Strategic Management of German Hypermarket-Samples for Students

Question: Discuss about the Strategic Management of German Hypermarket. Answer: Introduction: The report gives an overview of a company named Kaufland opening its stores in Australia. Kaufland is a giant hypermarket chain that entered the retail market of Australia. An analysis done based on the market size and trends followed by Kaufland in Australia. The report also puts forward the companys financial and corporate performance in the Australian market. There is also discussion on the available strategic options for the company in the Australian market. The report also mentions a final recommended strategy for the company along with its implementation. There is also a discussion on the monitoring and control of its future performance in Australia. Market Size and Trends in Australia: Market Size Kaufland, part of Schwartz Group from Germany entered Australias fiercely competitive grocery market and plans to launch its first store on the fringes of Adelaide. Schwartz also owns a discount chain named Lidl and has been targeting a foothold in the $ 90 billion plus supermarket sector of Australia (Armstrong et al., 2014). The new operation in Adelaide would be one of its flagship and inaugural store. With Kaufland, shopper in Australia can have a vast and a completely new experience. This is because the company plans to introduce stores in warehouse styles spread out over an area of 20,000 square meters, something unique compared to the traditional Woolworths and Cole stores that were less than fifth of its size. Thus, Kaufland plans to bring in a new retail experience to its customers by introducing close to about 60, 000 products that included various known brands. The Kaufland stores will also include white goods and groceries. With Kaufland, customers will thus have a destin ation shopping experience ("Kaufland Immer eine Idee frischer! 2017). Key Trends The grocery market in Australia has become more competitive than ever. The present scenario is that two of the largest retailers of the Asia Pacific are battling in terms of online discount, market leadership, the rapid growth of the wholesale channels and the entry of the new contenders in the market (Davey Richards, 2013). There are however five key trends that can shape the market and influence the strategy of the retailer. These are as follows: Woolworths Regaining Its Position: By 2017, Woolworths expected to continue with its progress on the AU$1 billion restructure that might not only outpace the growth of its rival Coles but also prove to be challenging for Kaufland. . Offering Fresh Battle Grounds: The major Australian retailers not only maintain long-term relationship with the suppliers of its fresh food but at the same time tries to strengthen their policies of sourcing (Ward et al., 2012). The retailers also focus on in store execution of all fresh items with stock availability, attractive displays and freshness of the product and staff skills. Kaufland should try to follow such trend in order to gain a foothold in the Australian market. Focus on the Market Entrants: In the recent year, although the density of supermarket is quite high in Australia, still gaps exist in the markets providing a chance for new entrants. This gap is fulfilled by Amazon and as well as Kaufland. Amazon plans to enter the market with either fresh products or physical stores. Moreover, Amazon also focuses on customer service with its prime loyalty program. Kaufland therefore can face a tough competition from Amazon. Intensification of the Online Capability: The market entry of Amazon has forced other retailers including Coles and Woolworths in focusing more attention on the improvement of their online capabilities (Nothhaft, 2016). Kaufland being a part of the retail industry must also focus on its online capabilities for keeping pace with the market. In addition, the retailer should also focus on customer flexibility and service. Convenience is Reality: Melbourne has focused on store innovation with the introduction of new style formats. Stores are increasingly tailoring the ranges for delivering better quality of food for now and the food for later options (Munro Andrade, 2015). There has also been innovation for delivering exciting and new options for keeping the offers different and fresh from the competitors. Thus, Kaufland must take up this trend to be at par with other competitors. Financial and Corporate Performance in Australia: Corporate Performance Kaufland, part of German giant Schwarz Group aims to capture the Australian retail industry with stores that are five to six times larger than the Woolworths and Coles. The Kaufland store is a combination of large supermarket along with generalized merchandize retail (Cohen et al., 2012). The store follows Aldis path for entering Australias supermarket business. Therefore, the giant supermarket store made an investment for setting up a store in Adelaide whose ideal size estimated to be within15000 to 20000 square meters along with car parking facilities of 200 to 300 vehicles. The stores also plan to stock around 60000 product lines. Financial Performance The grocery industry in Australia is quite concentrated. The increase in the level of concentration has taken place over many years with major supermarket chain, Woolsworths and Coles having successfully grown their market share and sales (Shi and Yu, 2013). The major change in the grocery market of Australia brought about by the entrance of the international retailer Aldi in the year 2001. Aldi offered a completely new supermarket experience to its customers by being tough discounter (Metzger, 2014). Australia also had another international retailer in the form of Costco in the year 2009. This retailer presently owns eight warehouses and brings to its customers a completely new supermarket experience in the form of hypermarket. In addition to Aldi and Costo, Kaufland also aims to make its presence felt in Australia. Therefore, the retailer must realize that the grocery industry is gradually evolving in the Australia and hence these international retailers must compete with the major Australian Supermarket to gain a foothold. Kaufland should also note that Coles and Woolworths, the major supermarket chain in Australia are comparatively smaller operations (Bailey, 2017). To capture the Australian market Kaufland should also understand the aggressive pricing promotions of Coles and Woolsworths which the two supermarket chain have undertaken for defending their shares and sales Figure: Financial Performance of Retailing in Australia Source: (Vlachos, 2014) However, Schwarz Unternehmenstreuhand KG mentioned in the above figure owns Kaufland and Wesfarmers own Coles. Strategic Options in Australia The retail giant Kaufland enters the Australian supermarket arena with a strategic $25 million acquisition. The German retailer has thus snapped the sprawling site of Le Cornu located on the Anzac highway in Adelaide for a price of $25 million for building the first Australian supermarket (Price, Bailey Pyman, 2014). The 3.6-hectare site chosen by Kaufland on the southwest corner fringe of Adelaide had initially been a furniture showroom and warehouse marked for disposal after the death of Lance Le Cornu, the patriarch of the Cornu family. Kaufland, a part of the giant Schwarz Group of German is the largest retailer of the world with over 1200 stores in Europe. The stores of Kaufland are five to six times bigger than the size of the Woolworths or Coles store and they put forward a combination of larger supermarket with retail merchandize, stocking up to 60,000 product lines (Voigt, Buliga Michl, 2017). The store built in Adelaide would cover an area between 15000 to 2000 square meters with car parking options for around 300 vehicles. Final Recommended Strategy The Australian retail industry has undergone a bigger change with the rise of e-commerce. The internet access along with the adoption of Smart phone has forced various small and large retailers to include online options for complementing their existing channels. However, the reality lies in the fact that consumers do not entirely devote themselves to one channel. Not only do they appreciate the experience of shopping at a store but at the same time they also find convenience when goods gets delivered at door step with just few clicks. Thus, recommendations put forward for the retailers in the creation of Omni channel Strategy. Implementation of Final Strategy Retailers like Kaufland can implement the Omni Channel Strategy by the following means: Ensuring a 360-degree Customer Experience: The expectation of the customers from its retailers is increasing on a day-to-day basis. The look of the website, the product layout, shipping options, product packaging and customer experience affects the customer experience (Piotrowicz Cuthbertson, 2014). There must be categorization of the products so that customers initiate search based on brand, lifestyle or department. Treating the Online Customers Similar to the Customers in Store: While implementing its Omni Channel Strategy retailers must make sure that they receive the same benefits online as they did while making a purchase in the bricks and mortar location (Bell, Gallino Moreno, 2014). Kaufland should also make sure that the return of the items bought online should be easy as done in the stores. Monitoring and Control of Future Performance There are five essential metrics for monitoring and control of the future performance of retail industry. These are as follows (Condea, Thiesse Fleisch, 2012): Accessing the Customer Traffic: Keeping track of the number of customers represents the straightforward metric for the retail business. Thus, the number of potential customers visiting a store determines the amount of revenue generated. Accessing the Retail Conversion Rate: There is a necessity for distinguishing between the retail customers and visitors. This is because there are some visitors who do not buy anything. Keeping a Track of the Average Sale: Getting more people to the store where everyone is making a purchase it becomes important in calculating the average value of the orders. Taking into Account the Size of an Average-Shopping Cart: In a brick and mortar outlet of a supermarket chain, each sold item helps in estimating the generated revenue. Therefore, determination of the size of the average shopping cart is important. Considering the Sales Profit over Cost: Considering the difference between the revenue and the cost before the consideration of other costs is important. This helps in determining the cost of acquiring or producing the product that is being sold. Conclusion The report ends with a discussion on the monitoring and control on the future performance of the hypermarket store in Australia. The report also discusses about the strategic options of Kaufland in Australia. 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