Strategic Analysis of Coles Group: Australian Supermarket Report

This report provides a comprehensive strategic analysis of Coles Group, a major Australian supermarket chain. It begins with an executive summary and a table of contents, followed by an introduction that outlines the report's objectives. The analysis delves into Coles' mission statement, generic strategy (cost leadership), and business model, examining its 'WHO, WHAT, and HOW' components. Value curves are used to illustrate Coles' market positioning relative to competitors like Aldi and Woolworths. The report then evaluates Coles' strategy within the industry framework, utilizing Porter's Five Forces and PESTEL analysis to assess external and internal factors. A discussion of Coles' cost leadership strategy and its impact on market share and revenue is included. The report concludes with recommendations and references, offering a thorough examination of Coles Group's strategic approach in the competitive Australian supermarket landscape. The report highlights Coles' focus on providing quality products at affordable prices, its efforts to gain market share, and its recent independent operation after separating from Wesfarmers.

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

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Executive Summary
The report throws light on the strategic analysis of the supermarket named Coles Group in
Australia. The report follows a systematic format whereby the brief overview of the company
has been provided followed by the analysis of the strategy adopted by the firm. The Business
model throws light on how the business functions and how it is performing in the market. The
report has helped in understanding the value curves of Coles Supermarket that has assisted in
understanding their marketing position and strategy in competitive market. The different kind
of external and internal fit has been analysed effectually with the usage of different PESTEL
and Porter’s Five Forces Analysis. The different kind of generic strategies has been applied in
an effectual manner to properly describe the characteristics of the firm effectually.

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Table of Contents
1. Introduction.........................................................................................................................3
2. Assessment of Coles` Strategy...........................................................................................3
2.1. Mission statement of Coles Group..................................................................................4
2.2 Generic strategy.........................................................................................................4
2.3 Business Model................................................................................................................5
2.4 Value Curves....................................................................................................................7
3. Evaluation of Strategy of Coles.............................................................................................8
3.1 Industry Framework.........................................................................................................9
3.2 External Fit.....................................................................................................................10
3.3 Internal Fit......................................................................................................................10
4. Conclusion and Recommendations......................................................................................11
References................................................................................................................................13

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1. Introduction
The primary aim of the given report is to check and analyze the strategic positioning
of the Australian supermarket brand which is the Coles group. The Coles Group is under the
Wesfarmers group of companies and is one of the largest supermarket brands in the given
country (Hill, Jones and Schilling 2014). The Coles Group Limited is an Australian public
limited company which has various retail stores around the country. The given retail chain
store has its head office in Melbourne. The first Coles group had opened in Melbourne in the
year 1914. The given stores were under the acquisition of different company groups but had
been acquired by Wesfarmers in 2007. However recently in the year 2017 the given
acquisition had been given away and the company functions independently at present. The
two huge brands, Woolworths and Coles tend to have the major share of the Australian
market. Although world wide it has been observed that the Supermarket industry is not a very
strong one, but the Australian supermarket is a relatively profitable industry and has been the
major target of a majority of international companies.
The given report will be throwing light on the strategic positioning of Coles in the
Australian Supermarket (Wheelen, et al. 2017). The strategy of Cole’s group will be analyzed
in the first section followed by the Industrial Context and the Environmental Analysis of
Coles.
2. Assessment of Coles` Strategy
The Coles Group of Retail stores has come forward in the given industry by using a
particular strategy in order to expand the business case and in order to compete with its
primary competitor which is the Woolworths (Lasserre 2017). Hence, this section will be
analyzing the strategy used by Coles using the Porter`s generic strategies tool and also the
related internal as well as external fir is examined.

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2.1. Mission statement of Coles Group
The primary vision of Cole’s group is to provide premium quality products at
affordable prices. Cole’s group understands the value of money and for this reason, its
primary objective is to perform better than its competitors and for this purpose it has vowed
to provide good quality products with comparatively low prices (Lasserre 2017). After
analyzing and comparing the actual performance of the brand with that of the stated mission
statement it could be analyzed that although the prices of the Coles group were quite low as
compared to its competitors, the same could not be stated for the quality. The brand rather
provides normal produces same like its competitors and nothing of a premium category.
2.2 Generic strategy
According to Michael Porter, there are three primary strategies which a company
follows in order to gain success in the business environment. These strategies are as follows:
 Cost Leadership- In the cost leadership strategy, the company aims to become a leader
in the given market using a low cost strategy. In the given strategy the company
follows a policy whereby it tends to offer low prices better than its competitors which
then leads to better competition and larger market share (Ginter 2018).
 Differentiation- In the given strategy the company tends to offer better products to its
customers which are quite different than that of its competitors and may be premium
in nature. Hence, these strategies tend to work for those customers who are looking
out for a premium product. When companies follow this strategy then they may
charge prices, higher than its competitors.
 Focus-The focus strategy aims to concentrate on a particular niche market so that the
company can specialize in the given domain (Moutinho and Vargas-Sanchez 2018).
The given category is further divided into Cost and Differentiation focus.

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The strategy which is followed by Coles us the cost leadership strategy. As the
primary aim of the company lies in offering the customers a good quality product, it does so
at affordable prices. As stated earlier, the given company has value for money and for this
reason it wants to ensure that it offers the lowest price possible in the Australian market.
Figure 1: The Strategy adopted by the Coles (As created by the author)
2.3 Business Model
The Business Model can be described as a synopsis of what a business does and how
a business needs to operate in the given domain (Barney 2014). It determines, whom the
company is working for, who are its partners and the procedure using which it carries out its
operations. The Business Model is basically concerned with What, How and Who.

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In the following section, the different components of the Business Model of Coles
will be given.
WHO
The WHO component refers to that component of the business domain which looks
after the markets which the company seeks to serve. In the case of the Coles group, the
company aims to serve all the customers in the retail segment who want to receive good
products at reasonable prices (Eden and Ackermann 2013). The price conscious buyers who
tend to have a value for money can successfully shop at Coles. The company has a loyalty
program for its buyers whereby the get special discount s and related offers if they shop at
Coles.
WHAT
The WHAT Component describes the system through which a company functions. In
the case of the Coles Group, the company is primarily based in Australia and has spread its
operations to New Zealand as well. The company offers almost all brands of food products to
its customers and prices them at reasonable values (Rothaermel 2015). The company aims to
make an offer which is rather generalized in nature. For this reason, it stocks all items like
food products, skin care, baby care, vegetables and other daily requirements. The company
aims to offer no frill services which aim offer hassle free buying procedures for the customers
(Slack 2015). If the given is compared with the actual performance of the firm, it still has a
long way to go and improve its services.
HOW
The value which has been offered by the Coles Group aims to create sustainability and
affordability among the different customers. The company fulfils its missions by offering
goods and services which are easily available in other supermarkets but the price is not the

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same as others. The range of products is wide and almost every important item a customer
may need is present in the given stores.
The company is the second largest retail store in Australia after Woolworths which
clearly shows how the customers perceive value in Cole`s offerings. Although the
competition in the Industry has increased considerably with more companies trying to offer
reasonable goods to the different customers at reasonable prices, Coles is trying its best to
cope (Rothaermel 2015). However, they cannot match up to the level of Coles who has
created a brand name of offering the lowest priced products. The company has recently come
out of the control of Wesfarmers and the different investors have started doubting the
different operational plans of the supermarket that will be required to function on its own.
However, if it analyses its market holistically and ensures that it is fulfilling its mission
objectives, it will be able to perform well.
2.4 Value Curves
The entire supermarket chain in Australia is in their lifecycle stage and it is well-
serviced in nature. The entire growth of the supermarket has been dependent on increased
spending power of the unlike customers along with aggressive competition against different
players along with dissimilar major supermarkets that is expanding the range of products in
the entire business (Armstrong et al. 2015).
The entire market could be described as the red ocean; however, Coles has entered the
entire market place with the blue ocean strategy with the help of focusing more on the private
label products in the sector that is dominated traditionally dominated by the branding of big
name. Coles has tried to keep up to the expectation of the customer preferences by not
compromising in the quality of the products and services among the other major players in
the market(Coles.com.au, 2018).

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Coles has tried to determine the profitable kind of model to deliver the proper quality
products and services by reducing the prices of the goods. The company has tried to create
expectations by reducing the different prices of the products and through this, the company
has tried to gain geographical presence. The assessment of the value curves of Coles along
with other supermarket chains such as Woolworths and Wesfarmers. Coles is trying to work
in the competitive market with differentiating kind of strategy that is included in the diagram:
Figure 2: Values curves of Coles vs. Aldi
(Source: Created by author)
3. Evaluation of Strategy of Coles
Coles has entered into the market of Australian retail market with a cost leadership
strategy. The supermarket tries to offer their customers with offering them with lower prices
of goods and services along with providing them with high quality branded goods and
services to the customers as well (Chaffey and Ellis-Chadwick 2016). Coles is trying to
lowers the cost of the products whereas the cost of living of the individuals staying in
Australia remains high and this helps them in gaining the competitive advantage (Song,
Sunand Jin 2017).

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With the help of the such process, Coles has tried to increase the share in the market
and this has increased the revenues in the market over the last six years and the households
are saving up to $640 a year by shopping the necessary goods from the respective
supermarket. The business strategy that has been applied by Coles is successful in nature and
this has been executed appropriately to capture the value in competitive market and gain the
attention of the customers as well (Dockalikovaand Klozikova, 2014).
3.1 Industry Framework
Coles is dominating the entire retail market in Australia along with Woolworths
wherein the share of the market is more than 35% and 45%. The entire retail sector in
Australia is generating more than $5.67 billion of profit and Coles is targeting more than
3.5% of the entire market share in the Australian retail sector (Zhao et al. 2016). The Porter’s
Five Forces Analysis has illustrated the dominating factor of the two main players such as
Coles and Woolworths in the market along with the intense rivalry between the firms. The
entry of Coles in the market has increased the competitive prospective in the retail sector of
Australia and this has increased the entire focus of the customers (Makos 2015).
Political There are different kind of government
regulations and laws that has been enforced
by the Australian government against the
entire misuse of the power of the market by
the different market leaders (Yunna and
Yisheng 2014)
Economic There is huge rate of change in the habits of the
different consumers in the retail market of
Australia and the consumers are trying to adjust
with such economic changes that are taking

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place in the organizations (Jaworski 2018)
Social The entire growth of the population is more than
1.5% and the population in the Australian
market are educated and diverse culture
individuals are present in the society as well
Technological There is huge upgradation of the technology in
the entire Australian Supermarket and the
infrastructure is unique in nature as well
Legal There are different kind of legal actions in
relation to the safety of the different products
and in relation to the price wars
Environmental Different usage of the sustainable practices and
products along with change in climate as well
3.2 External Fit
The entire external kind of trading environment is applied to all the companies that
are players in the competitive Australian market. All the retail supermarkets are being
subjected to different kind of standards related to food and safety that is required to be
followed by them effectively. The external fit of Coles in the competitive environment is
similar to the different other players in the market in different aspects and in comparison, to
the geographic presence as well. The positioning strategy of Coles is cost leadership strategy
wherein the supermarket provides huge number of discounts to the customers and offer
quality products to the customers as well.
3.3 Internal Fit
The value chain of the industry is similar in nature with the other competitors in the
market and there is huge scope of the different kind of internal approaches by the major

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competitors is differentiating in nature. Coles has focused on different kind of branded
products and the quality is appreciated by all the customers in the market as well. The entire
value chain analysis is system through which Coles has tried to separate the activities of
value creation. The supplier and company relationship are competitive in nature and the
payment is made easier in nature and more stable in nature (Mathooko and Ogutu 2014). The
value chain of Coles has included the different HRM activities along with technology
development and procurement of the goods and services in the market. Coles has tried to gain
profit in the market with the help of different kind of usage of buy lead and improvement of
the transportation processes in an effectual manner. The development of the technology has
been provided with huge importance that has helped them in maintaining and introducing
new methods to gain success.
Figure 3: Value Chain Analysis of Coles
Source:
4. Conclusion and Recommendations
Therefore, it can be concluded that the entry of Coles in the year 1914 has been of
huge success in the entire retail market of Australia. The market share of the company has

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been around 11.45% and they have been successful in an effective manner in terms of
revenue in the entire market. Coles is trying to use the quality, low cost branded products
kind of business model to fit in the Australian retail market. The entire company has managed
the program of expanding their entire geographical presence with more than 125 stores all
over the country within a few years. The main mission of the company is to provide the
customers with premium quality of goods at affordable prices and this has helped them in
attracting huge number of customers in the entire economy as well.
Furthermore, the cost leadership strategy adopted by Coles has assisted them in
increasing the range of goods and services provided by them to the customers. The company
has tried to increase the presence in overall market by fulfilling the demands of the customers
in the market and gaining competitive advantage as well. Coles is trying to provide the
customers with different branded goods and services in comparison to the Woolworths and
Aldi to satisfy the requirements and solve their grievances of the customers. With the cost-
leadership strategy, Coles has been successful in the competitive market and adopted a large
portion in the market as well.
Recommendations
Coles needs to work on the quality of goods and services that are provided by them to
the customers. In comparison to Aldi and Woolworths in the market, Coles need to focus
more on delivering quality and branded goods and services to the customers to gain more
geographical presence in the competitive market
Lastly, Coles needs to increase the different services and diversify the segments in
their company by training the staffs to deal with the different situations in the market and
create proper customer company relationship effectively to meet the different expectations of
the customers effectually in competitive market.

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