Strategic Management Woolworth and Coles Case Study

Question: Discuss about theStrategic Managementfor Woolworth and Coles Case Study. Answer: Introduction The survival of the company in the industry depends on how the company has strategized itself to meet the uncertain and unanticipated future outcomes. This places the management in a critical position of usually scanning the environment to establish appropriate management strategies. For a comprehensive elaboration of strategic management, this paper uses the case study focuses on the players in the retail industry of Australia. There are many grocery industries in Australia. The groups that dominate the grocery supermarket industry in Australia are Woolworths and Coles. These two groups account for nearly 60 percent of sales of alcohol, 50 percent of sales of petrol as well as 80 per cent of supermarket sales. For a long time, Woolworth and Coles have been in competition. However, the competition between the two giant supermarkets has changed with the entry of the new players in the industry. To over the problem of completion the two companies have used their supermarket's businesse s as means of finding a competitive edge over their competitors (Dunne, 2008, p.367). Industry Analysis Woolworth's group in 2011 achieved a 5.1 percent increase in earnings. This was gotten from the many enterprises owned by the group. In Australia, there was a total of 840 supermarkets, with an addition of 21 new supermarkets. There were207 stores in New Zealand. The sales from liquor were also high. The 581 petrol stations owned by Woolworths also recorded an increase in sales. Its electronic business reported a 2.1 percent sales increase from 394 stores. Woolworths also operated hotels business and had 282 holdings. In the gambling industry of Australia Woolworths is the leading player and has more poker machines than other groups in the gambling industry (Keith, 2012, p.69). Coles is a group owned by Wesfarmers. Coles is a major competitor to Woolworths in many aspects. Coles group holds Bunning in hard wares, Coles in supermarkets and Kmart in general merchandise. Also, it also has various businesses in chemicals and fertilizers, insurance and resources. Its operations include 785 liquor stores, 741 supermarkets, 620 petrol stations as well as 93 hotels. Coles has more than 100,000 employees. Up to April 2012, Coles has had the best performance for the 11 quarters in the industry and the 2010-2011 financial years had growth of earnings by 21.1 per cent (Lyons, 2007, p.161). The competition between Woolworth and Coles has been stiff. This contest intensified when Cole was acquired by Wesfarmers. Previously Woolworths had been the leading player and Coles lagged behind because it was underfunded. This later on changed and Coles has been the leading player for some years. Reducing the petrol incentives for customers caused both players to open more petrol stations. Coles and Woolworth usually are in stiff price competition, and a move by one player regarding pricing is closely watched by the other. Another importance element of competition is home branded products (Sohal, 2013, p.434). Research indicates that 15- 20 percent of both Coles and Woolworths products are usually home branded. This home branding makes Australia not attractive to suppliers who are branded since their products are being removed from supermarket shelves for in-house brands. One area of competition that is unknown to an average consumer is the acquisition of land. Both players have enough land to be used for development in the future which eliminates other players from areas of growth. The ownership of land guarantees excellent sites for these players where they can carry out high-density development. Other players such as Aldi tend to be locked out, and the managing director of Aldi has claimed laws regarding planning need to be revised to allow other players in. Players who are small in the industry suffer from the fact that Woolworth and Coles can subsidize their stores which make losses until they become established which cannot be done by the small independent players. Additionally, it is hard for suppliers to deal with these two major players since they bargain hard. Further, due to an emergence of home brand products the supplier's supply products that compete with its brand. In Australia, the government has not seen it necessary to control competition for the small players as this would distort competition (Booth and Whelan, 2014, p.1399). In competitor analysis, a firm known as the Germanys Aldi is of key significant since it competes with the two major players which are Coles and Woolworths. On the eastern coast of Australia, Germanys Aldi owns more than 200 grocery stores, and it is growing rapidly. The model used by the company is one that it started in Germany which is a value chain of small cost which features a range of limited good quality products which have reduced the price. Despite its primary business being the sale of groceries, it sells other products. Many of the products in the stores have low prices and the stock in the shelves is usually packaged in boxes to help reduce packaging time. The suppliers are under strict contracts to ensure that they supply the goods promptly. The model used by Aldi is designed to make sure that the products offered are of good value and are attractive to various categories of people (Rahman, 2008, p.541) Another important group in the supermarket industry of Australia is The Independent Grocers of Australia (IGA). It is an alliance between manufacturers, retailers, and wholesalers. The reason IGA was put together was to strengthen and protect the relationship of the three key players against the chain stores growth. Currently, IGA is the biggest network of a voluntary supermarket in the world owning more than 4000 independent stores (Campbell and Chalmers, 2008, p.492). In analysing the macro environmental factors encountered by the grocery industry in Australia, the Australian Society plays a significant role. In Australia, 20 per cent the wealthiest households account for 62 per cent of total household net worth while the poorest 20 percent account for 1 per cent of total household net worth. Income levels among people in a way show the lifecycle that people are in. People in different lifecycles have different disposable incomes to shop in supermarkets. For instance, a couple with no children may have a significant disposable income and may use this revenue to buy in supermarkets. Another important change in the Australian society has been extensive use of the internet to shop for goods (Jensen and Webster, 2008, p.135). Company Corporate and Business Strategy The players in the grocery industry in Australia have taken various corporate and business strategies. These policies adopted are to help them survive in a business environment that is dynamic. The external factors that affect this industry are political factors, economic factors, social, cultural factors, demographic factors and technological factors. Any firm that wishes to remain competitive must take into consideration these factors. For instance, businesses such as Woolworths and Coles are usually keen to identify their target customers and know their geographical positions as well as analyse their demographics. By firms knowing their customers taste and preferences they can serve their customers better which leave them satisfied. Major players in the grocery industry have realized that most of their customers like to shop through the internet and hence have improved on their technology so as to reach their clients in different parts of the world. Another strategy that these firms have taken is diversifying the kinds of activities they engage in. Woolworths has ventured into other businesses such as electronics, petrol stations, and joint venture and this has made the firm's profitability to increase. Coles has also diversified their businesses and are offering increase range of services which has seen its profit margins improved tremendously (Keith, 2012, p.72). Better management of the firms in the grocery industry of Australia has helped the industry to experience increase growth. The managers have relevant skills and experience to run the firms. They can manage the staff well which results in improved performance. Marketing of goods and services is also well managed which lead to large market share. Another strategy that is being taken by firms is the home branding of their products which enable them to be more advantaged than other suppliers, and this has seen them retain their place on the shelves of various supermarkets. Ability to subsidize stores that are making losses until they stabilize another strategy that firms in the grocery industry of Australia are taking. A Large firm like Coles and Woolworth can do this because of their large economies of scale. These have made this business extend their operations in various parts of the world. Another strategy is that firms in the industry have been keen on the prices set by their competitors. They have to respond appropriately to any price change so that they remain competitive in the market. Land acquisition by companies such as Coles and Woolworth has been another strategy that players in the grocery industry have taken. This has made them make a step ahead of their competitors since they can invest in productive areas (Rahman, 2008, p.546). Strategic Leadership Evident Both Coles and Woolworth groups are well managed. The Woolworths group is led by Grant OBrien. Coles is led by Scotsman Ian McLeod, who is the CEO and has been a very successful leader. He is paid incentives by Coles performance improvement. Due to this improve performance; it has made him the CEO who earns the highest in Australia. Efficient leadership has seen both firms operations running smoothly. The logistics systems of these firms are excellent, and contract of suppliers can be organized efficiently. The goods ordered can be transported in good times so that they can be put on the shelves. The employees are also well managed and have been equipped with the necessary skill to perform their work. Updated technology is also used by the staff which allows faster business transactions. Marketing in both firms is well financed and managed. This is done for each firm to gain more customers (Lyons, 2007, p.166). The Current Position of this Industry Currently, the grocery industry in Australia has seen tremendous growth due to other players entering the industry. This has made the giant players who are Coles and Woolworths engage in stiff competition with each trying to control the market. This has made them increase the quality of goods and services they offer. One of the ways they have done this is by home branding their products. Other upcoming players such as Aldi are taking measures to outdo the two leading players. They have good quality goods which are lowly priced. Currently, the government does not regulate the competition in this industry since it would hinder competition and hence players must find ways to remain in the market (Sohal, 2013, p.437). Conclusion The business operates in a very competitive environment. Business competition comes both the internal and external environment. The understanding of the external environment helps the business to establish the strategies to overcome the obstacles that may be availed by its elements. Similarly, the players of the grocery industry in Australia are faced with the stiff competition which is portrayed by the leading companies in the industry. Therefore, predicting the future of the grocery industry of Australia is not easy. The battle between Woolworths and Coles is a tough one as each tries to outdo the other in the market. Aldi is also fast approaching and the question whether it will eventually come to the top remains. It still not yet certain whether the government will intervene in the future and make the players compete for more. References Booth, S., and Whelan, J., 2014. Hungry for change: the food banking industry in Australia. British Food Journal, 116(9), pp.1392-1404. Broderick, S., Wright, V. and Kristiansen, P., 2011. 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