Strategic Analysis of Woolworths and Coles Supermarkets

The report identifies that both Coles and Woolworths are engaged in a stiff competition which forces them to establish strategies to outdo one another in the future. Also, the report discusses the Coles and Woolworths’s management strategies and how they contribute towards the success of the duopoly. Table of Contents Executive Summary………………………………………………………………………………. 2 Introduction………………………………………………………………………………………. 4 Industry Analysis………………………………………………………………………………. In response to this competition, Coles and Woolworths seem to use their supermarket businesses to counter the competition. The duopoly account for more than 60 percent of alcohol sales, 80 percent of supermarket sales, and more than 50 percent of the petrol market in Australia (Bankwest 2018). Also, this report discusses Woolworths and Coles’ business strategies as well as their structure and acquisition mechanisms that make them competitive in the industry.

Industry Analysis Primarily, supermarkets act as intermediaries between producers and consumers, and as service providers with the aim of complementing their sales. In Australia, over the past five years, the grocery industry’s profitability has declined because of the increased and intense price competition (IBIS 2018). Coles operates several businesses such as hardware, general merchandise, chemicals and fertilizers, insurance services, and retail supermarkets among others. It operates more than 800 liquor stores, more than 600 petrol stations, 745 supermarkets, and 93 hotels. Coles has employed more than 100 000 employees and is regarded as the best performer in the 11 quarters in the industry in which it operates (IBIS 2018). Woolworths’ Vision, Mission, and Objectives Vision- Woolworths Group Limited’s vision is to be one of the world’s most responsible supermarkets who reflects their commitment and passion for doing business for their customers, society, and the entire world (Woolworths Holdings Limited).

Mission- Woolworths’ mission is to add quality to life. Table 1: PESTEL Analysis for Coles and Woolworths Political Economical • The government plans to pass regulations to discourage mergers and acquisitions which are meant to bar completion. • The suppliers’ bargaining power have reduced significantly. • Low confidence and spending powers from Australian consumers. Social Technological • Both supermarkets have been trying to address the problem of food insecurity in Australia. • Both retailers have engaged in corporate social responsibilities programs such as improving cancer care for young people. Their major value-chain creating capabilities include: Inbound Logistics: Essentially, Woolworths and Coles do not produce the goods they sell; instead, they control the distribution network of these products. To achieve their objectives, there are two significant activities that must take place for the firms to dominate this industry and they include logistics and procurement (Sohal 2013).

Woolworths and Coles’ supplies go directly from the producers to regional or national distribution centers where they are checked for quality before being transferred to stores. The simple and efficient logistics and procurement systems have enabled Woolworths and Coles to remain competitive in the industry. Operations: Both Woolworths and Coles maintain a high-quality assessment and inventory management practices. Australian Bureau of Statistics (2017) indicate that about fifteen to twenty percent of the duopoly’s products are home branded. Mostly, home branding of products makes Australia unattractive for non-local suppliers whose products already branded because they are normally taken off the shelves for in-house branding. Another critical area of competition between Coles and Woolworths is land acquisition. Both Woolworths and Coles have acquired enough land which may be used for future expansion of the businesses which leaves out the other competitors from the areas of growth.

As Choi, Garcia, and Friedrich (2009) indicate, Woolworths and Coles have acquired land in strategic regions which guarantees them excellent opportunities of carrying out high-density developments in those regions. In such dynamic business environments, external factors like socio-cultural, economic, legal, demographic, and technological factors are likely to affect the business’ performance and serious a firm that wants to remain competitive must watch these aspects (Booth and Whelan 2014). Since Woolworths and Coles want to remain competitive and transient in the future, normally, the duopoly are keen to identify their target customers, demographics, as well as their geographical locations. By having a better understanding of their customers’ tastes and preferences, Coles and Woolworths have been able to respond to the needs of their customers promptly which helps the firms to increase their profitability and remain competitive in the industry (Booth and Whelan 2014).

With the changing consumption trends in which consumers have become more concerned about their health, the majority of having shifted their spending to natural and organic food products (Pulker, Scott and Pollard 2018). In response to this trend, Coles and Woolworths have also increased their investments in the provision of these products such that they can compete with convenience stores (Dunne 2008). The current position of the grocery industry The entry of Aldi and other players has contributed to the tremendous growth of the grocery retail industry in Australia. The competition between Coles and Woolworths has been heightened because each firm wants to outdo the other through every possible means. As a result, the consumer benefits from this competition because of the increased quality of products as well as relatively low prices of the commodities.

Aldi’s lowly priced but quality products model has also posed a significant competition in the market because it wants to outdo the giants in the industry (Bankwest 2018). With these regards, Coles and Woolworths must find ways to make them remain competitive in the industry. au/AUSSTATS/abs@. nsf/DetailsPage/6401. 0Sep%202017. [Accessed on May 16, 2018]. Bankwest.  British Food Journal, 116(9), pp. Broderick, S. , Wright, V. and Kristiansen, P. Cross-case analysis of producer-driven marketing channels in Australia. com. au/about-coles. Dunne, A. J. The impact of an organization's collaborative capacity on its ability to engage its supply chain partners. Keith, S. Coles, Woolworths and the local.  Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, pp. Nenycz-Thiel, M. Private labels in Australia: A case where retailer concentration does not predicate private labels share.