Strategic Analysis of Kaufland's Entry into the Australian Market

The report provides a comprehensive analysis of Kaufland's entry strategy into the Australian market. It discusses the company’s historical background, international expansion efforts, and recent growth in Europe with an emphasis on China. The paper explores strategic options for Kaufland in Australia, emphasizing financial performance, market trends, and corporate strategies. Key points include the challenges of local adaptation and absorptive capacity in establishing discount department stores. Furthermore, it highlights recommendations for adopting omnichannel retailing to enhance customer engagement and supply chain management practices for improved retail performance. The report concludes with a discussion on monitoring future performance metrics such as sales profit over cost and the size of average shopping carts in hypermarket settings.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student:
Name of the University:
Author Note:

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Executive Summary:
The report is a discussion on a German Hypermarket chain store, Kaufland, planning to open
its outlet in Australia. There is discussion on the market size and trends that the company
needs to follow for ensuring a foothold in Australia. The report also describes the financial
and corporate performance that the retail store must undertake in Australia. There report also
discusses about the strategic options of Kaufland in the Australian market. Further, the report
also put forwards discussion on the final recommended strategy and its implementation. The
report also describes about the monitoring and control of the future performance of the store.

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Table of Contents
Introduction......................................................................................................................................3
Market Size and Trends in Australia...............................................................................................3
a. Market Size..............................................................................................................................3
b. Key Trends...............................................................................................................................4
Financial and Corporate Performance in Australia.........................................................................6
Corporate Performance................................................................................................................6
Financial Performance.................................................................................................................6
Strategic Options in Australia..........................................................................................................7
Final Recommended Strategy..........................................................................................................8
Implementation of Final Strategy....................................................................................................8
Monitoring and Control of Future Performance..............................................................................9
Conclusion.......................................................................................................................................9
References........................................................................................................................................9

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Introduction:
The report gives an overview of a company named Kaufland opening its stores in
Australia. Kaufland is a giant hypermarket chain that entered the retail market of Australia.
An analysis done based on the market size and trends followed by Kaufland in Australia. The
report also puts forward the company’s financial and corporate performance in the Australian
market. There is also discussion on the available strategic options for the company in the
Australian market. The report also mentions a final recommended strategy for the company
along with its implementation. There is also a discussion on the monitoring and control of its
future performance in Australia.
Market Size and Trends in Australia:
a. Market Size
Kaufland, part of Schwartz Group from Germany entered Australia’s fiercely
competitive grocery market and plans to launch its first store on the fringes of Adelaide.
Schwartz also owns a discount chain named Lidl and has been targeting a foothold in the $ 90
billion plus supermarket sector of Australia (Armstrong et al., 2014). The new operation in
Adelaide would be one of its flagship and inaugural store. With Kaufland, shopper in
Australia can have a vast and a completely new experience. This is because the company
plans to introduce stores in warehouse styles spread out over an area of 20,000 square meters,
something unique compared to the traditional Woolworths and Cole stores that were less than
fifth of its size. Thus, Kaufland plans to bring in a new retail experience to its customers by
introducing close to about 60, 000 products that included various known brands. The
Kaufland stores will also include white goods and groceries. With Kaufland, customers will
thus have a destination shopping experience ("Kaufland – Immer eine Idee frischer!” 2017).

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b. Key Trends
The grocery market in Australia has become more competitive than ever. The present
scenario is that two of the largest retailers of the Asia Pacific are battling in terms of online
discount, market leadership, the rapid growth of the wholesale channels and the entry of the
new contenders in the market (Davey & Richards, 2013). There are however five key trends
that can shape the market and influence the strategy of the retailer. These are as follows:
1. Woolworths Regaining Its Position:
By 2017, Woolworths expected to continue with its progress on the AU$1 billion
restructure that might not only outpace the growth of its rival Coles but also prove to be
challenging for Kaufland. .
2. Offering Fresh Battle Grounds:
The major Australian retailers not only maintain long-term relationship with the
suppliers of its fresh food but at the same time tries to strengthen their policies of sourcing
(Ward et al., 2012). The retailers also focus on in store execution of all fresh items with stock
availability, attractive displays and freshness of the product and staff skills. Kaufland should
try to follow such trend in order to gain a foothold in the Australian market.
3. Focus on the Market Entrants:
In the recent year, although the density of supermarket is quite high in Australia, still
gaps exist in the markets providing a chance for new entrants. This gap is fulfilled by
Amazon and as well as Kaufland. Amazon plans to enter the market with either fresh
products or physical stores. Moreover, Amazon also focuses on customer service with its
prime loyalty program. Kaufland therefore can face a tough competition from Amazon.

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4. Intensification of the Online Capability:
The market entry of Amazon has forced other retailers including Coles and
Woolworths in focusing more attention on the improvement of their online capabilities
(Nothhaft, 2016). Kaufland being a part of the retail industry must also focus on its online
capabilities for keeping pace with the market. In addition, the retailer should also focus on
customer flexibility and service.
5. Convenience is Reality:
Melbourne has focused on store innovation with the introduction of new style
formats. Stores are increasingly tailoring the ranges for delivering better quality of food for
now and the food for later options (Munro & Andrade, 2015). There has also been innovation
for delivering exciting and new options for keeping the offers different and fresh from the
competitors. Thus, Kaufland must take up this trend to be at par with other competitors.
Financial and Corporate Performance in Australia:
Corporate Performance
Kaufland, part of German giant Schwarz Group aims to capture the Australian retail
industry with stores that are five to six times larger than the Woolworths and Coles. The
Kaufland store is a combination of large supermarket along with generalized merchandize
retail (Cohen et al., 2012). The store follows Aldi’s path for entering Australia’s supermarket
business. Therefore, the giant supermarket store made an investment for setting up a store in
Adelaide whose ideal size estimated to be within15000 to 20000 square meters along with car
parking facilities of 200 to 300 vehicles. The stores also plan to stock around 60000 product
lines.

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Financial Performance
The grocery industry in Australia is quite concentrated. The increase in the level of
concentration has taken place over many years with major supermarket chain, Woolsworths
and Coles having successfully grown their market share and sales (Shi and Yu, 2013).
The major change in the grocery market of Australia brought about by the entrance of
the international retailer Aldi in the year 2001. Aldi offered a completely new supermarket
experience to its customers by being tough discounter (Metzger, 2014). Australia also had
another international retailer in the form of Costco in the year 2009. This retailer presently
owns eight warehouses and brings to its customers a completely new supermarket experience
in the form of hypermarket.
In addition to Aldi and Costo, Kaufland also aims to make its presence felt in
Australia. Therefore, the retailer must realize that the grocery industry is gradually evolving
in the Australia and hence these international retailers must compete with the major
Australian Supermarket to gain a foothold. Kaufland should also note that Coles and
Woolworths, the major supermarket chain in Australia are comparatively smaller operations
(Bailey, 2017). To capture the Australian market Kaufland should also understand the
aggressive pricing promotions of Coles and Woolsworths which the two supermarket chain
have undertaken for defending their shares and sales

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Figure: Financial Performance of Retailing in Australia
Source: (Vlachos, 2014)
However, Schwarz Unternehmenstreuhand KG mentioned in the above figure owns Kaufland
and Wesfarmers own Coles.
Strategic Options in Australia
The retail giant Kaufland enters the Australian supermarket arena with a strategic $25
million acquisition. The German retailer has thus snapped the sprawling site of Le Cornu
located on the Anzac highway in Adelaide for a price of $25 million for building the first
Australian supermarket (Price, Bailey & Pyman, 2014).
The 3.6-hectare site chosen by Kaufland on the southwest corner fringe of Adelaide
had initially been a furniture showroom and warehouse marked for disposal after the death of
Lance Le Cornu, the patriarch of the Cornu family.
Kaufland, a part of the giant Schwarz Group of German is the largest retailer of the
world with over 1200 stores in Europe. The stores of Kaufland are five to six times bigger
than the size of the Woolworths or Coles store and they put forward a combination of larger
supermarket with retail merchandize, stocking up to 60,000 product lines (Voigt, Buliga &

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Michl, 2017). The store built in Adelaide would cover an area between 15000 to 2000 square
meters with car parking options for around 300 vehicles.
Final Recommended Strategy
The Australian retail industry has undergone a bigger change with the rise of e-
commerce. The internet access along with the adoption of Smart phone has forced various
small and large retailers to include online options for complementing their existing channels.
However, the reality lies in the fact that consumers do not entirely devote themselves to one
channel. Not only do they appreciate the experience of shopping at a store but at the same
time they also find convenience when goods gets delivered at door step with just few clicks.
Thus, recommendations put forward for the retailers in the creation of Omni channel
Strategy.
Implementation of Final Strategy
Retailers like Kaufland can implement the Omni Channel Strategy by the following means:
Ensuring a 360-degree Customer Experience:
The expectation of the customers from its retailers is increasing on a day-to-day basis.
The look of the website, the product layout, shipping options, product packaging and
customer experience affects the customer experience (Piotrowicz & Cuthbertson, 2014).
There must be categorization of the products so that customers initiate search based on brand,
lifestyle or department.
Treating the Online Customers Similar to the Customers in Store:
While implementing its Omni Channel Strategy retailers must make sure that they
receive the same benefits online as they did while making a purchase in the bricks and mortar

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location (Bell, Gallino & Moreno, 2014). Kaufland should also make sure that the return of
the items bought online should be easy as done in the stores.
Monitoring and Control of Future Performance
There are five essential metrics for monitoring and control of the future performance
of retail industry. These are as follows (Condea, Thiesse & Fleisch, 2012):
Accessing the Customer Traffic:
Keeping track of the number of customers represents the straightforward metric for
the retail business. Thus, the number of potential customers visiting a store determines the
amount of revenue generated.
Accessing the Retail Conversion Rate:
There is a necessity for distinguishing between the retail customers and visitors. This
is because there are some visitors who do not buy anything.
Keeping a Track of the Average Sale:
Getting more people to the store where everyone is making a purchase it becomes
important in calculating the average value of the orders.
Taking into Account the Size of an Average-Shopping Cart:
In a brick and mortar outlet of a supermarket chain, each sold item helps in estimating
the generated revenue. Therefore, determination of the size of the average shopping cart is
important.
Considering the Sales Profit over Cost:

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Considering the difference between the revenue and the cost before the consideration
of other costs is important. This helps in determining the cost of acquiring or producing the
product that is being sold.
Conclusion
The report ends with a discussion on the monitoring and control on the future
performance of the hypermarket store in Australia. The report also discusses about the
strategic options of Kaufland in Australia. There is also discussion on the final recommended
strategy for Kaufland along with its implementation. One can also find a portion dedicated to
the financial and corporate performance of the company. Further, the report also presents a
discussion on the size and market trends that Kaufland must follow.
References:

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Armstrong, G., Adam, S., Denize, S., & Kotler, P. (2014). Principles of marketing. Pearson
Australia.
Bailey, M., 2017. Absorptive Capacity, International Business Knowledge Transfer, and
Local Adaptation: Establishing Discount Department Stores in Australia. Australian
Economic History Review, 57(2), pp.194-216.
Bell, D. R., Gallino, S., & Moreno, A. (2014). How to win in an omnichannel world. MIT
Sloan Management Review, 56(1), 45.
Cohen, J. R., Holder-Webb, L. L., Nath, L., & Wood, D. (2012). Corporate reporting of
nonfinancial leading indicators of economic performance and
sustainability. Accounting Horizons, 26(1), 65-90.
Condea, C., Thiesse, F., & Fleisch, E. (2012). RFID-enabled shelf replenishment with
backroom monitoring in retail stores. Decision Support Systems, 52(4), 839-849.
Davey, S. S., & Richards, C. (2013). Supermarkets and private standards: unintended
consequences of the audit ritual. Agriculture and human values, 30(2), 271-281.
Kaufland – Immer eine Idee frischer!. (2017). Kaufland. Retrieved 10 December 2017, from
https://www.kaufland.de/
Metzger, K. (2014). International Management Analysis of ALDI.
Munro, P., & Andrade, N. (2015). Australia 2034. LID Editorial.
Nothhaft, C. (2016). Supermarket Sophistication: Yonghui. In Made for China (pp. 175-184).
Springer, Cham.