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Competitive Dynamics

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Competitive Dynamics

Competitive Dynamics 

This is a solution of Competitive Dynamics Assignment   in which we discuss Developing business Competitive  strategy can help your company cope with aging systems and limited resources that can lead to fragmented Business  solutions. 

 

Executive Summary

The report provided focuses on the key aspects of the competitive dynamics of the three companies named Coles, Woolworths and ALDI. It has been found that the companies Woolworths and Coles have been the biggest competitors and the retail industry dominators in Australia. Both of these companies are on the constant practice of outpacing each other and focus on maintaining the momentum of their market dominance. With the entry of the new retail organisation ALDI, they have been finding it difficult to gain a place in the retail industry of the company, and it has been said that Woolworths would continue to outpace these companies due to the high quality of their services and products 

 Introduction

The firms that are operating in the same market and are operating the same kind of products and targeting the same kind of customers are known as competitors. The case study of Australian Supermarkets has been chosen to focus on the understanding of the competitive dynamics, which would allow in forming an opinion on the extent of the rivalry going on among the biggest supermarket chains of the country such as Coles and Woolworths. With the entry of the German, brand ALDI the competition has just increased and both the companies are concerned that they will have to change their marketing strategies for gaining a competitive advantage over ALDI and ensure that they continue to operate as two of the biggest supermarket chains in the country. They have great dominance in the Australian market, and thus, this report will focus on their dynamics with their competitors and the ways they use to improve their marketing strategies.

Australian Supermarkets and Competitive Dynamics

The retailers and the prominent supermarket chains in the country are facing a huge amount of competition. Initially, the competition was mostly between the companies Coles Supermarket chain and Woolworths Group. Both of these companies have managed to gain a competitive advantage on the domestic level and have gained the loyalty of the customers as well. Both of these companies have also managed to ensure their presence in some of the most remote towns to make their products more accessible and increase their customer base on a wider scale (Chen and Miller, 2015). With the entry of the new competitors, it is relevant that the companies would probably have to make some changes to maintain their market dominance and articulate the business in the same manner as usual.

Competition between Coles and Woolworths

Various reports and economists of Australia have suggested that the level of competition between Coles and Woolworths is hindering the retail growth. The competition between them is turning aggressive and has been going on for decades. It is also important to address the fact that the competition between them was also responsible for contributing to the growth of the retail sector of the country. At the same time, with the fierce competition between both the companies Woolworths have been able to gain victory most of the time. Being a part of Wesfarmers the company has made sure that they can operate effectively in the market and incorporate the involvement of multiple brands from around the world. The company sells its products at a cheaper rate and makes sure that the products are accessible to everyone, the reason why they have managed to operate almost 873 stores around different parts of the country. The company even has 527 liquor outlets and 600 co-branded petrol outlets. However, the company incurred a huge amount of losses in 2016 due to the failure of their hardware chain and because of those almost 7000 jobs were lost and the financial losses were more than a billion dollars. The competition scenario between both the companies has been constant and hostile for decades.

At the same time, Coles is also trying their best to maintain a competitive advantage in the market. Coles has been one of the prominent retailers since a long time and is being considered as one of the biggest rivals of Woolworths (Sutton-Brady et al., 2015). The company has however managed to maintain its market dominance and competitive stature by operating around 750 supermarkets, multiple vintage cellars, around 810 liquor outlets and they have 92 hotels. The company generates almost revenue amounting to $62 billion (Business Insider Australia, 2017). The company has been able to witness success over a long period and witness growth in their profit margin every year but the company has not been able to gain a competitive advantage over Woolworths and have been outperformed by the company multiple times. However, when Woolworths was being acquired by Wesfarmers, the number of resources used for funding the changes have declined, and the company has not been able to cope up with the competition occurring in the market. In the current scenario, the investment of Wesfarmers has taken a drastic turn, and because of that, the company has managed to nudge ahead of its key competitors regarding market share (Geyskens, 2018).

A brief overview of the performance of ALDI

Both the companies Coles and Woolworths are the giant competitors in their home, and the competition between them is so intriguing that one does not let the other to go ahead of them. The supply chain management of these markets is very stiff and functioning as well. Both the companies have formed tight schedules for the delivery of the supplies, and the companies have a strict contract regarding fresh fruits and vegetables. To ensure that ALDI can perform better in the already existing competitive environment, it is important that they can acquire the attention of the customers and make them purchase their products.

In the currents scenario, ALDI is trying to gain some market share in Australia and is looking forward to enticing potential employees with the bait of multiple workplace benefits. As Coles and Woolworths provide a substantial amount of employee benefits, so the company can ensure gaining the profitable amount of market share in the country. Both the companies are trying to maintain their competitive advantage in the market, and ALDI is trying to earn a competitive place in the industry. One of the biggest aspects of the operations of both the companies is that they make it difficult for the smaller stores with slightest of a higher price tag (SmartCompany, 2015). Being some of the trusted brands of the country for more than a decade there is a possibility that people might still prefer to avail products from Coles or Woolworths and there is a chance that ALDI might not even be able to gain enough customers with lower prices.

Present Competitive Dynamics

In the current scenario, it has been assumed by the performance of all the three companies that Woolworths will continue to outpace them regarding growth, development, skills of the employees, innovation and even makes sure that they can operate their stores in different parts of the country. The company also ensures its operations in places where it is easier for the people to access the products (You and Barry, 2016). Multiple business analysts have forecasted that Woolworths will continue to outgrow its rivals and in the recent situation when the company has been able to introduce so much of newness with the opening of their flagship store in Marrickville metro in NSW have live bakery and the option of plucking the customer’s choice of fresh herbs from the store. The company is a threat to multiple large and small-scale stores in the country. With the expansion rate of the company, ALDI has decided that they would aim to introduce 32 stores in every state of Australia in the upcoming years. However, in the same condition, Coles has been lowering the costs of their products constantly and still have not been able to generate enough sales like that of Woolworths.

It was being identified that the company has been able to gain enough competitive dominance in the market also because of conducting some unethical practices. The competitive nature between the companies has been identified to be hostile, but there is a possibility that all of them have been conducting unethical practices to gain competitive dominance in the market. All the companies, however, are dropping comments on how the others have been busy conducting unethical practices for gaining market dominance but none of them has been able to compete to the level of Woolworths (NewsComAu, 2018). In the recent case, ALDI has accused both the supermarket chains of using their shopping lease agreements to control their tenancies by demanding a huge amount of reduction in a rental if a competitor is being provided with access. ALDI has also accused that their flexibility of opening shops has also been restricted due to the lease agreements of the company. It is not just the company that has been affected, but many small-scale ventures have also been affected by the operations of the company (Egan, 2008). One of the unethical practices of Woolworths comprises of acquiring land after a long fight with Mullumbimby in NSW and the family ultimately had to give up the land to the company and later conducted a survey identifying that most of the population of the area were against the decision.

Value of Products/Services

It is of prime importance to the company to understand the value of the products to their customers. Understanding the needs and requirements of the customers would allow the company to identify the different components of their businesses that the people find admirable. All of the products of the three different companies have their value. The products and services of Woolworths are of great value, and it can be said that the company has been gaining momentum in the market due to their innovative stature and live bakery at the same time. The company has also provided the customers with the option of booking a cake for themselves, mostly customised. One of the biggest advantages of the company is that they generate most of their raw materials from the Australian producers, thus, contributing to boosting the economy of the country. Since the Australian food sector is highly competitive, and the other companies have not been able to maintain the equal amount of market dominance as Woolworths.

Some of the primary reasons why the company has been able to gain market dominance are because of the following:

·         High standards of food safety

·         The stores of close to home

·         The stores are tidy and organised

·         The trading hours are properly scheduled and organised

·         The prices are convenient, and the quality of the products are good as well

·         The company generates the fresh fruits and vegetables from the farmers

·         Sustainable practices

The above factors indicate that there are enough reasons for the company to gain popularity among the customers. However, the other companies such as ALDI and Coles have not been able to gain much market dominance as Woolworths. It has been found that 12% of the country’s fruits and vegetables are being sold at Woolworths. The company abides by the voluntary code of conduct in for maintaining a sustainable relationship with the suppliers.

Conclusion

 

The report presented above provides with the idea of competition that might occur in multiple industries and among various companies. The report cited the importance of understanding the difference between competitive dynamics and competitive rivalry. The three companies that are a part of a bigger competition in the Australian retail industry is because all of them provide discounted offers at their products and services and made sure that the competitive dominance is being maintained by Coles and Woolworths. The competition between the two companies has been going on for decades, and ALDI has not yet been able to be a part of the competition due to their limited expansion of stores and operations across Australia. Due to the competition already existing between Coles and Woolworths, the marketing strategies of ALDI has turned out to be ineffective. The company Woolworths has been able to gain an advantage in the market due to the value of their products and services that generated a substantial amount of customer attention.

List of References

Business Insider Australia. (2017). Hot competition is back in Australian supermarkets. [online] Available at: https://www.businessinsider.com.au/hot-competition-is-back-in-australian-supermarkets-2017-10 [Accessed 17 Sep. 2018].

Chen, M.J. and Miller, D., 2015. Reconceptualizing competitive dynamics: A multidimensional framework. Strategic Management Journal36(5), pp.758-775.

Egan, C. (2008). Aldi slams competitors. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/national/aldi-slams-competitors-20080629-gdsk1n.html [Accessed 17 Sep. 2018].

Geyskens, I., 2018. 18. Retailer power in the grocery industry. Handbook of Research on Retailing, p.399.

NewsComAu. (2018). Why Woolies is beating Coles, Aldi. [online] Available at: https://www.news.com.au/finance/business/retail/why-woolworths-is-beating-coles-and-aldi-in-australias-ongoing-supermarket-war/news-story/7c0e1ea754035499f71e6364b465345e [Accessed 17 Sep. 2018].

SmartCompany. (2015). Coles and Woolies: super heroes or bad guys? - SmartCompany. [online] Available at: https://www.smartcompany.com.au/finance/economy/coles-and-woolworths-super-heroes-or-bad-guys/ [Accessed 17 Sep. 2018].

Sutton-Brady, C., Kamvounias, P. and Taylor, T., 2015. A model of supplier–retailer power asymmetry in the Australian retail industry. Industrial marketing management51, pp.122-130.

You, K. and Barry, M., 2016. Intra-industry competition among employer associations: a case study of the retail sector. Labour & Industry: a journal of the social and economic relations of work26(2), pp.120-137.

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