Coles Supermarket is a leading Australian retail chain of liquor, fuel and convenience. It was acquired by Wesfarmers in the year 2007. The sole purpose of the company is to give a trustworthy experience to the Australians by delivering quality, value and services. The company at present has 741 stores and has employed over 100,000 employees. At Coles, the employees hold up their standards of service and the buyers and suppliers are encouraged to follow ethical policies and the working strategies which are fair and complies with the code of conduct (Merrett & Smith, 2012).
This report will evaluate the market segments and decision making strategies for Coles Supermarket in Australia and will also evaluate the present competitors of this company in the markets.
Growth and Profitability
The company’s main sources of business include756 full service supermarkets, nearly 800 liquor markets, 636 fuel and convenience stores and more than 99,000 team members. According to the report presented by Wesfarmers for the year 2013, the company had revenue of $35.8 million and the return on capital rose from 8.7% to 9.5%. This year marked the total food and liquor sales growth of 5.5 percent and comparative store sales growth of 4.3% (Bloore, 2010).
The investment in the customer value has been funded from cost reductions and business efficiencies. The company is also working in the direction of improving its product quality simply by incorporating continued investments in the fresh categories of the products. The firm has readily expanded its business by launching 90 stores in renewal format and has opened 6 larger format stores too. The company has also progressed through multi channel initiatives like the new Coles online website through which it has been able to connect with the customers and suppliers present in the remote areas.
The above graph depicts the comparative growth of the food and grocery sales of Coles and Woolworths for the years 2012-214. The graph unveils that Coles has managed to retain a higher position in terms of sales when compared to this leading competitor in all the four quarters of the three consecutive years (Australian Government, 2004).
Macro-environment Analysis
The macro environment analysis is conducted in order to explore how external factors influence the working of the organization. The best macro-environment used in this case is the PESTLE analysis in which the impact of the Political, Economic, Social, Technological, Legal and Environmental factors is critically analyzed.
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PESTLE Analysis |
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Political Factors |
The company is a part of Supermarket Chain industry and this chain has a capability to attract a great deal of attention from the government and the non-governmental organization. Coles provides a myriad range of employment to the citizens of the country. The company positively contributes in the community where its business is established (Knox, 2015). Cole is functioning in a politically stable country which provides the company with suitable growth opportunities. Government initiatives and subsidies for local procedures and foreign export activities also influence a firm’s internal workings. |
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Economic Factors |
The condition of the company has declined due to global financial issues and prolonged recession periods. The company faced major loss during financial crisis in UK, leading unemployment to nearly 30,000 people. Competition from other countries leads to competitive rivalry. The mergers and acquisition of big players in the Supermarket Chain Industry also play a crucial role. |
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Social Factors |
The changing tastes of the people and a shift towards the better and healthier lifestyle along with unique dietary requirements. The Australian government is playing a pivotal role in promoting a healthy living and positive culture in the country which is indirectly increasing market area for Coles. The company has kept the social trends into consideration and has launched loyalty program which has earned an increased number of members for the company. |
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Technological Factors |
The increased use of Internet and social media sites has reduced the promotion costs of the company by providing it a great platform to reach maximum customers. The company has invested a good capital on online sales and promotions and hence been able to attract young customers which have subsequently increased the sales. The self-service checkout has allowed the customers to avoid standing in long queues. The RFIDs of the products ah helped the managers to effectively manage the inventory and even keep an account of the available stocks at the stores. |
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Legal Factors |
The flexible taxation policies of the Australian Government have allowed the company to include number of reformations in the company (Shah, 2011). The recruitment and the employee management policies have allowed the firm to maintain a transparency while employing a candidate for a certain position. The country’s regulations have also allowed the availability of high quality of products at the store. |
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Environmental Factors |
The environmental laws of the country have compelled the company to align its activities in close compliance to the environmental standards. The environment organization has encouraged Coles to reduce wastage of the natural resources and even minimize the carbon footprint of the firm (IBISWorld, 2017). The increasing trend of sustainability in business has encouraged the company to source the food items using only ethically sound approaches. This establishes a socially responsible image of the company. |
The concept behind a successful market segmentation strategy is that the firm is able to anticipate the challenges in the markets and hence create a strong market position that the competitors are unable to attack. Coles has an access to a great geographical diversification and hence has been able to target a number of customers with few promotion strategies only. The mass customization of products has allowed the firm to improve the customer’s relationship and build a strong image that is far better than the other competitors in the markets (Sky News, 2015).
This leader of the Supermarket Chain industry of Australia has particularly focused on that segment of the population who generally wants all the products and daily commodities under a single roof. Coles have provided a number of solutions for the people of all the economic levels and even for the ones who cannot spare a lot of time for shopping. The services at the stores are both faster and satisfying.
Australia is a developed country with a stable economy and hence the standard of the living of the citizens is high. The government of the country provides all possible support to the citizens and the economic conditions are favorable for a rapid growth for the supermarket. Hence, the products sold at Coles are aimed at the higher classes of the society. Being a part of the developed economy, the Australians have a high disposable income and the prime reason behind the increasing growth of the supermarket is the high purchasing power of the citizens (Chung, 2016).
Coles aims at the social development of the people and even try to focus on their environmental needs. The prime strategy of the firm is to increase the market share for the future and for this it targets a wide range of consumers. The advertising strategies of the company attract the people of all the age groups. The prime strategy adopted by the firm to approach the people is the mass customization of the product. The researches have shown that in a stable economy like Australia, around 75% of the people prefer to purchase goods from the supermarkets (McMullan Conway Communications, 2011).
The primary target markets for the company thus are the people falling under the age group of 25-40 years, earning well and even have different cooking habits. Such people are easily satisfied with the services of the company. On the other hand the secondary target markets for the company are the children and youth falling under the age group of the 10-25 years. The company also targets the people with middle and low income levels at the secondary level. This group is targeted by a number of tempting food items, fitness equipments and other toys and playing stuffs. The company provides these target consumers with special offers over certain items matching up with their personality and requirements (School, 2011).
The target markets play a crucial role in determining which decisions are to be taken first than the others on a priority basis. A close analysis of the consumer behavior is crucial in determining the prime decisions of a company and even its success rates in the coming future. The level of involvement the primary target market is likely to have in the decision making processes of the Coles is being clarified in the coming paragraphs.
At present the company prices and products are entirely based on the demands and income levels of the highly earning population of the company. The company offers top quality fresh fruit, vegetables, seafood, meat and a wide range of special diet food. As the company has believed in targeting the people with good earnings, hence it has been observed that the prime reason of increment in sales for the firm is the primary target consumers of the company and to retain and increase the sales further is company will definitely involve these target markets in the prime decisions in the company (Regional Australia Institute, 2015).
The question arises why this high level of involvement is required and the most appropriate answer to this is that as the competition in the Supermarket Chain Industry is rapidly growing day by day, so a company could only succeed if it has all its products and services aligned to the precise needs of the customers and their changing requirements. And, in order to analyze these changes, the company needs to gather regular feedbacks alongwith the suggestions from the primary customers. But this doesn’t mean that the primary customers have the capability to entirely alter the core working strategies and the pivotal cultural ethics of the company. The role of the target consumers in decision making processes could be restricted only to provide innovative suggestions and critically analyze the any new product or service in the market. The final decisions of the company should still lie in the hands of the most experienced and senior executives of the firm who are highly aware of the market trends and the upcoming challenges in the Supermarket Chain Industry (ACT, 2015).
The Australia’s Supermarket Chain market is the most concentrated one and the 80% of the supermarket sales is due to Woolworths and Wesfarmers. Apart from this, 60% of the alcohol retail, 50% of the petrol and 40% of all the other retail are accounted by these two players. Due to this large share, both of the companies exert a great pressure and influence over the other small independent players in the market such as IGA, Foodland, 7- Eleven, etc. So it could be easily concluded that there is only one major competitor of Coles in the Australian markets and that is the Woolworths. The other direct competitors include the Aldi, Metcash and Costco (Knight, 2015).
Both the competitors, Coles and Woolworths are large and vertically integrated retailers who entirely operate their businesses throughout Australian markets. Following both of them is another retailer, ALDI, which is another vertically integrated retailer operating particularly in NSW, ACT and Queensland. In case of Franklins and IGA, the former is owned by Metcash and the latter receives its packaged products only from the Metcash. The next position in the competition is taken by the Costco which is again a vertically integrated retailer which operates in NSW, VIC and ACT. There are few non-supermarket retailers, categorized as “Specialty retailers” who sell standard and specialized groceries in few ranges like bakeries, fishmongers, butchers etc. there limited customer bases make them stand at the last rank of the prime competitors’ list.
The above table shows the market share of the Coles in the Grocery Industry as compared to the other competitors in the market. At present, Coles has a market segment of around 31% and the entry of ALDI has primarily come at an expense of the other independent retailers in the markets (Schoff, Moritz, & White, 2014).
The prime strengths and weaknesses of Coles as compared to its competitors are:
In the above positioning map, all the competitors displayed are ones that offer high quality products and follow the low cost strategy at the same time. (Speedy, 2011) It is revealed here that the Coles alongwith the Woolworths has more than 66% of the entire market share in the Australia. Both the competitors have a wide range of products to target myriads of market segments and also have a nationwide distribution. Thus, both of them have a large proportion in the market share. As the IGA has entered the markets in 1988 and even has a wide range of products, like the topmost leaders, hence it has managed to maintain a market share of 14%. The justification for this position of Coles is its marketing strategy of cutting costs by simply improving its supply chain management and also by incorporating a number of transformations in its IT sector on a regular basis (Sandeep, 2012).
References
ACT. (2015). Submission to Select Committee on ACT Supermarket Competition Policy: Coles Supermarket. Retrieved from https://www.parliament.act.gov.au/__data/assets/pdf_file/0019/375022/08._Coles_Supermarket.pdf
Australian Government. (2004). Coles supermarkets—energy improvement in action. Retrieved from https://buildgreen.co.nz/projects/eebp-coles/Coles_case_study20040907111052.pdf
Bloore, R. (2010). Case study: Coles Supermarkets . Retrieved from https://www.brassrazoo.com.au/casestudy/Brass_Razoo_Fujitsu_Case_Study_Coles.pdf
Chung, F. (2016, March). Woolies loses its crown to Coles. Retrieved from https://www.news.com.au/finance/business/retail/woolies-loses-its-crown-to-coles/news-story/7bb6c835a3ade9386221c7c6789809f4
Dunford, R., & Palmer, I. (2012). Strategy for successful entry into a concentrated and highly competitive market. Retrieved from https://www.anzam.org/wp-content/uploads/pdf-manager/2374_DUNFORD_RICHARD_BSP-01.PDF
IBISWorld. (2017, January). Supermarkets and Grocery Stores in Australia. Retrieved from https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/food-retailing/supermarkets-grocery-stores.html
Knight, E. (2015, June). Woolworths v Coles – the report card is in. Retrieved from https://www.smh.com.au/business/comment-and-analysis/woolworths-report-card–plenty-of-room-for-improvement-20150625-ghxo9q.html
Knox, M. (2015, June 13). Supermarket monsters – Woolworths and Coles too big to let fail. Retrieved from https://www.smh.com.au/federal-politics/political-opinion/supermarket-monsters–woolworths-and-coles-too-big-to-let-fail-20150611-ghlg2v.html
McMullan Conway Communications. (2011, March 21). Coles makes its play in toughest market. Retrieved from https://insurancenews.com.au/analysis/coles-makes-its-play-in-toughest-market
Merrett, A., & Smith, R. (2012). The Australian grocery sector: structurally irredeemable? Retrieved from https://law.unimelb.edu.au/__data/assets/pdf_file/0003/1682805/Session2-MerrettSmithpaper2.pdf
Regional Australia Institute. (2015). Coles and a Prosperous Regional Australia. Retrieved from https://www.regionalaustralia.org.au/wp-content/uploads/Coles-and-a-prosperous-regional-Australia_Final-October-2015.pdf
Sandeep, K. (2012). Analysis of the grocery industry Coles Supermarkets. Retrieved from https://www.academia.edu/4615254/Analysis_of_the_grocery_industry_Coles_Supermarkets?auto=download
Schoff, P., Moritz, S., & White, E. (2014). Competition in the Australian Grocery Industry. Retrieved from https://www.minterellison.com/files/Uploads/Documents/Publications/Articles/Pub_A_20140307_CPI_Comp_Grocery_Schoff.pdf
School, U. B. (2011, March 29). Milking the Market: What’s Behind the Coles Woolworths Price War. Retrieved from https://www.businessthink.unsw.edu.au/Pages/Milking-the-Market-Whats-Behind-the-Coles-Woolworths-Price-War.aspx
Shah, P. (2011). The marketing Environment and marketing analysis. Retrieved from https://studentvip-notes.s3.amazonaws.com/2580-sample.pdf
Sky News. (2015, October 22). Coles expands market share. Retrieved from https://www.skynews.com.au/business/business/national/2015/10/22/coles-lifts-1q-food-and-liquor-sales-4-7-.html
Speedy, B. (2011, February 1). Coles strengthens sales growth against arch-rival Woolies. Retrieved from https://www.theaustralian.com.au/business/coles-strengthens-sales-growth-against-arch-rival-woolies/news-story/887dd562549ff2588e2588fcf157c7a8
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