Porter's Five Forces Analysis of Wesfarmers Limited: Strategic Insights for Coles Supermarket

Porter's Five Forces Analysis of Wesfarmers Limited: Strategic Insights for Coles Supermarket

Examine the Porter Five Forces Analysis of Wesfarmers Limited.

Analysis of External Factors
This paper aims to evaluate resource management inside the business via the lens of strategic management. Strategic management is the systematic organizing of a business's resources to achieve its objectives and aims. It entails establishing goals, analyzing the competitive landscape, examining the internal environment, evaluating tactics, and ensuring that organizational leaders effectively communicate these strategies at all levels (Shimizu, 2012). The study will include the evaluation and analysis of both the internal and external environments of Coles grocery, a significant entity in the Australian retail and grocery sector. Alongside the effective deployment of resources and streamlined operations at Coles, a relevant information system will be proposed.

Coles Supermarkets, operating under the name Coles, is a network of consumer and retail services in Australia, headquartered in Melbourne. Wesfarmers is the parent company of Coles Supermarket. It was developed by George Coles in 1914. Coles runs around 807 stores in Australia, including several rebranded BI-LO stores. Coles Online provides online services. The firm aims to provide value to customers by reducing the weekly shopping basket price, improving quality, and facilitating a superior everyday shopping experience (Coles, 2018).

The food and supermarket sector is among the most competitive businesses in Australia. According to the ACCC study (Australian Competition and Consumer Commission), the two firms, namely. Woolworths and Coles dominate the Australian supermarket sector, together holding 80% of the market share (Dunford, Palmer & Benveniste, 2018). However, the escalating growth rate of ALDI Supermarket is impacting the market share and profitability of both supermarkets. This results from ALDI's policy of offering inexpensive private-label items. These tactics have compelled the primary stakeholders, namely. Woolworths and Coles will decrease their pricing. Furthermore, both supermarkets have expanded the assortment of their own label items to intensify rivalry with ALDI.

Political concerns often have a more significant impact on the Australian retail business. The dominance of independent retail supermarkets, such as Coles, has intensified competition for small businesses; therefore, the government has implemented necessary laws to mitigate this impact. Furthermore, the government has implemented many rules concerning shareholder rights and the regulation of market monopolies (Fern Fort University, 2018).

Summary of Coles
The economic conditions of the Australian market adversely affect Coles' performance regarding client demand and buying behavior. The global recession in 2009 affected market consumption patterns, leading to reduced disposable income and therefore diminishing sales revenue for Coles supermarket (Fern Fort University, 2018).  

Coles is a key employer with a substantial staff and several stockholders in the corporation. The acquisition of Coles by Wesfarmers has aimed at the substantial population of around 22 million individuals. The organization consistently implements diverse programs for societal enhancement and develops engagement and employment solutions for Aboriginal and Torres Strait Islander individuals.

Technology plays a crucial role in the growth of companies in Australia. To address the intense rivalry in the sector, the firm has invested in the NCR RealPOS XR8 as its future point-of-sale terminals (NCR Corporation, 2018). This technology has facilitated the corporation in improving the checkout experiences of its clients.

The government asserts that utilities, vehicle gasoline, and food are areas that impact consumers' finances. Consequently, the Australian government has resolved to implement stringent measures to counteract the dominance of market participants such as Coles and Woolworths in the food industry (King, 2018).

The whole industrial portfolio held by Coles Supermarket has implemented certain preventive measures to safeguard the environment from pollution or degradation. The organization has invested in innovative technologies to minimize resource waste, improve adaptability to climate change, and optimize water consumption. It thus adheres to rigorous criteria for environmental protection (Fern Fort University, 2018).

The suppliers' negotiating strength poses a potential danger to the company's profitability, and Coles recognizes this fact. Coles is striving to maintain positive relationships with its suppliers. This business sector experiences less market rivalry in supply. Coles store obtains its resources from several suppliers, resulting in a modest level of supplier negotiating power (Fern Fort University, 2018).

Coles has significant rivalry from market competitors like as Woolworths and Aldi, who often modify their methods to enhance their market share and provide formidable opposition to Coles. This indicates that the fierce competition among current market participants is very intense (Fern Fort University, 2018).

Industry Overview
Coles consistently does market research to comprehend the evolving expectations and current trends of customers. The company advocates its legitimate operational strategy that has enhanced the organization's brand awareness. Consequently, the customer's bargaining power is minimal, attributable to the methods used by the corporation despite its presence in a competitive market (Fern Fort University, 2018).

The danger of new entrants in the Australian retail and grocery sector is minimal due to the dominance of major corporations like Coles and Woolworths, who own substantial market share and a varied portfolio. Additionally, big corporations engage in several activities, making it very difficult for a new entrant to have a prolonged presence in the sector (Fern Fort University, 2018).

The danger of substitutes in the business is minimal, since the company's goods are essential for everyday use and lack market alternatives. In this sector, consumers choose items with few variants and options (Fern Fort University, 2018).  

The competition within Australia's grocery retail sector has consistently garnered the attention of political entities, regulatory bodies, and media outlets throughout the years. The biggest supermarket retailers in Australia, namely Woolworths and Coles, have significant influence on small companies, consumers, and primary farmers, and often face criticism over their dominance in the sector (Schoff, 2014).

A strategic group refers to a concept in strategic management that categorizes organizations sharing similar business models or strategic combinations within an industry. In the Australian retail and grocery sector, three principal entities constitute a strategic group. Coles, Woolworths, and ALDI. The competition among these three firms is quite severe as they vie for significant market share and consumer base.

Companies within the Australian retail sector engage in competition about pricing and private label items. The expanding presence of Aldi supermarkets in Australia poses a significant challenge to Coles and Woolworths. This increase results from ALDI's low pricing strategy and private label items, compelling Coles and Woolworths to reduce their prices (Mudditt, 2017).

A primary competency of ALDI supermarket is its cost leadership approach, enabling it to provide items at reduced prices and draw in consumers. Additionally, it reduces the expense of staffing each shop, hiring less than six individuals (Bhasin, 2018).

PESTLE Analysis of Coles
Woolworths employs proficient and seasoned personnel at its establishments. Additionally, the firm provides in-store services to its customers, including the delivery of bulky items or bulk purchases (MBA Skool, 2018).

ALDI maintains a straightforward retail layout to minimize waste and consistently prioritizes lowering product prices. In addition, while selecting a retail site, ALDI considers variables such as the volume of visitors to the region, the demographic composition of the area, and the population must exceed 25,000 individuals in that specific locale (MBA Skool, 2018).

Woolworths advocates for an extensive network, with 976 supermarkets and 90 convenience outlets. The company's storefronts are appealing, well-maintained, and situated in locations that are readily accessible to customers. Additionally, the firm has launched a mobile application and online purchasing services (Bhasin, 2018).  

ALDI poses significant competition to Coles regarding pricing and private label items, hence increasing the danger to the firm and impacting its market performance.    

Coles grocery has several potential within the Australian grocery sector, as it can expand its assortment of private label items to rival ALDI store. Additionally, it may seize development opportunities in the liquor industry and the insurance and banking sectors (S&P, 2018).

The primary danger that imposes limitations and obstacles for Coles in the market is governmental and regulatory laws. The evolving purchasing and consumption patterns of consumers are impacting the company's success. Established rivals like Woolworths and Coles consistently implement new and inventive methods to enhance their market share, posing a significant challenge to Coles store (MBA Skool, 2018).  

Coles Supermarket has around 807 locations in Australia, employing over 100,000 people (MBA Skool, 2018). This indicates that both the physical and intangible resources of Coles are very effective and robust. It has structured human resource management, diverse product offerings, innovative capabilities, a reputable brand, and recognition as a provider of quality and fresh items. Additionally, the company's supply chain is substantially optimized (Giles, 2015).   

A capacity is defined as the ability to execute or accomplish certain actions or activities. The management of Coles grocery demonstrates competence, as seen by its performance in the grocery business. The firm has successfully acquired around 30.9% of the market share (Pash, 2017).

Porter's Five Forces Model
Coles has an efficient supply chain, whereby distributors acquire items from suppliers, then transferring them to shops and arranging them on shelves to ensure food freshness (Giles, 2015).  

Retail Proficiency - To thrive in the market, it is essential to possess a comprehensive understanding of the fluctuations and evolving trends. The Coles administration have competence and is cognizant of environmental changes and client buying habits. Consequently, they are aware of what to provide, when, and when (S&P, 2018).   

Brand Recognition - The Wesfarmers group, as the parent business of Coles Supermarket, enhances its recognition among consumers in the marketplace. It is among the most esteemed brands and organizations globally (S&P, 2018).

Coles supermarket has a robust brand portfolio that caters to the varying demands of various market groups (Fern Fort University, 2018).

It is important for organizations to focus on their skills and transform them into strengths while seeking to go beyond competition. According to the Core Competencies Model, often known as the Prahalad and Hamel Model, established by C.K. According to Prahalad and Gary Hamel, firms may advance into new markets and development opportunities by using their core skills. The objective of delineating core competencies is to highlight the unique expertise that is difficult for other companies to copy. This paradigm focuses on the "inside-out view," in contrast to Michael Porter's "outside-in view" concept. (Macat Team, 2017)

The paradigm emphasizes a blend of comprehensive, coordinated, coherent, and pragmatic knowledge, skills, and methodology. According to this approach, the strategic purpose should be not on contending with competitors, but on creating a new competitive area. This indicates that the model is avant-garde (Drejer, 2002).

The core competencies matrix may be used to obtain and enhance additional core competencies, including:

The firm must ascertain which competencies may be used in the current market. Coles may use its efficient supply chain to ensure the successful delivery of goods and the preservation of perishable food items.

In organizing competences inside the new market, the organization may encounter the danger of excessive product variety. Consequently, to penetrate the new market, Coles needs maintain proximity to its core business, using its retail skills and competencies.

Bargaining Power of Suppliers
To enhance its longevity in the market, Coles supermarket may use its robust brand portfolio within the current market landscape.

The abilities required must have significant potential when the organization transitions to a new market. Coles Supermarket can use its brand familiarity to position itself as a formidable competitor in the industry.  

A data warehouse, commonly referred to as an enterprise data warehouse (EDW), is a system used for data analysis and reporting, serving as a fundamental component of business intelligence. Data warehouses serve as the primary repository for aggregated information from many sources (Vaisman & Zimányi, 2014).

Coles may leverage a data warehouse to store both current and historical information in a centralized location, which is employed for generating analytical reports for personnel across the firm. It is advisable for Coles to install this technology, since it can examine current and historical data using a data warehouse to formulate various strategies for enhancing market share.

Final Assessment

The research indicates that Coles has robust and effective core skills that might facilitate its expansion into new markets. Additionally, these abilities may aid in competing with market competitors like as Woolworths and ALDI, hence enhancing its market share in the current landscape. The aforementioned analysis has examined both the internal and external environments of Coles grocery and its performance within the Australian grocery and retail sector. Furthermore, a thorough review of the competitive landscape indicates that ALDI is now posing significant opposition to Coles and Woolworths in Australia. Both supermarkets are actively responding to ALDI's efforts with considerable effort.

References

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

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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 1st 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

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

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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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