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HI5003 The Market Structure Of Coles And Woolworths Assessment Answer

    Group Assessment Details and Submission Guidelines
    Trimester
    T2 2020
    Unit Code
    HI5003
    Unit Title
    Economics for Business
    Purpose of the assessment (with ULO Mapping)

    1. Students are required to work in groups of 4 members to choose an industry/Sector of their choice. While working in a specific group, students are required to apply their knowledge learned in the course unit to write an industry/sector report (Learning Outcomes 1, 2, 3, 5)


    2. Also, students may choose to work as individual. In this regard, contact the Unit Coordinator specifying that you are working on your Group Assignment as INDIVIDUAL and not group.

    3. Finally, students should form their respective groups in the BB as INDIVIDUAL or GROUP of: 2 members or 3 members or 4 members maximum.


    Assignment Specifications

    Purpose:

    This assignment aims to enhance students’ research and analytical ability through the application of their

    economics knowledge learned in the course unit to compose a company report.

    The recommended assignment structure for final submission is as follows:

    Note*: The structure content is not limited to the items listed above. Creativity for a better report structure is a key requirement.

    Detailed requirements of the assignment

    You are a group of advisors to the Management Board in your company with Headquarters in Australia. As advisors you are first, required to conduct research on your selected sector/industry covering the previous 5-10 years. Second, you are required to present a company strategy to your Management Board covering the next 5 years. Third, your Management Board requires that you make a presentation of your findings and strategies, and you prepare a 2,500 word market report. The market report should, as a minimum, address the following key issues:

    1. A description of your company and the industry of your company
    2. An analysis of the market structure of the industry
    3. A discussion about the demand and supply conditions for your product(s) or service(s).
    4. A discussion about the demand elasticity for your product(s) or service(s)
    5. An analysis of a recent event that has (or is likely to have) substantial impacts on your industry/sector.

    Note: if your company has many products and/or services, you can select a representative product/service to discuss for points (2); (3); (4); and (5).

    This report should provide useful information for your company’s Management Board. It should use a variety of resources, including the textbook, newspapers, industry reports, the ABS website, and other sources.

    Furthermore, your report should include headings and sub-headings. It needs to be properly referenced using the Harvard style and at least 5 references.

    Answer

    THE MARKET STRUCTURE OF THE COMPANY 

    Australian Supermarket Industry

    As discussed above, Coles group operates in the supermarket industry of Australia. According to the draft report by the Australian treasury 2018, more than 80% of the supermarket sector revenue is generated by four big groups (AC, 2018). 

    Major Players

    Coles and Woolworths are the two biggest groups in the supermarket sector holding over 65% of the market share (AC, 2018). The huge market share by the two giants significantly impacts the retail sector with their practices (Keith, 2012).

    Coles and Woolworths are established players in the Australian supermarket industry. ALDI, a budget-friendly option entered Australian supermarket space in 2001 and since then has grown tremendously. Its impact has been felt in Australian supermarket already by changing the pricing through availability of low-cost products. In order to differentiate their own products, Coles and Woolworths have now started focusing on better experience, both in-store and online. Technology as well as marketing and promotional strategies is being applied to capture as much market share as possible. Hence, the market is characterized by fierce competition and ever changing business models.

    Market Share

    According to IBIS (2018), the market share of Australian supermarkets and grocery stores was as follows:

    Company
    		Share
    Woolworths
    		37.5%
    Coles Group
    		29.6%
    ALDI
    		9.9%
    Metcash (IGA)
    		7.3%
    Other
    		15.7%
    TOTAL
    		100%

    This can be presented graphically as follows (IBIS, 2018): the market share of Australian supermarkets and grocery stores

    From the above, it can be seen that large chunks of market share are concentrated with a few market players such as, Woolworths, Coles Group and ALDI, which together constitute more than 75% of the market.

    Economic Market Structure

    All of the above data indicates that the Australian supermarket industry is characterized by presence of few large players that dominate the market. There is fierce competition in the market and high spend on promotion and marketing so as to capture maximum market share.

    This is one of the main characteristics of an oligopoly market structure. The main features of an oligopolistic market structure are (Perloff, 2008):

    1. Few Large Sellers: An oligopoly market is dominated by a few large sellers where decisions of one firm directly impact the decisions of the other firm, particularly those related to prices. This is true in the subject case where there are top 4 players practically capturing more than 75% of the market share.
    2. Marketing and Promotions: An oligopoly will have firms advertising frequently and will normally have a large budget reserved for the marketing and promotional activities as it helps to capture more consumers. This is also true in case of Australian Supermarket industry where the top three players engage in frequent advertising warfare.
    3. Fierce Competition: Oligopoly market will reflect a tendency to collude in order to reduce market competition and players will be very competitive. The current players are also fiercely competitive so as to capture the Australian market share. 
    4. Interdependence: An oligopoly has few large players such that a price cut by one player will have a significant direct impact on the other players. There is a high degree of interdependence in the firms such that there is a kinked demand curve where prices are sticky.  

    Future Outlook

    According to IBIS (2018), the supermarket industry of Australia continues to be fiercely competitive with the current players looking at minimizing the costs and streamlining the process so as to attract maximum consumers and capture maximum possible market share. The report predicts that this will continue for coming years as well. Additionally, some of the new players are expected to enter the Australian supermarket industry in nearby future which will bring more challenges for the dominant players.

    Some of the expected new players are Costco (American) which is expected to start with Perth, Kaufland (German) which is expected to start its journey with Adelaide and David Jones (South African) which will begin with a gourmet food store in Melbourne.

    The industry will face further pressure, especially the brick and mortar stores as online stores become even more popular due to convenience and price competitiveness. This is particularly true of smaller stand-alone stores whose market share is declining steadily as the large, multinational corporations capture the market.

    However, as the Australians value quality over price, the specialty food retailing within the market remains lucrative. This can be an opportunity for the players in the market by providing healthy and quality alternatives to the consumers.

    Tags:hi5003coles and woolworthsmarketing management
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