Environmental Strategy And Performance In Small Firms – Coles Supermarket Analysis

Global Environmental Analysis

Coles Supermarket is an Australian retail and supermarket chain founded in 1914. The headquarters of the company is situated in Collingwood, Melbourne but it is operating in more than 800 + locations and the number of employees working are more than 1, 00,000.

In early Australia’s retail industry, George Coles the founder of Coles has a great influence. In the 1900’s, George travelled to the US for seeing and understand the retail practices and then he returns to Australia and started the first retail practice in Collingwood, Melbourne. The retail stores are going to increase in numbers with the time and these stores get famous with their specialised slogan ‘nothing over 2/6’. In 1927, their first variety store was opened and with the continuous growth, the company listed on the Melbourne Stock exchange in 1935. As they are offering superior value to their customers, time make them a leader in the market. During 1960 in North Baldwyn, the first Coles Supermarket was opened and by 1973, in every Australian capital city, the company had successfully established a chain of their supermarket. Later on, Wesfarmers purchased Coles supermarkets with an offer of $22 Billion in July 2007 (Carson, 2007).

The industry in which Coles Supermarket constitutes is the Retail and Supermarket which stands as one of the most fiercely competitive industries in Australia (Mortimer, 2013).

In this report, there is an identification for strategic management analysis on the Coles Supermarket including its internal and external analysis and will conclude by several recommendations for the future.

It includes various external factors, which affects the management of the organization and the decisions taken by them. They are –

• Political factors– From the last five years, the operations of the retail industry is affected by various significant changes in the political and legal atmosphere. The federal government, who modifies various policies, opens up the entry barrier for other industries through the development of ACCC (Australian Competition and Consumer Commission’s) and this increases the competition (Wells, 2015). While formulating various necessaries strategies, Coles needs to consider several legislative changes including the tax and regulatory environment.
• Demographic factors– Cole Supermarket presence is in every Australian Capital city and the majority of the population comprises of the youth. Here, achieving the full potential of the respective market should be the part of the Coles strategy and they can target the customers of age between 12 to 60 years as they occupy the majority of the population (Hatch, 2018).
• Technological factors– In this digital era, the disruptive technologies play an important role in every business enterprises and it is necessary for the organization to align these strategies according to the organizational policies and framework (Conole , et al., 2008). Most of the Australian population are using the help of technology in their day-to-day works like shopping and buying goods online. Coles Supermarket needs to adopt these technologies in understanding the necessary demands of their consumers and to make their process of manufacturing efficiency.
• Socio-Cultural Factors– It is estimated that the maximum amount of consumers are shifted to more of the healthy and organic product because of their consciousness towards well-being and health (Shafie & Rennie, 2012). Coles Supermarket should treat this as an opportunity, not as a threat and shift their production into healthy and organic food products.
• Economic Factors– The trend in the market force Coles Supermarket to shift on the private labels, which can help them, is saving a huge amount of cost, which will directly help in the rise in their profits margin (Steenkamp, et al., 2010).  This will also help consumers in getting low-cost choice alternatives.

Thus, the global environment is changing with the time, which is affected by various factors, but the business enterprise needs to adopt these changes by making their strategies fit with the global environment before any competitor and creates a competitive edge in the market (Correa, et al., 2008).

In this part of the report, the competitive force in the retail industry in Australia will be identified through the porters’ Fiver Forces model focused on the company – Coles Supermarket.

• The threat of Substitutes products– In retail and grocery industry, the threat of substitutes is relatively high whereas the Coles Supermarket lacks in grocery stores and the farmers market. It is estimated the customers are now getting more choices from the convenience stores and this shows the significant growth of these stores. On the contradictory, the taste and preference of the customers towards more healthy and organic food shows that the market of farmers constitute a potential threat to the supermarkets (Belk, 2010).
• Competition and Rivalries– In the whole of the Australian retail industry, the presence of retail stores are around 140,000 (Pickett, 2011). This shows that the competition will be very tight in the market. The more the number of competitors present in the market results in a smaller number of the retail stores in the whole industry. The biggest competitor of Cole Supermarket in the industry is Woolworths (Keith, 2012). It can be analysed that rivalries in the market will be increased in the industry when the new players or retailers will enter in the market and due to the growth of the private retailers like Action and IGA.
• The bargaining power of suppliers – As Coles and Woolworth contribute to having 72.5% of the market share, the bargaining power of the supplier in the industry is low (Ma, 2014). This is why the supplier has a limited selection available in the form of intermediaries to supply from the industry. In addition, ACCC already has tried to diminish the entry barrier in the industry, which shows that bargaining power of suppliers can be come to the stage of moderate condition, as they can select more intermediaries from the industry.
• The bargaining power of buyers – Currently the bargaining power of the consumers also as same as a supplier but from the course of future perspective, it can be rise due to the new regulations of diminishing the entry barriers by ACCC. In addition, the consumer bargaining power can also be rise due to the various price comparison websites like “https://www.finder.com.au › shopping”, as this helps the customers to check and compare different markets with the price of their product.
• The threat of potential entrants – The risk of new competitors is low. It can also be expected to be low in the future because of the various contractual agreements related to renting, ownership and leasing. In addition, it is especially tough for the foreign companies who want to make a stand in the Australian retail industry. New entrants in the market need a big investment in the form of capital and property and only a few competitors like Action and IGA can be come up as a threat (Martino, et al., 2008).

• Opportunities– Cole supermarket has a strategy to adopt the private label, which can help them in saving a huge amount of cost and increase the company’s long-term profitability. They also have a growth opportunity in the national liquor market and their efficient market team who made various change management strategies on time ( Jernigan, 2009).
• Threats – The political and legal factors made under the framework of ACCC serve as a threat to the company. One of the major threat is the change in the customer preference towards organic and healthy products.

An organization internal analysis states its core competencies, cost position and competitive viability in the marketplace. For the provision of internal analysis, it is necessary to evaluate useful information related to the business enterprise including its strength and weakness (Griffin, 2007).

Each resource is the part of the organization, which is focused on strong operational productivity and cost control in the business environment. Resources in an organization can be tangible as well as intangible. Intangible resources are less visible but superior source of core competencies.

Industry Environment

In Coles Supermarket, Tangible resources are –

• Financial Resources– It represents the Coles borrowing capacity in the market. It can easily find out by comparing the liquidity ratio of two years. As per the 2017 balance sheet of Coles, the liquidity ratio of both years i.e. 2017 and 2016 are came to be same, 0.92:1 (Anon., 2017). This shows that the company is not making up enough cash to fulfil its current liabilities.
• Organisational Resources– It includes Cole formal reporting structure, and its formal planning, organising, coordination and controlling system. In August 2007, after the takeover by Wesfarmers, the organizational was
• restructured by comprising of its supermarket chain, liquor and convenience stores.
• Physical Resources– Physical resources of Coles includes stores, manufacturing plant and the raw material accessibility. For example, Coles Supermarket is having many suppliers from different parts of Australia like Port Augusta in South Australia, Victoria, Lismore, New South Wales and Labrador, Queensland and Northern Territory.
• Technological Resources– The technology used in the processing of customer service and manufacturing, its patent and trademark, copyrights and trade secrets. For example, Tablet-based technology is used by the Coles to guide their team members to the exact location of each item within the order using the most efficient route possible (Chung, 2015).

• Human Resources– HR is an important aspect of any organisation, which needs to handle carefully. In Coles, the HR resources knowledge, trust and managerial capabilities help them in achieving their strategic goals. The suggestion of their employees also gets appreciated which shows that the organisation follows the delegation of authority policy.
• Innovation Resources– It includes the organization Ideas, Scientific capabilities and innovation capability, which provide the organization with a competitive edge. Recently, Coles and Accenture started a new digital device named hiku, which works as a compact Wi-Fi device that is attached to a fridge with a magnet and this also includes voice-recognition capabilities that help customers to make effective shopping lists and manage their digital experience (Kidman, 2015).
• Reputational Resources– The goodwill and strong brand identity come under this category. It also includes relations with customers. For many years, Coles is selling quality products and providing excellent customer service to the millions of Australians.

Coles Supermarket has a workforce of over 107,000 team members, which are present in every state, and locality of Australia. According to the Coles annual report, they have network of around 801 supermarkets, 884 stores of liquor, 702 Coles Express fuel stores, 89 hotels across the country.

The company is diversified as they also offer insurance of cars, home and landlord and other financial services. The company also has one million customer accounts in Australia.

Coles Supermarket is the most affordable and advanced supermarket network of the chain, which is helping Australia in growing with their superior services. The major core competencies of the company are –

• Innovative advertising– The way of their advertising is very effective, like using patriotic slogans in the Ads, i.e. ‘Proudly Australian since 1914’ attract conscious buyers and customers (McIlwraith, 2012).
• Pricing Strategies– The company management system is well known for using effective pricing strategies and various advertisement offers from time to time.
• Customer service– Providing efficient customer service like online ordering and free delivery and pickup.
• Using disruptive technology– The new digital device ‘Hiku’ already enhanced the customer experience of shopping.
• Private label strategy- Save costs and increase profit margin.

• Fill in the blanks- Innovative advertising and Pricing Strategies
• White Spaces – Not a well-known identity against the competitors.
• Mega Opportunities – Private label strategy and disruptive technology, insurance service.
• Premier plus ten –Affordable quality food and customer service.

The information system of Coles Supermarket is the collection of application of people, process and technologies. It helps in solving enterprise business problem and decision-making. In Coles, several types of information system can be used like –

• Transaction Processing System– It can be used in the routine tasks like payroll, allocating employee records, relevant recording, etc. This system can help Coles in recording necessary information regarding the vendor like name, address and quality of items purchased and the amount of invoice. This is happening as when Coles place order to the supplier, a transaction is happening.
• System Decision Support -It can help Coles in making quality decisions by gathering necessary data like Coles thought to give wireless device in their stores, and so they try to gather customer usage, sales level and with the help of the system, the incoming data can be analysed with the decisions.
• Management Information System – This can help Coles in producing of periodic reports of the work done by the employees and expenses against the set budgets, which also includes working hours, monthly report of cash flows etc.
• ERP– It stands for enterprise resource planning which comprise of software’s modules that can support every activity and process of the business. As Coles is a big supermarket and has large numbers of chain across the Australian city, it can connect all its stores with one ERP system, which provide a single integrated set of systems.

Coles Supermarket should make the focus on technological advancement, which will help in achieving their organisational and strategic goals. In Australia economy, the online stores are increasing at a high pace and every retail business should use a digital tool like social media for the business diversifications and growth. As the customer needs and preference are changing and they are attracted towards well quality and healthy food, the company should focus on cost-saving strategies so that they can diversify additional funds towards the promotional campaign.

The company should also focus on the strong internal environment as the negativity publicity with the Australians suppliers already hurt the public sentiments towards which can be proved as a disparages in terms of blocking of investments.

Conclusions

The strategic position and Management objectives need to be in alignment as there are other competitors also present in the market. The using of Hiku technology creates a good startup point for the company. The rules and regulations will also affect the organisation in long-term.

As because of the intense competition, many other retail stores also shifted towards various forms of strategies and this makes Coles to follow private label strategy.

The financial report of Coles comprised of its balance sheet statement and consolidated cash flow statement, which does not show any good sight for the company, and this shows the undesired result for a company in the market.

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