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Coles & Woolies play offence and defence

Reports today in The Australian Financial Review and The Australian newspapers suggest Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) the owner of Coles, are moving to set up a dispute resolution body in co-operation with the Australian Food and Grocery Council.

The defensive move is aimed at stopping the Federal Government from imposing a mandatory code of conduct on the powerful supermarket chains after claims of excessive market power being made by both food manufacturers and the Australian Competition and Consumer Commission (ACCC). Coles and Woolies are hoping if they implement a voluntary code that this will appease the government, industry and ACCC.

While the supermarket giants have been busy defending themselves from further regulation they have also gone on the offence to request that the GST is imposed on online imported goods under $1,000. Wesfarmers and Woolworths have joined forces with Harvey Norman (ASX: HVN) and in conjunction with the Australian National Retailers Association, are launching a campaign to encourage the government to lower the threshold for GST-exempt imports.

Foolish takeaway

Management teams must always juggle a number of interest groups. First and foremost, a board and management team must act in the interests of its owners – the shareholders. Often shareholders’ long-term best interests are served by having content customers and this requires a delicate balancing act between giving customers what they want so that they are happy and keep coming back, with the need to maximise profits for owners.

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Motley Fool contributor Tim McArthur has no financial interest in any company mentioned in this article.

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