Hi6006 Competitive Strategy Of Coles Assessment Answers

Answer:

Introduction

The factor of the competitive rivalry has a great impact in determining the ability of a firm to operate profitably. Besides, competitive pressures may manifest themselves in different ways in the market such as advertising wars, competition based on price and new products. The rivalry may tighten when an enterprise identifies an opportunity to grow its market or feels pushed by a competitor (Omsa, Abdullah & Jamali, 2017, p. 10). Such is the case of Woolworths, Coles, and Aldi. For many years, Woolworths and Coles have led the Australian retail business. Although there has been stiff competition between them, they were seriously challenged by the entry of Aldi into the Australian market. As at 2017, Aldi’s market share was 90 billion Dollars, and this has continued to grow, creating fears that it may dominate the Australian market, thanks to its low-cost strategy. However, Woolworths and Coles have clear corporate structures and a pool of loyal customers in Australia which may give Aldi a difficult time dominating the market.

External Analysis: General Environment for Groceries

Political-legal

Fortunately, there are no government laws in Australia controlling duopoly as at the moment (Keith, 2012, p. 48). Although MGA (Master grocers Australia) has been calling for the change in competition laws to abolish duopoly, the government has made no attempts to execute such changes. Consequently, this has given an opportunity for Coles and Woolworths to own 80 percent of the Australian market. The two companies also benefit from close competition, active interaction, simplicity and competition in pricing.

Demographic

The Australian population is majorly clustered along the coastline. Moreover, in each of the country’s states over 50 percent of the population and some cases up to 80 percent live in urban areas, this provides a large customer base for the two companies (Keith, 2012, p. 50). Also, the income inequality in Australia is very high with 90 percent of Australians earning very high incomes and only ten percent earning poor incomes. Therefore a majority of the population has a stable purchasing power. Coles and Woolworths may use this as an opportunity to continue increasing their sales.

Economic

The economic conditions in Australia are relatively favorable. There has been a continuous decrease in the rates of unemployment throughout the country for the past ten years (Keith, 2012, p. 52). This impacts positively on consumer spending, which may give Coles and Woolworths an opportunity to increase their sales levels. The rate of inflation has also declined during the past two years, making it easy for consumers to spend more because of high purchasing powers.

Technology

A study conducted by Addis (2016, p. 6) uncovered that as of April 2011, more than 62 percent of Australian consumers purchased products online because of convenience and affordability. Technology has been on the increase in Australia with many businesses selling their products through online shopping portals and social media pages. This is an opportunity that must be taken by the two companies to remain competitive.

Global

Coles and Woolworths have an opportunity to source their products globally. Such will help in reducing costs, enabling access to new technology and accessing superior products. It will also help them to focus on their core activities and mobilize more capital for investment.

Conclusion

Coles and Woolworths have great opportunities to increase their sales revenues in Australia. Australia has favorable economic conditions, low unemployment levels, and a large population of rich people and competition laws that permit a duopoly. Therefore, with the robust market and online shopping, Coles and Woolworths have no significant threats to their ability to operate profitably.

References

Addis, J., 2016. Retail sector wrap: One Opportunity and Plenty of Worries. Equity, 30(3), p.6.

Keith, S., 2012. Coles, Woolworths and the Local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, pp.47-81.

Omsa, S., Abdullah, I.H. and Jamali, H., 2017. Five Competitive Forces Model and the Implementation of Porter’s Generic Strategies to Gain Firm Performances. Pp. 10-16