Developing Competitive Strategies for Coles: An Australian Market Case

This case study analyzes Coles' competitive strategies in the Australian retail market, focusing on challenges posed by new retailers and the need for differentiation. It examines Coles' internal and external environments, including government regulations, technological advancements, and consumer behavior. The report identifies core competencies such as an efficient supply chain and brand reputation. It discusses corporate strategies, including cost leadership and differentiation, and uses the BCG matrix to assess Coles' market position. Recommendations include adopting activity-based budgeting and TQM, embracing technological advancements, and adapting to changing consumer preferences. Desklib offers similar resources for students seeking academic assistance.

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Executive Summary
With the increase in the number of organisations in the retail sector, their exist a cutthroat
competition. The purpose of the report is to compile with corporate strategies of Coles to
become a retail market leader and differentiate its product in the market. The purpose is to
address the case study of Coles suffering from such as identification of value added factors
that determine product prices. To stand apart from the competitors in such a way that Coles
become a retail leader in the Australian retail sector.

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Contents
ecutive SummaryEx .................................................................................................................................2
ntroductionI .............................................................................................................................................4
ntroduction of the companyI ...................................................................................................................4
nternal and e ternal analysisI x ................................................................................................................5
Corporate strategies..............................................................................................................................6
Recommendation....................................................................................................................................9
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11

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Introduction
Coles is one of the most renowned supermarket retailer in Australia. This report is based on
case study of Coles. The case study reveals what type of challenges Coles face due to entry of
new retailers. The report brings out a glimpse of the strategic analysis of Coles just to identify
what type of corporate strategy Coles should adopt to achieve an image of retail leader in the
Australia’s retail industry. The BCG matrix and growth metric is used to identify the best-
suited corporate strategy (Grant, 2016). In the end, the report is concluded with
recommendation for Coles. The business strategy can be achieved mainly through two factors
either through cost leadership or differentiation strategy whereas the decision of corporate
strategies depend on the internal and external environmental analyses. The corporate strategy
is formed to sort and resolve the company`s weakness or threats to attain long-term
sustainable success (Deloitte, 2012).
Introduction of the company
Coles has been developed as one of the pioneering retailer in the retail sector of Australia
(Coles annual report, 2016). It is renowned for its fresh food providing and efficient
groceries, general merchandise, liquor and fuel, and financial services. The company operates
more than 21 million customer transactions in a week throughout the national store network
(Coles annual report, 2016). In addition to this, the company has a network of 865 liquor
stores, 787 supermarkets, 89 hotels, and 690 convenience outlets in the nation. It has more
than 140000 retail stores in Australia that contribute to approx. 4.1% to GDP Coles (annual
report, 2016). The retail industry of Australia employs more than 10.7% out of the total
employment. Apart from retail sector, the company operates in finance service market, car
life, credit cards, offering homes, and landlord insurance (Coles, 2015).

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Internal and external analysis
Before forming the business strategies, Coles has to undertake a strategic management
analysis that includes external and internal analysis of Coles. Although Coles operate in
Australian, retail industry but is still affected by the external and internal environmental
factors. Under the external analysis of Coles, increasingly there are no government control
above the duopoly among Coles and Woolworth (Tan, 2012). The ACCC (Australian
competition and consumer commission) has introduced several policy changes promoting
competition in the industry. These legislative changes lead to include tax and regulatory
environment to consider the factors while formulating strategies (Fels, 2015). The
technological advancement in last 10 years use the smart system to improve the efficiency of
the operation and check their progress. The financial crisis of 2008 still has a little effect on
purchasing power of the consumers. The flexible goods are more affected due to allowed
private label based on lower price while generating huge profit margin. Some provisions of
private label by Coles enables the company to compete in the supermarkets due to its choice
of the customers (Meyers, 2010).
The internal analysis helps to identify Cole’s competencies. Undoubtedly, the Cole
supermarket combines the capabilities, which has retained unique and sustainable position to
build core competencies of the organisation (Epstein, 2018). These core competencies
develop strategic values to the organisation and ensure the maintenance of advantage over the
competitors. The internal analysis highlights and evaluates the ability of supermarket to
deploy the resources. It includes SWOT analysis and VROI analysis. Some of Cole’s core
competencies are highly effective supply chain, effective top management, brand reputation,
suitable advantage, and effective top management (Mortimer, and Grimmer, 2018). Efficient
supply chain of Coles has both resources and capability in its inbound and outbound logistics

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of supply chain. The competent top management directs the Coles by current changing
economic conditions and constantly achieving high growth (Coles annual report, 2016).
Corporate strategies
Corporate strategy is the path through which an organisation takes the objective to achieve
business success in a sustainable manner. Recent approaches and models have focused on the
need to manage the change according to the business environment (Epstein, 2018). The
company forms the strategy to offer value to the customers by lowering their price in the
weekly shopping baskets that improves the quality by delivering fresh goods. The values
promotes the strategy by driving the behaviour to build and maintain long-term relationships
with the suppliers and other stakeholders. The company strikes such strategies that they could
provide with the best shopping experience for their customers. Corporate strategies contribute
to create long-term sustainable value for the business (Epstein, 2018). Coles strives
continuously to improve the way of operating and running the store smoothly to look whether
the team members are available to serve the customers (Rugman, and Verbeke, 2017).
As per the recommended case study, Coles has been facing challenges by the Metcash brans
since many years. Moreover, recently the entry of low cost German brand Aldi is serious
challenge faced by Coles. The rise of Aldi in early 2016 was big challenges faced by Coles.
Before a decade, when Coles was outperformed by Woolworths (Coles annual report, 2016).
It lead to changes when acquired by Wesfarmers because it was having huge resources to
throw at the retail sector. This corporate strategy of conglomerating with Wesfarmers. This
collaborating lead to provide funds to the Coles to improve and makes changes. Competition
between Woolworths and Coles remains hostile. Although, there is less strategic difference
between Coles and Woolworths especially in relation to moves and prices (Fels, 2015). Both
Coles and Woolworths strive to establish the stores in a populated area. The supply chain of
both the rivals is very well established. Another aspect of operations is constraint to

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alternative market share because it becomes very difficult for small retail players to operate if
the prices of its goods are higher (Sarma, 2014).
The core corporate strategies that Coles have adopted includes the integration of
differentiation strategy cost leadership. Coles gets the advantage of its brand reputation to
differentiate and improve the supply chain to achieve minimisation of cost of the products.
Cost leadership strategy ensures that it offers real value to customers at lowest cost possible
without hampering the quality of goods. Low cost strategy make sure that by producing
products that have few superfluities usually demonstrates superior quality with limited
selection (Thiel, 2012).
The integration of cost leadership and product differentiation strategy will lead to ensure that
product possess from good to excellent product feature. The generic integration of strategy
ensures that Cole supermarket will invent and coin new actions, which will offer value to
customers (Sarma, 2014).
The corporate-level strategy of Cole supermarket is to emerge as a market leader in
Australian retail sector. Wesfarmers is trying to focus the strategies which would help in
diversifying the portfolio of value added services and new products (Haskova, 2015).
Wesfarmers portfolio management focuses on finding and identifying the investment
opportunities in value added services. Moreover, It`s strategies focus on diversifying its
portfolio of products across various industries (Biddle, 2016).
Corporate strategy focuses on strengthening the existing industries and identifying the growth
opportunities and sustain them until the successful business operations are conducted.
Although there are several tools, through which the strategic position of the company can be
analysed such as Growth Share Matrix, Business position matrix, PIMS (profit impact of
Market strategy), BCG (Boston Consulting Group) matrix, Product portfolio Analysis, GE9

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cell matrix and Hofer`s product Market evolution matrix. However, most commonly used
strategic tool used to analyse corporate strategy is BCG matrix (Jarzabkowski, and Kaplan,
2015). BCG is a framework, which is most appropriate to analyse the strategic position of
Coles brand portfolio. Currently, the company has substantial market share, which indicates
that company utilises, spends more cash, and subsequently receives substantial returns
(Rolbina, 2016).
Cost leadership is achieved by economies of scale that the company applied during the
production. The growth rate of market share is comparatively small in 2011 where the retail
and grocery industry grew by less than 2%. To analyse the market share, a matrix known as
growth share matrix is used to evaluate the relevant market share of Coles (Mortimer and
Grimmer, 2018). The relative market share matrix has tried to differentiate the company`s
situation and what decision should they adopt to get success. Star includes such situation
where company is at its high growth. At the same time, it is the market leader and requires
cash to invest. Question marks is the situation where company competes in high-growth
industry but have weak market. The resources can be invested in them to improve their
competitive positions. These companies operate with high market share in slow growing
industries. These companies have limited long run growth industry and represent a source of
current cash flows to fund the investments in star and question marks. These companies have
weak market share in low growing industries. Many analyses recommend that they should be
divested. The matrix is as follows-
RELATIVE MARKET SHARE
High Cash generation Low
STARS
Earning are low but stable and growing. The
cash flow is neutral. The strategy invest in
QUESTION MARKS
Earing are low, unstable, and growing. The
cash flow is negative. The strategy is to invest

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growth. to diverse the portfolio of brands or if has
potential otherwise sell.
CASH COWS
Earnings are high and stable. The cash flow
is high and stable. At this stage, the strategy
can be to invest in either maintaining the
current level or harvest.
DOGS
Earnings are low and unstable. The cash flow
can neutral or negative. The strategy is not to
invest more and divest.
Coles belongs to Cash Cow category. The company should maintain its investment and
growth opportunities in the current position in the market. Coles earns a good sum of money.
Moreover, Coles earning is stable. The flow of cash is high and stable (Coles annual report,
2016).
Recommendation
Until now, many supermarkets have been using tradition budget costing method that do not
give true reflection of inflation in the cost structure of a product. Coles should adopt Activity-
based Budgeting method to improve the cost structure of similar product group and at the
same time, the company should follow TQM (Total Quality Management) philosophy to
maintain its quality of goods. The combination of both the techniques can be recommended
to the company to achieve greater place in the market. Moreover, the company should grab
the technological advancement in order to achieve strategic goals. As the Retail stores has
been increasing in the Australian market. The entry of Amazon Australia is the biggest threat
to Australian retail sector (Hatch, 2018).
Retail stores should promote and embrace social media and online retail store to expand its
accessibility and grow the business. Although, Australian potential industry primarily include
retail sector in its list. Majority of Australian GDP is contributed by this sector. However,

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resistance to change still characters Australian business (Phillipov, 2016). The retail sector of
Australia has delegated the advantage of online platform to overseas retail organisation to
attract the foreign investment. Moreover, Coles does not embrace changes fast as per the
changing demand and preferences of consumers towards organic and healthy food products
(Herrera, 2015).
Conclusion
From the above discussion, it can be summed up that the case study clearly asks to develop a
corporate strategy that focuses to help Coles to stand first in all the competitors. This is the
case of competitive rivalry and to attain the competent position, two most important factors
should be considered such as cost leadership and differentiation strategy. Coles and
Woolworth dominates the market but since 2016, the market has seen huge changes due to
entry of Aldi and Amazon Australia (Hatch, 2018). The competitive rivalries has shaken the
image of Coles and Woolworth. Low cost product differentiation and cost leadership has
been constantly backing each other. As a part of recommendation, Coles should take better
advantage of online platform.

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