Coles is one of the most renowned supermarket retailer in Australia. This report is based on case study of Coles. The case study reveals what type of challenges Coles face due to entry of new retailers. The report brings out a glimpse of the strategic analysis of Coles just to identify what type of corporate strategy Coles should adopt to achieve an image of retail leader in the Australia’s retail industry. The BCG matrix and growth metric is used to identify the best-suited corporate strategy (Grant, 2016). In the end, the report is concluded with recommendation for Coles. The business strategy can be achieved mainly through two factors either through cost leadership or differentiation strategy whereas the decision of corporate strategies depend on the internal and external environmental analyses. The corporate strategy is formed to sort and resolve the company`s weakness or threats to attain long-term sustainable success (Deloitte, 2012).
Coles has been developed as one of the pioneering retailer in the retail sector of Australia (Coles annual report, 2016). It is renowned for its fresh food providing and efficient groceries, general merchandise, liquor and fuel, and financial services. The company operates more than 21 million customer transactions in a week throughout the national store network (Coles annual report, 2016). In addition to this, the company has a network of 865 liquor stores, 787 supermarkets, 89 hotels, and 690 convenience outlets in the nation. It has more than 140000 retail stores in Australia that contribute to approx. 4.1% to GDP Coles (annual report, 2016). The retail industry of Australia employs more than 10.7% out of the total employment. Apart from retail sector, the company operates in finance service market, car life, credit cards, offering homes, and landlord insurance (Coles, 2015).
Before forming the business strategies, Coles has to undertake a strategic management analysis that includes external and internal analysis of Coles. Although Coles operate in Australian, retail industry but is still affected by the external and internal environmental factors. Under the external analysis of Coles, increasingly there are no government control above the duopoly among Coles and Woolworth (Tan, 2012). The ACCC (Australian competition and consumer commission) has introduced several policy changes promoting competition in the industry. These legislative changes lead to include tax and regulatory environment to consider the factors while formulating strategies (Fels, 2015). The technological advancement in last 10 years use the smart system to improve the efficiency of the operation and check their progress. The financial crisis of 2008 still has a little effect on purchasing power of the consumers. The flexible goods are more affected due to allowed private label based on lower price while generating huge profit margin. Some provisions of private label by Coles enables the company to compete in the supermarkets due to its choice of the customers (Meyers, 2010).
The internal analysis helps to identify Cole’s competencies. Undoubtedly, the Cole supermarket combines the capabilities, which has retained unique and sustainable position to build core competencies of the organisation (Epstein, 2018). These core competencies develop strategic values to the organisation and ensure the maintenance of advantage over the competitors. The internal analysis highlights and evaluates the ability of supermarket to deploy the resources. It includes SWOT analysis and VROI analysis. Some of Cole’s core competencies are highly effective supply chain, effective top management, brand reputation, suitable advantage, and effective top management (Mortimer, and Grimmer, 2018). Efficient supply chain of Coles has both resources and capability in its inbound and outbound logistics of supply chain. The competent top management directs the Coles by current changing economic conditions and constantly achieving high growth (Coles annual report, 2016).
Corporate strategy is the path through which an organisation takes the objective to achieve business success in a sustainable manner. Recent approaches and models have focused on the need to manage the change according to the business environment (Epstein, 2018). The company forms the strategy to offer value to the customers by lowering their price in the weekly shopping baskets that improves the quality by delivering fresh goods. The values promotes the strategy by driving the behaviour to build and maintain long-term relationships with the suppliers and other stakeholders. The company strikes such strategies that they could provide with the best shopping experience for their customers. Corporate strategies contribute to create long-term sustainable value for the business (Epstein, 2018). Coles strives continuously to improve the way of operating and running the store smoothly to look whether the team members are available to serve the customers (Rugman, and Verbeke, 2017).
As per the recommended case study, Coles has been facing challenges by the Metcash brans since many years. Moreover, recently the entry of low cost German brand Aldi is serious challenge faced by Coles. The rise of Aldi in early 2016 was big challenges faced by Coles. Before a decade, when Coles was outperformed by Woolworths (Coles annual report, 2016). It lead to changes when acquired by Wesfarmers because it was having huge resources to throw at the retail sector. This corporate strategy of conglomerating with Wesfarmers. This collaborating lead to provide funds to the Coles to improve and makes changes. Competition between Woolworths and Coles remains hostile. Although, there is less strategic difference between Coles and Woolworths especially in relation to moves and prices (Fels, 2015). Both Coles and Woolworths strive to establish the stores in a populated area. The supply chain of both the rivals is very well established. Another aspect of operations is constraint to alternative market share because it becomes very difficult for small retail players to operate if the prices of its goods are higher (Sarma, 2014).
The core corporate strategies that Coles have adopted includes the integration of differentiation strategy cost leadership. Coles gets the advantage of its brand reputation to differentiate and improve the supply chain to achieve minimisation of cost of the products. Cost leadership strategy ensures that it offers real value to customers at lowest cost possible without hampering the quality of goods. Low cost strategy make sure that by producing products that have few superfluities usually demonstrates superior quality with limited selection (Thiel, 2012).
The integration of cost leadership and product differentiation strategy will lead to ensure that product possess from good to excellent product feature. The generic integration of strategy ensures that Cole supermarket will invent and coin new actions, which will offer value to customers (Sarma, 2014).
The corporate-level strategy of Cole supermarket is to emerge as a market leader in Australian retail sector. Wesfarmers is trying to focus the strategies which would help in diversifying the portfolio of value added services and new products (Haskova, 2015). Wesfarmers portfolio management focuses on finding and identifying the investment opportunities in value added services. Moreover, It`s strategies focus on diversifying its portfolio of products across various industries (Biddle, 2016).
Corporate strategy focuses on strengthening the existing industries and identifying the growth opportunities and sustain them until the successful business operations are conducted. Although there are several tools, through which the strategic position of the company can be analysed such as Growth Share Matrix, Business position matrix, PIMS (profit impact of Market strategy), BCG (Boston Consulting Group) matrix, Product portfolio Analysis, GE9 cell matrix and Hofer`s product Market evolution matrix. However, most commonly used strategic tool used to analyse corporate strategy is BCG matrix (Jarzabkowski, and Kaplan, 2015). BCG is a framework, which is most appropriate to analyse the strategic position of Coles brand portfolio. Currently, the company has substantial market share, which indicates that company utilises, spends more cash, and subsequently receives substantial returns (Rolbina, 2016).
Cost leadership is achieved by economies of scale that the company applied during the production. The growth rate of market share is comparatively small in 2011 where the retail and grocery industry grew by less than 2%. To analyse the market share, a matrix known as growth share matrix is used to evaluate the relevant market share of Coles (Mortimer and Grimmer, 2018). The relative market share matrix has tried to differentiate the company`s situation and what decision should they adopt to get success. Star includes such situation where company is at its high growth. At the same time, it is the market leader and requires cash to invest. Question marks is the situation where company competes in high-growth industry but have weak market. The resources can be invested in them to improve their competitive positions. These companies operate with high market share in slow growing industries. These companies have limited long run growth industry and represent a source of current cash flows to fund the investments in star and question marks. These companies have weak market share in low growing industries. Many analyses recommend that they should be divested. The matrix is as follows-
High Cash generation Low
|
STARS Earning are low but stable and growing. The cash flow is neutral. The strategy invest in growth. |
QUESTION MARKS Earing are low, unstable, and growing. The cash flow is negative. The strategy is to invest to diverse the portfolio of brands or if has potential otherwise sell. |
|
CASH COWS Earnings are high and stable. The cash flow is high and stable. At this stage, the strategy can be to invest in either maintaining the current level or harvest. |
DOGS Earnings are low and unstable. The cash flow can neutral or negative. The strategy is not to invest more and divest. |
Coles belongs to Cash Cow category. The company should maintain its investment and growth opportunities in the current position in the market. Coles earns a good sum of money. Moreover, Coles earning is stable. The flow of cash is high and stable (Coles annual report, 2016).
Until now, many supermarkets have been using tradition budget costing method that do not give true reflection of inflation in the cost structure of a product. Coles should adopt Activity-based Budgeting method to improve the cost structure of similar product group and at the same time, the company should follow TQM (Total Quality Management) philosophy to maintain its quality of goods. The combination of both the techniques can be recommended to the company to achieve greater place in the market. Moreover, the company should grab the technological advancement in order to achieve strategic goals. As the Retail stores has been increasing in the Australian market. The entry of Amazon Australia is the biggest threat to Australian retail sector (Hatch, 2018).
Retail stores should promote and embrace social media and online retail store to expand its accessibility and grow the business. Although, Australian potential industry primarily include retail sector in its list. Majority of Australian GDP is contributed by this sector. However, resistance to change still characters Australian business (Phillipov, 2016). The retail sector of Australia has delegated the advantage of online platform to overseas retail organisation to attract the foreign investment. Moreover, Coles does not embrace changes fast as per the changing demand and preferences of consumers towards organic and healthy food products (Herrera, 2015).
Conclusion
From the above discussion, it can be summed up that the case study clearly asks to develop a corporate strategy that focuses to help Coles to stand first in all the competitors. This is the case of competitive rivalry and to attain the competent position, two most important factors should be considered such as cost leadership and differentiation strategy. Coles and Woolworth dominates the market but since 2016, the market has seen huge changes due to entry of Aldi and Amazon Australia (Hatch, 2018). The competitive rivalries has shaken the image of Coles and Woolworth. Low cost product differentiation and cost leadership has been constantly backing each other. As a part of recommendation, Coles should take better advantage of online platform.
References
Biddle, I. (2016) The Wesfarmers/Woolworths duopoly war: The Bunnings vs. Masters battle. Busidate, 24(3), p. 3.
Coles annual report, (2016) Coles 2016 year in review. [online] Available on: 04099/Downloads/Coles_Year_in_Review_2016%20(1).pdf [Accessed on 20/09/18]
Coles, (2015) Coles Annual report. [online] Available on: Downloads/467372_coles_annual_report_2015_18%20(1).pdf [Accessed on 20/09/18]
Epstein, M. J. (2018) Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. US: Routledge.
Fels, A. (2015) Current Issues in Competition Policy. Australian Economic Review, 48(4), pp. 410-416.
Grant, R. M. (2016) Contemporary strategy analysis: Text and cases edition. US: John Wiley & Sons.
Haskova, K., (2015) Starbucks Marketing Analysis. CRIS-Bulletin of the Centre for Research and Interdisciplinary Study, 2015(1), pp. 11-29.
Hatch, P. (2018) here is how little Amazon Australia sold in its first month of trading. [online] Available on: https://www.smh.com.au/business/companies/here-s-how-little-amazon-australia-sold-in-its-first-month-of-trading-20180803-p4zva4.html [Accessed on 20/09/18]
Herrera, M. E. B., (2015) Creating competitive advantage by institutionalizing corporate social innovation. Journal of Business Research, 68(7), pp.1468-1474.
Jarzabkowski, P. and Kaplan, S. (2015) Strategy tools?in?use: A framework for understanding “technologies of rationality” in practice. Strategic Management Journal, 36(4), pp. 537-558.
Meyers, M. (2010) Grocery Shopping Patterns In Melbourne, Australia. In Academy of Marketing Studies, 15(1), p. 53. Deloitte, (2012) Analysis of the Grocery industry; Cole Supermarkets Australia, Sydney, Australia. [online] Available from: https://www2.deloitte.com/au/en/pages/economics/articles/reforming-regulation-australian-food-grocery-sector.html [Accessed on 23/09/18]
Mortimer, G., and Grimmer, L. (2018) Love them or loathe them, private label products are taking over supermarket shelves. [online] Available from: https://theconversation.com/love-them-or-loathe-them-private-label-products-are-taking-over-supermarket-shelves-98465 [Accessed on 23/09/18]
Phillipov, M. (2016) ‘Helping Australia Grow’: supermarkets, television cooking shows, and the strategic manufacture of consumer trust. Agriculture and human values, 33(3), pp. 587-596.
Rolbina, E. S. (2016) Trade network’s product range management. Academy of Strategic Management Journal, 15, p. 83.
Rugman, A. and Verbeke, A., (2017) Global corporate strategy and trade policy. US: Routledge.
Sarma, P. K. (2014) An Agribusiness development approach of beef cattle in selected areas of Bangladesh. Journal of the Bangladesh Agricultural University, 12(2), pp. 351-358.
Tan, L. P. (2012) Intra-category competition, entry probability, and private label share: Evidence from organic food retailing in Australia. Asia Pacific Journal of Marketing and Logistics, 24(3), pp. 414-432.
Thiel, N. M. (2012) Value-for-money perceptions of supermarket and private labels. Australasian Marketing Journal (AMJ), 20(2), pp. 171-177.
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