Two prevailing companies having major share of market dominate the Australian supermarket. Domestic market in the world is dominated by these two organization having 80% of market shares. However, in the recent year, Coles and Woolworth have been facing seriously challenge from Aldi that is a low cost German brand and mildly challenged by Metcash brand (David and David 2015). Both the organization are facing direct rivalry from the new brand that has entered in the Australian retail market.
The porter’s five forces helps in the assessment of the current position of supermarket industry of Australia. Application of this particular tool by analysing the retail sector are as follows:
Buyers bargaining power- The Australian retail industry has considerably higher bargaining power. The reason is attributable to the fact that there are large numbers of retail stores and supermarkets selling necessary items to consumers. Consumers are provided with wide range of options that they can chose product from that result in higher bargaining power (Stead and Stead 2013).
Suppliers bargaining power- The majority of market share of Australian retail industry has been concentrated in hands of few organizations because the industry is considered as highly concentrated. Suppliers bargaining power is considered as moderate as bargaining power is increased to certain level (Durand et al. 2017).
Rivalry amongst existing organization- After assessing of the retail sector, it has been ascertained that retail industry has high amount of rivalry as there exist few major competitors in the industry competing for acquiring larger market share. This includes Woolworths, Coles, and Wesfarmers.
New entry threats- The new entry threat is considered as low because the new players have been facing extreme difficulty to enter into the industry that helps in reducing the overall threats of existing competitors.
Substitute threats- It is highly important for consumers to have retail consumable products, they are no such available substitutes, and due to this reason, the substitute threat is considered as lower (Peppard and Ward 2016). Since, consumers is required to consume then retail products because of unavailability of other choice.
For assessing the macro environmental factor of affecting the supermarket industry performance, it is required to apply the PESTLE analysis.
Political factors- Performance of Retail industry in Australia is affected by the political factors and the major player that is Cole and Woolworths are hugely impacted it. For instance, federal government of Australia that prevented major players in eliminating competition launched a competition policy (Hubbard et al. 2014).
Economic factor- The performance of Coles and Woolworths is hugely affected by declining economic activity in Australia and prevailing economic conditions.
Social factor- Organization undertaking societal initiatives and preferring to be highly socially responsible is preferred by customers. Retail organizations operating in Australia is heavily influenced by social factors.
Technological factor- Technological factor helps in driving the retail firm’s performance. The major player such as Woolworths has adopted green technology application for storing their goods (Woolworthsgroup.com.au 2017).
Environmental factor- The entire retail industry of Australia is significantly affected by environmental factors. Operations of retail giants such as winemaking and petrol business is considerably hampering the environment conditions that needs to be take care of.
Legal factors- The operation of retail organization in Australia has also been affected by legal factor such as implementation of carbon tax. It is required by organization to adopt fair policy for continuing their operations as consumer commission and Australian regulation (Eden and Ackermann 2013).
The weakness and strength of organizations can be ascertained by performing the internal market analysis. Internal environment of Woolworths and Coles can be analysed by considering their resource and capabilities along with their core competencies. Furthermore, value chain analysis is also performed for analysing the internal environment of organizations.
Resource and capabilities of Woolworths:
Across New Zealand and Australia, there are more than 3000 stores of Woolworths employing approximately 180000 people. The human management and resources are efficient and there is strong relationship in their vertically integrated business. Organization offers wide range of fresh products to their customer base and has well designed logistics system. Capabilities on other hand, is the organization skills for coordinating resources for making it to productive usage (Rothaermel 2014). Woolworths is highly efficient in putting their resources to right use and at right time.
Some of the core competency of business of Woolworths are as follows:
Market and branding- Woolworths has been able to create differentiated image of healthy and quality products available at reasonable price by positioning the store with their slogan of “ The fresh food people”.
Efficient supply chain- Supply chain of Woolworths has been able to develop their competitive advantage and innovation by focusing significantly on cutting cost and efficiency so that there are no redundant expenses.
Integration and innovation- Organization has implemented new idea program for petrol retailing. They have enhance their share of market by integration of suppliers in using their inputs.
Inbound logistics- Organization enjoys the benefit of procuring in bulk quantity and lower costs due to their own distribution centres. They are able to avail discounts and reduction in per unit costs from their suppliers.
Outbound logistics- The quality and freshness of products sold is ensured by vendor quality management system that is in stores within the organization.
Operations- Woolworths are able to supply the fresh products at reduced costs as they can procure supply from root level.
Sales and marketing- Organization is able to create successful brand awareness by spending more amount on marketing.
Customer service- Waiting time of trolleys is reduced and employment of refunding policies has helped organization in maintain service provided to customers.
Supply chain of Coles are well established and there is a tighter contract for vegetables and fruits. Trucking companies of organization has tight policy concerning delivery
The core competencies of Coles has the unique combination of strategic values and sustainability that helps organization in maintaining strategic and competitive advantage over its competitors. Coles capability lies in effectively deploying their resources for achieving organizational gaols with the help of integration (Peppard and Ward 2016). Some the core competencies and capabilities of Coles are as follows:
Reputation of brand- Over several decade, the brand value of Coles has been highly developed and achieved through experience of customers. A considerable amount of differentiation if offered by Coles products compared to their competitors that makes the brand valuable. The point of parity is considered as factor responsible for building brand image for competing with competitors
Highly efficient supply chain- The capability and resource of organization is efficient supply chain in their outbound and inbound logistics. Efficient supply chain enables organization in saving substantial amount of costs that helps them in competing with Woolworths. For the proper implementation and management of strategy, level of competency is considered as essential factor.
Sustainable advantage- Coles set the criteria of rare, non-substitutable, and costly in imitating and valuable as the factors in framing sustainable advantage. Value chain is regarded as efficiency as it helps in creating value for customers. Giving the competitive advantage of organization, it enjoys economies of scale that is easily substitutable. For the proper implementation of strategy, it is vital for organization to maintain competency level.
Efficacy of top management- The operating environment of Coles is effectively navigated by its competency concerning management in the event of recession. Increasingly competitive environment is navigated by the top management level.
Inbound logistics- The success of Coles is contributed resulting from their logistics and procurement that are its two main activities. Supermarket of Coles has their own distribution stores operated by their own distribution system management. Company maintains their stated of having one time delivery of services and goods.
Resource and capabilities of Woolworths
Out bound logistics- The distribution network of company is under their management that helps in products distribution to various branches. Superior technology supports the supply chain of value addition services due to their infrastructural level and level of service.
Operations- The two primary activities are involved in their operation activities that helps in guaranteeing value and convenience to customers. It also enables proper inventory management and improved assessment of quality.
Sales and marketing- Dynamism of organization and promotion are the activities of Coles that ensures success of sales and marketing activities. Sales of product and turnover in organization is maintained by the implementation of strategy of issuing catalogues (Morden 2016).
Woolworths and Coles are among the twenty biggest retailer in the world and they dominate the world’s domestic market. Coles that is a subsidiary of Wesfarmers have grown to become highly successful. Turnover of Woolworths is comparatively higher than that of Coles and it is more than just supermarket chain. Both the organization occupies more than eighty percent of market share of the whole retail industry of Australia. They are positioned as the most competitive retail organization in the world (Skjølsvik et al. 2017).
Woolworths focuses on branding strategy that is well implemented and managed. The planned reduction and the private label strategy and is focusing on the promotion of brand. Corporate strategy of Woolworths comprise of growth plan and maximizing the leadership that would help the organization in store led culture team and generating the sales momentum. Strategy is focused on placing the customers first. Organization is currently working towards the vision that helps in pursuing the strategy enabling turnaround of business. Coles on other hand, are employing the strategies that will help in value adding to the transactions and human resource capability.
Woolworths has outlined three-year strategy having lots of potential and leading to strong business growth. The strategy helps in winning the trust of customers and this helps in increasing the customer food shared through improvement all aspects and lowering of prices. Strategy is focusing on three capabilities such as offer, efficiency and growth. Adoption of range and pricing strategy will lead to the implementation that will neutralizing other competition sales. Woolworths that would assist the development of new products categories have established a new division of food. The market of New Zealand and Australia have been streamlined into one division. The three-year growth strategy help in reduction of cost through the stores and comes with the commitment of innovation about their products, better convenience, improving service and lowering prices (Frynas and Mellahi 2015).
Core competencies of Woolworths
Some the business strategy of Coles comprised of products diversification, removal of service and products duplication, improving the availability of on shelf products and strategies intended for enhancing the customer shopping experience. In order to deliver value to customers, Coles has adopted innovative combination of business that helps in increasing price absorption and decreasing costs.
The landscape of supermarket of Australia is very complex and the industry is facing a great change due to entrance of new organizations competing with the existing organizations. The major players of retail industry that is Woolworths and Coles are facing competition on many fronts. This involves digital reach, marketing power, price, coverage of markets and suppliers control. In regard with the present strategies, the strategies of both the major players needs to be revised. In order to make the vision visible to customers, organization is required to focus enhancing and refining their investments in flied of promotion and investments and improving the customer’s service and products. Quality and range of products are the two main things that needs to be focused. An increase in prospects and advertising coherence needs to be created by the valuable point of differentiation in retail market.
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