Comparative Analysis of Retail Market in China and UK for Coles Supermarket

This report compares the retail market of China and UK for Coles Supermarket using PESTLE and SWOT analysis. It concludes that UK is a better market for Coles due to its flexible business environment and growing opportunities in the retail sector.

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Executive Summary
Coles Supermarket, the leading retail chains in Australia wants to expand its market by
establishing new set up in a foreign country such as China or UK. Therefore, this report
puts emphasis on the comparative analysis of the retail market of both the countries
with the help of PESTLE and SWOT analysis tool. In a conclusion, the report rightly
argues in favour of the UK market and provides a justification behind opting for the UK
retail market.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Company brief.............................................................................................................................3
PESTLE analysis.........................................................................................................................4
Political....................................................................................................................................4
Economic.................................................................................................................................4
Social.......................................................................................................................................5
Technological..........................................................................................................................5
Legal........................................................................................................................................6
Environment............................................................................................................................7
SWOT analysis............................................................................................................................7
Recommendation.............................................................................................................................8
Conclusion.......................................................................................................................................8
Reference.......................................................................................................................................10
Appendices....................................................................................................................................13
Appendix 1.................................................................................................................................13
Appendix 2.................................................................................................................................13

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Introduction
Coles Supermarket is one of the largest and most popular retail chains in
Australia. In this context, the organisation recently intends to expand its business in a
foreign market. Therefore, the company chooses China or UK as the target market.
Both these two markets are renowned for their prospect and opportunities in terms of
financial benefits and future sustainability. In this regard, the report aims to initiate a
comparative analysis of the external environment of these two markets in order to get a
clear perception of the better one. The report incorporates the PESTLE analysis for the
macro environment study whereas utilises the SWOT analysis to compare the risk and
opportunities. Based on the understanding, the report will provide a recommendation of
the better market for Coles.
Discussion
Company brief
Coles Supermarket is considered to be one of the largest supermarket retail
chains in Australia. The Company has its headquarter in Melbourne. The Coles
Supermarket opened its first store in the year 1914 by George Coles and now it has 807
stores across Australia (Coles.com.au, 2018). Moreover, the company is succeeded to
generate around AU$33 billion per year. Based on this understanding, it can be argued
that the Coles Supermarket is one of the largest retail chain giant in Australia. For
Coles, trust and quality service are the main concern for its operation in the Australian
market. Moreover, for a better market capitalisation in the Australian market the Coles
Supermarket has initiated a number of sustainability program in the form of selling fresh
and green foods.

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PESTLE analysis
Political
The Chinese government has played a crucial role in order to expand the growth
of the supermarket industry in China. As a matter of fact, the government policy has
been changed in course of time since 1986 and introduces the high growth policy that is
highly beneficial for the Chinese Supermarket industry. Government initiatives like the
Asia-Pacific Economic Co-operation (APEC) and the federal structure of the
government facilitates the process of accomplishing the goals of the government with
the robust growth in the Chinese supermarket sector (Zhang van Doorn & Leeflang,
2014).
On the other hand, after the event of Brexit the UK retail market falls short in
compare to the other European market. The retail sales volume enjoyed a steady
growth in the UK market with a 3.0% increase. In addition to this, high inflation rates are
considered to be a major obstacle for the steady growth of the UK supermarket industry
(Ellickson, 2016). Nevertheless, the UK government claims that they are working on the
stability of the economic ups and downs in the market and assured to make a better
supermarket atmosphere within the 2020.
Economic
In terms of the economic aspect, the Chinese supermarket sector witnesses a
major advantage with the high growth in the market. As per the report of the Khan Deng
& Khan (2016). it can be sated that the Chinese Supermarket sector has been growing
with an annual expansion rate of 5.6% and reached $196.4 billion. Moreover, the
market is highly competitive with a number of both domestic and international
supermarket retail chains. As per the government survey in 2017, it was resulted that
around 91.76% of the enterprises enjoyed an annual sales of 100 million Yuan or
above. Moreover, in 2017 (Chen et al., 2016), the Chinese supermarket sector opened
new stores in a large basis and witnessing rapid expansion that fosters a lucrative
opportunity for the international retail companies to invest more in the market.

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On the contrary, the UK market is popular with its branded products and full of
expert staffs and market analyst who can provide better understanding of the UK retail
sector. The retail sector in the UK has expanded in a rapid pace after the major hit of
Brexit. However, as per the government statistics, the industry witnesses a growth of
2.5% and expected to offshoot up to 5% within the next 2-3 years (Lauritsen & Perks,
2015). With the growth in the economy the retail market in UK also escalates
simultaneously which is a optimistic approach for international supermarket companies.
Social
As far as the customers are concerned, in China there is a huge prospect for the
retail companies due to a population boom. In fact, the Chinese customers have
reached a new level of empowerment with a number of options and alternatives in the
retail market. According to the Wei Chen & Zhang (2017) survey, it can be seen that the
Chinese market has been boosted with an increase of 65% consumption. Moreover, the
global forecast of the expansion of the Chinese retail market can be identified as a
growth rate of 11% from 2016 to 2021 { Zhu, 2018}. Furthermore, the young generation
growth of 69% within 2021 is also provides an impetus for the international retail
companies to look forward to the Chinese supermarket industry.
Besides this, in UK sector the buyers are more prone towards the brand value.
There are 86% of the consumers in UK influenced by the shopping behaviour. In
addition to this, 785 of the customers are like to be influenced by the good services
(Cheshire, Hilber & Kaplanis, 2014). Therefore, trust or the brand image is considered
to be the most important characteristic for the retail industry in UK. In the report of the
McConnochie et al. (2017) the social aspect can be described in the form of customer
perceptions and likelihood. Outside London, tenants are more cautious about the price
tags and they invest less for the high price products.
Technological
Technological advancement is considered to be one of the major aspect on
which the Chinese retail market is based upon. Recently, China becomes the biggest
ecommerce market with an online sales worth of US$ 123.6 billion (Zhu, 2018). The

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percentage of the growth is very impressive in this regard. The Chinese retail sector has
succeeded to expand its business with an annual growth of 35.4% in compare to the US
retail sector growth of only 16.4% (fbicgroup.com, 2018). As a matter of fact the year
2017 is considered to be the cornerstone for the future sustainability incorporating a
number of online and offline channels of distributors. The shift from traditional retail
business to digital retail puts more thrust to the business growth of the Chinese
supermarket sector.
Subsequently, the UK retail market also expands its business rapidly with the
help of technological advancement. As the practice of digital marketing was prevalent in
the UK market from a long time, now the business organisations are tried to introduce a
unique approach by assembling both the online and offline consumers. As a result of
that the retail industry puts more focus on its supply chain management and connected
it with the online distribution of products for getting more outstanding performances and
maximise the consumers (Gain.fas.usda.gov., 2018).
Legal
For doing business in China the multinational companies have to follow prolong
legal process. For an instance, before entering into the Chinese market the company
must demonstrate its products and based on analysis the government will decide
whether gives the company a pass or puts a ban. Moreover, the registration,
certification and licensing requirements in China are very complex task. The new Food
Safety Law in 2009 creates more problems for the multinational retail companies to do
business in the Chinese market (fdi.gov.cn., 2018).). In addition to this, the intellectual
property protection is considered to be another detrimental step for the new
multinational companies in order to enter into the Chinese retail market.
On the other hand, the UK market is more liberal for the multinational companies
to enter and doing business profitably. However, there are some measures that the
retail business organisations have to follow while doing business in UK. The factors are
related to the licensing, trademarks and copyright issues. Moreover, product quality and

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corporate social responsibility factors are also identified as important aspects that the
multinational retail organisations are compelled to follow in UK market (Gov.uk, 2018).
Environment
Environment factors are considered to be an important aspect while doing any
kind of business in China. Due to the growing rate of pollution and the increase in the
population the government is going to take some steps related to the environmental
sustainability of the business companies (fdi.gov.cn., 2018).
On the contrary, in UK there are number of corporate sustainability acts in terms
of food safety and quality of products. In fact, an effective monitoring process is always
practiced in order to put pressure on the retail organisations to follow the government
guidelines (Colliers.com, 2016).
SWOT analysis
Strength Opportunity
China UK China UK
 Rapid growth in
the retail market.
 Intense growth in
the population.
 Incorporation of
advance
technology.
 Strict monitoring
process of the
government.
 Flexible
business
operations.
 Steady growth
in the market.
 Government
endorsement for
multinational
companies.
 Matured
customers
 Promising growth
in near future.
 New government
policies for the
multinational retail
organisations.
 Economic boom
in an emphatic
manner.
 Flexible
environment to
pursue
business.
 Limited
government
intervention.
 High price
policy.
Weakness Threats
China UK China UK
 High taxation
policy.
 Due to the
Brexit event
 Centralised
structure of the
 The UK market
is yet to be

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 Intense
competition in
the market.
 Government
intervention in
every business
aspect.
 Lack of
infrastructure.
there is a
decline in the
market growth.
 High impact of
the fluctuating
consumer
behaviour.
 Intense
Government
regulation on
sustainability.
government.
 Pollution issues.
 Domination of the
local brands.
 Government
endorsement to
the local retail
organisations.
stable.
 High rate of
inflation.
 Diversity in
customers in
town and cities.
 High quality
regulation for
the products.
Recommendation
On the basis of the above discussion, it can be asserted that the Coles
Supermarket should opt for the UK market due to the flexibility in business and the
growing opportunities in the UK retail sector. From the apparent analysis it seems that
the Chinese market is more lucrative and better option for global expansion. However,
in reality, the government intervention is highly frequent in the Chinese market.
Moreover, high taxation and rigorous use of the regulations and legislative proceedings
can perturb the healthy expansion of Coles Supermarket. In addition to this, the
Chinese government encourages the local or domestic companies over the international
organisation. It is a disadvantage for Coles to leverage more opportunities without the
government support. On the contrary, despite of having an intense competition in the
UK market Coles can set up its influence on the market by providing quality product and
services. In fact, the government encouragement would be played as a stimulus for the
expansion of Coles.

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Conclusion
In a conclusion it can be argued that the report rightly depicted a comparative
analysis of the risks and opportunities for Coles Supermarket in order to expand its
market in China or UK. In fact, by using the external environment analysis tool as
PESTLE the report further justified it perfectly that it would be better for Coles to expand
its business in UK rather than China. Therefore, the report is relevant and undoubtedly
contextual.

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Reference
Chen, L., Parcell, J. L., Chen, C., James, H. S., & Xu, D. (2016, May). Consumer
preference for supermarket food sampling in China. In 2016 Annual Meeting, July 31-
August 2, 2016, Boston, Massachusetts (No. 236043). Agricultural and Applied
Economics Association.
Cheshire, P. C., Hilber, C. A., & Kaplanis, I. (2014). Land use regulation and productivity
—land matters: evidence from a UK supermarket chain. Journal of Economic
Geography, 15(1), 43-73.
Coles.com.au. (2018). About Coles. Retrieved from https://www.coles.com.au/about-
coles
Colliers.com. (2016). UK SUPERMARKET INVESTMENT REPORT 2016. Retrieved
from http://www.colliers.com/-/media/files/emea/uk/services/retail/201703-colliers-
msci-uk-supermarket-investment-report.pdf?la=en-gb
Ellickson, P. B. (2016). 15 the evolution of the supermarket industry: from a&P to
Walmart1. Handbook on the Economics of Retailing and Distribution, 368.
fbicgroup.com. (2018). CHINA’S DEPARTMENT STORES REPORT 2017-
2018. CHINA COMMERCE ASSOCIATION FOR GENERAL MERCHANDISE, 1-48.
Retrieved from https://www.fbicgroup.com/sites/default/files/DeptStores2017_Eng.pdf
fdi.gov.cn. (2018). Company Law of the People's Republic of China (Revised in 2013).
Retrieved from http://www.fdi.gov.cn/1800000121_39_4814_0_7.html

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Gain.fas.usda.gov. (2018). United Kingdom Retail Foods 2017. Retrieved from
https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail
%20Foods_London_United%20Kingdom_12-21-2017.pdf
Gov.uk. (2018). Business regulation - GOV.UK. Retrieved from
https://www.gov.uk/government/policies/business-regulation
Khan, J. A., Deng, S., & Khan, M. H. A. (2016). An Empirical Analysis of Inventory
Turnover Performance Within a Local Chinese Supermarket. European Scientific
Journal, ESJ, 12(34).
Lauritsen, B. D., & Perks, K. J. (2015). The influence of interactive, non-interactive,
implicit and explicit CSR communication on young adults’ perception of UK
supermarkets’ corporate brand image and reputation. Corporate Communications: An
International Journal, 20(2), 178-195.
McConnochie, M., Walton, R., Campton, J., Inglis, G., & Omar, S. (2017, June).
Exploring the influence of price promotions on student’s FMCG purchase decision
making. In 5 th International Conference on Contemporary Marketing Issues ICCMI
June 21-23, 2017 Thessaloniki, Greece (p. 183).
Wei, F., Chen, J., & Zhang, L. (2017). Demand shocks, airline pricing, and high-speed
rail substitution: Evidence from the Chinese market. Journal of Transport Economics
and Policy (JTEP), 51(4), 266-289.

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Zhang, S. S., van Doorn, J., & Leeflang, P. S. (2014). Does the importance of value,
brand and relationship equity for customer loyalty differ between Eastern and
Western cultures?. International business review, 23(1), 284-292.
Zhu, L. (2018). The Future Of The Supermarket: Fresh Is King. Retrieved from
https://www.forbes.com/sites/forbesfinancecouncil/2018/02/15/the-future-of-the-
supermarket-fresh-is-king/#5ebb1d216ace

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Appendices
Appendix 1
UK retail market analysis 2016
(Colliers.com. 2016)
Appendix 2
Chinese supermarket 2017

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(fbicgroup.com, 2017)