Wesfarmers Limited Porter Five Forces Analysis Essay.

Discuss about the Wesfarmers Limited Porter Five Forces Analysis.

The aim of this report is to analyze the management of the resources within the organization through the concept of Strategic management. Strategic management is the organization of the resources of the business to attain its objectives and goals. It comprises the setting of objectives, evaluating the competitive environment, evaluating the internal environment, assessing strategies and confirming that executives of the organization appropriately communicate the strategies at every level (Shimizu, 2012). The report will comprise the evaluating and analysis of the internal as well as an external environment of Coles Supermarket, which is one of the key players in the Australian retail and supermarket industry. In addition to the successful utilization of the resources and smooth process in the Coles, a suitable information system will be suggested.

Coles Supermarkets operating as Coles, is the chain of consumer and retail services of Australia, with headquarter in Melbourne. The parent company of Coles Supermarket is Wesfarmers. George Coles established it in 1914. Coles operates around 807 supermarkets across Australia, comprising various re-branded BI-LO Supermarkets. The company with the name of Coles Online offers online services. The company is focused towards offering value to their consumers by decreasing the weekly shopping basket price, enhancing quality, and offering an easier as well as a better experience of shopping daily (Coles, 2018).

The grocery stores and supermarket industry is part of the most competitive Australian industries. As per the ACCC report (Australian Competitions and Consumer Council), the two companies i.e. Woolworths and Coles dominate the industry of Australian grocery as both possess 80% of the market share (Dunford, Palmer & Benveniste, 2018). However, the increasing growth rate of ALDI Supermarket is affecting the market share as well as profitability both the supermarket. This is due to the discounted private-label products strategy of ALDI. These strategies have forced the main players i.e. Woolworths and Coles to reduce their prices. In addition to this, both the supermarkets have also increased the variety of their private labeled products in the market to give strong competition to ALDI.

The political factors generally have a greater influence on the retail industry of Australian. The cumulative business and supremacy of the self-determining retail supermarkets like Coles have increased the level of competition for small retailers, hence, to reduce that the government of the country has introduced the required policies. In addition to this, the government has introduced different policies in relation to the shareholders right and restricting monopoly in the market (Fern Fort University, 2018).

Overview of Coles

The economic situation of the Australian market negatively influences the Coles performance in terms of the demand of the customers and purchasing behavior. The worldwide crunches in 2009 influenced the consumption behavior of the market, which resulted in less disposable income and hence decreasing the sales revenue of the Coles supermarket (Fern Fort University, 2018).  

Coles is one of the key employers with a vast base of workforce along with shareholders in the organization. Acquisition of Coles by the Wesfarmers has resulted in targeting the huge population of around 22 million people. The organization regularly takes various initiatives for the upliftment of the society, besides this, company frames engagement and employment strategies for Aboriginal and Torres Strait Islander people.

Technology performs one of the essential parts in the success of the company in Australia. To cope up with the huge competition in the industry business has invested in adding NCR RealPOS XR8 as its future POS terminals (NCR Corporation, 2018). This technology has supported the company in enhancing the checkout experiences of their customers.

According to the government, utilities, automotive fuel, and groceries are those sectors that influence the customer’s hip pocket. Hence, the government of Australia has now decided to form strict reforms in against of dominance of the players in the market such as Coles and Woolworths of the grocery sector (King, 2018).

The complete industry portfolio detained by the Coles Supermarket has retained distinct protective measures to protect the environment from getting polluted or damaged. It has been noticed that the company has invested in possessing advanced technology in order to avoid resource wastage, enhance the flexibility of climate change, passable usage of water, etc. It consequently, follows high standards to protect the environment (Fern Fort University, 2018).

The bargaining power of the suppliers can be a threat to the company's profit and Coles is aware of this. In this way, Coles is putting its efforts to maintain good relations with the suppliers. In this type of business, there is less competition in the market of supply. Coles supermarket get its resources from various suppliers which makes the power of the supplier’s bargaining moderate (Fern Fort University, 2018).

Coles deal with huge competition from its rivals present in the market such as Woolworths and Aldi, who alter their strategies from time to time to increase their market share and give strong competition to Coles. This reflects that the competitive rivalry among existing players in the market is very high (Fern Fort University, 2018).

Overview of Industry

Coles constantly conduct market research in order to understand the altering anticipations and contemporary trends of the consumers. The business also endorses its justifiable approach of operating business that raised the brand recognition of the organization. Therefore, the bargaining power of the customer is moderate, due to the strategies adopted by the company in spite of operating in the competitive market (Fern Fort University, 2018).

The threat of new entrants is low in the Australian retail and grocery industry because there are big companies such as Coles and Woolworth with huge market share and diverse portfolio. Besides this, these companies possess multiple operations, which make it very tough for the new company to stay for a longer time duration in the industry (Fern Fort University, 2018).

The substitute threat is low in the industry because the products offered by the company are utilized for daily consumption that does not have a substitute in the market. In this market, customers like to take products with fewer variations and choices (Fern Fort University, 2018).  

Competition in the grocery retail industry of Australian has always been the focus of politics, regulatory activities, and media of Australia for various years. It can be seen that the largest grocery retailers of Australia possess major influence on the small businesses, customers, and primary producers, Woolworths and Coles are regularly receiving the criticisms about their apparent supremacy in the industry (Schoff, 2014).

A strategic group is said to be the concept that is utilized in the strategic management that groups businesses with the same models of business or same strategic combination in the industry. In the Australian retail and supermarket industry, three main players in the market make a strategic group i.e. Coles, Woolworths, and ALDI. The rivalry among these three players is very intense as all of them compete for major market share and customer base.

The companies in the Australian retail industry compete with each other in terms of price and private labeled products. The increasing growth of the Aldi supermarket in Australia is raising threat for Coles and Woolworths. This growth is the outcome of a discounted price strategy of ALDI and private labeled products, which has enforced Coles and Woolworths to decrease their prices (Mudditt, 2017).

One of the key capability of ALDI supermarket is its cost leadership strategy, which helps it in offering products at low cost and attracting customers. Besides this, it saves the cost of employing people for each store; it hires less than six employees (Bhasin, 2018).

PESTLE Analysis of Coles

Woolworths hire skilled and experienced employees in its stores. Besides this, the company offers in-store services to its consumers such as delivery of heavy products or bulk purchases (MBA Skool, 2018).

ALDI keep its layout of the store simple to reduce wastage and always focus towards reducing the price of the product. Besides this, while choosing a retailing store ALDI always consider some factors like a number of people visit that region, the demographic sorting of that location, moreover, the count of the population should be more than 25,000 people in the particular area (MBA Skool, 2018).

Woolworths believe in having a widespread chain, therefore, it operates through 976 supermarkets along with 90 convenience stores. The stores of the company are attractive, clean and are placed in such area that could be easily searched or visited by the customer. Besides this, the company has introduced mobile application and online services for shopping (Bhasin, 2018).  

ALDI is giving strong competition in terms of price and private labeled products to Coles, who increases the threat to the company and affecting its performance in the market.    

Coles Supermarket has various opportunities in the Australian supermarket industry as it can increase the range of private labeled products to compete with ALDI supermarket. Along with this, it can grab the growth opportunity in the liquor market and insurance and finance sector (S&P, 2018).

The major threat that raises boundaries and hurdles for Coles in the market is political and legal regulations. Along with this, the changing spending and consuming habits of the customers are also affecting the performance of the company. The established competitors such as Woolworths and Coles are regularly bringing new and innovative strategies for increasing their market share, which is eventually a major threat for the Coles supermarket (MBA Skool, 2018).  

Coles Supermarket operates around 807 stores in Australia with 100,000+ employees (MBA Skool, 2018). This reflects that tangible as well as intangible resources of Coles are very effective and strong. It has organized management of human resource, with a variety of products and product innovation skills, brand reputation, and status as the vendor of quality and fresh products. Besides this, the supply chain of the company is highly optimized (Giles, 2015).   

A capability is considered as the ability to achieve or perform some actions or tasks. The administration of Coles Supermarket is capable enough as it could be observed by its success in the supermarket industry. The company has been successful in possessing around 30.9% share of the market (Pash, 2017).

Porter 5 Force Model

Optimised Supply chain – Coles possess optimized supply chain, according to which the distributors of the company receive products from the suppliers, then they are shifted to the stores and to the shelves in an appropriate manner so that food remains fresh (Giles, 2015).  

Retail Expertise – To survive in the market it is very important to have a thorough knowledge of the ups and downs and altering trends. The administration of the Coles is expertise and well aware of the changes in the environment as well as purchasing behavior of the customers. Hence, they know what to offer, at what time, and place (S&P, 2018).   

Brand Recognition – Wesfarmers group is the parent company of Coles Supermarket, which helps it being recognized by the customers in the market. It is one of the most reputed brands as well as the organization in the whole world (S&P, 2018).

Strong brand portfolio -   The brand portfolio is very strong of Coles supermarket as it serves the needs of diverse segments of the market (Fern Fort University, 2018).

It is very essential for the businesses to concentrate on their competencies and create them their strength the time they desire to go ahead from the competitors. As per the model of Core Competencies or Prahalad and Hamel Model, which was introduced by C.K. Prahalad, and Gary Hamel, companies can move towards the new market and possibilities of growth by utilizing their core competencies. The purpose of describing the core competencies is the accessible knowledge that is tough to replicate by any other company. Unlike the “outside-in-view” model of Michael Porter, this model concentrates on the “inside-out-view.” (Macat Team, 2017)

The model focuses on a mixture of detailed, concerted, cohesive, and practical knowledge, abilities, and approach. As per this model, the strategic objective must not an emphasis on struggling with the competition, but on making a new competitive space. This reflects that this model is futuristic (Drejer, 2002).

The core competencies matrix could be used to acquire and develop more core competencies such as:

Here the organization needs to identify what competencies could be used in the existing market. Coles could make use of its optimized supply chain in order to confirm the successful delivery of the products and preserving fresh food items.

While arranging competencies in the new market business could face a risk of having a large diversification of the product. Therefore, to enter the new market Coles should remain close to its main business for this company can make use of its retail expertise competency.

Supplier’s Bargaining Power

In order to survive for longer time duration in the market, Coles supermarket can make use of its strong brand portfolio in the existing market.

The competencies that could be used here must possess high potential because the company is moving towards a new market. Here, Coles Supermarket can make use of its brand recognition to represent itself as one of the strong players in the market.  

Data warehouse also called as enterprise data warehouse (EDW), is a system utilized for analysis of data and reporting, and is one of the main elements of business intelligence. DWs are the main source of combined data from different springs (Vaisman & Zimányi, 2014).

Coles can make use of Data warehouse because it helps in storing current as well as historical information at a single place that is utilized for making analytical reports for employees across the organization. It can be recommended that Coles can implement this system because it can analyze the current and historical data with the help of a data warehouse to frame different strategies to increase market share.

Conclusion

From the above analysis, it could be analyzed that Coles possess strong and operative core competencies that could help it in expanding its business operations in the new market. Besides this, these competencies can support in competing with the rivals present in the market such as Woolworths and ALDI and increase its market share in the existing market. The above report has analyzed the internal as well as the external environment of Coles Supermarket and its performance in the Australian supermarket and retail industry. In addition to this, proper analysis of the competitive environment has reflected that right now ALDI is giving strong competition to Coles and Woolworths in Australia. However, both of these supermarkets are putting their best foot forward to give a strong response to ALDI's strategies.

References

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Bhasin, H. (2018). Marketing mix of Woolworths. Retrieved from https://www.marketing91.com/marketing-mix-of-woolworths/

Coles. (2018). Our strategy, values and brands. Retrieved from https://www.colescareers.com.au/about-us/our-brands

Drejer, A. (2002). Strategic Management and Core Competencies: Theory and Application 1^st ed. U.S: Greenwood Publishing Group.

Dunford, R., Palmer, I., & Benveniste, J. (2018). 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

Fern Fort University. (2018). Coles SWOT Analysis / Matrix. Retrieved from https://fernfortuniversity.com/term-papers/swot/1433/1248-coles.php

Fern Fort University. (2018). Wesfarmers Limited PESTEL & Environment Analysis. Retrieved from https://fernfortuniversity.com/term-papers/pestel/nyse4/4814-wesfarmers-limited.php

Fern Fort University. (2018). Wesfarmers Limited Porter Five Forces Analysis. Retrieved from https://fernfortuniversity.com/term-papers/porter5/asx/625-wesfarmers-limited.php

Giles, B. (2015). Coles. Retrieved from https://www.evolutionpartners.com.au/5-reasons-kogans-killer-new-strategy-should-worry-coles.html

King, S. (2018). Groceries, power & fuel: crunch time for competition review. Retrieved from https://www.australiancompetitionlaw.org/opinions/king-2013crunch.html

Macat Team. (2017). The Core Competence of the Corporation 1^st ed. U.S: CRC Press.

MBA Skool. (2018). ALDI Marketing Mix. Retrieved from https://www.mbaskool.com/marketing-mix/services/16807-aldi.html

MBA Skool. (2018). Coles Group SWOT Analysis, USP & Competitors. Retrieved from https://www.mbaskool.com/brandguide/lifestyle-and-retail/9926-coles-group.html

MBA Skool. (2018). Coles Marketing Mix. Retrieved from https://www.mbaskool.com/marketing-mix/services/16831-coles.html

MBA Skool. (2018). Woolworths Marketing Mix. Retrieved from https://www.mbaskool.com/marketing-mix/services/17155-woolworths.html

Mudditt, J. (2017). Spotlight on Australia’s supermarkets and grocery industry. Retrieved from https://www.retailworldmagazine.com.au/spotlight-australias-supermarkets-grocery-industry/

NCR Corporation. (2018). Coles Adds NCR’s Latest POS Technology to Speed-Up Checkout Experience, Improve Operations. Retrieved from https://www.ncr.com/news/newsroom/news-releases/coles-adds-ncrs-latest-pos-technology-speed-checkout-experience-improve

Pash, C. (2017). Hot competition is back in Australian supermarkets. Retrieved from https://www.businessinsider.com.au/hot-competition-is-back-in-australian-supermarkets-2017-10

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