MGT302: Strategic Management Case Study - Coles Supermarket Analysis

This report provides a strategic management analysis of Australian Coles Supermarket, examining the challenges it faces in a competitive market. It includes a macro-environmental analysis considering demographic, technological, economic, socio-cultural, cultural, and political factors affecting Coles. The industry analysis utilizes Porter's Five Forces to assess the attractiveness and profitability of the Australian supermarket sector. Company analysis focuses on Coles' resources, capabilities, and core competencies, such as its effective supply chain, brand reputation, and management. Competitor analysis identifies key rivals like Woolworths, Aldi, and IGA, highlighting the pricing pressures from Aldi. Finally, the report evaluates Coles' strategic responses to maintain a competitive advantage, including lowering product prices and differentiating through innovative products. This detailed analysis aims to understand Coles' strategic positioning and potential for success in the Australian market.

Running head: STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction......................................................................................................................................2
Macro environmental Analysis........................................................................................................3
Demographic factor.....................................................................................................................3
Technological factor....................................................................................................................3
Economic factor...........................................................................................................................4
Socio- cultural factor...................................................................................................................4
Cultural factor..............................................................................................................................4
Political factor..............................................................................................................................5
Industry Analysis.............................................................................................................................5
Company’s analysis.........................................................................................................................8
Competitors Analysis.......................................................................................................................8
Strategic Analysis............................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
The present report focuses on the importance of strategic management in today’s
organization. Strategic management refers to the formulation as well as adoption of major
initiatives and target taken by the enterprise’s management (Alkhafaji and Nelson 2013). This
study analyzes on the strategic management of Australian Coles supermarket. Australian Coles
Supermarkets, trading as Coles, is one of the biggest supermarkets, consumer services chain and
retail company, situated in Melbourne and owned by the parent organization Wesfarmers. Coles
has near about 100,000 employees and with competitor Woolworths, it accounts for about 80 per
cent of the market in Australia.
For over the last few decades, this enterprise has continued to deliver exceptional
customer service, good quality products and huge value to the people residing in this nation.
Their long term commitment is to help this nation grow towards sustainable future, build
relationship with the Aussie farmers and support local jobs within this food industry (Babatunde
and Adebisi 2012). Their mission statement is to become innovative leaders in the industry and
provide their consumers with convenience, value and good service. Their
positioning statement is to serve in better way by focusing on consumer proposition, operating
excellence and innovation. In fact, they strive to provide value to their customers by reducing
price of shopping basket, improving product quality through fresh manufacture and delivering
easier as well as better shopping experience per week. The sector is one of the concentrated
sectors in Australia, with Woolworths and Coles accounting for about 65% of sectors revenue in
present year. Huge growth of the existing companies over the last few years has considerably
altered this industry (About Coles 2018). Small Supermarket Company struggles to compete in

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this increasingly price-intense sector. Recent facts reveals that sector-wide profit margins have
declined over the last few years since players have decreased their prices and accepted low
margins for staying competitive. One of the challenges that this industry has been facing is price
deflation occurring from intense price competition.
Macro environmental Analysis
Macro environmental analysis is important for every business as it helps to observe
certain factors that influence Cole’s business in Australian market. These external factors
facilitate to identify several problems that Coles faces while operating in this industry.
Moreover, this analysis is essential method of observing industry conditions that impacts the
business. The macro environmental factors that affect this enterprise are explained below:
Demographic factor
The population in this nation increases by about 2% per year and most of these people
reside in urban areas. The total population in Australia involves individuals belonging from
various backgrounds as well as cultural groups. As the population in this country consists of
large number of young customers, Coles faces challenges of innovating new products for
matching up with youth customers. As high density regions are basically major cities in
Australia, they face issues of attracting large number of customers. Thereby , Coles is targeting
customers whose age is between 15 to 65 years in order to attract more customers (Eden and
Ackermann 2013).
Technological factor
Australia has all types of developed technologies to support requirements of Coles.
Recent facts reflect that young aged population in this nation uses more internets with respect to

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other people. In fact, social media growth has turned television advertising media an obsolete
technique. Moreover, enhanced environmental concern enforces Coles to utilize less energy and
this creates issues within the business. In addition, Coles supermarket are adopting new
marketing methods as well as introduces developed technology for meeting with varying
requirements of these customers. Although integration of new technology creates several
problems for Coles, it helped them to innovate new products.
Economic factor
The Australian economy has been one of the most developed economic countries.
Presently, fluctuation in foreign financial market has affected Australia’s economic condition.
Moreover, Australians purchasing power also declined from past years owing to financial crisis
and high unemployment rate. This decline in economic condition in Australia has increased
competition level in this industry. As a result, Coles faces several challenges owing to this
economic condition. The management of this enterprise thereby strategizes to lower their product
price for making it affordable to their customers.
Socio- cultural factor
The Australians have become highly conscious about their heath as well as well-being.
This trend also offers huge opportunity for this enterprise since there are less number of players
in the industry that offers organic products. However, Coles benefits from this factor as the
organic food sales increases over long term. On the contrary, it constitutes huge threat in niche
supermarkets that specializes in these products.

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Cultural factor
One of the influencing factors that control purchasing habit of customers in Australia is
culture. As Australian consists of individuals belonging from ethnic backgrounds and various
cultures, the purchasing habits of customers also varies. Due to this varying culture, Coles faces
several issues regarding sell of their product. However, the management of this enterprise
strategizes to diversify their product and offer wide product range to their customers for meeting
this challenge. Thus, Coles faces huge difficulty in working in this multi- cultural environment of
this nation.
Political factor
A considerable change in legal as well as political environment in Australia might affect
Coles operations in this industry. The Australian government developed Australian Competition
and Consumer Orientation( ACCC) for governing this industry. However, ACCC has adopted
new policies, which in turn enhances the competition level in this industry. Variation in taxation
policy as well as environmental regulations by Australian government makes it highly difficult
for Coles to operate in this environment. Additionally, it also decreases the purchasing power of
customers, which in turn influences revenue framework of this enterprise. Owing to this, Coles
adopts flexible marketing strategy for meeting with changing political factors of this industry.
Industry Analysis
The retail industry life cycle stages mainly comprises of four distinct phases based on
both the sales as well as profit growth. The theory of retail competition states that the retailing
institutions such as the commodities they distribute mainly pass through identifiable cycle. This

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cycle is basically divided into four stages that involve- innovation, development, maturity and
decline.
Innovation stage- At this stage, the retail store tries to innovate new product in order to attract
large number of customers. The firms in this industry implement new strategy for expanding the
business in the global market. Few Retail experts have found out that the business owners often
reenergizes their failing business by returning to this stage.
Development stage- In this stage, the retail businesses starts to grow and attain higher profits in
their business. In fact, the competitors create several challenges for new retail business (Stead
and Stead 2014). The challenge that enterprise faces in this stage is to continuously innovate
product in order to retain their customers in competitive marketplace.
Maturity stage-At this maturity stage, the retail firms faces intense competition owing to
overexpansion of industry. As a result, the firms face decreasing profits as well as declining
customer’s loyalty. Owing to this condition, prices begin to decline since the rivalries strategize
to retain their consumers with large deals.
Decline stage-This is the last stage of this retail industry life cycle. The retail firms that fail to
innovate new products or services enter this stage. Hence, they lose their share in the market and
attain bad reputation.
The attractiveness or the profitability of this industry at present times in analysed with the
help of Porter’s five forces. This is followed by analysis of relative position of Coles in this
sector.

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Buyers bargaining power- Although buyers bargaining power has been low in this
industry, it might increase in future. As there are few players dominating this sector, the buyers
bargaining power is low (Fung 2014). Aggressive policies by ACCC to reduce entry barriers
facilitate to increase buyers bargain power in future owing to entry of new entrants. Moreover,
their bargaining power might crease to reasonable level in future.
Suppliers bargaining power- Bargaining power of the suppliers in this sector has been low
owing to huge control of market share of Coles and Woolsworth. However, the suppliers have
limited intermidiaries selection from this sector. These companies are the main purchasers in this
industry and thus holds significant market share. The current change in policies by Federal
government and ACCC helps to decrease entry barriers in this industry. It is predicted by some
researchers that suppliers bargaining power might become moderate owing to huge
intermediaries range that manufacturers might select from this industry.
Threats of substitutes- Threats of substitutes in this industry are generally high. Coles lace
several convenience stores, farmers’ stores and grocery stores. Indirect rivalries basically form
threats of substitutes (Fung 2014). In addition, shift of customer’s preferences as well as tastes
towards organic goods signifies that farmers market poses threat to this supermarket.
Threats of new players- New entrant’s threats are also low in this industry. The agreements
such as rent, ownership and zoning laws results in deficiency in the retail stores location. Despite
reforms in laws adopted by ACCC, the new entrant’s threat might remain low in future.
moreover, Coles, woolsworth will create challenge for the new entrant and thereby the new
players might need huge investments(Gamble and Thompson 2014)

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Rivalry among competitors-Since there is near about 140000 retail stores, huge competition
exists in this sector. Woolsworth, Aldi are some of the rivalries of Coles that operates in this
market (Porter 2014). Coles faces huge competition from its rivalries in terms of product quality
and pricing.
Company’s analysis
The capability of Coles to outperform their rivalries as well as maintain competitive edge
basically rests on the resources as well as capabilities. The three vital resources as well as
capabilities of Coles involves-
Effectual Supply chain-This Company’s distribution network is basically a resource as well as
capability in both in- bound and out- bound logistics (Grant 2016). This resource helps Coles to
save cost throughout the network and compete with their rivalries.
Brand Reputation- Coles has attained reputation in terms of quality food over the last few
years. Their brand reputation helps them to give differentiation to their rivalries and contributes
to customer satisfaction (Wheelen et al. 2017).
Effective management-Despite increasing inflationary rates and recessionary pressures, Coles
has attained high growth rate owing to effective implementation of strategy by their management
(Lasserre 2017). The capability of Coles management steers them through present economic
environment. Moreover, continuous attainment of high growth makes it highly valuable resource.
Coles capabilities combining in unique as well as sustainable manner helps to generate core
competencies for this enterprise.

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Competitors Analysis
Some of the major competitors of Coles are Woolsworth, Aldi, Costco, IGA. These
competitors have transformed this industry over the last few years. Costco and IGA are the new
entrants in this industry and thus face huge competition from Coles, Woolsworth and Aldi. In
fact, Coles faces difficulty while competing with Aldi in terms of product price since Aldi sales
lower price as compared to Coles and wools worth. Coles thereby differentiate itself from
producing innovative products at low cost in order to gain competitive advantage over its
competitors (Hitt, Ireland and Hoskisson 2012).
Strategic Analysis
As this enterprise has been facing challenges from its rivalries regarding product pricing and
varying demand as well as preferences of consumer, the management of Coles is adopting new
strategies for gaining competitive advantage over its rivalries. Internal analysis signifies that Aldi
poses threat to Coles regarding product pricing. Owing to this, Coles also strategizes to lower its
product price in order to compete with Aldi. Financial analysis also signoifies that Coles profit
margins has been under huge pressure owing to fierce marketing, Coles adopt new marketing
techniques or campaigns for selling their product. Although these strategizes are adopted by
Coles, it has not been working effectively. However, recommendations on further
implementation of new strategizes will help Coles to mitigate challenges and attain higher
profitability.
 Coles must build effective suppliers network and increase online sales in order to
establish good brand image in the market

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 Coles should also invests in innovative as well as sustainable ventures in order to remain
ahead of increasing competition
 Coles should also implement low cost product pricing strategies in order to compete
effectively with new entrants
 The marketing group of Coles should also interact with their customers for attaining their
feedback about the product. This strategy will help them to create products based on their
customer’s preferences.
Conclusion
Coles has been suggested to adopt online retail advancement of technology measurement.
Moreover, they can increase online sales by matching online product price with that of stores.
Additionally, varying digital interactions basically for online sites might help Coles to leverage
customer loyalty program. Coles should also adopt hybrid cloud framework for attaining
reduction in cost of product along with good information management. However, it is predicted
that adoption of these strategies will help Coles to increase their sales and attain higher market
shares in future. It will also help Coles to achieve success and expand business successfully.

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References
About Coles. (2018). Coles.com.au. Retrieved 20 April 2018, from
https://www.coles.com.au/about-coles
Alkhafaji, A. and Nelson, R.A., 2013. Strategic management: formulation, implementation, and
control in a dynamic environment. Routledge.
Babatunde, B.O. and Adebisi, A.O., 2012. Strategic Environmental Scanning and Organization
Performance in a Competitive Business Environment. Economic Insights-Trends &
Challenges, 64(1).
Coles careers (2018). Colescareers.com.au. Retrieved 20 April 2018, from
https://www.colescareers.com.au/about-us/our-brands
Drnevich, P.L. and Croson, D.C., 2013. Information technology and business-level strategy:
Toward an integrated theoretical perspective. Mis Quarterly, 37(2).
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management.
Sage.
Fung, H.P., 2014. Using porter five forces and technology acceptance model to predict cloud
computing adoption among IT outsourcing service providers.
Gamble, J. and Thompson, A.A., 2014. Essentials of strategic management. Irwin Mcgraw-Hill.
Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper
Saddle River, NJ: pearson.