Strategic Management Analysis of Coles: A Business Report

This report provides a comprehensive analysis of Coles, a leading Australian supermarket chain. It begins with an executive summary outlining the assignment's purpose: to analyze Coles' strategic management decisions, particularly in response to rising competition, including Aldi's market entry. The report then delves into the macro-environmental analysis using PEST analysis, examining political, economic, societal, and technological factors influencing Coles' operations. An industry analysis follows, assessing the retail industry's life cycle stage and applying Porter's five forces to understand the competitive dynamics. The company analysis explores Coles' resources, capabilities, and core competencies, particularly its supply chain management. A competitor analysis highlights the market share and competitive strategies of Coles' main rivals, Woolworths and Aldi. The report concludes with an overview of Coles' strategic decisions and recommendations for maintaining its market position in the face of increasing competition.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
Name of the University
Author’s note

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Executive Summary
The purpose of this assignment is to understand the case study that has been provided and
analyze the strategic management decisions and policies taken by the company that has been
mentioned in case study. Coles is one of the leading retail companies in Australia as well as in
the world. The issue that has been discussed in the case study is regarding the rising competition
in the market due to the entry of new large scale entities like Aldi. The strategic management
decisions of the company are analyzed in the assignment along with the analysis of the micro and
macro environment.

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Contents
Introduction......................................................................................................................................3
Macro environmental analysis.........................................................................................................4
Industry analysis..............................................................................................................................5
Life cycle stage of the industry....................................................................................................5
Porter’s five force analysis..........................................................................................................6
Company analysis............................................................................................................................8
Resource and capabilities............................................................................................................8
Core competencies.......................................................................................................................8
Competitor analysis.........................................................................................................................9
Strategy analysis............................................................................................................................11
Conclusion.....................................................................................................................................11
Reference:......................................................................................................................................12

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Introduction
Coles is a chain of supermarkets that operate under the parent organisation Wesfarmers.
The company has a long history of more than 100 years of service. In April 2014, the company
has. Established by George Coles the company has it’s headquarter in Melbourne. In 2016, the
company was valued at 33 billion. With time and strategic management plans the company has
successfully established itself as one of the leading supermarket brand in the country, there are a
number of store format of Coles (Coles.com.au, 2018). The company’s strategic management
decisions and policies are based on three aspects quality, service and value. Coles has continued
to deliver quality products, outstanding customer service and premium value to the consumers.
The company has a number of products in the private brand that supplies grocery items; the
company also has special diet items. The company operates on the basis of the triple bottom line
business model and recognizes the societal, environmental as well as financial responsibilities
(Coles.com.au, 2018).
Following are the objectives of Coles:
 To strive towards a sustainable future
 To build valuable relation with the customers with premium customer service and high
quality products at reasonable price
 To create job opportunities in the localities and therefore contribute significantly towards
the economy of the country
 To encourage Australian farmers and Australian grow (Coles.com.au, 2018)
The company operates in two industries retail industry as well as grocery industry, the
company has a number of store formats that operates in several parts of the country, and there are
almost 1400 stores which include Coles and Coles express format. The company has a range of
grocery items that are manufactured under the brand name, the price of the products are kept in
the reasonable range in order to cater to the target market. The issue that the company has been
facing in the recent times is that the competition in the market has become intense and there are
new innovative forms of market place that is being developed by new entrants in the market. The
major competitor in the industry is Woolworths and Aldi. The company has been strategizing to
keep up with the changing dynamics of the industry as well as the requirement of the customers
(Coles.com.au, 2018).

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Macro environmental analysis
The Macro environment or external environments are aspects that impact the operation of
the business significantly, but they factors are not under the control of the company. In order to
determine the macro environment in which the company exists, PEST analysis is conducted:
Political: Political aspects of a country is the direct impact of the government, in Australia
government is stable and encourages trade and commerce within as well as outside the countries.
The Federal Government in Australia has recently launched a competition policy which prevents
major independent players such as Woolworths and Coles in eliminating competition. Small
organisations in the retail industry are going through a tough phase due to the intense
competition from the bigger players in the industry. On the other hand, there are a number of
policies that the government has coined which supports the policies of the organisations in the
retail industry thus making the industry lucrative for investors (Freeman, 2010).
Economic: The value of the organisation in 2016 is recorded as 33 billion, though the economy
of the country has been through ups and downs there has been decline in the activity of the retail
industry as well. Fluctuations in the currency exchange rates and weakening of Australian dollar
have adversely affected the operations of the retail industry. The retail industry has a significant
contribution towards the economy of the country (Deloitte.com, 2018).
Societal: The standard of living among the target market of the company is moderately high;
therefore they prefer using supermarket and retail units to purchase products. The companies that
operate in the retail industry across Australia have to achieve higher societal and community
development. The organisations have to keep up with the changing trends in the society in order
to update the products and services as per the requirement to of the customers. The society and
the dynamics of this factor heavily impact the industry as the organisation closely operates with
the customers and caters to their social needs. Depending on this aspect the companies in this
industry also decided the ways and means to reach out to the target market (Gupta, 2013, p.13-
17).
Technological: the role of technology plays an important factor in the industry. There is
available technology in the industry which provides the organisation with improved efficiency
and high performance providing opportunity to expand and grow (Kolios and Read, 2013, P.
5023-5045)

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Industry analysis
Life cycle stage of the industry
There are four stages in the life cycle of an industry, the introduction phase, the growth
phase, the maturity phase and the decline phase. The annual growth rate of the industry is 2.0
percent approximately, and the forecast that has shown below states that there will be a 0.3
percent rise in 2018, thus it can be concluded that the industry is in the early phase of maturity as
there are a number of growth opportunity for the industry in terms of incorporation technology in
the industry as well as growing trends with the requirement of the customers. As long as there is
opportunity in the external business environment the industry will continue to grow.
Figure: Forecast of retail sales growth in Australia between 2008 and 2018, by volume
Source: (Statista.com, 2018)
The growth prospect of the industry is in the following factors:
 Ability to control stock on hand
 Attractive product presentation

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 Experienced work force (Ibisworld.com.au, 2018)
Figure:
Source:
Porter’s five force analysis
Threat of new entries: As mentioned above the retail industry is an attractive industry for
organisations those that are willing to invest a lot of capital in the industry. In Australia, with the
help of the government policies and rules, it makes it easier for organisations to open business in
this industry. Despite the support from the authorities’ small and medium scale business
enterprise in this industry are threatened by the industry giants like Coles, Woolworths and Aldi.
Therefore a company is trying to open a business with large scale economies then the
organisations like Coles and Woolworths can be threatened. Thus it can be said that the threat is
high as the advent of Aldi in the market has raise concerns in the industry as the company has its
own strategic plan to take away the market share.
Competition in the industry: There is intense competition in the industry; some of the direct
competitors of Coles are Aldi and Woolworths. The threat of the industry arises from the fact
that all the organisations competing to be the market leader in the industry be the market leader
in the industry.
Bargaining power of the buyers: The bargaining power of the buyer are high due to the intense
competition in the market, the switching cost of the customers low therefore they can easily
choose the services of a competitor over the Coles.
Retail Industry

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Bargaining power of the suppliers: The retail industry in Australian is dictated by large scale
players and this market is concentrated. As there are a number of large player in the market the
bargaining power of suppliers also increased as the switching cost are reduced.
Threat of substitute: in retail grocery items do not have any kind of substitute the daily
consumable products that that are used by the consumers are replaced by any other type of
grocery items. Hence it can be concluded that the threat of substitute is low in this industry.

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Company analysis
Resource and capabilities
As per the porter’s value chain analysis the activities of the company can be divided in
two segments:
Support activity: Coles is an organisation that incorporates the skills and capabilities of the
human resource, there are more than 107,000 team members in the organisation who ensure that
the operations of the business are carried out smoothly on a day to day basis. There are around
1400 stores as well as warehouses, manufacturing units and suppliers who make the firms
infrastructure strong enough to cater to the requirements of the target market as well as help the
company in growth and expansion (supplierportal.coles.com.au, 2018). RFDI technology is used
in the delivery system of the operation and software are used in the stores as well as in the
warehouses to ensure that there is JUST IN TIME approach of stock refreshment is undertaken.
The company has strategic management tie ups with several suppliers and third parties who offer
services to the company so that the operations of the business can commence unhindered
(supplierportal.coles.com.au, 2018).
Primary activity: The inbound and outbound logistics of Coles are connected with the operations
of the business, as a retail unit there is a refreshment of the shelves on, the company focuses on
lean production and therefore reduction of product wastage is an important objective of the
supply chain therefore, the Just In Time approach back up with First in First concept helps in
maintaining the freshness of the products as well as reduce the wastage. Apart from this the
company uses sales promotion as one of the biggest marketing and sales strategy along with
several other IMC strategies (Porter, 1991, P. 95-117).
Core competencies
The supply chain management of the company is the core competency; it helps the
company in maintaining the requirement of the customers with time and place. Efficiently
strategized supply chains, offers the opportunities to create sustainable competitive advantages
over the competition in the market. The company ensures that the products are mostly Australian
made and encourages the market within the country. The supply chain management helps the
company in marinating the quality of the products as well.
Coles in order to gain competitive advantage ensures that the quality, price and delivery,
product innovation, and time to market are on spot. The supply chain management of the
organization is planned in a way that it helps the organisation gain these objectives
(supplierportal.coles.com.au, 2018).

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Competitor analysis
Figure: Market share of Retail industry in Australia
Source: (Businessinsider.com.au, 2018)

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IGA
Woolworths
Aldi
Coles
Coles and Woolworths dominated the retail industry and they are still regarded as the
market leaders. The companies are among the biggest retailers in the world as well. However, the
industry has been facing challenges from the new entry of the global retail giant Aldi. As is clear
from the figure above that Aldi has taken over two percent of the market in the span of two years
thus reducing the market share of Woolworths, on the other hand it is also observed that the
market share of Coles has also improved by two percent remaining unaffected by the rise of
Aldi. The rise of Aldi in the Australian retail market has proven to be a threat that the company is
not ignoring. Coles is focused on developing strategies to improve the process of operation
(Businessinsider.com.au, 2018).
Figure: Perceptual map of competitors in the retail industry
Source: Author’s creation
Low price
High price
Narrow product
range
Broad product
range

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Strategy analysis
The company is focused on delivering the products and services based on the values and
principles of the company that was created 100 years ago. The company keeps the process of
operation simple and focuses on the supply chain in order to maintain the objective of providing
the customers with high quality product at a low price (Freeman, 2010).
The company uses Australian grown materials which cuts the cost of transport as well as
boost the economy of the country at the same time.
The company focuses on the service and keeps up with the requirement of the customers
with the help of market research and development programs. This helps the company to
determine the trends in the industry (Businessinsider.com.au, 2018).
The supply chain management of the organisation is efficient and forms the core
competency of the organisation in terms of the ways in which it can fulfill its objective and serve
the target market better.
The company has the opportunity to improve the e-commerce sector of the organisation.
As it already has the logistics efficiently placed, it is the perfect strategy as both the strength and
opportunity of the company and the industry can be used in this strategy.
Sales promotion is one of the major activities that the company undertakes to engage the
customers (Businessinsider.com.au, 2018).
Conclusion
It can be concluded form the above discussion that Coles though being the forerunner in
the retail industry of Australia, has severe competition from the large scale new entries in the
market. The objective of the company is driven by the high quality and better price of the
products and services that they offer. Over the years the company has build goodwill among
several stakeholders of the company.