Strategic Management At Woolworth And Cole

Section1 For some decades now, Woolworth and Cole have remained to be the dominant players within Australian Supermarket with a joint market share of 80 percent. Their dominance is however under threat from the fast rising Aldi Supermarket. Despite this threat, the major competition in the industry has been between Cole and Woolworth. The competition between the two supermarkets has remained stiff and hostile. However, there is little difference in their strategic moves. Whenever one supermarket makes a certain strategic move, the other copy and follow suit. For example, after some years of being outperformed by Cole, Woolworth adopted the ‘fresh food People’ strategy which helped it to dominate the market for some time before Cole Copied the strategy. More recently, Cole launched a marketing Campaign dubbed “down, down Price down” which was intended to bring the price of its products down. This saw Woolworth run a similar campaign dubbed “Cheap Cheap” which had similar intention to that of Cole. In other word, neither of the supermarket can afford to let the other goes ahead. Both Cole and Woolworth also understand the threat new entrants pose to them. As such their operation has been characterized by constriction. Whenever there is a big supermarket in nearby, Cole or Woolworth do all they can to make it difficult for them to operate Section2 There are several strategic management issues evident as Woolworths has several strategic problems during the competing process with other stakeholders in the vital industry. Woolworths and Coles are both major supermarket chains in Australia. They dominate the Australian supermarket industry with around 80 per cent of the market share. Coles is part of Wesfarmers, which is a highly successful conglomerate. Woolworths is also far more than just a supermarket chain; it owns 873 supermarkets and over 1000 licensed outlets in Australia. Generally, with two giant players in the same market, neither can afford to let the other get ahead which has resulted in fierce competition for many years. An example of a strategy issue is part of “playing catch up” or the “copy cat” strategy. As Woolworths is behind, they must draw even with Coles before they can pull ahead. They will always be copying new and innovative ideas and programs that Coles releases, rather than paving the way for new ideas and setting the trends. Woolworths “fresh food people” strategy worked pretty well and it dominated the market after a while in 1980s in the circumstance which Woolworths was lagging Coles, Coles copied exactly the same strategy. At another point of time, Coles had a successful “down down, prices are down”marketing campaign, Woolworths ran a campaign based on “ cheap, cheap” as well. Coles and Woolworths are both lack of innovation, coping each others strategy. Another issue in particular is Woolworths’ Master’s hardware chain which was forced to close down after a 6 year venture into the home improvement industry; which brought upon a projected $1 Billion loss. With expansion, always comes cost. Woolworths were caught out by wage increases and the included costs of introducing a new store, with the aims to develop it into an industry leader to combat Wesfarmers’ Bunnings. Bunnings already had a firm grasp and a large share of the market, and prying away at the metaphorical cake, would take serious planning, research, time and money. Woolworths sought enter the home improvement industry and essentially tap into a “new” market. With the implementation of Masters, they aimed to expand far too quickly. The expectations they set were far too high, and the aim for such rapid growth to combat industry giant Bunnings, was the downfall and eventual fall of the 6-year project. With financial factors, the economy, with wage increases and overall costs of opening not just one store, but a chain of stores whilst managing them, was far too great and seemed no longer viable under the current strategies. So much so, that it was more appropriate to take a Billion dollar loss rather than doubling down and going in for the long haul. Poor decisions on product range, unfavourable store locations and a disappointing store roll out strategy were also key factors which led to the collapse of Master’s. What was envisioned to help propel Woolworths in the industry leader race, eventuated to be an anchor. This project demanded focus, focus away from their already underperforming supermarket division. With Coles and ALDI chipping away at their market share. For the purpose of taking over more market share, Woolworths now is trying to add more working hours to the system and reduce prices so customers get better services. Especially, Woolworths are staying open late and killing a traditional advantage of small players in the industry. It is also extending hours used for stocking shelves so goods on the shelves are more readily available. Woolworths also strive to open stores in all areas of Australia, even in anti-big-business markets. For example, Woolworths offered to buy a local brand store in Byron bay. They already had a store but could not keep up with demand. The offer was refused until six years later. The community sought a formal town referendum to decide whether the store should be acquired. Over half the residences there were supportive of the small business. Woolworths then went to the state government which overruled the local council and the supermarket construed. The Australian supermarket industry is complicated now and has huge potential for change, the strategy of Woolworth is radical which is unhealthy for the whole industry. Its cutthroat price competition and “copy cat” strategy with competitor like Coles is major obstacle for long-term development. In addition, Woolworths were trying to fit into new markets as more as possible which aren’t the potential market, in other words, its current strategy seems a trend towards the development of monopoly industry. Section 3 In this case study had pointed out the issue of the competition between Australian supermarkets, especially Coles and Woolworths. IGA had faced different challenge on the system, compared by the price, marketing power or the supplier control that are weaker than Coles and Woolworths. Moreover, Aldi as a new competitor in the market since 2001, they have some specific selling strategy for customer, for example they are limited the range of high quality product and limited choice for guest. Those four main Australian supermarkets have different market strategy to make great market share and well customer loyalty. In this section will use Porter’s Five Force and Value Chain to analysis the market environment in the Australian supermarket. Macro environmental factors can affect the operation and decision-making in the industry (Worthington, & Britton, 2015). Using Porter’s Five Forces to analysis the macro environment factors can be making better decision for companies future development (Michaux, Cadiat, &Probert, 2015). Porter Five Forces model can investigate the current situation in the Australian supermarket industry and consider with different factors to affect the performances of the supermarket. With the Bargaining Power of Buyers, the demands of potential customers are relatively high in the retail industry. When the supermarket produces low than other, then the customer may bargain for higher quality product. Thus, they have ability to control prices down and affect the quantity of buyers. To analysis the Power of Suppliers in the supermarket industry can determinate how the supplier drive the price of the products. If there are limited of the supplier for supermarket, then the power of supplier is increase. The Threats of New Entry, which the new entrants develop into the market, also can influence the power of company. If the new supermarket cost less of time and money enter to market that may affect or weaken the current supermarket’s position. Rivalry among Existing Firms is to observe the ability and threat from other company and focus on how many competitors in the supermarket industry. If there are lager number of competitors with similar quality of product that it decide the power of the supermarket. The Threat of Substitutes can used to place of the supermarket's products or service by the competitors substitutions, it may cause to threat for the company. For instant, if customers are rely on one of supermarket before, after they find another better of supermarket to replace it. Thus, the power and position of the origin supermarket can be weakened. Internal environment analysis is important for supermarket. The manager can identify the strengths and weaknesses of the supermarket to making good strategic decisions (Analoui, &Karami, 2003). The internal environment analysis is look at the supermarket’s current vision, mission, strategic objectives and strategies. Also, the aspects of operations is reviewed are marketing strategy, production capacity. Those of elements are examined in vetted way that to find out any problem occur. Value Chain analysis is another important analysis tool for supermarket identify the internal performance conditions (Saxena, 2010). Moreover, value chain demonstrates about the essential and activities that permits an association in supporting its operations. The primary activities mainly imply the Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales and Customer Service. For Inbound Logistics, supermarkets are concerned the receiving, storing of the products and their distribution to manufacturing as they are required. For the Operation is the processes of transform the input products into finished products and services for customer. In the Outbound Logistics, there are involve the collection, store and distribution the product from warehouse to customer. For Marketing and Sales that determinate the customer needs and using different way to promote the brand of supermarket. For example, use advertisement or promotion sale. For the Service, which provide the quality after sale service for customer. Such as, change policy or refund. Conclusion As explained above, it can be concluded that the major challenges faced by Woolworth at the moment include stiff competition from Coles (Rivalry among industry players) as well as the threat from the fast rising supermarket Aldi( threat of new entrant). To address these challenges and take the top spot in the Australia supermarkets industry, Woolworth need to stop employing the ‘copycat’ strategies that has characterized the competition in the industry. This “copycat” Strategy is doing more harm than good to the supermarket. Instead, Woolworth should employ the focus strategy. The supermarket should stop copying the diversification strategy used by its main competitor i.e. Cole. It should focus on continuously building a value proposition around fresh food. This focus strategy has a number of advantages. First, it helps a company develop it tremendous expertise on the good or services they offer (Ketchen, 2016). By adapting to the focus strategy, Woolworth would be in a better position to develop tremendous expertise around fresh food and this may lead to more innovation as far as fresh food is concerned. Secondly, the strategy, help a firm understand the dynamic of the market and unique need of customers within the market. As result, the company is able to offer well-specified products for the market. This unsure customers needs are uniquely met and this goes a long way in developing customer loyalty. The strategy does however have one disadvantage, once the market is fully served; there is no option for further growth (Ketchen, 2017). The second Option available to Woolworth is differentiation. Currently due to the ‘Copy cat’ strategy employed by both Cole and Woolworth, there are little differences in their offering. Woolworth needs to break from this trend if it was to claim the top position within the industry. Another option to do so is by pursuing differentiation strategy. Instead of copying Cole, Woolworth need to differentiate itself from the rest by paying more attention to Customer experience through improved services, enhance it brand as fresh food retailer, offer fantastic range of products and fair/affordable prices. This strategy has several advantages; first, successful differentiation allows the company to charge even higher prices leading to higher profit margins. Secondly, effective differentiation creates customer loyalty which helps stabilize company earning (Saint-Leger, 2017). The major disadvantage with strategies is that competitors can easily company each other (Saint-Leger, 2017). Given that Cole and Woolworth have a history of copying each other strategic moves, it is likely that after successfully pursuing this strategy, Cole would follow suit.