ICMS ECO600: Business Strategies of Woolworths and Coles Analysis

This report analyzes the market structure and corporate strategies of Woolworths and Coles, two major players in the Australian retail sector. The study, based on secondary research from industry journals, company reports, and strategic management literature, examines their current competitive positions, growth strategies, and pricing approaches. The analysis reveals that Woolworths leverages cost-minimization and differentiation strategies to gain a competitive edge, while Coles faces challenges in like-for-like sales growth. The report suggests that Coles should adopt differentiation, focus, and cost leadership strategies to enhance competitiveness. It explores the growth strategies of both companies, with Woolworths focusing on online store development and Coles investing in private label products. The report also compares their pricing strategies, highlighting the use of promotional strategies. The conclusion recommends that Coles implement specific competitive strategies, such as unique consumer rewards programs, to enhance its market share and consumer attraction. The report uses Porter's Generic Competitive Strategy Framework and Ansoff Growth Strategy framework to provide insights and recommendations for both companies.

Running head: ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND
COLES
Economics and Finance for Business: Woolworths and Coles
Name of the University:
Name of the Student:
Authors Note:

1ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
Abstract
The objective of the report is analyses the market structure and the corporate strategies of the
organisations operating in the Australian retail sector such as Coles and Woolworths. It was
gathered from the report from analysing the e-commerce sites of Coles and Woolworths it is
gathered that the psychological pricing strategy developed by Coles might not secure competitive
advantage over Woolworths as it follows effective competition oriented pricing keeping its
prices low within the industry. From analysing the growth strategies of Woolworths and Coles it
has been evidenced that Woolworths have increased scope for capturing a better market share for
the reason that they have implemented several strategies on developing its online stores with
increased focus on offering fresh food along with own brand products in their e-commerce sites.
For ensuring Coles to attain competitive edge over Woolworths, the retail company is
recommended to implement competitive strategy of differentiation, focus and overall cost
leadership. With such strategy, the retail company must manage its effective relationship with
the overall value chain and must be focused on lowering costs all through the value chain.
Differentiation strategy of Coles must be focused on creating services or products that are unique
than Woolworths and are valued by its consumers.

2ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
1. Introduction
The objective of the report is analyses the market structure and the corporate strategies of
the organisations operating in the Australian retail sector. The companies that are selected for
investigation in this paper are Coles and Woolworths. Coles is an Australia based retail company
that offers various retail products such as groceries, food, household goods and financial services
(Coles, 2019). Woolworths is an Australian retail company that has its business operations in
several segments including food, logistics and store clothing retailer. Both the retail companies
have international business operations.
The research was carried out through implementing secondary research methodology,
where the relevant data has been collected from peer reviewed journals on Australian retail
industry, annual report of the companies and the books on strategic management.
In accomplishing the report, the second section ill analyses the current competing
position of both the companies selected along with offering proposals for improving business
competitiveness. The third section will focus on analysis the growth strategies of the two
selected companies along with developing proposals for improving growth strategies of them.
The fourth section will analyses the pricing and non-price strategies of the selected companies
along with developing proposals for effective pricing and non-pricing strategies for them.
2. Market Structure and Corporate Strategies
The retail industry of Australia is a booming sector and is observed to be highly
competitive due to existence of numerous strategically competing companies. The treat of new
entrants in the Australian retail sector is high as new entrants in Australia are increasing that are
bring in innovative offerings and new statehouse of operating retail business. The rivalry among
retail companies in Australia is fierce that can pose a threat to the overall market share and
profitability if Coles and Woolworths (Block, Kohn, Miller & Ullrich, 2015). Some of the major
competitors of these companies include Aldi, IGA and certain non-supermarkets. The barriers to
entry within the retail sector of Australia was not high two years ago that facilitated both Coles
and Woolworths to easily enter the industry.

3ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
Figure 1: Woolworth and Coles Growth in Market Share Indicated in Red and Grey
Colors
(Source: Boscagli, 2019)
Moreover, the market share of the companies is also observed to grow rapidly for these
two companies as indicated in the figure above in the last and in the current year. The increased
market share of the company indicates that Coles and Woolworths are among the most visited
supermarkets by people residing in Australia. Based on such analysis Herfindahl-Hirshman-
Index analysis is carried out. This index analysis can facilitate in analysing the market
concentration of Coles and Woolworths in the retail industry of Australia ranges (Cusumano,
Kahl & Suarez, 2015). From analysing the market index below it is evaluated that HHI of the
industry is 1625 that indicates moderately concentrated industry, however any merger and
acquisition decision of Woolworths can increase HHI by more 200 points that can even push the
index to 2500 making its highly concentrated industry.
Retail
Company
Market
Share
Square of Market
Share
Woolworths 35% 1225

4ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
Coles 20% 400
HHI 1625
2.1. Current Competing Position of Businesses
The two retail companies in Australia like Coles and Woolworths are observed to
compete with each other is based on differentiation strategy and minimization of the supply
chain costs. In order to analyse the ways in which both the companies are successfully competing
with each other competitive strategies of Coles and Woolworths are analysed. For instance,
Woolworths has exceptional ability to minimize its costs related with supply chains that has
ensured successful competitive advantages of the company over Coles in maintaining higher
margins in the price wars (Woolworths, 2019). Moreover, the differentiation strategy of
Woolworths is different from that if Coles that had facilitated the retail company to attain
competitive edge over Coles through attaining large consumer base that are attracted to its
differentiated products and services with high quality lowest prices in the industry. Through
implementation of such differentiation strategy Woolworths is able to penetrate existing
consumers as the organisation consistently strategies fir new ideas and innovation in its offerings
(Woolworths, 2019). On the other hand, Coles faces tough competition from Woolworths on this
aspect as Coles is able to generate limited “Like-for-sales” growth because if its low quality
offerings, shopping experience, branding and consumer service. Cole’s competitive strategy
failed in comparison to Woolworth’s differentiation strategy as the company became
recretionary with increased reliance on price-based promotions by having low focus on other
value measures. Woolworths is competing successfully being a market leader in Australian retail
market through increasing its online presence along with different evolving and innovative
offerings such as organic, ready-made and heath food ranges on a regular basis.
2.2. Proposals for Improving the Competitiveness of Business
Porters Generic Competitive Strategy Framework is implemented in developing effective
strategy based proposals for improving the competitiveness of Coles against Woolworths. This
competitive strategies framework can facilitate in developing one among the three strategies such
as cost leadership, differentiation and market segmentation strategy (Stummer, Kiesling, Günther
& Vetschera, 2015).

5ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
Figure 2: Porters Generic Competitive Strategy Framework
(Source: West, Ford & Ibrahim, 2015)
For ensuring Coles to attain competitive edge over Woolworths, the retail company is
recommended to implement competitive strategy of differentiation, focus and overall cost
leadership. The cost leadership strategy of Coles must consider developing its low cost position
relative to a company's peers. With such strategy, the retail company must manage its effective
relationship with the overall value chain and must be focused on lowering costs all through the
value chain. Differentiation strategy of Coles must be focused on creating services or products
that are unique than Woolworths and are valued by its consumers. The differentiation strategy of
Coles must be transformed in ensuring consumers regarding its new market offerings at
competitive prices and in high quality than that of Woolworths (Stummer, Kiesling, Günther &
Vetschera, 2015). This can be ensured through Cole’s differentiation competitive strategy
implementation in the form of “re-fresh” and “new-idea” along with introduction of “Everyday
value for money” and introducing unique consumer rewards and convenience programs through
offering them “every money shopping cards and rewards”. Implementation of such generic
competitive strategies is deemed to increase competitive advantages of Coles above Woolworths
in the firm of high market share and increased consumer attraction to Cole’s stores.
3. Growth Strategies
3.1. Growth or Expansion Strategies of Businesses
Both the retail companies Coles and Woolworths have made exceptional attempts in
growing their businesses in the Australian retail market in terms of new product development
and product differentiation. Vertical growth is evidenced in case of both the retail companies in
the form of their business diversification strategies and strategy development approaches based
on their core competencies. Woolworths is observed to follow the growth strategy of new

6ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
product development and differentiate aggressively in attaining competitive advantages over
other Australian retail companies. For instance, Woolworths is attaining marginal growth
through constantly improving its online offering of food and liquor (Stummer, Kiesling, Günther
& Vetschera, 2015). On the other hand, Coles is constantly investing in innovation within its
private label products as per consumer needs. It is also focused on opening more online stores
named “anytime, anywhere shopping” through offering competitive services of one-hour home
delivery services and improving quality if its cold grocery offerings.
Vertical integration growth strategies are also implemented by Coles and Woolworths
where they majorly focus on business diversification in competing with one another. The
successful diversification growth strategies of Coles include product diversification,
improvement of on-shelf product availability, removal of product duplication and diversifying
food options on a daily basis to deliver value to its consumers (Stummer, Kiesling, Günther &
Vetschera, 2015). Whereas, Woolworths is competing successfully through implementing
diversification based growth strategies such as current home improvement strategy that will tap
into joint ventures and financial services in financial institutions. Moreover such strategic
approaches of the retail company also includes re-evaluating the manner which it has joint in the
electronics business through divesting and restructuring Dick Smith.
3.2. Proposals for Growing Business
From analysing the growth strategies of Woolworths and Coles it has been evidenced that
Woolworths have increased scope for capturing a better market share for the reason that they
have implemented several strategies on developing its online stores with increased focus on
offering fresh food along with own brand products in their e-commerce sites. Moreover, it also
has the opportunity to grow its business through earning more revenue from acquiring new target
consumer base (Woolworths, 2019). This is ensured as the company makes constant investment
in offering daily low prices along with introducing more tailored sore offering based on
consumer needs. In analysing the future growth opportunities available for Woolworths, Ansoff
Growth Strategy framework is implemented that includes developing growth strategies in the
form of market development, diversification, product development and market penetration.

7ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
Figure 3: Ansoff Growth Strategy Framework
(Source: West, Ford & Ibrahim, 2015)
Through implementing the above growth matrix framework it is elucidated that
Woolworths can attain sustaining its leading position and can attain more growth through its
market penetration strategies like improving its business share of grocery and through new
product development like financial services and petrol based product offerings. Vertical
horizontal diversification growth strategy if implemented by Woolworths can be benefited from
sales stage storage programme (Stummer, Kiesling, Günther & Vetschera, 2015). However, it
must also be considered that such strategic framework implementation might have certain
limitations such as it fails to indicate that market development and diversification strategies need
a change based on every business operations. Moreover, accurate predictions on growth might
also be difficult.
4. Pricing and Non-Price Strategies
4.1. Similarities and Differences in Pricing Strategies of Coles and Woolworths
The non-pricing strategies of Coles and Woolworths are different but the pricing
strategies of both the companies are observed to be somewhat similar. Both the retail companies
are observed to compete based on their promotional strategies and product features rather than

8ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
price. This is for the reason that profit margin in Australian retail industry is quite thin. The
pricing strategies followed by Coles and Woolworths are indicated in the table below:
Product Price and Strategy (Coles) Price and Strategy
(Woolworths)
Gluten free rice $ 4.59/ 750 grams $ 3.50/ 750 grams
(Competition oriented pricing)
Organic lentils $ 3.99/ Kg (psychological
pricing)
$ 3.06/ Kg
The table above indicates that the prices of products of Coles and Woolworths are almost
similar but Woolworths has set competition oriented pricing strategy to sustaining its leading
position in Australian retail market (Nagle & Müller, 2017). From analysing the e-commerce
sites of Coles and Woolworths it is gathered that the psychological pricing strategy developed by
Coles might not secure competitive advantage over Woolworths as it follows effective
competition oriented pricing keeping its prices low within the industry.
4.2. Proposal on Pricing Strategies
For the products mentioned in the table above Coles can consider changing its pricing
strategies in attaining competitive edge over Woolworths. Changing its pricing strategy to
penetration pricing approach for gluten free rice and organic lentils can facilitate Coles in
triggering a series of discounting schemes by the company in attracting huge consumer base.
This pricing strategy can facilitate Coles in setting low prices for its products in the retail
industry than Woolworths as it will set very low price than will even be less than its marginal
cost of production (Mitra, 2016). This can further increase its market share long with attracting
wide consumer base and loyal consumers over the future years. However, Coles must be careful
while implementing this pricing strategy as Woolworths have strong product and service
branding because of which the consumers might not be willing to switch to a low-price
alternative offered by Coles.
4.3. Difference in Non-price Strategies Used by Coles and Woolworths
The most observable non-pricing strategies used by Coles and Woolworths are market
research and these strategies are employed by most of the retail companies. This strategy
facilitates both the retail companies to attain important information on changing consumer needs
along with analysing distinct different prices of commodities within the market. However, it is
observed that Woolworths employ certain non-pricing strategies that are not yet considered by
Coles. For instance, Woolworths greatly focuses on its product packaging strategy that uses
different appealing colors, different manners of packaging each product and effective branding
that has the motive of making the product look attractive for consumers to buy them (Malysheva
et al. 2016). However, Coles did not yet consider employing such non-pricing strategy as it still
continued to use plastic containers despite of plastic packaging ban in Australia. Moreover, it
focused on implementing branding strategies and making the products in its shelves look more

9ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
attractive trough implementing “Red ribbon” design. Through implementing this non-pricing
strategy Coles felt that it can attain increased consumer appetite appeal that did not turn out to be
effective before innovative packaging strategies of Woolworths.
4.4. Proposals on Non-pricing Strategies
In order for Coles to compete successfully with Woolworths in terms of its non-pricing
strategies, it must consider using strategies such as improving its extensive national store
network through leveraging consumer insights, innovations along with technology that can
support its store renewal programs, tailoring stores along with product ranges (Cusumano, Kahl
& Suarez, 2015). This might be useful fur Coles in attaining competitive edge for the reason
those consumers will perceive the offerings of Coles to be fresh and new in the industry.
Moreover, this strategy is also observed to be useful in other industries in terms of attaining
improved market share and consumer brand loyalty. Moreover, Coles can also consider
implementing an effective non-pricing strategy of “fresh designer lighting” in its stores that can
improve consumer experience in the store along with bringing out best in product offerings.
Moreover the lighting design in the stores can enhance food products natural colors and textures
and such real feel and modern look of store and its products can attract consumer attention.
5. Conclusion
It is evident from the report that the retail industry of Australia is a booming sector and is
observed to be highly competitive due to existence of numerous strategically competing
companies. The rivalry among retail companies in Australia is fierce that can pose a threat to the
overall market share and profitability if Coles and Woolworths. The report revealed that
Woolworths has exceptional ability to minimize its costs related with supply chains that has
ensured successful competitive advantages of the company over Coles in maintaining higher
margins in the price wars. Moreover, the differentiation strategy of Woolworths is different from
that if Coles that had facilitated the retail company to attain competitive edge over Coles through
attaining large consumer base that are attracted to its differentiated products and services.
Differentiation strategy of Coles must be focused on creating services or products that are unique
than Woolworths and are valued by its consumers. The differentiation strategy of Coles must be
transformed in ensuring consumers regarding its new market offerings at competitive prices and
in high quality than that of Woolworths. This analysis can be extended in future to evaluate the
ways in which entry of multinational companies can impact the competitive position of these
companies.

10ECONOMIC AND FINANCE FOR BUSINESS: WOOLWORTHS AND COLES
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