Discuss about the Technology Changes and Grocery Market.
Strategic analysis is a process of performing research on the environment of business in which company operates to formulate the strategies (Gartenstein, 2018). This report is being prepared in order to inspect the industry of Australian Supermarket, emphasizing the strong performance and possible future growth. It recognizes the role of Coles Supermarket as a product retailer and an intermediary, its growth since last few years, along with its position as one of the leading supermarket in the industry. In order to identify this Macroanalysis, industry analysis, company analysis, competitor analysis, and strategy analysis of Coles will be performed.
Coles Supermarket is an Australian consumer service chain and retail chain with headquarter in Melbourne. The parent company of Coles is Wesfarmers. The supermarket was founded in 1914 by George Coles (The Law Society of New South Wales, 2018). It controls 801 supermarkets all around Australia, along with various now re-branded BI-LO stores. About 100,000 employees are working in Coles, and have around 80% market share of this industry. Home delivery and click and collect service are provided to the customers through Cole’s online shopping website (Wesfarmers, 2018). Today Coles offer fresh food, liquor, financial service, groceries, fuel, and general merchandise to approx. 20 million consumers every week through its online platform and store network. Besides having such huge network company is facing the challenge is the rise of Aldi which is a low-cost German brand.
The impact of macro environment is one every company. It involves various factors which are left unchecked, can finish a business (Frue, 2017). In order to abolish the impact of macro environment Pestle or Pest analysis is formed.
The political situation in Australia has a major impact on the retail industry and on the performance of Coles. As an example, the Australian Federal Government has introduced a policy of competition which prevents main self-governing companies like Coles and Woolworths in abolishing competition. The growing dominance of these key retailers has led to the struggle for small retailers to achieve in the industry (S&P, 2017).
The present economic climate has led to decrease in the spending levels, particularly with unrestricted goods. Therefore, customers are transferring to the brands with private label in order to save the cost. Consequently, supermarkets are increasing the number of private label products. This allows them to compete depending on the price while understanding the advanced margins. Facility of private labels also allows the supermarket to strive depending on the choice suitability, i.e. proposing a less costly alternative (Australian Food News, 2012).
One key social trend is the growing awareness in the direction of well-being and health, reflected in a program of healthy alternatives and organic produce. This movement provides an opportunity for Coles, as presently there are some companies in the industry providing organic foods, and organic foods sales are set to increase in the coming future.
There have been quick technological developments in the environment in the last few years. People and Companies are getting engage by using these smart technologies and systems in order to increase the operation’s efficiency and observe their growth. The use of advanced technology and computers is increasing in Australia for doing their shopping. Coles make use of advanced technology in order to track the stock process, and also observe the changes in the demand of the customer and taste (Sampson, 2014).
The industry life cycle can be observed that it follows the same stage as product lifecycle i.e. introduction, growth, maturity, and decline. The Australian supermarket industry is presently located at the maturity stage (CISION, 2018)).
Introduction Stage – The market growth rate at this stage is slow and alterations in the rate can be observed. The main concern for firms will be R&D and all the key companies will invest a lot of amount at this stage n allowance and discount, promotional activities.
Growth Stage – The products reach this stage because the more customers come to know about the products and ask retailers to place big orders. The growth rate of the market becomes very high and alterations in the growth rate upsurges quickly. The key concern here will be production and engineering.
Maturity – At this stage, the growth of the sales gets slow or level off. The growth rate of the market is not so high and the alterations in the rate of growth decrease slowly. This maturity stage usually stays for a longer time as compared to the growth stage, and it provides tough challenges to marketing administration (Ingram, 2018)).
Decline – At decline stage, the growth rate of the market goes in a negative direction. The main concern at this stage will be finance and marketing. Most of the products and brand sales eventually dip. The decline can be rapid or slow. Sales may drop to zero, or it may fall to the lowest level where they remain for many years. Companies that identify themselves at this stage will have to adopt a strategy of asset reduction strategies.
The buyer’s bargaining power in this industry is low; it is fixed to grow in the future. The forceful push by ACC and the national government to decrease the entry barriers in the supermarket industry is set to raise the buyer’s bargaining power in the coming future because of entry of various companies in the industry. The development of the websites of price comparison will result in the increase in the bargaining power of the buyer in the industry which will convert it to a moderate level.
The supplier’s bargaining power is low in the industry due to Coles and Woolworths as they have 80% of the share in the market, hence the supplier has a less choice of mediators in the industry. In the production purchasers mostly Coles and Woolworths in the industry are the key purchasers, and many times the only buyers.
The substitute threat in the retail and grocery industry is high. Coles lace many grocery stores, farmers markets, and convenience stores. The indirect competitors create the major substitute threat to Cole supermarket. The convenience store has practiced major growth in recent times and is providing various selection options to customers. Through this, the supermarket of Australia is facing direct competition (Merrett and Smith, 2018).
There is huge competition in the Australian supermarket industry with approx. 140,000 retail stores. The high level of rivalry that is present in the supermarket industry is a reason of the retail stores are small in number and low observed change in the general nature of the services and goods provided in the industry. The price is the highest factor of the competition, while the location of the store and choice of product also perform the key role.
There is the low threat of new entrants in the supermarket industry. This is anticipated to stay like this in the coming future due to the zoning law’s indigenous agreements and other various agreements such as ownership, rent, and leasing. These laws have led to the shortage in the retail and grocery stores sites, particularly for the foreign companies who are looking for the venture in the retail and grocery industry.
The Coles supermarket capabilities are important when they are gathered together in an exclusive and justifiable manner that makes core competencies for the company, which grows and makes strategic value and confirms that the firm keeps a strategic advantage over its rivals.
The effective supply chain of Coles is both a reserve and a competence in the outbound and inbound logistics of the company (Supplier Portal, 2017). The considerable cost saving offered by the supply chain allows Coles to compete successfully with Woolworths.
The brand image of the Coles has been established over some decades and this was realized by optimistic customer practices. This can be recognized to the strict quality valuation that is present in the company. The brand of the Coles is appreciated, because it provides considerable variation from the competitors, and adds a high level of consumer satisfaction (Giles, 2015).
The Cole competencies have allowed the company to follow the working environment efficiently in the arrival of recessionary pressures. This can be credited to the top management of the company. The top management’s competence is guiding Coles from the present stormy economic climate and continually attaining high rates of growth which makes it a treasured resource.
The major threat for Coles is possessed by the market competition in operating business activities effectively. With the help of external environment analysis, it was analyzed that the firm deals with an aggressive competition from both local and international retailers. New entrants are also a threat for the Coles because the number of retailers in the industry is increasing. This is due to the retail sector of Australia as it is presently providing stable profits. Obtainability of substitute products is increasing Cole’s competition. Online retailers have a cost advantage over Coles and due to this, it is dealing with harsh logistical and technological challenges.
Furthermore, the industry retailers are dealing with pricing challenges from the new rivals who are altering the demand of the customers and changes in their preferences from the influence of culture which is said to be the threat for a retailer that limits it from attaining a competitive advantage. The internal analysis reflects a threat from the Aldi supermarket chain who offers products at low cost.
The business strategy that Coles follow includes the combination of differentiation strategy and cost leadership strategy. The company makes use of its brand image in order to distinguish and greater supply chain to reduce the product cost. The strategy of cost leadership is utilized to confirm that the Coles provide expected value to the consumers at the reasonable and lowest possible cost. This is attained by its activities of economies of scale, use of innovative technology and effective supply chain. Coles offers its differentiation strategy by brand image. The firm has established its brand image since last many years, and by offering satisfaction and value to the consumers. The combination of differentiation and cost leadership strategy reflects that the Coles is capable to target a wide segment in the market, by providing goods that are diverse from the goods of competitors at the lowest possible costs. The general use of the combination strategy confirms that Cole supermarkets will bring new methods that will provide value to the customers by providing goods at less cost.
The integrated strategy of differentiation and cost leadership strategy has gained success in the industry due to the experienced and focused staff of the Coles Supermarket. The management of the supermarket has an idea about their staff that they need a leader who can guide them and show a direction towards achieving the goals. Therefore, they followed the leadership, performance assessment and revolving strategy into action devices. The involvement of the staff members converted strategy into action. The assets for the implementation of the strategy are taken by different departments and separate levels of the organization. This confirms that the strategy was implemented successfully in the company. Leadership in the strategy implementation makes a change. It is a variance between failure and success of the company. Revolving the strategy into act includes connecting the strategy through personal and departmental activities. Performance management is performed to confirm that the implementation of the strategy is one inside the strategy and timescale necessities.
The retail industry of Australia must hold technological developments to attain its strategic purposes. The utilization of retail stores online is growing in the economy of Australia. Retail stores must hold social media platform and online retail stores to raise their business. The business of Australia is categorized by resistance to change. The companies of retail have been slow in accepting the variety of attitudes and customer taste towards healthy and organic food products. In this indeterminate economic turmoil, companies of retail must rationalize their processes to make considerable cost savings, which will allow the company to possess extra funds for expenditures.
Conclusion
The above report has provided a brief idea of the external environment factors that are influencing the performance of supermarket industry, analysis of the industry which provides the position of the industry in the market. Along with this the analysis of the competitors is provided which reflects the threat for the company, and company analysis which shows the core competencies of the company. Furthermore, the strategy analysis is performed to identify the strategies that company is using and how effective they are. In the conclusion, it can be said that the strategies company is using is very effective helping it to fight against its competitors specially Aldi who is offering low cost products. In the above report it is recommended that Coles should increase its involvement in the advanced technology and online retail stores which will help it in increasing the market share, profit, and offering goods at low cost in order to compete with Aldi supermarket chain.
References
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Australian Food News (2012) Economic Challenges in Australian Food and Grocery Industry, AFGC reports [online]. Available from https://www.ausfoodnews.com.au/2012/10/15/economic-challenges-in-australian-food-and-grocery-industry-afgc-reports.html [Accessed 19 April 2018]
CISION (2018) Supermarkets and Grocery Stores in Australia Industry Market Research Report Now Updated by IBISWorld [online]. Available from https://www.prweb.com/releases/2014/09/prweb12143687.htm [Accessed 19 April 2018]
Frue, K. (2017) What is Macro Environment Analysis? [online]. Available from https://pestleanalysis.com/what-is-macro-environment-analysis/ [Accessed 19 April 2018]
Giles, B. (2015) 5 reasons Kogans killer new strategy should worry Coles [online]. Available from https://www.linkedin.com/pulse/5-reasons-kogans-killer-new-strategy-should-worry-coles-brad-giles [Accessed 19 April 2018]
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Ingram, D. (2018) Product Life Cycle for Grocery Stores [online]. Available from https://smallbusiness.chron.com/product-life-cycle-grocery-stores-80485.html [Accessed 19 April 2018]
Master Assignment (2017) Industry Analysis: The Porter Five Forces [online]. Available from https://www.masterassignment.com/porter-five-forces/ [Accessed 19 April 2018]
Merrett, A. and Smith, R.L. (2018) THE AUSTRALIAN GROCERY SECTOR: structurally irredeemable? [online]. Available from https://law.unimelb.edu.au/__data/assets/pdf_file/0003/1682805/Session2-MerrettSmithpaper2.pdf [Accessed 19 April 2018]
S&P (2017) Coels Group Limited Swot and Pestle Anlaysis [online]. Available from https://www.swotandpestle.com/coles/ [Accessed 19 April 2018]
Sampson, A. (2014) Technology changes grocery market [online]. Available from https://www.weeklytimesnow.com.au/agribusiness/technology-changes-grocery-market/news-story/b3a7781ea8504d4c6e0c716a572ee3bb [Accessed 19 April 2018]
Supplier Portal (2017) Coles Supply Standards [online]. Available from https://www.supplierportal.coles.com.au/csp/docs/Coles%20Supply%20Standards_December%202017_Good.pdf [Accessed 19 April 2018]
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