Question 1

OPINION

'Down Down' and 'Cheap Cheap' are gone gone: Coles, Woolworths moving away from 'supermarket price wars'

The Conversation By Gary Mortimer and Louise

Grimmer Updated Wed 7 Mar 2018, 7:26pm

On January 26, 2011, Coles fired the first shot in what would soon be dubbed the "supermarket price wars" by reducing the price of its ownbrand milk to A$1 per litre. Woolworths fired back, triggering seven years of intense price competition.

But now Coles has waved the white flag, indicating a move away from pricebased marketing, to a focus on other attributes, such as sustainability, local produce and community.

Research shows if price is the main selling point, shopper loyalty decreases and customers become more conscious of price. Price wars are also costly for retailers.

While operational costs (wages, rent, bills) remain fixed or go up, prices can't keep coming down. You eventually run out of margin.

Coles' recent halfyearly results reflect this, with a drop in earnings of 14.1 per cent from $920 million to $790 million.

In contrast, Woolworths announced an 11.1 per cent increase in earnings for their supermarket business. But Woolworths dropped their "cheap, cheap" pricecutting campaign nearly two years ago.

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Other retailers also get caught in the cross fire of price cutting. Case in point is Aussie Farmers Direct, which fell into administration this week saying they were: "no longer able to compete against the domination of the major two supermarkets."

While it may be overly simplistic to blame the two big supermarkets for the downfall of Aussie Farmers Direct, price conscious consumers and thin grocery margins certainly contributed.

How this strategy came about

Supermarkets are now looking beyond price to stand out.

Both Coles and Woolworths are very similar in the brands they offer, prices, layouts, weekly specials and online channels. The move away from price gets shoppers thinking about what is unique to each chain.

So, rather than price, the focus has shifted to service quality, social programs and connecting with the community.

Shoppers who are continually exposed to loyalty program logos, may eventually stop noticing these logos, or "switch off". This is because of a behavioural tendency called "habituation".

What these new strategies are trying to sell

So, if Coles are no longer selling themselves on price, what are they selling?

Coles' new approach is more subtle, selling themselves through aspirational stories and employing classic advertising techniques to do it.

These techniques are used in advertising to convey positive feelings and emotions associated with a particular experience. A simple way to achieve this in advertising is to feature people telling their own stories as seen in the new Coles advert launched this week.

With the Commonwealth Games near, both supermarkets are also featuring sports stars in their marketing. Woolworths' new campaign features athletes and their connection with fresh food, positioning the company, once again, as "Australia's Fresh Food People".

Meanwhile, Coles have partnered with Uncle Toby's for their Sports for Schools campaign. Their advertisements feature an array of young, fit, attractive and successful athletes linking the athletic success with the purchase of products from Coles.

By moving away from price and focusing on a storytelling strategy, both supermarkets can engage consumers with a process called "internalisation". This is where people accept the endorser's position on an issue as their own.

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Internalisation is a powerful psychological mechanism because even if the source used in the campaign is forgotten, the internalised attitude usually remains. Price doesn't create this effect.

While food prices won't necessarily go up anytime soon, consumers shouldn't expect to see any further significant price drops. Instead, Coles and Woolworths will draw attention to other important attributes.

Faced with the expansion of Aldi across South Australia and Western Australia and the entry of German supermarket Kaufland, Coles has recognised they can't keep fighting a battle on price alone.

Source: http://www.abc.net.au/news/20180307/whysupermarketsaremovingaway fromprice/9524110

Required:

1. (a)EvaluatethecompetitivepositionofColesusingPorter'sfiveforcesmodel.Foreach force, explain their competitive position in detail, using relevant examples where possible, and identify the 'level' of the threat/power as low, medium or high.
2. (b)Using Porter's strategic typology, identify and briefly explain the strategy that Coles is currently pursuing in the Australian market.
3. (c)Coles has decided to implement a balanced scorecard as a way to refresh their approach to performance management. Briefly explain to the Management Committee why careful change management in adopting and implementing the balanced scorecard is an important issue. In addition, also briefly explain why a pilot study might be used prior to fullimplementation of the balanced scorecard.
4. (Total = 25 + 5 + 12 = 42 marks)

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Question 2

1. (a)Describehowpublicsectororganisationsdifferfromnotforprofitorganisationsand provide one example of each type of organisation.
2. (b)In creating public value through the provision of services or goods, public sector organisations, such as Monash Children's Hospital, strive to achieve 'Value for money' within their operations. Describe how value for money can be assessed in this environment and provide examples using Monash Children's hospital, where relevant.
3. (c)Identify and briefly explain four reasons why performance might be measured in public sector organisations.

Question 3

Each question below is independent of one another.

(Total = 10 + 10 + 8 = 28 marks)

1. (a)Describetheprincipleofrevenuemanagementanditsrelevancetotheservice industry. Provide a detailed example of a real service organisation that could use revenue management to their advantage.
2. (b)In risk management, describe and provide an example of the processes of risk identification and risk assessment.
3. (c)Briefly explain intrinsic motivation and the value of having employees who are intrinsically motivated.
4. (Total = 14 + 10 + 6 = 30 marks)