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Strategic Information Systems: Coles Supermarkets Australia Pty Ltd

(Strategic Analysis) 

HI5019 STRATEGIC INFORMATION SYSTEMS T3 2018



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 local company. The report consists of two parts and should cover the following requirements:

PART 1

(External analysis)

  1. Business background
  2. What industry is it?
  3. General environment analysis (economic, physical, sociocultural, global, technological, political/legal and demographic  and work out what the important facts are).
  4. The industry environment ((i.e., supplier power, buyer power, potential entrants, substitute products and rivalry among competitors) and explain briefly what is significant for each).
  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?)
  6. Opportunities and threats

PART 2

(Internal analysis and proposal)

  1. The firm’s resources, tangible and intangible
  2. Capabilities identification (explain the capabilities carefully to indicate what the firm really does.)
  3. Core competency analysis (For each capability, indicate which of the four tests for core competency it meets).
  4. Propose a suitable information system solution that meets the chosen company needs.
  5. Evaluate the proposed system and provide your recommendations

Submission Requirements:

The research should include a list of at least seven (7) references and a bibliography of the wider reading done to familiarize oneself with the topic.

Submission:

  • Soft copy to Self-check and Final Submission with cover sheet

You are reminded to read the “Plagiarism” section of the course description. Your research should be a synthesis of ideas from a variety of sources expressed in your own words. All reports must use the Harvard referencing style. Marking rubrics are attached.

Answer


Executive Summary

The importance of external and internal environment analysis is a necessity in assessing the position of a company or an industry. The market share, revenues, business strategy and supply chain networks decide the long term fate and sustainability of a company. The Coles group has been chosen for evaluating the prospects of organizations in the retail sector. So the report will critically analyze factors related to the retail industry in great details for strategic analysis in the corporate world. 

Introduction

Coles Supermarkets Australia Pty Ltd is an Australian supermarket, retail and consumer services chain, headquartered in Melbourne as part of the Coles Group. The company was founded in 1914 in Collingwood; Melbourne by George Coles, Coles currently operates 807 supermarkets across Australia, which includes the newly branded BI-LO Supermarkets. Coles has employee strength of over 100,000 and, along with Woolworths, dominates around 80 percent of the retail and supermarket industry in Australia (Aloysius et al. 2018). The company is also known for its social activities which include collaborating with 12 suppliers for distribution of Apple laptops named "Apples for Students" which met with a massive response and 25,000 computers, equipment and software worth $13.6 million were distributed (Amman and Parameswari, 2018).

Industry chosen: Brief description

Coles Supermarkets operates in the retail, supermarket and consumer services industry. The retail, supermarket and grocery stores industry is valued at $102 billion in the 2017-18 fiscal and is expected to grow by 2.2 per cent in 2018-19 because of the changing food preferences leading to a rise in premium products such as organic fruit and vegetables (Aranda, Martín and Santos, 2018). Heavy discounting in the supermarket chains in the last few years have slowed down the growth but have brought back the customer interest in this segment. Presently the top four players in Australian retail includes Woolworths (37.2% market share), followed by Coles. ALDI and Metcash each having market shares of 30.3%, 9.2% and 7.4% respectively (Atulkar and Kesari, 2018). However, intense price competition continues to define the industry.

General environment analysis 

Economic 

In recent times, the tendency of customers of spending less has affected the retail sector severely. Even the suppliers are not being able to bargain effectively which has somehow affected the demand and supply chain of the Coles group (Wang, Du and Olsen, 2018). Nowadays, people are looking to buy branded products at a much cheaper rate and this has not gone well with the organization. They are really struggling to survive in this competitive market.

Physical 

Coles group has always done things which are eco-friendly and healthy. The organization has always used sustainable stuffs as raw material for the production of hygienic products. They have multiple numbers of retail outlets across the country for delivering eco-friendly goods and services to their customers (Azeem et al. 2018). They have always used a highly innovative and efficient supply chain management system for creating values for their customers.

Socio-cultural 

Cole’s group is quite active in addressing social issues and always looks for ways to solve them. Recently, they put forth the issue related to food insecurity which was appreciated by everyone. The organization has also worked to develop the cancer care unit for children. They always look to deal with eco-friendly products. For this reason, the Coles group was awarded with the “Fair trade retail chain of the year” award (Corbet and McMullan, 2018).

Global 

The free trade agreements both multilateral and bilateral are shaping up the retail markets. The Coles group has been able to penetrate the foreign markets due to the reduced trade barriers and enhanced technology (Dilek, Karaer and Nadar, 2018). They are facing strong and healthy competition from their rival companies as they are also flourishing in this industry. Coles group has expanded rapidly across the country and are looking to expand it further into the international arena. 

Technological 

Technology is evolving day by day and it has affected each and everyone in both positive and negative ways. Coles group has also done some technological up gradations like contact less payments, self check out utilities, utilization of cloud infrastructure etc (Drezner, T, Drezner, Z and Zerom, 2018). The usage of internet by the customers of Coles group has increased rapidly. The three-pronged strategy used by the company for management purpose has helped the organization to operate smoothly and effectively.

Political/legal 

The duopoly retail market in the country involving Cole’s group and Woolworths has helped both the giants to control the entire market. But the recent step taken by the government to reduce the entry barrier and introduce new players into the market has taken these two retail giants by surprise. Now, Cole’s group is facing a tough competition from the new players and is toiling hard to survive. In recent times, some legal actions were taken against them by ACCC and this affected their work flow and sales. 

Demographic 

The demographic set up of a country always has an effect on the companies operating there. Few years back when Coles group has started their journey, they were operating among a sustainable amount of customers. But as time has passed, the population of the country has increased and this increased their profit margin by multiple times.

Industry environment: Analysis 

Supplier power

The bargaining power of suppliers is quite weak in retail industry. The number of suppliers is quite high.  Established organization like Coles group can easily collaborate with these suppliers. Based on this it can be said that competition among suppliers, availability and the similarity in the pattern of products sold has weakened the supplier power. 

Buyer power

Cole’s group faces a huge pressure from the consumers as the increasing number of retailers has provided similar options to the people. Based on Porter’s Five Forces analysis model, the large number of buyers and there varied choices always forces a retailer to have innovative, unique and affordable products leading to  multiple assembly lines and supplier count (Ellison, G and Ellison, S.F, 2018). Cole’s group is subject to the following external factors concerning the weak bargaining power of buyers or customers. Even though the population is big the smaller size of individual products prevents an individual consumer to affect a retailer in a bigger way, which is a benefit.

Potential entrants

Coles group Inc. need to tackle the fierce intensity of the threat of new entrants. As small retailers and local players continue to foray into the Australian retail market, larger firms need to remain competitive through improving the economies of scale, profit margin and product diversification (Fernandez, et al.  2018). Convenience, location and demographics are the three main criteria based on which new retailers and supermarket chains are operating presently. 

Substitute products 

The threat of substitutes or substitution has minimum intensity that affects the retail industry environment. Cole’s group has different varieties of goods and services that have minimum substitutes. Most consumer products in food, accessories, electronics or durables have similar features and building something new is expensive and takes a lot of time (Hafezalkotob et al. 2018). Large companies have research and development teams which attempt to make new product lines, however for smaller retailers it is quite tough. 


Rivalry among competitors

The power of competitive rivalry is extremely high in the retail industry. Multiple firms comprising of different sizes compete in this industry environment. The variety and aggressiveness of the rival firms has always been a massive threat in the retail sector leading to a decrease in market share and profitability of larger firms (Kokovikhin, et al. 2018). Cole’s group faces the fierce competition of these external factors which accounts for the competitive rivalry in the retail industry. In Porter’s Five Forces analysis model, greater number of firms typically strengthen competition. In relation, the problems faced by premium stores in developing Cole’s group’s competitive advantages, helps in creating diversity of approaches which benefits the company.

Competitive environment 

Coles has repeatedly worked in developing and giving more space to their innovative brands, The company has rivalry with companies like Aldi, Spencer’s and Wal-Mart. Most of their rivals produce similar kind of products like household items, food items, clothing and accessories, toys etc that make the retail competition intense in all domestic and international markets. The strategies their rivals follow is quite similar to Coles which includes lower pricing, deep discounting techniques and expanding to enjoy the larger economies of scale. Coles presently does not have much threat from ofline retailers as they have the same kind of potential. However the online stores and platforms are a serious threat to the organization like EBay and Amazon.

Opportunities and threats 

Opportunities

Coles group is mainly into the grocery sales but recently they are trying to earn some direct dollars by trading private branded goods to their customers. As per reports private branded goods will contribute around 33% of the total sales of the organization by the end of 2018 (Lee and Kim, 2018).

The parent organization of Coles, Wesfarmers have a share of around 20% in the national market of the liquor industry. There is a huge scope for improvement for Wesfarmers as only two competitors are there and they are Woolies and Woolworths. So, they have to thrive for this opportunity and increase its stronghold in this industry.

In the retail sector, Coles is looking to expand their territory and enter the booming sectors in the Asian continent.


Threats

There are many threats compared to opportunities like the changing political and legal regulations have an adverse effect on the functioning of the organization. Furthermore, Increase in the number of competitors in both the established as well as evolving sectors has reduced the profit margins of the Coles group (Teixeira, e Silva and Santos, 2018). Again, the fake products that are being sold in the market led to the situation where customers criticize the company resulting into the damage of its reputation. Finally, the critical and changing food habits of the people also poses as a threat to the company as demand for a product can suddenly reduce which directly affects its sales budget.

Internal analysis: Tangible and Intangible resources

Tangible resources

Cole’s group has a very strong and sustainable balance sheet. The financial structure of the company includes 19% net debts and a huge portion of the balance sheet long-term, income from assets. The company has over 66% of their assets in the long-term capital management. The company has 807 stores and 23 suppliers who continuously provide services to the organization. Employees, warehouses, furniture, machineries all have been an integral part of the tangible part of the retailer. 

Intangible 

An intangible asset is something which is not physical in nature. Goodwill, brand recognition and intellectual property, such as patents, trademarks and copyrights, are all intangible assets. Cole’s groups have a great public image which has improved the goodwill of the company. As being the close leader of the Australian retail industry Cole’s group has patented some of their own products which have been in sale for a long period of time (Walker, Gowland and Points, 2018.). The rise of competition and other forces has a chance of reducing their brand value leading to a decline in the intangible asset base. Furthermore Coles also has a large group of trademark initiatives and campaigns which has provided them unique characteristics in the supermarket industry.

Identification of capabilities

Coles is one of Australia’s largest retailers, providing fresh food, groceries, general merchandise, and liquor and have been giving service to 19.9 million customers on an average per week through its national store network and online platform. The Company has close to 99,000 team members and has been operating more than 2,300 retail outlets nationally (Mayadunne. Johar and Saydam, 2018). The supermarket group runs a network of 762 supermarkets, 831 liquor stores, 90 hotels and 642 convenience outlets operates throughout the country.  Australia has seen a large segment of the retail growth in Kingston, Tasmania, to as far north as Casuarinas, Northern Territory. Coles Financial Services has more than 400,000 MasterCard customer accounts and has issued more than 350,000 homes, car and life insurance policies as at 30 June 2018 (Peiffer-Smadja and Torre, 2018.).

The firm is known for its affordable products which is popular among the majority of the consumers and the quality premium segment products which has given satisfaction to the urban upper middle class. They have a strong supplier network which allows the company to penetrate deeper into multiple Australian zones and segments with utmost ease. The competencies of quality supplier network, variability in product pricing and discount offering as well as their foray into the digital market place with great campaigning strategies are really good.

Core competency analysis 

Coles group has used the pricing advantage to its benefits by providing lower price for the products that has improved its customer base. Mainly the areas where the retailer has done extremely well includes

Capability
Core competency
Strong supply network
Huge product base and long-term partnership buildup
Cheaper products
Cost optimization and usage of advanaced technology.
Strong customer engagement
Trained staff 


(Source: Rao et al. 2018)


The Coles group has been extremely effective in training employees to be hardworking and efficient so that they can deliver quality performance. Mainly communication, technology and product marketing initiatives have helped the retailer to improve its standards leading to a better competitive advantage and improved financial efficiency. Also the inventory management of Coles has been extremely good which has led to an optimum usage of products. The just-in-time inventory has made it sure that there are no wastage of time in sending and receiving orders. Also the cost of managing inventory at Warehouses has been reduced by a large extent. Better connect with suppliers and partners have bolstered the image and strength of he organization to improve the speed and efficiency of the business which can ultimately lead to a sustained profitability. 

Suitable information system solution addressing company needs

Coles group needs to build a retail management information System RMIS which helps in collecting data on customers, inventory tracking mechanism, electronic point of sales services and carry out market research. A clothing store, for instance, likely uses a RMIS for keeping the name of customer in its loyalty program database, speed up purchase and asses product quality and review to give instant service to the customers. Also building up a interactive website along with multiple YouTube channels is needed for Coles group for continuous connection with the audience and generate business revenues.

Conclusion and Recommendations 

The proposed system shall be beneficial for the suppliers in knowing the requirement which Coles would be having n the curse of the business. Moreover the inventory management would become easier and feasibility analysis would benefit the retailer in choosing discounts, pricing policy, employment pattern and decoding consumer references. Coles also needs to increase its product base in the e-commerce channels and provide ample opportunities for third-party sellers and international buyers to purchase products as per their own choice and convenience. As people are travelling less Coles must follow the digital marketing path compared to the offline store expansion which is increasing its cost by a large extent. 

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