of the company Kaufland. Kaufland is
aiming to enter in the retail market of Australia with an aim to expand the scope of business and
successfully expand the scope of business as well. Kaufland is a German giant company that is
present in the retail industry. The company has targeted Australia and is aiming to open five
retail stores at suburb places in the country. The Hambrick and Frederickson’s Strategy Diamond
model has been used in the case to explain the strategic move of the company and challenges that
they might face while initiating it. Further, findings from the strategic application has been
evaluated along with a few recommendations. From the analysis, it was concluded that the
company Kaufland is a giant organization that will eat the existing companies like Aldi, Coles
etc. present in Australia. Kaufland adopted Greenfield investment strategy to enter in the market
and succeed as well. Through the analysis, it was recommended to the company that they should
focus on doorstep delivery of product along with selling. The company should also focus on
creating good infrastructure, and adequate promotional strategies.

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Contents
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................2
Case Analysis...................................................................................................................................2
Use of Hambrick and Frederickson’s Strategy Diamond................................................................3
Findings...........................................................................................................................................5
Conclusion and Recommendations..................................................................................................6
References........................................................................................................................................7

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Introduction
The purpose of this report is to provide brief information about the case of Kaufland acquiring
land in Australia for business purposes. The report discusses about the motive of Kaufland to
enter in the market of Australia. It also describes the ways in which the company wants to enter
in the Australian market using strategic management tools and techniques. The report discusses
about the analysis of the given case along with the use of Hambrick and Frederickson’s Strategy
Diamond model by the company to successfully create a market presence. Further, the finding
explains the information gained about the strategic practice of company (Tomasevic, and
Spasojevic 2018).
Market entry is considered as the most way aspect for a business willing to expand its scope of
activities. It is important for the company to adequately make use of marketing tools and
techniques to place themselves at a reputable position in the target market. More details about the
report are discussed below:
Case Analysis
The case published in Sydney Morning Herald on 1st of June, 2018 explain about the market
entry of the German Giant Kaufland in Australia. The headline, ‘Coles, Woolies under siege as
German giant Kaufland eyes five superstores’ explains the pressure created on other supermarket
with the expansion strategies of the company Kaufland. Kaufland is a German hypermarket
chain store organization that is a part of the Schwarz Group. This group also owns other famous
organizations naming Lidl and Handelshof. The company is a privately owned organization that
is present in retail industry since 1984 (Blahová 2017).
Coming upto the case, it should be noted that the article states that Kaufland is aiming high to
open five new supermarket stores in the market of Australia. The company wants to expand $90
the market of Australia by exercising their resource and capabilities and initiating sales in
Australian market as well. Kaufland is a part of world’s fourth largest grocery stores and has

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already started its site construction in Melbourne (Kamal Jamal 2018). The company has placed
themselves in the eastern suburbs of Melbourne for about $ 16.5 million and attain 3.5 hectares
of land in Chirnside Park that is one of the best growth suburb of city. Another site also that the
company aimed to setup is a large suburban infill site that is occupied with housing (Austin,
Bentkover, and Chait 2016). With such initiatives tken by the company, it can be clearly seen
that the organization is targeting only those segments in the market that have high value and
demands grocery store products on a regular basis (Vuorinen, et. al., 2017).
After setting up two plants in Australia, Kaufland targeted the third market in Sydney. The
company showed its existence in Australian market when they came to Adelaide suburb for $ 25
million. Further, the company aims to expand by making it two-storey $34.6 million market. The
company is aggressively promoting the brand in the Australian market and hiring people for the
work. Along with Kaufland, entrance of sister company Lidl is also acting as a threat for the
company Aldi(Gottschalck, and Günther 2017). With such activities initiated by the company in
the Australian market, it can be clearly seen that Kaufland is much bigger that the company
Coles, Woolworths etc. and will displace the position of rivals through its entrance. The
company has major shares to invest in Australia as they see it as a potential market to capture.
The company also uses potential strategies to adequately capture the market through entrance as
well (Timofeeva 2016).

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Use of Hambrick and Frederickson’s Strategy Diamond
Source: (https://expertprogrammanagement.com/2017/10/strategy-diamond/)
Looking at the ambition of the company Kaufland to grow and succeed in the target market, the
company utilized various marketing tools and techniques as well. One of such technique H&F
diamond strategy successfully explain market entry ways and objectives of the company to grow
in Australian grocery industry. The H&F model was coined by Hambrick and Frederickson, this
strategy is also known as strategy diamond. This tool acts as a useful source for the managers
and business owners in initiating the everyday operations of the business and succeeding as well.
This model ensures that all the relevant data is collected and considered and decisions are made
for the organization accordingly in a strategic way (Zentes, Morschett, and Schramm-Klein
2017). Lastly, it model also ensures the complete accountability of work and its probability to
succeed in the market. This aspect shows that different parts of the business adequately fit
together to provide the best for the organization. This model acts as a strategy to ensure that the
business has a good strategy or not. Further, five questions are answered by the way of this
strategy that includes different segment of this model a well (Johanson 2018). These questions
are mentioned below:

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 In which areas will the company will be active? (Areana)
 How will the company reach there? (Vehicles)
 How will the company win in the new marketplace? (Differentiators)
 What will be the speed and sequence of moves? (Sequencing)
 How will the company make returns? (Economic aspect)
Relating this aspect to the activity of the company Kaufland, it should be noted that the company
successfully answers the above mentioned questions. These five aspects on the part of the
company are discussed below:
Arena: This aspect talks about the area where the company is going to expand its scope of
business. The company utilized the arena phase in analysing the target market that can help them
in expanding the business and growing as well. So, Kaufland has chosen Australia for expanding
its activities as the retail market of Australia has a great potential to make the companies
profitable. Organizations like, Coles, Woolworths etc. are working in the market and earning.
Therefore, it can be clearly seen that the organization Kaufland has chosen a great place to
explore. The area of Australia to attain optimum resources and logistics services present in the
country will also increase its efficiency (Triscari 2018).
Vehicles: after knowing the area, it is important for the company to analyse the ways in which
they are going there. In respect to which Kaufland initiated the Greenfield venture strategy.
Under this strategy, the organization is aiming to effectively place a wholly owned joint venture
in Australia. In this way, the Kaufland will have full confidence on the business that it will
succeed in the market (Duvall, and Salt 2018).
Differentiators: This aspect talks about the unique selling proposition of the company that
differentiates themselves from the existing competitors present in the market. The biggest selling
proposition of the company Kaufland is its identified brand in the market. The brand image of
the company is so big and pompous that they do not need brand name of any other domestic
organization to enter in the Australian market (Hogan 2018).

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Staging: The above mention three aspects talks about what the company wants to do in the
market but this aspect talks about the moves with the help of which the company will get into the
place where they actually want to go. Under this step, the company aims to hire many people
from Australia and that too from competitor firms like Aldi. These people will help the company
to adequately position themselves in the target market (Johanson 2017).
Economic Aspect: This part of the H&F model everything together with an aim to earn profits for
the organization. According to this process, the organization aims to work at low cost model.
Under this model, Kaufland focuses on the economies of scale and provide products at low costs
so that the customers feel satisfied and the organization earns profits (Daidj 2014).
The company adequately used the H&F model in successfully creating their footsteps in the
country Australia. The aspect arena helped them to find out the adequate place to setup the
business for Kaufland. Differentiator helped the company to analyse the USP and use them in the
business expansion process as well. Further, the company chose the enter in the market of
Australia through Greenfield investment because it suits to the process and functions. This will
give them more power in the country. Staging helped the company to move in the directions of
their objectives set to capture Australia. Lastly, the economic logic of the company will help
them once they have flourished their five stores in the country.
Findings
From the analysis of the market entry action of the company Kaufland with respect to the H&F
model, it should be noted that the organization adequately initiated a strategic move using the
available resources and capabilities of the organization. While entering in the market of
Australia, one thing is for sure that the company Kaufland will not many difficulties in placing
themselves in market of Australia, except in one case that is with the customers. The retail
market of Australia is very disruptive but at the same time, the customers are very laid back, so if
the customers have loyalty towards Woolies or Aldi then they will not switch the organization in
any case (Han, and Hou 2016). However, it is easy for Kaufland to attract such customers by
providing them products at highly discounted prices and giving various perks as well. Further, it

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should be noted that the company Kaufland is entering the market of Australia with the most
appropriate entry mode. Firstly the company has targeted right market that is Australia because
this country has most efficient retail industry. Although, the competition is high but the
company’s image will somehow eliminate it as well (Lewa, and Narikae 2017).
Conclusion and Recommendations
Thus, in the limelight of above mentioned events, the fact should be noted that marketing
strategy is an important aspect that explains the motive and with the expected growth of the
company in the target market. The above mentioned report explained the analysis of the case in
which Kaufland, the German giant is aiming to enter in the market of Australia. The Hambrick
and Fredrickson’s Diamond Strategy Model has been used in the paper to provide an elaborative
view of the strategic aim of the company in the external market. Further, below mentioned are
some of the recommendations given to other supermarket companies like Aldi to grow and
manage the competition in market of Australia.
The initial thing that other supermarkets present in Australia should do is to enhance their
position in the retail industry. The fact is known to all that, Kaufland has a strong market
presence in international retail industry so in order to compete with such a giant organization, it
is important for other organizations to build a strong market image. The companies should invest
more on the promotional and branding strategies so that customers get to know about the brand
and initiates value addition in it. People present in the target market are the people who create
image of the company in the market and reflect it towards other prospective people in the
market. Therefore, it is important for the organization to create an impression on the customers
so that when Kaufland enters in market, the customer do not make sales for the company and
shows loyalty towards the existing organizations.
Further, it is recommended to the existing supermarkets that they should make use of disruptive
techniques in their business so as to increase the satisfaction level of the customers. On doorstep
services should be used by companies to capture the market share in Australia. This disruption
innovation should also be used in the business to provide products to the customers at discounted

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rates. Although, the companies are already providing product at reasonable rates but decreasing
the price to goods and services for a while will attract more and more customers in the market.
The companies should offer a price to customer at which Kaufland would fail to get down, this
will help the other supermarkets to increase their competence in the market and get customers
loyalty and satisfaction as well.
Thus, using this strategy will help the other supermarkets will maintain their position in the retail
market of Australia.
References
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