Strategic management is the process to determine the objectives and formulate the strategies accordingly so that an organization can attain those objectives. Before developing these strategies, each and every company analyzes its internal and external environmental factors which support or affect its growth in perspective industry (Doz, 2017). The major objective of this report is to analyze the Australian supermarkets. The given case study shows that there are various players in Australian supermarket industry like Coles, Wesfarmers, Woolworths and IGA etc. which are operating their businesses successfully. For this discussion, Coles is chosen that is operating its business operations in Australian retail industry. The company is using effective strategies and tactics so that it can stay competitive in the industry.
Coles Supermarkets Australia is one of the most popular retail chains in Australia that is headquartered in Melbourne as a part of Coles Group. The company actively deals in offering retail services and consumer products to the targeted population in Australia. It was founded in the year 1914 in Collingwood, Melbourne by George Coles. Further, it was purchased by Wesfarmers in 2007 with the ownership transfer. It operates more than 800 retail stores across Australia, including many re-branded BI-LO Supermarkets (Coles, 2018). It has more than 100,000 employees and along with competitor Woolworths accounts for approximately 80% of Australian industry. This firm is operating its business in Australian retail industry that has become unpredictable over past few years. Currently, the industry is growing at a growth rate of 2.2% that is continuously increasing due to rising demands for organic vegetables and fruits, premium food products etc. This industry is facing various challenges such as digital disruption; growth of e-commerce retailers, people’s spending on online retailers etc. (Clark, 2018). It is asked to analyze this case so that it can be analyzed and found who the strongest player in Australian supermarket industry is and who will win.
PEST Analysis: Political/Legal Factors
In the last five years, there have been major changes in the political environment in Australia that have different impacts on supermarkets and retailers. There are various political forces which had adversely affected in Australia but Australian retail industry received a set blow while government recently introduced a campaign which proposed to stop well-emerged firms like Woolworths from eradicating the smaller retailers via unfair rivalry for market. It is profitable for the growth and development of Coles in Australian supermarket industry. Moreover, the federal government came with the Australian Competition and Consumer Commission that is regulating the retail industry. The changes in its policies will open up the sector to competition. It is very important for Coles to develop strategies by considering these policies and changes in rules (López-Gamero and Molina-Azorín, 2016).
In Australia, current changes and trends in economic environment has reduced the purchasing power of customers. The most negatively impacted products are flexible goods and customers are moving towards private labels so that they can save the costs. It has enabled these firms to compete in the market based on lower prices. Offering of private labels by Coles Supermarkets to compete based on choice convenience that is providing its consumers a low cost alternative (Mortimer, 2017).
One of the major social trends is raising concern towards well-being and health, showed in shift towards health and organic products. This trend may provide an opportunity for Coles because there are very few retailers which are selling organic food. Moreover, there is an increase in the number of time sensitive customers in Australia. Considering this concern, Coles Supermarkets can offer more accessibility to the people as much as possible. This is the reason that this retailer introduced Coles Express in Australia.
In past few years, there were fast changes and advancements in the technological environment in Australia. Customers are shifting towards online shopping as they are actively using smartphones and exploring e-commerce sites. Even Coles has introduced its online services that offers “click & collect and home delivery services. These factors are profitable for the growth of Coles as it is using modern technology to track the processing of its inventory.
Thus, there are various factors in Australia which have huge impact on the growth of supermarket industry and its players including Coles Supermarkets (López-Gamero and Molina-Azorín, 2016).
Life Cycle Industry Analysis
By analyzing the given case study and Australian Supermarket Industry, it can be stated that this industry is now on the growth stage of industry life cycle. By looking at the industry and its players, it can be stated that profitability of Australian supermarket is increasing now. There are various players such as Woolworths, Wesfarmers, Coles, Aldi and IGA etc. which are using effective strategies so that they can enhance the overall profitability of industry. There is an improvement in the features like Coles has introduced its online services which has provides the customers convenience and easiness to shop their grocery products. It has led the industry players to enhance the overall value to customers (Wheelen, et al, 2017). Considering the demands of customers and competition, companies are reducing the prices of products. As supermarket industry is at the growth stage, its revenues are continuously rising and generating positive cash flows.
Industry Rivalry (High)
With more than 140,000 retail stores in Australian supermarket industry, the degree of competition is very high. This rivalry in Australia is the direct outcome of number of players in industry and lack of differentiation in the products and services offered (Dobbs, 2014). The major determinant of competition level is the prices of products, however choice of products and location of stores have significant role. Woolworths is the biggest competitor of Coles Supermarket in Australian industry that is operating its business as market leader. The competition in this sector will be increased in the future because of entry of new local and international players like ALDI and IGA. Moreover, there is the expansion and growth of private retailers like Action and IGA (Keith, 2012).
Currently, bargaining power of buyers is low in Australian supermarket industry, but it will be to increase in the near future. Currently, Woolworths and Coles are the major supermarkets where people can shop their retail and grocery products. In future, a push by ACCC and government to reduce the entry barriers is set to enhance the bargaining power of customers as there will be entry of many retailers. Moreover, there is an emergence of the price comparison sites where people can compare the prices of different retailers and select cheapest option (Thornton, et al, 2017). Thus, these are the factors which can bring the future bargaining of customers to moderate degree.
In Australian supermarket industry, bargaining power of suppliers is very low as Coles and Woolworths are the major players that have control 80% of Australian market’s share. Therefore, country’s suppliers have limited choice of mediators to choose in the market. Suppliers’ bargaining power changes depending on the size of supermarket and brand reputation of suppliers. Some of the large suppliers are such as British American Tobacco, Coca Cola that hold robust power (Lasserre, 2017).
In this market, threat of new entrants is low as it has already well-established players which have made new entry very complex. It is very difficult for new entrants to enter in this market. Behind this, there are many reasons such as compliance with licensing rules and regulations, intense competition, extensive market research and higher capital requirements etc. In this industry, new entrants need to compete with the economies of scale of Woolworths and Coles (KPMG, 2018).
Threat of substitutes is high in Australian supermarket industry as there is the availability of various substitutes for the retail customers. These substitutes are such as online stores, convenience stores, grocery stores, fresh food and vegetable market etc. In this nation, the people are ready to shop grocery products at comparatively higher prices for convenience like easy parking, close to their houses and no waiting time etc.
Thus, the above Porter’s five forces have concluded the industry attractiveness for Coles Supermarkets. Recently, the attractiveness of industry for Coles is moderately high in the sector. The main reason behind this is the higher entry barriers in this market and moderate bargaining power of customers (Cooper, 2018). It can be seen by looking at the increased profitability of Coles in Australian Supermarket industry.
Effective Supply Chain
Efficient supply chain of Coles is both a capability and resource in its outbound and inbound logistics. The considerable cost saving offered by supply chain allows Coles to compete with Woolworths (Chan, Ngai and Moon, 2017). The extent of this competency is important for management and implementation of strategies.
Even there will increase in the recession and rate of inflation but still Coles has attained a significant growth. It has made a great contribution to the senior management of Coles. Its senior management is an important resource which is allowing it to compete with other competing firms in Australian retail market.
The brand image of Coles has been developed over various decades and it was attained via positive experiences of customers. It can be attributed to the rigid quality evaluation which exists in the organization (Rothaermel, 2015).
VRIO analysis of Coles Supermarkets is conducted below:
|
Resources |
Valuable |
Rare |
Imitable |
Organization |
Advantage |
|
Brand Image |
Yes |
Yes |
No |
Yes |
Sustainable |
|
Technological Capability |
Yes |
Yes |
No |
Yes |
Temporary |
|
Quality |
Yes |
Yes |
No |
Yes |
Sustainable |
|
Qualified Team |
Yes |
Yes |
No |
Yes |
Sustainable |
|
Cost effectiveness |
Yes |
Yes |
Yes |
Yes |
Sustainable |
|
Efficient Supply Chain |
Yes |
No |
Yes |
Yes |
Permanent |
|
Senior Management |
Yes |
No |
Yes |
Yes |
Sustainable |
The brand image of Coles is valuable as it provides substantial differentiation from competing brands and contributes to the higher satisfaction level of customers. However, competitors also have the potential to offer higher quality products. So, this is not a distinctive competitive edge for Coles.
At Coles, all the various resources and capabilities are rare expect senior management and efficient supply chain process. Top management cannot be considered rare as many of the companies have the potential to establish a capable top management (Knott, 2015).
Coles owns various resources and capabilities which cannot be copied by other firms in Australian supermarket industry. Technological innovation is one of the most significant resources that other players cannot imitate. It is very important for the company to ensure that it uses exclusiveness in its resources and capabilities.
It indicates that the company has managed its resources and capabilities in an effective way so that it is able to deal with the competitive threats and other external factors.
As mentioned in the above industry rivalry force, Coles is facing intense competition in Australian supermarket industry. The price is the major competitive threat that is affecting the business operations of Coles. Woolworths is the organization that is offering its products on possible lowest prices that can affect the customer base of other companies. Moreover, a German retailer Aldi is another player that is offering a wide range of products to its targeted population all over the world (Keith, 2012). Thus, it can be concluded that Australian supermarket companies are competing on the basis of prices, store location and product and services offered by them.
The business level strategies which are adopted by Coles are differentiation and cost leadership strategies. This organization implements its brand image to differentiate and effective supply chain so that they can minimize the costs of its products. By using cost leadership strategy, Coles ensures that it provides value to customers at lowest possible cost. Moreover, it has created its brand reputation by offering significant value and higher level of satisfaction to customers. Thus, by integrating cost leadership and differentiation strategies, Coles is able to gain significant competitive advantage against competing brands. However, both of the strategies are working in positive way but still company can adopt more strategies. In the future, the company should adopt business expansion strategy so that it can increase its brand presence in other foreign markets. Moreover, it should focus on using most effective business and corporate level strategies so that it can stay competitive in Australian supermarket industry (Hill, 2017).
From the above analysis, it is hereby recommended that Coles Supermarket should embrace advancement in technologies so that it can attain its strategic and business objectives. In Australian supermarkets, there is a growth in the number of online stores so Coles should focus on upgrading its e-commerce site and offer variety of products. Additionally, the company needs to analyze the needs and demands of customers and then introduce new products in its product range. In the future, if there will be the situation of economic turmoil then Coles should streamline its operations to make the cost savings that will allow the organization to have extra funds for spending. By doing this, the company will be able to overcome the competitive threat posed by Woolworths Company and it can win the Australian Supermarket industry.
Conclusion
From the above analysis, it can be concluded that Coles is one of the strongest players in Australian supermarket industry. By using different frameworks, internal and external environments of the company are analyzed. It indicates that company has moderate environment in Australia where it can continue its business to generate more profits and revenues. Industry environment of the company is moderately attractive where it is facing intense competition from Woolworths. Currently, Woolworths is the player that is winning Australian Supermarket industry, but Coles can win by using effective strategies and marketing tactics in the future.
References
Chan, A.T., Ngai, E.W. and Moon, K.K., 2017. The effects of strategic and manufacturing flexibilities and supply chain agility on firm performance in the fashion industry. European Journal of Operational Research, 259(2), pp.486-499.
Clark, G., 2018, Research: Key challenges for retail sector unveiled, Available from https://www.retailbiz.com.au/latest-news/research-key-challenges-for-retail-sector-unveiled/ [Accessed on 7 December 2018].
Coles, 2018, Coles Supermarkets, Available from https://www.coles.com.au/ [Accessed on 7 December 2018].
Cooper, R., 2018, Challenges and opportunities of retailing in 2018, Available from https://www.retailbiz.com.au/topics/trends-research/challenges-opportunities-retailing-in-2018/ [Accessed on 7 December 2018].
Doz, Y.L., 2017. Strategic management in multinational companies. In International Business (pp. 229-248). Routledge.
Dobbs, M., 2014, Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function. Macmillan International Higher Education.
Keith, S., 2012, Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, 47-81.
Knott, P. J., 2015, Does VRIO help managers evaluate a firm’s resources?. Management Decision, 53(8), 1806-1822.
KPMG., 2018, Future of retail in Australia, Available from https://home.kpmg.com/au/en/home/insights/2018/04/bernard-salt-next-5-years-retail-future-australia.html [Accessed on 7 December 2018].
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
López-Gamero, M.D. and Molina-Azorín, J.F., 2016, Environmental management and firm competitiveness: the joint analysis of external and internal elements. Long range planning, 49(6), pp.746-763.
Mortimer, G., 2017. Why Australian supermarkets continue to look to the UK for leadership. The Conversation, (20).
Rothaermel, F. T., 2015, Strategic management. McGraw-Hill Education.
Thornton, L.E., Crawford, D.A., Lamb, K.E. and Ball, K., 2017. Where do people purchase food? A novel approach to investigating food purchasing locations. International journal of health geographics, 16(1), p.9.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy. pearson.
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