HI6006 Assessment Details Assignment 2: Group Report; 30 marks; week 10 Write a report on the following 5 case, highlighting key aspects of competitive strategy:1. Australian Supermarkets (Case

Case 3 A u s t r a l i a n s u p e r m a r k e t s : w h o w i l l w i n a n d w h e n ? I N T R O D U C T I O N This is a case in competitive rivalry and most of the concepts in competitive rivalry theory can be used. It is therefore a good learning case for that material and also has some good issues for forecasting into the future , such as :  Will Aldi become an industry -altering threat?  Will Coles or Woolworths dominate for the long term? Coles and Woolworths operate in the Australian grocery retailing industry. They dominate this industry to an unusual extent. Both companies operate corporate structures and have the backing of other business areas. E X T E R N A L A N A L Y S I S General Environment for groceries  Political –legal – interestingly, there is no government control over a duopoly. Is it likely to come in the future ? Apparently not  Demographic – the population clusters in cities on the co ast, incomes are good, at least good enough to fund groceries. Up to the 90 th perce ntile in income is fertile g round. A continuing opportunity  Economic – conditions are good  Technology – online shopping is advancing, an opportunity that must be taken  Global – global sourcing of products, a long supply chain Conclusion : Opportunities with the solid market and online shopping. No major threats. I N D U S T R Y A N A L Y S I S This is a slow -cycle industry with a large profit pool that is being accessed by well - resourced firms. Rivalry – this is constant rather than hot. Aldi is inc reasing the level of rivalry though with their low cost system. Hanson 6 e – Case Analysis © 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Suppliers – are being squeezed. This may lead to political heat in the future. Buyers – very low switching costs mean that can change firms easily. New entrants – it is possible that international players will enter but Aldi have already done so and the market is now crowded. Substitutes – small delicatessens perhaps, but no threatening substitutes . Overall this is a fairly unattractive industry. Buyers are difficult and rivalry is con stant. C O M P E T I T O R S This is a first -class example of market depend ence and resource commonality , which means the players are aware of everything that market players do and are motivated to take actions that match the competition. They have large resource s ets and can match any tactical and most strategic actions quickly. They have no choice in the shared market, s ince this is necessary for long -term survival. In this market and industry, any competitive advantage is likely to be temporary. Both Coles and Wo olworths have strong corporate backing – Coles via Wesfarmers and Woolworths through their corporate group. They cover almost every possible everyday buying expe rience from groceries though to alcohol and general merchandise. The strength of this corporate backing is critical in their rivalry – they are strong behind the scenes. Their list of tangibles and intangibles is fairly matched – they track each other systematically and take any initiatives that the other has launched. Aldi is different, having fewer items in each store, less marketing, lower cost syst ems and a concentration on home -branded products. Coles and Woolworths are following in the home brand initiatives. The IGA group has a role in marginal areas and is now well organised. It only repr esents a minor threat because their stores cannot obtain the full economies of scale of Coles and Woolworths (or Aldi) or the prime locations of the big two. R E S O U R C E S Coles and Woolworths are equally matched in many areas: s tores, brand , locations, corpo rate backing and more . A full list is contained in the case. The big difference is the current strength of the resources and capabilities – Coles is, simply, in a better position than Woolworths. Aldi is a nother matter and the ir capability for low prices is a core competency. Case 3 : Australian supermarkets: who will win and when? © 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C A P A B I L I T IES These are the capabilities that are matched : 1. Outstanding logistics abilities (these are really logistics companies) 2. The ability to retail groceries and a range of other consumer items 3. The ability to source a wide variety of consumer items from global and local suppliers 4. The ability to build brand continually 5. The ability to use resources to quickly respond to competitor initiatives 6. The ability to innovate in retailing 7. The a bility to expand the services offered in a retailing experience 8. The a bility to locate new stores in good areas . Aldi adds the ability to operate stores at very low cost. Thi s is a core competency –no other player has it to the same extent. IGA adds the ability to build links with local communities (although Coles , Aldi and Woolworths are starting to match that). IGA lacks high levels of performance in numbers 1, 3, 4, 6 , 7 and , particularly , 8. S T R A T E G I E S Low cost differentiation for all players. This is backed by constant marketing and by cost management that has meant farmers and other suppliers are squeezed.

Corporate backing, size and great locations (with future locations already under control) give Coles and Woolworths advantages over IGA. The IGA group can realistically compete only in marginal locations. Aldi is a different proposition because it is lower cost and runs a different model. It will steadily increase market share but cannot compete for the prime locations – these end up being a key resource for C oles and W oolworths . Aldi , at the time the case was written, is not an industry -altering threat because of the lack of locations and the essence of their model – low cost/home brand, which is now being adopted by the big two. They have hastene d a change to home brand in the industry , but not altered it. This issue remains open for the long term though – the Aldi system is so good it threatens profit levels for the others. Coles and Woolworths need to take better advantage of online shopping, and both need to continue with the home -brand strategy because it leads to bigger margins (and as they do this , some of the margin advantage that Aldi enjoys drifts away ). Hanson 6 e – Case Analysis © 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Will one dominate the other? This is unlikely because of resource matching at both supermarket and, broadly, at corporate level. If anything, Coles has the advantage with Wesfarmers as t he parent company; it is large , diversified and runs Bunnings. The strategy of building smaller Coles, Woolworths and Aldi stores is a good option. These would take a dvantage of smaller markets that corner stores in the IGA stable now dominate. By late 2016 Coles and Woolw orths had started to implement this strategy and the IGA network of stores has never been more endangered. They are the likely losers in this battle of the giants of Australian retailing.