Executive summary

This report aims to discuss the importance of strategy development tools to identify
various aspect of market in relative industry. The main agenda of this report is to cover
the competitive dynamics of Supermarkets of Australia. The report will discuss the
macro-level environment and the internal system of the industry. The report will
examine the industry through competitive development theories and tools like PESTLE
and Porter analysis. Moreover, three brands Aldi, Coles and Woolworths will be
discussed and how Aldi gain success in the industry will also be analyzed. While
summing up, suggestion and conclusion will be added.

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Contents
Executive summary......................................................................................................................1
Introduction....................................................................................................................................2
Brief summary of supermarket industry of Australia................................................................2
Macro-level Analysis of Industry-Pestle analysis.....................................................................3
Political factor............................................................................................................................4
Economic factors.......................................................................................................................4
Social factors.............................................................................................................................4
Technological factors................................................................................................................4
Legal factors..............................................................................................................................5
Environmental factors...............................................................................................................5
Competitive Dynamics of Australian supermarket industry....................................................5
Power of supplier......................................................................................................................5
Power of buyer..........................................................................................................................6
Threats of New entrants...........................................................................................................6
Threats to substitutes...............................................................................................................6
Threat from rivals......................................................................................................................6
Internal Analysis of the Firms’ Resources and Capabilities...................................................6
Resources and capabilities of Woolworths...........................................................................7
Resources and capabilities of Coles......................................................................................7
Resources and capabilities of Aldi.........................................................................................7
Competitive Dynamics- Strategies of Individual Firms............................................................8
Woolworths’ Lean Retail and Focus on Supermarket Business.......................................8
Coles’ Acquisition and Strategy of low-cost Private Label.................................................8
Aldi’s Low-Cost and Price Differentiation Strategy..............................................................8
Metcash & IGA..........................................................................................................................9
Recommendation and conclusion..............................................................................................9
References.....................................................................................................................................9

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Introduction
The supermarket industry of Australia is highly competitive in nature. Due to many
brands offering same products on same prices, companies under this industry are on
constant pressure to stay on top. Above all, there are two main leaking brands which
stays on top of supermarket industry of Australia. They are Coles and Woolworths.
Along with these big brands, other small brands like Aldi is also working hard to
compete well in the industry. The revenue generated by Australian supermarket is 103.4
billion dollars, along with this the latest trend of shopping have also influence to raise
the revenues by 2.1%. the trend of online stores also encouraged people to buy grocery
through online, which also promotes the companies in market. In this report,
Competitive dynamics will be used to analyze supermarket store of Australia.

Brief summary of supermarket industry of Australia

As of 2018, Woolworths was one of the main leading grocery stores which holds up to
34% of the supermarket industry. While Woolworths expanded its piece of the overall
industry the recently Coles currently has a portion of 27.6% of the absolute grocery
showcase down 1.6ppts on a year back. German store Aldi has had a decent year in

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2018 developing its piece of the overall industry to 11.4%, up 0.5ppts from a year back
as shown in fig 1.

Figure 1 Market share of grocery brands in Australia (Roy Morgan 2019)

Macro-level Analysis of Industry-Pestle analysis

Macro-level of the industry relates to the external environment and the analysis of
relative market to gauge the performance of the company. The macro-level analysis is
the key to investigate and eliminate all the negative factor in the external environment of
company which may stops if from growing. In order to have a wide approach to the
analysis, PESTLE analysis will help to examine the supermarket industry of Australia.
Pestle analysis is the tools help to analysis and examine external environment in order
to detect threats and eliminate them to succeed in future. Hence Pestle analysis of
supermarket of Australia will help to examine the policies and intervention of
government and other factor impact on the growth and performance of brands.

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Political factor
Political factor plays important role in determining the nature of business. The taxation
policies, government interventions and currency fluctuation are the primary factors
involves under this heading. The policies of Australian government play an important
role in maintaining the competitive environment among the rivals in industry. Currently
there is no rules set for the infrastructure but the policies made by the government must
eb followed by each company at to stay in market. Moreover, government aims to
regulate its rules as per the needs and demand of customers. The rules also cater to
cater suppliers demand. Moreover, big brands like Coles and Woolworths have also
impact the growth of small brands like Aldi.

Economic factors
Economy of Australia is quite stable and the disposable income of residents of Australia
increase the opportunities for supermarket and grocery stores. The employment rate
also helps to provide opportunities to these brands as people can afford to buy instant
food which can be prepared instantly. But the inflation in economy can affect the income
of such stores badly. The fluctuation and decline in Australian Dollar can also affect the
retailors in terms of generating revenues.

Social factors
The culture and habits of people involves in social factor which determines the
perception of customer regarding the brand. Australian people often promote healthy
lifestyle which can be catered by the grocery store through providing organic food and
ingredients. The growing trend of organic food can help to increase the brand image
and revenues of grocery retailers.

Technological factors
Technology is one the biggest factor in raising the industry and revenues. Emerging
technologies helps to provide better services to the customers. The emerging trends of
shopping to raise revenues every year. In the supermarket industry, technology has
helped to raise revenues by 21.7%. Latest technologies like self-checkouts kiosks helps

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to improve the shopping experience of customers which also increase brand name. it
also helps to reduce the costs and labor work.

Legal factors
The carbon tax in Australia has affected the growth of supermarket of Australia.
Moreover, Australian Competition and Consumer Commission had a great impact on
the retailers.

Environmental factors
The environmental factors like carbon footprint and gas emission has a great impact on
the sustainability of industry. The companies must think of using energy efficient
equipment to reduce their carbon footprint from nature (Meyer & Estrin 2014).

Competitive Dynamics of Australian supermarket industry

It is evident that Australian Supermarket has access to the price driven strategy which
made it highly competitive in the market. Well-resourced companies can gain a lot of
profit and income through supermarket business. The industry ahs been running due to
four main brands which helps to retain the market share of industry in the country. The
competitive dynamics of supermarket of Australia will be examined with the help of
porter five force model.

Power of supplier
Power of supplier involves the power of negotiation done by suppliers to earn profit. The
research on the Australian supermarket retailers shows that the industry is highly
competitive in nature. It also decreases the power of suppliers in the market. It brings
about the net revenues separated. It likewise will in general lessening the item cost and
improve the opposition in the market. The opposition a few times turns into the greeting
for the administration intercession and political factors.

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Power of buyer
The buying power of buyer has been high in supermarket industry of Australia. Due to
disposable income of residents and wide variety of stores, people can easily choose the
stores to buy. Their bargaining power is relatively high because of the availability of
different brands, customer can easily switch between brands to buy grocery items.

Threats of New entrants

Threats of new entrant involve the entry of new business in the relative market which
starts competition with already established companies. Large players like Coles and
Woolworths made it difficult for any small retailer to enter the market. This make the
threat of new entrant very low. But after 2018, Aldi has improved its market share which
may be a threat to big players (Elmas 2019).

Threats to substitutes
Threat to substitutes involves the products which can replaced the existing brand. The
threat to substitutes for Australian supermarket is relatively low. As because the grocery
store items are important for daily life. There are no current substitutes to them. People
have to buy the products from grocery stores in order to cater their daily need. Hence
the threat to substitutes is relatively low in such industry.

Threat from rivals

It is evident that big players in the market like Coles and Woolworth hold rivalry against
each other. Research on Australian Retailors indicates that big players in the field of
supermarket are biggest rivals to each other. Each of them is struggling hard to gain
largest share of market (Fitzgerald & Priolo 2018).

Internal Analysis of the Firms’ Resources and Capabilities

Since Woolworth and Coles are the main leading players, they both hold resources and
capabilities to win their market share of industry. Both these players share recruits and

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resources. Supermarket industry provides them powerful support and backup, this also
help them to recreate resources both tangible and non-tangible. On the other side, Aldi
is trying to fit into big players. Since Aldi is relatively new, the company is trying to go for
low-cost resources and operations to settle in the industry first.

Resources and capabilities of Woolworths

Woolworth is the company well developed in industry and backed up with strong group.
Moreover, the company recently sold up their fuel agency to EG Retailers group which
has net worth of 1.7 billion dollars. The primary reason behind this is the company want
to fully occupied themselves with grocery store business. The company excels in
logistics and supply chain management to deliver fresh ingredients comes directly from
supplier. Moreover, their advance inventory system also helps to make them lead
among competitors. Woolworth has stores located in main areas of country which has
increased the popularity of brand among public. The brand is able to work under
market dynamics and present the customer-oriented products. The elements like growth
and private-label helps them to lead in the competitive environment of market (Williams,
Memery, Megicks & Morrison 2010).

Resources and capabilities of Coles

As mentioned about Woolworth, Coles has similar resources and potentials to work in
dynamic environment. They also have similar capabilities which makes hard for other
brands to compete. The company uses sustainable methods to produce their products
in markets. Moreover, their operation also promotes sustainability which is a plus factor
to create diversity with Woolworth. Generally speaking, as a technique capacity, it builds
the market change to achieve the better situation with contrast with its position then the
Woolworths.

Resources and capabilities of Aldi

As compare to Coles and Woolworth, Aldi is new brand in supermarket which is
gradually increasing its market share after 2018. Although Aldi has started its career
back in2001, the company has increased its market share which depicts that it might be
a competition for both of the brands. They have hopped into the market with the

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assistance of their new minimal effort procedure, they are not in the phase to
grandstand the ease activity, however the competency on different firms (Rooderkerk &
Gallino 2019).

Competitive Dynamics- Strategies of Individual Firms

Woolworths’ Lean Retail and Focus on Supermarket Business

Ever since the start of Australian supermarket, Woolworths remain on top among all the
grocery stores. After the invention of other relative brand, the popularity of Woolworth
got affected only little. Since the invention of rivalry brands, the company have been
working hard to be on top. They have put their focus just on grocery stores. They have
gone with lean retail strategy which helps to minimize the expenses and costs. They are
focused to just customer care programs. While Aldi has been playing private label
strategy which also cut the expense of products in market. Moreover, the premium offer
strategy helps to drive customer and built customer loyalty. Lastly, Woolworth always
open new store on prime location which help to cater audience directly (VUONG 2018).

Coles’ Acquisition and Strategy of low-cost Private Label

Coles has used the strategy of acquisition with private label named K-mart to stabilize
their position. Although they are second popular grocery stores in Australia but still, they
need to develop some strategy to retain their position. Coles have started the private
marks to present the ease methodology of the items with the fine quality. They have
assessed the matter of 21 billion dollars alone. West designer has reported demerger of
the market while thinking about the business at a feasible position.

Aldi’s Low-Cost and Price Differentiation Strategy

Aldi is relatively new in the field of supermarket grocery stores. They need to develop
strategies through which people can be able to differentiate the brand with another big
player. So, the company has developed low cost strategy which attracts customers
through selling branded products on low costs. This strategy helps in adding the net
revenues of company from the last two years.

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Metcash & IGA
With their limited assets and low-cost products, Metcash & IGA represent the grocery
market by starting with small stores. As the company is relatively new and small so they
are able to compete in high end market with big brands.

Recommendation and conclusion

The Australian supermarket covers major share of the market in Australian economy.
They have maintained their position in the country due to two main leading brand,
Woolworth and Coles. These two brands share large market part of industry which
contribute in building economy. The companies are working hard to retain their positions
and they have been following some pricing strategy to strive in market. Moreover, these
brands have been using latest technologies to accommodate customers with best
shopping experience.

The industry of supermarket must utilize techniques to improve shopping experience of

customers to retain and build loyalty with the customers. Moreover, they must used
competitive dynamics to analyze their position in the market.

This report is concluded with the fact that, competitive dynamics has been able to
analyses the position of brands working under Australian supermarket. Their pricing
strategies and other tactics have been examined to see the importance of competitive
dynamics as to stay in market. Moreover, tools like Pestle and Porter help to examine
the impact of external environment on the progress of company.

References
Elmas, M 2019, 'Government agrees to tougher rules for Woolworths, Coles,
Aldi supplier dealings - SmartCompany', SmartCompany, accessed June

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 5, 2020, from <https://www.smartcompany.com.au/industries/retail/code-
woolworths-coles-aldi-suppliers/>.

Fitzgerald, D & Priolo, A 2018, 'How Do Firms Build Market Share?', SSRN

Electronic Journal.

Meyer, K & Estrin, S 2014, 'Local Context and Global Strategy: Extending the
Integration Responsiveness Framework to Subsidiary Strategy', Global
Strategy Journal, vol. 4, no. 1, pp. 1-19.

Rooderkerk, R & Gallino, S 2019, 'New Product Development in an

Omnichannel World', SSRN Electronic Journal.

Roy Morgan 2019, 'Woolworths and Aldi grow grocery market share in
2018', Roy Morgan, accessed June 5, 2020, from
<http://www.roymorgan.com/findings/7936-australian-grocery-market-
december-2018-201904050426>.

VUONG, B 2018, 'Consumers Are Increasingly Favouring Organic Foods |

IBISWorld Industry Insider', Ibisworld.com, accessed June 5, 2020, from
<https://www.ibisworld.com/industry-insider/industry-insights/organic-
farming-has-benefited-from-a-shift-in-consumer-preferences/>.

Williams, J, Memery, J, Megicks, P & Morrison, M 2010, 'Ethics and social

responsibility in Australian grocery shopping', International Journal of
Retail & Distribution Management, vol. 38, no. 4, pp. 297-316.

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