Impact of External Environment on Coles: Strategies to Resolve Challenges

This report analyses the impact of external factors like government regulations, consumer behaviour, competition, public opinion, etc. on Coles Supermarkets Australia Pty Ltd. and suggests appropriate frameworks like cost leadership and diversification to resolve challenges faced by the organization.

Running Head: Business Environment
Coles
usiness nvironmentB E

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Table of Contents
Introduction......................................................................................................................................2
Effect of external environment on Coles.........................................................................................2
Government Regulations and economic conditions.....................................................................2
Consumer Behaviour....................................................................................................................2
Competitions and their strategies.................................................................................................3
Public Opinion.............................................................................................................................3
Application of appropriate frameworks to resolve challenges........................................................4
Cost Leadership............................................................................................................................4
Diversification..............................................................................................................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

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Introduction
Coles Supermarkets Australia Pty Ltd. mainly functions as Coles and it is an Australian
supermarket, consumer service and retail chain. The company is headquartered in Melbourne,
Australia. It is a subsidiary company of Wesfarmers which is engaged in several other industries
and their retail unit is functioned under the name of Coles Supermarkets. The company was
founded in 1914 and today, it stands in the top retailers of Australia. It is one of the behemoth
players of Australian retail industry and its primary competitor is Woolworths and both of them
has formed duopoly market conditions in the Australia as they both have acquired approximately
80% market share of the whole Australian retail industry. Although, market share of Woolworths
is approximately twice the market share of Coles but still, Coles is considered as the strong
player in comparison to other supermarkets such as Aldi, Sainsbury, etc. (Brunswicker &
Vanhaverbeke, 2015).
Effect of external environment on Coles
Coles’ functions in a highly competitive business environment and the major reason behind high
competition are large number of supermarkets in the industry and diversified customers’
requirements. In order to gain competitive edge over each other, every organization is heading
towards innovation, creativity and advance approaches for the objective of building appropriate
brand image in the target market. There are numerous other external factors which have direct
impact over organizational performance. These factors are government regulations, consumer
behaviour, taste and preference of consumers, competitive conditions in the market, competitors’
strategy and public opinion. Impact of these factors could be mitigated with the help of strategies
like Ansoff matrix, cost leadership pricing strategy, and with various other options which will be
adopted on the basis of issues faced by the organization (Fraj, Matute & Melero, 2015).
Government Regulations and economic conditions
Although, political conditions in Australia are stable and the country have appropriate strategies
favourable for retailers. Australian government does not impose regulations overnight, thus,
retailers could easily design their policies and strategies considering regulations of the

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government with the objective of smoothening organizational performance (De Medeiros,
Ribeiro & Cortimiglia, 2014).
Economy of Australia is large mixed-market economy with GDP of AUD 1.69 trillion by the end
of 2017. Australia is considered as the second-wealthiest nation after Switzerland and in terms of
GDP, Australia is the 14th largest national economy. Thus, individual disposable income of
Aussies is sufficient enough through which organizations could easily approach to the larger area
of the target market (Saunila, Pekkola & Ukko, 2014).
Consumer Behaviour
Consumer behaviour towards the retail industry is not constant and it keeps on changing rapidly
as per their requirements and wants. With regards to this, it is necessary for the organizations to
make their product and service offering as per their target customers’ demands. Consumer
behaviour is analysed by analysing the purchasing history of consumers, trend followed by
customers and interest shown by them towards the different product categories. Impact of
consumer behaviour over Coles Supermarket is very high because their functionalities are linked
with the consumers, thus, Coles have adopted customer oriented approaches with the objective of
fulfilling their target customers’ needs in terms of attainment of their desired goals and
objectives. Apart from this, customers always seeks for variety and choices and Coles always
tries to update their product and service offerings with the objective of providing choices to the
customers. This is necessary in terms of enhancing customer satisfaction along with retaining
customers’ interest in the organization, thus, consideration of consumer behaviour is very
necessary (Shamir & Howell, 2018).
Competitions and their strategies
Competitive conditions in the retail industry in Australia are very intense due to large number of
retailers. Major players in retail industry are Woolworths, Tesco, Walmart, Amazon, eBay, Aldi,
etc. With regards to this, every retailer tries to update their products and services on regular basis
with the objective of differentiating its image from its competitors. Along with introducing new
products and services for attracting customers, these companies also adopt other measures such
as cost leadership strategy, components of Ansoff Matrix for business expansion, and other
relevant strategies for standing apart from the competitors (Kim, Lee, Chun & Benbasat, 2014).

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Although, Coles have developed its separate image in the competitive business environment and
it has acquired leading position in the retail industry in Australia and formed duopoly type of
market conditions along with the Woolworths. Thus, it is required for the organization to retain
its acquired position in the global market through adopting unique strategies along with adopting
approaches in relation with enhancing organizational performance by delivering appropriate
products and services as per the target customers’ demands and wants (Tseng & Lee, 2014).
Public Opinion
Companies directly or indirectly deals with the customers and it is necessary for the
organizations to analyse the importance of public opinion towards their company and their
functionalities as this factor has huge impact over organizational success and growth. With
regards to this, organizations invests in making effective CSR strategies through which
functionalities could be driven along with the fulfilment of demands of factors such as economic,
environmental and social (Harper, 2015).
Apart from this, it is necessary for the organizations to develop public relations which focus on
customer engagement along with retaining customers’ interest with the organization. This is
necessary for the organization with the objective of attaining sustainable growth and overall
development in the dynamic business environment (Armstrong & Taylor, 2014).
All these external factors have huge impact over organizational performance, success as well as
on the growth. With the objective of enhancing organizational performance, it is necessary for
the organizations to determine relevant issues and challenges faced by them in order to originate
appropriate strategies to mitigate the impact of those challenges and issues. Apart from this,
organizations could also move towards innovation, creativity and adaptation of latest
technologies in relevance with meeting with the challenges in an appropriate manner. Major
issues and challenges faced by Coles Supermarket in relevance with the external factors are
competition, changing consumers’ demands and wants, matching up with the competitors’
strategies and retaining customers’ interest in the organization as there are numerous options are
available with the customers and their switching cost is also very low (Sutton-Brady,
Kamvounias& Taylor, 2015).

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Application of appropriate frameworks to resolve challenges
Various options are available for different challenges in order to enhance organizational
performance. In order to adopt one or more than one frameworks for resolving challenges faced
by the organization, it is necessary to determine the type and severity of challenges whose direct
impact is over organizational performance.
Cost Leadership
This framework will be adopted by Coles Supermarket to beat the competition and to gain
leading position in the retail market of Australia. Although, Coles is one of the largest retailers in
Australian retail industry, still, it faces competition from the leader of retail industry i.e.
Woolworths and from other supermarkets such as Aldi, Sainsbury, Tesco, etc. With the help of
cost leadership strategy, organization would be able to decrease its cost of production by
minimising waste and by eliminating other unnecessary costs. This will direct create impact over
the cost of production and ultimately, the final prices of the product will also be reduced. Thus,
Coles would easily be able to target other customer segments along with attaining competitive
advantage. Larger will be the target audience, higher will be the demand for the products which
will result in enhancing revenues, and profitability of the organization. Market share of the
organization also increases with the increased demand, profitability and revenues by decreasing
the prices of the products. This strategy is capable enough to resolve challenges like competition,
retaining acquired position in the market along with building brand loyalty amongst the target
audience (Price, Bailey & Pyman, 2014).
Diversification
This framework is essential for the organization to expand the business in other markets with
new products and services. Coles is present in Australian market and the retail market of
Australia is saturated due to large number of retailers in the industry. With regards to this, it is
necessary for the organization to expand its business in new markets by introducing new
products and services in order to enhance its market share in the global market along with the
objective of enhancing demand of their products and services, revenues and profitability. This
framework is effective enough to resolve the challenges and issues faced by the organization in
terms of competition, changing customers’ needs and wants, expansion in the domestic as well as
in international markets, etc. (Tuckey, et. al., 2017).

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Conclusion
From the aforesaid information, it can be concluded that impact of external factors over firms’
growth and success is very high; thus, it is required for the organization to regularly update their
product and service offering in terms of target audience’s demands and wants. This report has
concluded the impact of external factors like competitors, their strategies, public opinion for the
organization, government regulations, consumer behaviour, etc. Apart from this, report has
concluded the application of appropriate frameworks to deal with the challenges and issues faced
by the organization. Cost leadership and diversification strategy has been discussed in relevance
with matching up with the latest customer and market trends along with fulfilling their demands
in order to build positive image of the organization amongst the target market.

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