Task: Each student will write a strategic analysis report of NOT more than 2500 words. The report should demonstrate that the student has thoroughly researched their topic. Students should use examples of business practice from the scholarly journals papers, conferences, books and professional magazines to support their arguments. The strategic analysis will be on a local company. The report consists of two parts and should cover the following requirements:
PART 1 (External analysis)
PART 2 (Internal analysis and proposal)
This Strategic management assignment explores the process by which coles group formulates goals and objective for their firm in order to increase their business performance. In this assignment the business environment of Coles Group, one of the leading retailers of Australia will be explored in a detailed manner. The internal and external environmental analysis will help in understanding about the company’s current position in the market. The major strategies that are presently being used by the company in sustaining their performance will be analysed. The analysis will highlight the opportunities and threats that are faced by the company in the business market. The resources and technologies that are being used by the firm for operational purpose will be explored and as per the analysis, a proper solution for the company will be developed. The Strategic management assignment will assist the company in attracting consumers and enhancing their market performance. The solution will be developed with the help environmental analysis that help in identifying the threats and weaknesses of the company.
Part 1 (External Analysis)
1. Business background
Coles Group was founded in the year 1914. Since then the company has witnessed tremendous growth and is considered as one of the largest supermarket chain of Australia. It operates as departmental and retail stores providing the Australian citizens with a wide variety of products such as magazines, home decors, groceries and financial services. It has a workforce of around 107,000 team members working for diversified business from selling retailer products to handling online sales. The employees are trained in an efficient manner to improve the productivity of the organization (coles.com.au, 2018). The company was able to generate revenue of around $970 million in the year 2017 (news.com.au, 2017). Wesfarmers acquired this firm in the year 2007.
2. Business industry
Coles supermarket operates in the retail sector of Australia. The grocery stores and supermarket industry is considered as one of the most competitive industries of Australia. The rapid growth of discounters such as Aldi has had a significant impact on the retail industry of the country. Due to high discounts on private labelled products, Aldi has captured the attention of majority of consumers and increased market competition. As a result, established giants such as Coles and Woolworths were forced to cut down their prices and expand their private labelled products. It is observed that as the giants have lowered their profits and accepted lower margins in order to stay competitive, the industry wide profit margins have dropped at a significant rate (Nicholls and Orsmond, 2015)
3. General environment analysis
Economic: The economic condition of Australia is quite stable, in the year 2017 the GDP of Australia was 1,379.55 trillion US dollars (statista.com, 2018).
Figure 1: GDP of Australia
(Source: statista.com, 2018)
The Strategic management assignment also observes that consumers are inclined towards budget shopping especially with discretionary goods. Therefore, customers are switching to brands with private labels in order to save money. Thus, Coles should try to increase their private label products in order to grab the attention of the consumers.
Sociocultural: One major trend prevailing in Australia is the increasing consciousness of the citizens towards health and well-being. Majority of citizens are inclined towards organic products and healthy alternatives (business.nab.com.au, 2018). This is a major opportunity for Coles as there are very few organization that offer organic produces and the sale of organic products are expected to increase in coming future.
Technological: This Strategic management assignment outlines how Technology is one of the most important aspects for business growth. Australia is technologically advanced and Coles could effectively use this in order to enhance their business. They can increase their interaction with their consumers with the help of internet and serve their consumers with convenient shopping time with the help of online shopping.
Political/legal: Political and legal aspect influences the business of Coles. For example, the free trade policy of the government helps the company in reducing their trade expenditures. However, the new competition policy of the federal government has restricted Coles from eliminating competition from the retail sector of the country.
Demographic: As per the report of (australias.guide, 2018), Australia had a population of around 24.22 million citizen in the year 20016. This reveals an increase of around 1.4% in population as compared to 2015.
Figure 2: Demographic of Australia
(Source: australias.guide, 2018)
Therefore, Coles should try to expand more bushiness as the consumer base will be enhancing enormously in the coming future. The Australian population includes individuals from different culture and background. Therefore, it is significant that the business organisation must understand the density of the population of the area in which they are conducting business. In order to increase their business Coles must expand their stores in urban areas of the country so that they are able to attract more consumers.
4. The industry environment
The industrial environmental is analysed on this Strategic management assignment to help enhance about the potential threats and opportunities available for Coles in the present business market (E. Dobbs, 2014).
Threat of Substitute- High: Coles faces indirect competition from convenience stores, farmer markets, specialist grocery stores and more the threat of substitution is very high. Evidence suggests that convenience stores have witnessed positive expansion in their products and will be competing with supermarkets such as Coles in a direct manner. Farmer markets are considered a potential threat for Coles as they provide organic products and can reduce the sale of organic food provided by Coles.
Rivalry among existing competitors- High: There are a number of retailers in Australia providing similar products at different prices thus, competition is primarily based on pricing and is increasing gradually. The popularity of discounters and technological advancements has contributed actively towards increasing the rivalry between the retail firms.
Bargaining power of suppliers- moderate:Bargaining power of suppliers is moderate as there are a number of suppliers ready to provide resources to Coles. Due to free trade, policy Coles also trades resources from other countries at a cheaper price. However, due to the enhanced quality of products provided by few suppliers they hold certain bargaining capabilities.
Threat of new entrants- Low4: The Strategic management assignment also explores the threat of new entrant is relatively low, as entering the retail sector would require huge investment capital. The new entrant will have to invest a huge fund in advertisement in order to create awareness regarding their services so that they are able to compete with poplar retailer such as Coles.
5. Competitive environment (Is there a strategic group that you need to take account of? What is the rivalry like in this group? What capabilities do the relevant firms have? What strategies do they follow? What threats do they represent?)
There are a number of strategic groups such as Woolworths, Aldi, and more affecting the business of Coles. For instance, Woolworths is a popular retailer of Australia that is focused on providing quality services and enhancing their private label in order to increase its market share. In addition, Aldi is gaining huge success due to discounts provided by the company (Steenkamp, 2017). Apart from these giants, Coles is facing threats of huge international marketers such as Wal-Mart that is providing their services in Australia with the help of online platforms. These forms provide quality products at affordable prices and free home delivery option. Therefore, most of the consumers are inclined towards their services. Thus, the competition in the Australian retail sector is heating up and Coles is facing potential threats from increasing competition. ?
6. Opportunities and threats
The opportunities and threats faced by Coles Group have been mentioned below:
Part 2 (Internal Analysis and Proposal)
1. The firm’s resources, tangible and intangible
Tangible resources: Tangible resources include both fixed assets of the company such as land, buildings, machineries and current assets like inventories (Schriber and Löwstedt, 2015). The tangible assets of Coles Group are:
Organizational: In context of organizational resources Coles has a very effective strategic planning process, excellent control and evaluation system, unique in store layout and a very low turnover inventory system. These systems help in strengthening the operational activity of Coles.
Physical: the property and facilities provided by the store adds up to the physical aspect of the store. Coles stores are big around 2,150 square meters and well furnished that helps in attracting consumers. The company keeps purchasing more locations for store so that Coles stores are available and accessible by all the citizens of Australia. They are focused towards enhancing the experience of the consumers thus; they try to keep their store technologically updated. They have self-checkout service to save time of the consumers.
Intangible resources: Intangible resources lack physical substances and are difficult to evaluate. Some examples of intangible assets are copyrights, patents, franchises, goodwill and more (Jardon and Molodchik, 2017).
Human Resource: This Strategic management assignment outlines some principles followed by Coles Group in order to enhance their human resource asset. The human resource keeps recruiting well skilled and talented candidates for the development and enhancement of the firms. The employee engagement strategies are excellent that helps in retaining the skilled staff of the firm. This also helps in reducing the recruitment cost as existing employees help in enhancing the business and provides training to the new joiner.
Creativity and innovation: The staffs help in innovating new products and providing creative ideas in order to increase the business of the firm. Creative ideas such a cutting of pricing, online shopping services, front of pack nutrition labelling helps in providing information to the consumers and win their loyalty. Creative ideas are important in order to serve the customers in a better manner and enhance their shopping experience.
2. Capabilities identification
Distribution network: Coles efficient distribution network is considered both a resource and capability in its out-bound and in-bound logistics. Gathering of both tangible and intangible resources such as supplier’s relationship, technological capabilities is significance for cost reduction achieved throughout the entire logistic network. It is observed that imitation of products is also difficult as the scope of technological capabilities involved is highly staggering and specialized.
Brand popularity: Coles brand popularity is very high in Australia. Positive brand image is acquired with the help of satisfactory consumer experience with the firm. The products provided by the firm are of superior quality and helps in enhancing the consumer experience. The advertisement campaign of the company helps in improving the brand popularity of the company among the local community. Brand reputation is important as it helps in differentiating of the company from their competitors. However, this aspect is not rare as most of the firms are working towards increasing their customer satisfaction levels, thus reputation or bran image cannot be considered as a competitive edge.
Efficient Management: Effective management helps Coles Group in order to improve their productivity and assist the company in enhance the performance of the company. All the employees of the firms are well skilled and creative that helps in improving the product quality and assist in the growth of the company. Employees ensure to enhance customer relation so that the customer base of the firm is improved.
3. Core competency analysis
Distribution network: The distribution network meets the comprehensive test of core competency. Each role requires a set of technical behavioural and functional competencies. This will help in ensuring that supply chain is managed in an effective way. The employees are skilled and technologies are beneficial in managing the supply chain in an effective way.
Brand popularity: Test of technology can help in understanding regarding the brand popularity of Coles Group.
Effective management: For effective management test of relevancy is important to ensure that the firm is working as per the present culture and climatic changes and is able to meet the requirements of their customers. For example if any new technology have been introduced then the management must implement it and provide training to all the employees so that business can be befitted and stay competitive.
4. Propose a suitable information system solution that meets the chosen company needs.
Information system solutions are the technologies that can help in enhancing the business performance of Coles Group. As per the report, it is suggested that the company should provide more training to their staffs so that quality of their services can be improved. Coles Group can implement the latest Cloud technology in order to improve their management procedures. They should try to work on their marketing options as well they can make use of social websites in order to increase their approach and reach out to more consumers that will help them in enhancing their business.
The company can also implement Data warehouse and technology in their application of DSS on the decision support system. This is one of the most popular trends among the retailers (Fazal et al., 2017). Data warehouse is a multiple distributed heterogeneous database that helps in providing a unified query technology to the retailers. This will help in improving the decision making process of the managers and enhance the business of the firm.
5. Evaluate the proposed system and provide your recommendations Traditionally it was observed that the invoicing systems were built with the help of a single database centric data model, the decision analysis were unable to meet all the requirements of the system on the database. Data warehouse is a multidimensional process with comprehensive data on capacity. An accurate and fast method helps in analysing the data so that the decisions of the mangers can improve (Su and Needamangala, 2017). This will be a great way to earn competitive advantage for the firm. Enterprises having complex structure have a large number of invoicing business data and they require decision analysis in which this technology can be beneficial. It is recommended that the company should try to advertise more in order to increase its profit revenue and implement this technology to improve their decision-making system that will help them in figuring out ways in which they can enhance their business performance and gain competitive advantages.
As per the assignment, it can be conclude that the external and internal business environment helps in understanding the position of Coles Group in Australia. As per the external environment, it was noted that the company is popular in Australian market; however, it is facing threats from other retailers and discounters. The advancement in technology has influenced the business of the company, as more consumers are inclined towards online shopping. As per the internal analysis, it is observed that the strong supply chain and brand image of the company is beneficial for the success and stability of the business. However, due to increasing competition the company is losing market value. Therefore, it is recommended that the company should try to improve its marketing initiative and should implement Data warehouse technology so that the decision making process of managers can be enhanced. This Strategic management assignment outlines initiatives that allow the company in gaining competitive advantages over their competitors.
Australia's Guide. (2018). Australia Demographics. Available at: https://www.australias.guide/australia-demographics/ [Accessed 17 Aug. 2018].
Business.nab.com.au. (2018). Available at: https://business.nab.com.au/wp-content/uploads/2017/09/The-future-of-retail-September-2017.pdf [Accessed 17 Aug. 2018].
Business.nab.com.au. (2018). Available at: https://business.nab.com.au/wp-content/uploads/2017/09/The-future-of-retail-September-2017.pdf [Accessed 17 Aug. 2018].
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Fazal, T., Strutt, D., Gibb, R., Armstrong, M., Adendorff, M. and Helal, R., International Business Machines Corp, 2017. Data warehouse system. U.S. Patent 9,740,992.
Jardon, C. and Molodchik, M., 2017. What types of intangible resources are important for emerging market firms when going international?. Journal of East European Management Studies, 22(4), pp.579-595.
NewsComAu. (2017). Bunnings, Kmart and Officeworks were the winners, while Target and Coles struggled.. Available at: https://www.news.com.au/finance/business/retail/wesfarmers-profits-up-13-per-cent-to-16-billion-as-bunnings-kmart-and-officeworks-shine/news-story/6cf0b1116a53f01b7d9e93b320f21586 [Accessed 17 Aug. 2018].
Nicholls, S. and Orsmond, D., 2015, March. The economic trends, challenges and behaviour of small businesses in Australia. In Proceedings of the Reserve Bank Annual Conference (pp. 5-31).
Schriber, S. and Löwstedt, J., 2015. Tangible resources and the development of organizational capabilities. Scandinavian Journal of Management, 31(1), pp.54-68.
Statista.com. (2018). Australia - Gross domestic product (GDP) 2022 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/263573/gross-domestic-product-gdp-of-australia/ [Accessed 17 Aug. 2018].
Steenkamp, J.B.E., 2017. Brand and Retailers under Attack from Hard Discounters. Edward-Elgar Publishing.
Su, S.P.T. and Needamangala, A., 2017. Harvesting information from a library data warehouse. Information Technology and Libraries, 19(1), pp.17-28.