Coles Strategic Management Report

A Strategic Analysis on Coles Supermarket

MGF3401

Assessment task 2: Individual Report

By Ryan Bourke (22588671)

This report analyses the supermarket industry within Australia. It identifies Coles' supermarkets role as an intermediary and retailer for producers in the industry, its strong growth over recent years and its position as a market leader.

Significant socio-cultural trends identified within the report demonstrate the emerging trends toward time-poor and health conscious consumers. Industry attractiveness has declined over recent years due to a rise in buyer and supplier bargaining power, greater intensity amongst rivals and higher threats from substitutes.

Three main value creating functions of Coles are inbound logistics; were Coles control of the distribution network of its products ensures quality and distribution efficiency, operations through which inventory management and strict quality assessment procedures assist in value creation; and marketing and sales in which promotional activities ensure the supermarket remains competitive. Chief capabilities and resources Coles poses are its highly effective supply chain, its brand reputation and effective top-level management.

It is recommended in the short term that Coles continue to invest in adverting and promotions in order to position themselves in consumers' minds as low-priced fresh and healthy produce which is convenient. In the Long term it is recommended that Coles emphasises its differential factors such as in-store atmosphere and customer service. Strategic alliances need to be developed for offerings such as FlyBuys. As well as this it would be recommended that Coles diversifies into more profitable businesses due to the decline in the industry profitability.

Table of contents Page

1.0 Situational Analysis...........................................................................................................................3

1.1 External Analysis...............................................................................................................................3

1.2 Macro-Environmental factors affecting the industry.......................................................................3

1.3 Porters Five Forces............................................................................................................................4

1.4 Industry attractiveness for Coles......................................................................................................6

2.0 Internal analysis................................................................................................................................6

2.1 Barneys Resourced Based Vied of the firm.......................................................................................7

2.2 Resources and capabilities of Coles................................................................................................10

3.0 SWOT Analysis................................................................................................................................10

4.0 Competitive Strategy......................................................................................................................11

4.1 Loyalty programs............................................................................................................................11

4.2 Pricing strategies.............................................................................................................................11

4.3 Brand extensions............................................................................................................................12

4.4 Network efficiency..........................................................................................................................12

5.0 Recommendations.........................................................................................................................12

6.0 References.............................................................................................................................15

1.0 Situation Analysis

1.1 External Analysis

The External Analysis examines opportunities and threats that exist in the environment. Prominent trends in the macro-environmental dimension will be discussed, specifically socio-cultural and economic trends and how they will impact Coles Supermarkets profitability in the future. The porters 5 Forces will then be utilised to discover the current conditions of the competitive environment and finally the attractiveness of the industry to Coles in the future shall be examined.

1.2 Macro-Environment Factors affecting the industry

Socio-Cultural factors

One major social trend in today's market is the increasing consciousness towards health and well-being; reflected through a movement towards the demand for organic produce and healthy alternatives. This trend offers a unique opportunity for Coles as currently there are few key players in the market who offer organic foods; and sales of organic foods are set to rise over the long-term (Ibis World, 2009). It also represents a potential threat in that farmers markets that specialise in these specialty foods will thrive in the environment. Coles through the recent introduction of their Coles Organic range have exploited an opportunity in the marketplace and neutralised a threat.

Another social trend is the increasing number of consumers who are 'time-poor'. In consequence of this there is a higher demand for 'time convenience' i.e. the ability of a customer to attend a store when they have time. The capacity to satisfy this need has been facilitated through the alteration in trading hours.