Strategic Management in Coles Supermarket: A Comprehensive Analysis

This report offers a comprehensive strategic management analysis of Coles Supermarket, examining its market size and trends, financial and corporate performance, and competitive advantages. The analysis includes an evaluation of Porter's Five Forces and a SWOT analysis to assess the company's strengths, weaknesses, opportunities, and threats. The report delves into the characteristics of the general environment and their impact on Coles. It also investigates the company's core competencies, strategic options, and provides strategic recommendations for future growth. The analysis covers financial performance, corporate performance, and competitor analysis, offering a detailed understanding of Coles' position in the market. The report also explores the sources of competitive advantage, strategic competencies, and the types of competitive advantages gained by Coles. This report offers a detailed overview of the strategic position of Coles Supermarket.

Running Head: STRATEGIC MANAGEMENT IN COLES SUPERMARKET
STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Name of the Student
Name of the University
Author Note

1STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Executive Summary
The report analyses market size trends along with its financial and corporate performance and
focuses to critically analyse the characteristics of the general environment and the various
ways by which they affect the functioning of the Coles Supermarket. Five major forces are
discussed such as barriers to entry, power of buyers, power of suppliers, threat of substitute
products and the intensity of rivalry. A competitor analysis is done to know the future
objectives, current strategies, assumptions and capabilities of the supermarket Coles. The
sources of competitive advantage are discussed such as resources, capabilities and
competencies of the supermarket. The report analyses whether these competencies are
strategic or not by checking whether these strategies are valuable , rare, hard to imitate and
non-substitutable. The type of competitive advantage gained is discussed, whether they offer
no competitive advantages, whether temporary or sustainable advantages are gained by the
supermarket or whether competitive parity is achieved where standard or average results of
the firm are compared to others in the industry. Sustainable advantages are those which the
firm possesses which keep it ahead in competition. The report, at last, conducts a SWOT
analysis of the supermarket COLES by considering the strengths, weaknesses, opportunities
and threats of the firm. The strengths of Coles are its advantages over competitors,
weaknesses are the characteristics that put Coles at a disadvantage to others and opportunities
are elements that Coles can use to its disadvantage while threats are elements that trouble the
firm.

2STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Table of Contents
INTRODUCTION......................................................................................................................3
FINANCIAL AND CORPORATE PERFORMANCE.............................................................5
Financial Performance analysis..............................................................................................5
Corporate performance analysis.............................................................................................8
SWOT AND COMPETITIVE ADVANTAGE.........................................................................9
STRATEGIC OPTIONS..........................................................................................................31
STRATEGIC RECOMMENDATIONS..................................................................................32
REFERENCES.........................................................................................................................33

3STRATEGIC MANAGEMENT IN COLES SUPERMARKET
INTRODUCTION
The report analyses five different forces affecting the market Coles is explained along with
strengths, weaknesses, opportunities and threats to the company by conducting an analysis of
Porter’s Five Forces and SWOT analysis of the company .The structure ,segmentation,
distribution channels, competitors and trends of the Coles supermarket .The concept of
internal environment of a firm is explained along with the concept of core competencies .The
report also focuses to critically evaluate four criteria which determine whether resources and
capabilities can be considered core competencies or not. This report tries to identify resources
and capabilities by value chain analysis .It discusses the use of outsourcing to understand the
above topics regarding Coles supermarket by explaining the concept of outsourcing in
relation to the given market of Australia. The competitive advantage gained by the market
using core competencies is explained and are evaluated to check whether these are
strategically important or not. The report focuses to do a situational analysis by considering
the market size trends of Coles, its financial and corporate performance and by evaluating the
results by giving strategic recommendations. (Ariyawardana & Collins, 2013).

4STRATEGIC MANAGEMENT IN COLES SUPERMARKET
MARKET SIZE AND TRENDS
Coles Supermarkets is Australia’s leading grocery store headquartered in Melbourne. It was
founded in 1914 in Collingwood, Melbourne by George Coles. As far as the market size of
Coles is concerned, it has over 807 supermarkets throughout Australia having over 1, 00,
000employees. (Martin, 2015). Among the different parts of the Coles Group ,there were
approximately more than 18 million customer transactions each week which gave the
company an overall earnings of around 24 billion dollars revenue from their supermarkets.
The market expansion of Coles is scattered all over Australia. Coles is the central
marketplaces from where suppliers distribute products as well as customers are able to
purchase products directly. This facilitates convenience to the purchasers. Coles
Supermarkets was a brand of Coles Myers Limited between 1986 and 2006 before
Wesfarmers purchased the market in 2007.In 2019, the share price of Coles Supermarket has
underperformed by 11 %. (Ariyawardana & Collins 2013). On a retail calendar basis, the
overall sales revenue increased by 2.6 % and reported comparable sales growth of 3 %.
(Lawley, Birch & Craig 2016). The main reason for its decline was from Coles Express or
Eureka Operations Pvt. Ltd. The trading got lowered as transactions were impacted by fall in
fuel and unfavourable weather.
Coles used Marketing trends like Down -Down and Cheap- Cheap pricing strategies to sell its
products. These included the lowering of prices of products to achieve more sales .The
supermarket is now planning to compete with its competitors by shifting away from low
prices to focus on other attributes such as sustainability, local production and communities.

5STRATEGIC MANAGEMENT IN COLES SUPERMARKET
FINANCIAL AND CORPORATE PERFORMANCE
Financial Performance analysis
Financial Performance is the extent to which financial objectives are being
accomplished by an organization .It is the process by which a firm’s policies and operations
are measured in terms of monetary objectives. It is used to measure a firm’s financial health
over a length of time. By using this parameter, performances of similar firms across the same
industry can be compared. This analysis can be done by giving Income Statement, Balance
Sheet and Cash Flow Statement of the Coles supermarket from 2018 to 2019.
The income statement of Coles supermarket shown below compares the profits earned by the
supermarket in 2018 and 2019. It can be seen that profit for the year 2018 (1578 million
dollars) is more than profit for the year 2019 (1435 million dollars), thus creating a profit
margin of 143 million dollars. This may be due to sales earnings and merchandise costs. By
increasing merchandise costs, the net profit margin is increased thereby increasing sales of
products .Taxation is an underrated variable that can affect the margin of profits.

6STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Source : (Knox, 2015).
Source: (Perrone & Wodonga, 2015).
Source: (Sutton-Brady, Taylor &
Kamvounias, 2017).

7STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Corporate performance analysis
Corporate performance is a combined assessment of the ability of a firm to implement
its most important factors such as shareholder, market and financial performance. An analysis
of corporate performance by a company is important for its strategic management .With
regard to the supermarket Coles; corporate performance analysis can be done in two ways:
 DIAGNOSIS – This aims to provide an understanding of how the supermarket
Coles works and explains the changes that have taken place in its past
performances.
 PLANNING – This aims to determine future courses of action to be taken by
Woolworths to ascertain its implications in improving performance. (Arup, Beaton-
Wells & Paul-Taylor 2017).

8STRATEGIC MANAGEMENT IN COLES SUPERMARKET
SWOT AND COMPETITIVE ADVANTAGE
What are characteristics of the General Environment, and how do they affect the
industry?
Characteristic Factors present in the
characteristic
How do the factors affect the
supermarket Coles?
Political/Legal Factors that affect political or
legal characteristics of General
Environment of Coles are
influence of organizations on the
government, competition and anti-
monopoly laws; taxation, labour
and employment laws,
deregulation and educational
philosophies and policies.
Due to these factors, a sudden
change occurs in existing political
regimes leading to civil unrest.
Entrepreneurs find it risky to invest
in Coles as it has no policies for IP
(Internet Protocol) protection.
Employment laws ensure health,
safety and well-being of employees
of Coles. It has started a
deregulation of retail trading hours.
This has led to online purchase of
products at any time of the day.
Economic Factors that affect economic
characteristics of General
Environment of Coles are
direction of economy, inflation
Due to these factors, the level of
spending has decreased .Customers
are switching to private label brands
and Coles is increasing its private

9STRATEGIC MANAGEMENT IN COLES SUPERMARKET
and interest rates, membership
with trade organizations, trade and
budget deficits and surpluses,
GDP &GNP as well as personal
and business saving rates.
market offerings. This enables Coles
to realize a high profit margin.
Provision of private labels enables
Coles to compete on the basis of
choice convenience by offering a
low cost alternative.
Demographic Factors affecting demographic
characteristics of General
environment of Coles are
population size, age structure,
geographic and income
distribution and ethnic mix.
Due to these factors, there is an
increase in the number of customers
in Coles. Supermarket traffic was
seen to consist of 16 to 24 year olds
in Melbourne and 25 to 35 year olds
were seen in Sydney.
Socio-cultural Factors affecting socio-cultural
characteristics of General
Environment of Coles are women
in the workforce diversity,
Due to these factors, considerable
consciousness is being implemented
by customers in purchasing products
such as organic and healthy food

10STRATEGIC MANAGEMENT IN COLES SUPERMARKET
attitudes about quality of work
life, concerns about the
environment and shifts in work
and career preferences.
alternatives. It will help Coles to
increase its sales as there are few
organic product markets in
Australia.
Global Factors affecting global
characteristics of General
Environment of Coles are new
global markets, existing changing
global markets, important
international political events as
well as critical cultural and
institutional characteristics of
global markets.
Due to these factors, Coles is able to
gain a larger audience for its
products, so that it can expand its
domain worldwide and reach to the
maximum number of customers.
Moreover, political events being
held will enhance the reach and help
in making Coles a renowned global
brand.
Technological Factors affecting technological Due to these factors, prices of

11STRATEGIC MANAGEMENT IN COLES SUPERMARKET
characteristics of General
Environment of Coles are
innovations in products, creation
of new knowledge and new
applications, focus on private and
government supported research
and development expenditures,
implementing internet technology
by introducing global e-commerce
and proposing new business
models.
products of Coles get disrupted. The
market has to continuously innovate
its products to be at par with its
competitors. This needs to be done
to consistently maximise profits, and
become a better market leader.

12STRATEGIC MANAGEMENT IN COLES SUPERMARKET
How do the five forces impact on the company you have selected?
Force Impact on Coles
Barriers to entry  Economies of scale is fairly difficult
to achieve in Coles supermarket
which makes production costlier for
new entrants.
 Product differentiation is strong
which makes the threat of new
entrants a weak force.
 Access to distribution networks is
easy for new entrants which makes
the threat of new entrants a strong
force.
(Sutton-Brady, Taylor & Kamvounias
2017).
Power of buyers  Product differentiation is high, thus
buyers are not able to switch to other
supermarkets.
 Income of buyers in Coles is low,
which makes the buyers more price

13STRATEGIC MANAGEMENT IN COLES SUPERMARKET
–sensitive.
 As products of Coles have a high
product differentiation and
substitutes are unavailable, it has a
weak or low bargaining power than
its competitors.
Power of Suppliers  In Coles, suppliers are more than
buyers that makes the bargaining
power of suppliers a weak force.
 There are no substitutes available for
the products in Coles and the profits
of the industry are closely tied to
suppliers.
 In Coles, the supplier products have
low switching costs but since
substitute products are unavailable in
market, the supplier power of Coles
is high.

14STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Threat of substitute products  The substitute products of Coles
include Mc Donald and Burger King
for halal items like Foie Gras, spring
rolls and chicken nuggets.
 The only few substitutes available
are of high quality and highly
expensive.
 The threats posed by substitute
products to Coles include its
profitability. The level of threat,
whether high, medium or low is
determined by some factors. Low
switching costs of consumers make
threat of substitute products high. If
the substitute product has a quality
equal to or superior to the original
product, threat of substitutes
becomes high. On the other hand ,
a low threat of substitutes is found
when it is more expensive than the

15STRATEGIC MANAGEMENT IN COLES SUPERMARKET
original, is of lower quality and
consumer switching costs are high.

16STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Intensity of Rivalry  Competitors of Coles are few as well
as large in Size, which makes
industry rivalry a weak force.
 These few competitors have a large
market share which helps them to
engage in competitive actions and
become market leaders.
 Fixed costs of products are high
within Coles that means companies
can reduce prices when demand
slackens that makes industry rivalry
a strong force in Coles.

17STRATEGIC MANAGEMENT IN COLES SUPERMARKET
What do you know about your competitors? (Competitor Analysis)
Coles vs. Woolworths
Future Objectives  The future objectives of Coles are to
sustain all Australians to help the
customers lead healthier and happier
lives. It offers good products at a
lower price to consumers.
 The future objectives of Woolworths
are to make the company a top brand
and first preference of customers
across the world. To achieve this, it
optimizes network efficiency.
Current Strategy  Coles has the marketing strategy to
offer quality products to customers
at low prices, offer customers better

18STRATEGIC MANAGEMENT IN COLES SUPERMARKET
and fresh food.
 Woolworths changes its strategy
according to the needs of customers,
keeping them in the priority list and
changing business strategies to meet
their needs.
Assumptions
 Coles gains valuable data from on its
customer’s purchasing habits. It
emphasizes that everyone in the
company owns the customer.
 Woolworths makes assumptions that
customers are always put first, they
keep things simple and encourage
freedom within the framework.

19STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Capabilities  Coles can deliver superior quality
products and outstanding customer
service .It is working towards a
sustainable future forming long-
lasting relationships with farmers of
Australia.
 The capabilities of Woolworths
include listening and learning to
customers and always doing the
right thing.

20STRATEGIC MANAGEMENT IN COLES SUPERMARKET
What are the sources of competitive advantage for the company you are analysing?
SOURCES COLES SUPERMARKET
Resources Coles uses various resources to gain
competitive advantage . These include
distribution channels such as Wide and
Exclusive ones by displaying boards and
banners of products on display. These
products have high quality and price;
talented workforce which works together
to achieve the company goals ;
advanced
technology and equipments such as
robotics technologies and a software that
improves profit margins for e-commerce
sales ;
availability of funding such as
providing upto 5 lakh dollars to Australian
grocery producers and manufactures to
innovate and grow their business from the
Coles Nurture Fund; And
uniqueness in
products by providing fresh food as per
customer demands.
Capabilities The products of Coles are world class,
having high quality and delivering the best
to the consumer. It offers better and fresh
food to customers, by marketing the
products through excellent network

21STRATEGIC MANAGEMENT IN COLES SUPERMARKET
channels. Thus, customers are provided
with products that are a step ahead of
products made in other supermarkets. In this
way , Coles gains a competitive
advantage over others in the market.
Competencies By developing core competencies, Coles
can gain a competitive advantage over other
markets. These core competencies are
unique aspects that make a firm better than
others. Coles can determine these
competencies by ensuring their products
have initial values with added potential,
they add to the customer benefit of end
products, and are not substitutable and these
should be difficult to imitate and replicate.
Analytical Thinking,
Client Service,
Conflict Resolution,
Creative Thinking
and
Decision Making are five major core
competencies with regard to products in
Coles.
Are those competencies strategic competencies? Why?
Are they valuable? The major core competencies mentioned

22STRATEGIC MANAGEMENT IN COLES SUPERMARKET
above can be discussed in terms of their
value. The valuability of Analytical
thinking is that it helps to gather
information, visualize and solve complex
problems. Client service is valuable as it
helps in building strong relationships with
customers. Conflict resolution is valuable as
it increases productivity, retains good
customers and reduces risk .Creative
thinking is valued as it gives new solutions
to problems by reasoning ability. Value of
Decision making is that it takes critical
decisions to make or mar the organization‘s
future.
Are they rare: Core competency of Coles that is rare is
Product quality or client service. To make
their products the best, Coles should make
products that are non-imitable and costly to
replicate. This rare competency will hold
Coles in a good position.
Are they hard to imitate? The core competency of Client Service is

23STRATEGIC MANAGEMENT IN COLES SUPERMARKET
hard to imitate as products of Coles are
difficult as well as costly to imitate.
Are they non substitutable? The non-substitutable core competency of
Coles is both Client Service and Creative
Thinking. Products provided to customers
are difficult to replace and giving new
solutions for improvement of products is
also not substitutable.

24STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Looking at the competencies, what type of competitive advantage do they give you?
 No competitive advantage
 Competitive parity
 Temporary competitive advantage
 Sustainable competitive advantage
Competence Competency factors
Future Objectives Future objectives of Analytical thinking are
achieving best results for the firm, by
avoiding possible negative results. Client
Service has future goals of improving sales
and gaining customers, Conflict resolution
has future objectives of employees listening
to each other and avoiding abusive
behaviour. Creative thinking focuses to
think out of the box and decision making
focuses to maximise benefits in future for
the firm. These competencies , in totality
provide a
sustainable competitive
advantage that will benefit Coles as a
whole.
Current Strategies Current strategies adopted by Coles in
Analytical thinking are strategizing future
directions for the business, evaluating
impact of market on Coles and innovating
new applications for its products. To

25STRATEGIC MANAGEMENT IN COLES SUPERMARKET
improve client service , current strategies
adopted are seeking customer feedback,
strengthen the customer service team, use
Customer Relationship Management (CRM)
platforms and leverage multi-channel
servicing. To resolve conflicts, current
strategies adopted by Coles are embracing
conflicts, talking together, listening
carefully and providing guidance. Current
strategies in creative thinking are
developing creative courage ,
achieve work –life balance and listening to
feedbacks. Current strategies in decision
making are acknowledging and
compensating biases , using pro and con
lists and sticking to a decision and living by
it. These strategies provide a
competitive
parity to Coles.
Assumptions Assumptions associated with Analytical
thinking are prior knowledge and
experience of employees , those related
to client service are avoiding client
complaints. The assumptions regarding
Conflict resolution are inter-group conflicts
on a specific issue , those regarding

26STRATEGIC MANAGEMENT IN COLES SUPERMARKET
creative thinking are generating new ideas
based on the new criteria and those
regarding decision making are selecting a
particular choice that maximizes utility of
the firm. Thus, they provide a
sustainable
competitive advantage.
Capabilities Capabilities of Analytical Thinking are
identifying possible cause and effect
patterns, and drawing conclusions to
provide solutions. Client service
capabilities are delivering same customer
service across all channels and
strengthening customer feedback
management. Conflict resolution
capabilities are managing stress calmly ,
controlling emotions and respecting
differences. Creative thinking capabilities
include understanding of thinking processes
and ability to implement them. Decision
making capabilities are finding change
opportunities to create value. This creates a
temporary competitive advantage.

27STRATEGIC MANAGEMENT IN COLES SUPERMARKET
SWOT Analysis. What are the strengths weaknesses opportunities and threats to you
company?
Strengths  It has the lion’s share in domestic markets of Australia
with unmatched advertising and branding.
 It offers attractive price strategies and launches
successful promotional campaigns .
 Has impressive online ordering, delivery and pick-up
services across the world having 800 plus stores and 1
lakh employees.
Weakness  Coles has negative publicity surrounding hard –line
negotiation with Australian suppliers which has
marginally hurt the public sentiments towards Coles
 As compared to its competitor Woolworths , Coles

28STRATEGIC MANAGEMENT IN COLES SUPERMARKET
operates on lower margins.
Opportunities  To execute sponsorship and marketing exercises to help
the business of Coles to grow.
 To help in geographic expansion of Coles market to help
the market reach out to newer regions globally.
 To seize greater control of the supply chain to extract
greater produce and profits. (Lawley, Birch & Craig,
2016).

29STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Threats  Intense competition has led to food prices going down to
low levels.
 Consumers are getting confused between different
generic brands due to lack of clear distinctive
communication.
 Due to convenience, a section of buyers are shifting to
independent and smaller retailers than Coles.

30STRATEGIC MANAGEMENT IN COLES SUPERMARKET
STRATEGIC OPTIONS
Coles needs to establish and formulate an extensive and positive work culture so that
employees feel belonged to the company and towards other employees. Some strategic
options are
 Market development – it is a growth strategy to develop new segments of products .It
targets non-buying customers in currently targeted segments . Coles follows a
strategy of lowering of prices of products to attract customers and develop markets.
 Product development – it involves modifying an existing product to satisfy a new
customer or niche market segment. Coles implements integrity in its products to
satisfy the Australian customer base.
 Diversification- it is expanding the current market to increase sales of a
product .Coles diversifies its products by forging partnerships with Woolworths ,
Aldi and other major supermarkets.
 Cost leadership – it means establishing a competitive advantage by having lower costs
of operation. To implement cost leadership, Coles has been freshening up its
marketing and loyalty programs including price reductions.
 Differentiation- it is the process of distinguishing a product from its contemporaries to
make it more attractive in market. Coles uses its brand image for product
differentiation.
 Acquisition /Joint venture- it is a partnership where each entity contributes something
while gaining mutual benefits. Coles has entered into a joint venture with an
Australian property investment firm ISPT or Industry Super Property Trust. Coles
will retain a 25% share while ISPT will get a 75% share of property.

31STRATEGIC MANAGEMENT IN COLES SUPERMARKET
STRATEGIC RECOMMENDATIONS
Based on the above strategic options, some recommendations could be provided
which would help in dealing with the above issues. Issues in market and product
development can be sorted by improving on-shelf availability of products, combining
decreased price with increased absorption of cost to deliver quality products to consumers.
Diversification issues can be solved by expanding the market into the Wesfarmers group.
Coles can solve its cost leadership issues by reducing costs of products below their
competitors and charge lower prices than its competitors. To solve product differentiation
issues, Coles has been investing in innovating its private label products. To solve issues
regarding acquisition of Coles with ISPT, it can ensure it retains flexibility and control of
assets by enhancing in-store experience of customers.

32STRATEGIC MANAGEMENT IN COLES SUPERMARKET
REFERENCES
Ariyawardana, A., & Collins, R. (2013). The Competitive Landscape of the Australian
Vegetable Industry.
Arup, C., Beaton-Wells, C., & Paul-Taylor, J. (2017). Regulating supermarkets: The
competition for space. UNSWLJ, 40, 1035.
Biddle, I. (2016). The Wesfarmers/Woolworths duopoly war: The Bunnings vs. Masters
battle. Busidate, 24(3), 3.
Grimmer, L. (2018). Coles shifts away from ‘annoying’price-focused Down Down with new
wholesome slogan: Interview with Alana Mitchelson.
Grimmer, L. (2018). The diminished stakeholder: Examining the relationship between
suppliers and supermarkets in the Australian grocery industry. Journal of Consumer
Behaviour, 17(1), e13-e20.
Knox, M. (2015). Supermarket monsters: The price of Coles and Woolworths'
dominance (Vol. 6). Black Inc..
Lawley, M., Birch, D., & Craig, J. (2016). 20 Managing sustainability in the seafood supply
chain. A Stakeholder Approach to Managing Food: Local, National, and Global
Issues, 284.
Martin, P. (2015). Duncan Phillips-Chemmart: From Cambridge to Coles and now
Chemmart. AJP: The Australian Journal of Pharmacy, 96(1144), 20.

33STRATEGIC MANAGEMENT IN COLES SUPERMARKET
Perrone, A., & Wodonga, T. A. F. E. (2015). Centralian College: Creating a strategic
marketing plan for long-term growth. Marketing, 85.
Sutton-Brady, C., Taylor, T., & Kamvounias, P. (2017). Private label brands: a relationship
perspective. Journal of Business & Industrial Marketing, 32(8), 1051-1061.