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ECO600 Pricing and Non-Pricing Strategy Used by Coles and Aldi Supermarket Assessment Answer

Title: A Sample Report  

by… (first name, last name)

Word count: words

(Word limit only from 1. Introduction to end of 5. Conclusion. Aim for 2,500 words, max. 3,000 words; line spacing 1.15; font type: Calibri or Arial; font size 12; for table and figure, font size 10; ICMS cover sheet on the front.)

Abstract [200 words, all in one paragraph, no numbering needed for this section]

This report investigates… (state what you are investigating; state companies you are investigating). The key findings are… (what did you find out about each of the three key issues – market structure and competitive strategies, growth strategies used by the businesses, and the pricing and non-pricing strategies?). Business X could compete better if… (what are your key recommendations or advice for one of the two companies you selected?)

Introduction [200-300 words]

This investigation concerns… (what is this report about: what are the goals of this report? What are the companies you are investigating? Briefly give the readers some background information about these companies in a few sentences).

The research was carried out by… (methodology: site visit (primary research), where did you go, when, what information did you collect, how? What did you find from the Internet, journal database, books/magazines you’ve read (secondary research)?).

Section 2 provides an overview of… (state what you whole report covers: briefly say what Section 2, 3, 4, and conclusion will contain or what you will address in each – this paragraph is like a map for the reader of your report’s structure, so they get mental picture of how it is laid out).

Market structure and competitive strategies in… (what industry did you examine? What competitive strategies are used generally in it or by the two companies you selected?) [roughly 700 words— you can have more if you have good ideas but manage your total word count]

This industry is a booming industry in Australia/NSW/Sydney/Manly (Jinping, 2017), and consists of… (analyse the market structure briefly in Australia, then zoom into the market structure in the specific area you investigated. Give the reader an overview/a picture of the industry and how competitive it is – is it monopolistic competition or highly competitive or oligopolistic etc. and why you think so. You may cite news or magazine articles or use your observations from your site visit to support your view; assess who are the established players; whether there are new competitors who’ve entered the industry or plan to enter it; how difficult it is to enter this industry; what are the barriers to entry etc.). The barriers to entry are not serious; companies such as X and Y have easily entered this industry two years ago (ABC News, 2016). The market share of Y in particular has grown rapidly between last year and this year (Figure 1).

 Y’s market share

Figure 1: How Y’s market share (in light green) have grown between and (Beyonce, 2018).

Where these businesses are competing (which area did you investigate? Manly? CBD?), there are ten… (how many businesses like it— competitors— are there? How intense is the competition? Maybe you can judge by the number of people going to these shops? In your informed opinion/judgement, what is the market share for each of those competing businesses in the area? Then, using those numbers, calculate and report the Herfindahl- Hirschman Index – how concentrated is it? Evaluate). The Herfindahl-Hirshman-Index is… which means… .

How the businesses are currently competing

The two businesses are competing with each other primarily by (what kind of competitive strategies are being used? Contrast and analyse. What are the interesting things you see in the competitive strategies used?). If we look at the differentiation strategy used by Company Y, it is very different to X’s: they are using… whereas X is using… . The implications of this is that Company Y is likely to get more of the wealthier customers from… (and so on).

Proposals for improving the competitiveness of the business

What X could do to get a competitive advantage over Y in selling the A line of product is to… (use the competitive strategy framework in your readings labelled ‘application’, and any other competitive strategy framework or approaches you learn about on the Internet or from books, to develop realistic competitive strategies for the company you’ve chosen. Be critical and broad-thinking. So you might have proposed an idea. Can you think of ways this strategy might fail or consider whether there might be a weakness in it?).

Growth strategies [roughly 500 words— you can have more if you have good ideas but manage your total word count]

What the two businesses have done/or are doing so far to grow/expand

Business X and Y have grown/are trying to grow their businesses by… (state the growth strategies these businesses might be using – use Week 6’s reading material on growth strategies as your framework (plus see the lecture slides); e.g., organic growth, new product development, product differentiation or diffusion etc.; horizontal growth, in what way… franchising, mergers etc.; any evidence of vertical growth? Any diversification of the business? Evaluate: have they concentrated on their core competencies or have branched out from these significantly, for example like has the ice cream company you investigated started to sell cakes?).

Proposals for growing the business

Business X has a lot of scope for capturing greater market share because… . It could grow its business by… (propose, based on your investigation and informed opinion, how your chosen business – one of the two businesses you are examining – could expand its business and increase its customers to earn more revenue. Be creative and specific. Use, for example, the 6N framework from your reading material. Justify your answer. Identify any issues this strategy might involve, e.g., might cost a lot of money, can the business scale easily or not, might the rivals retaliate by cutting prices or doing something else etc.)

Pricing and non-price strategies [roughly 700 words— you can have more if you have good ideas but manage your total word count]

Pricing strategies of Business X and Y are largely similar but different in one way

Although the non-pricing strategies are wildly different (to be touched on later), the pricing strategies of Business X and Y are largely similar (with only one difference). They are trying to compete on promotions, product features etc. rather than on price. This makes sense because the profit margin in this industry is already quite thin (Beyonce, 2018, p. 10). Table 1 summarises their pricing strategies:

Table 1: A comparison of Business X and Y’s pricing for their most popular products, and the associated pricing strategies used.

Product
Price and strategy Business X
Price and strategy Business Y
Purple jellybeans (Identical products)
$1/kg
$0.99/kg (psychological pricing)
Striped jellybeans
$5/kg
(anchor pricing: “used to be $10/kg”)

$4.99/kg



Business X focuses on anchor pricing for products such as… . The prices are similar to that in Y, but… . A possible reason that X has done that in contrast to Y is because… . Brown et al. (2018) have shown that this is what businesses like this do in the USA. But in my opinion, this is not going to help X get an advantage over Y. This is because their prices are in the end very similar and purple jellybeans are also frequently sold at Y (personal communication, store manager). A quick survey of other similar shops in town reveal that…However… (and so on.)

Proposal on pricing strategies

Business X could benefit by changing its pricing strategy for Product A to… while keeping prices for… This is because, if Business X does this, Business X will be able to… . However, Business X should be careful about implementing this pricing strategy: Business Y could retaliate by… .

So what Business X could do is employ penetration pricing for purple jellybeans but maintain similar prices to Y for other jellybeans. This is because… (and so on. In this subsection, propose possible pricing and non-price strategies your chosen business could implement. Be creative and specific. Justify your proposals).

Non-price strategies used by Business X and Y are very different

The most prominent non-pricing strategies used by both businesses are… . This is not a surprise. If we consider similar businesses in other parts of the world (BBC News, 2018; Bieber, 2017; Trump, 2018), they all adopt the same approach. However, there are some businesses in some industries/countries that choose not to use it (Beyonce, 2018).

Business Y uses two non-price strategies that Business X is not using. It is using… . The reason why Business Y might be using them but not Business X is… .

Business X uses a menu that has far fewer choices of products than Y. This might make it easy for customers to make a pick according to the paradox of choice (e.g., The Economist, 2010). But Y, although offering more products, has designed its menu in a way that makes it easy for customers to choose (Figure 2)


minimal-offerings and ‘palette-style’ menus for the branches of Business Xminimal-offerings and ‘palette-style’ menus for the branches of Business Y

Figure 2: The minimal-offerings and ‘palette-style’ menus for the branches of Business X and Y in Manly (photos, my own).

From this, it can be observed that… (analyse and elaborate.)

Another strategy used by both X and Y which is commonly seen in this industry is… (and so on.)

Proposal on non-pricing strategies

Subtle ways for Business X to compete in terms of non-price strategies is for it to use… in combination with… . This would be better because… . This has proven successful in other industries (Market Analytics, 2018, p. 55)…

Second, X could… (and so on).

Conclusion [200-300 words]

It is clear that this industry is not an easy one to enter because… . Business X and Y are the only ones operating in Manly because… . They both compete on a low-cost strategy, but we saw how Business X could use… . It was found that Business X and Y are very similar in terms of pricing strategies but were very different when it came to non-price strategy. It was argued that their current growth strategies would be ineffectual because… . We saw that the key move that Business X could make to grow and capture a greater market share is… . However, the future is uncertain: a few new shops around the corner are opening and might pose a danger to both Business X and Y’s viability. This analysis could be extended in the future to include how newer business might drive X and Y out of business in the future with their trendy new style of products.

Answer

Pricing and Non-Pricing strategy used by Coles and Aldi supermarket 

Both business organization Coles and Aldi supermarket organization are focusing on the market penetration and diversification growth strategy in market respectively. However, Coles has focused on using the strategic alliance with other organizations in market as its non-pricing strategy to strengthen its business and attract more clients. Both companies have developed core competitive advantage in the business filed to compete with rivals by focusing on strengthen the product quality and customization of the offered products and services as per the client’s need in market. However, non-pricing strategy of both companies are focused to improve its product features, integrating the advance technologies in its product promotions and improving the packaging of its offered products. Coles has developed product differentiation strategy by focusing on customizing its offered services as per the clients. It was necessary as the profit margin in the market was too thin and company had to keep this strategy to create competency and attract more clients. 

Table 1: Comparison of pricing strategy of Coles and Aldi Supermarket

ProductPrice and strategy of  Coles  (Per Unit)Price and strategy of Aldi Supermarket (Per Unit)
Apple $4.9$4.49
Coke per Litre$ 1.43$ 1.43
Milk Per Litre$2.20$ 2.33
Orange cordial Per Litre$2.67$ 2.29


It is analysed that Coles Company has focused on the cost leadership pricing strategy in which it offers all of its products at least price to compete with the rivals in market. However, all the prices set for the products apple, coke, milk and orange cordial are similar to the Aldi supermarket but these have been kept low or equal to the pricing set by the Aldi Company.  It has focused on the selling all of its products in its retail store at least price to attract more clients and also diversifying its business with more products sales range.  This pricing strategy helps Coles to take advantage over the other rivals in market as it becomes easy for the Coles to grab more clients. But in my opinion, the cost leadership pricing strategy followed by Coles should be good if it continues with it irrespective of compromising with the quality of the offered products and services in market. 

 Milk in Coles

Source https://finance.nine.com.au/business-news/coles-milk-price-woolworths-increase-support-dairy-farmers/0f8c3f06-11e2-431f-871c-1a7e9cd7a330

The quantity of the Milk in Coles is way too high as most of the clients purchases milk from its store due to the least pricing. A quick survey of the other similar shops in towns has also divulged that the pricing of the Coles is low in market and it is offering its products at least cost irrespective of comprising with quality. Nonetheless, Aldi supermarket has faced tough completion from the Coles but it focused on strengthen the packaging and product quality to compete with Coles and other supermarket retail shops (Sutton-Brady, Taylor, & Kamvounias, 2017).

4.1 Proposal on pricing strategy 

Coles could benefit its business by changing its pricing strategy for apple product. It should lower down its apple product pricing to $ 4.40 – $ 4.50. This product sell would be increased by average 20% if company lower down its pricing on this product. Nonetheless, Coles needs to be more aware about the pricing strategy of Aldi Supermarket as it may retaliate by lower down its existing apple price in market.  Nonetheless, selling apple at BEP point will be beneficial for the company if they buy other products in which Coles has core competency in its cost leadership strategy (Knox, 2015).

So Coles could lower down the pricing of its apple products and also follow product features and integrating online technologies in its promotional strategy to attract more clients in market. Milk and Coke could be used for the non-pricing strategy of business promotion. For instance, selling combo package and offering extra offer after certain limit of purchase (Keith, 2012).

selling combo milk package

Source: - https://pressfrom.info/au/news/australia/-107656-minister-urges-coles-and-aldi-boycott-as-1-a-litre-milk-stays-on-sale.html


4.2 Non-price strategies used by Coles and Aldi Supermarket

The most prominent non-pricing strategy used by the Coles and Aldi supermarket are selling combo package and offering extra offer after certain limit of purchase. However, it is not surprise that both companies follow the same strategy. If we consider similar business in other industry then the same set of strategy would be found in their segments as well. Nonetheless, carter, is not followed as non-pricing strategy considering it ill-legal in the business world (Flannigan, 2010).

However, there are two main prominent strategy followed by the Coles in its non-pricing strategy different than Aldi such as strengthen the research and development department to customize its products and services as per the clients and discover newly advance better functions in its inbound and outbound activities.  The main reason of using these two strategy by the Coles is based on its vision to increase its business reach to more clients and increasing the market share.

 Aldi Supermarket Company

Source:-https://www.whistleout.com.au/MobilePhones/Guides/coles-vs-woolworths-best-phone-plans


Aldi Supermarket Company has focused on using the LED screen for the updated price of its offered products for the clients. It helps clients to identify the latest updated price of the offered products in its stores. Nonetheless, Coles is more focusing on delivering the information of its products through its developed app to its clients. 

4.3 Proposal on non-pricing strategy 

The main non-pricing strategy for the Coles to compete with its rivals in market would be developing its new app for its members. In this app, all the clients will get latest update regarding the offers, discount and extra benefits on their purchase.  This is the better idea as it has been proven non-pricing strategy in other industries such as Airline, Educational and transportation industry (Mortimer, 2016).

In addition to this, Coles Company could also upgrade its loyalty card approach to attract more clients. It will also help it to identify the problems faced by clients and resolve them in timely manner (Trevena, Neal,  Dunford., & Wu, 2014).

Conclusion 

After assessing all the available details and pricing strategy, it could be inferred that in context with the pricing strategy, Coles is dominating the market with its cost leadership style and in context with the non-pricing strategy, Aldi Supermarket is performing good. Therefore, it could be inferred that both organizations are doing their great and strengthen their market share with their different strategic planning and business process. 

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