Coles Myer, one of the largest retail firms in Australia, was established in Adelaide in 1900. After one whole century of experience, they now own more than 1,800 stores across Australia and New Zealand, and became the market leader in Australia retailing. Though, with the influence of the global market downfall, Coles Myer is experiencing many problems both external and internally. The most critical environment influences that impacted Coles Myer would be the pressure bought by their competitors.
Woolworths, another retailer from the market, had deployed a discount fuel scheme five years ago.In which, they have successfully increase their stock price and market share. Also, reports show that a proportion of customers were stolen by them. In addition, many overseas investors have claimed that Australia is one of the countries where they are thinking to invest in. This would then add extra pressure and competition for Coles Myer. Due to the impact bought by competitors, this have also affected Coles Myer internally. The chief executive John Fletcher is now under pressure by the boards to reclaim its position in the market and its profitability.
This leads him to reorganise a different set of strategies such as cost cutting and approach Shell for a fuel discount campaign. Although no deals have been signed as negotiation is still in process, but cost cutting had created some direct responds such as lack of labour in service line for supermarkets. According to the system theory, Coles Myers have been operating as an open system due to their continual interaction with its environment. Negotiation with Shell is an example of what could be done. Also, new management plans are being look at and if a right plan is applied, the organisation status in the market should rise once again.INTRODUCTION This report will analyse the environmental impacts on Coles Myer and identify the internal problems created by these impacts. We will then evaluate what Coles Myer I doing to manage these impacts and make some additional suggestion of how this problem could further be solved. ENVIRONMENTAL INFLUENCES External environment cn be defined as the major forces outside the organisation able to impact on the success of its products or services.
From this, we can say that there are many environmental influences which led Coles Myer into a low market position as today.Below, we will illustrate a major cause and explain how it affected Coles Myer. – ISSUES WITH COMPETITORS Woolworths, one of the biggest competitors from Coles, had launched a discount petrol scheme with Safeway fuel five years ago. With this effective strategic plan, Woolworths has successfully stolen a large percent of customers from Coles. Offering a discount of four cents a litre on purchase of thirty dollars and over, Woolworths is gaining too much of a competitive edge over Coles.
In one of the financial report, comparing stores growth, Coles has a 2. 9% for the first half of the year and 1.8% for the second half of the year in 2002.While in sharp contrast, Woolworths achieved nearly twice the level of sales growth for the first half of 10. 2% and 7. 4% in second half. Beside Woolworths, Coles Myer would also be facing pressure from overseas country.
Britain’s fourth largest grocery chain, Safeway Plc has also been one of many threats competing with Coles food and liquor line. German based companies such as Tesco, Sainsbury and Costco have recently applied for liquor licences and confirmed that Australia was one of several countries under consideration for international expansion.With more competitors coming around the globe, Coles Myer will definitely be under more pressure than ever before. INTERNAL PROBLEMS Apart from pressure caused by external factors, Coles Myer is also experiencing many internal crises which are affecting their daily operation. Below are a few main issues illustrating how Coles Myer is being affected by internal problems. – FINANCIAL STATUS Currently, Coles Myer owns eight different retail brands; they are Coles, Bi-Lo, Myer Grace Bros, Mega-mart, Kmart, Target, Liquor-land and Office-works.
Due to the undesirable market, Coles Myer is experiencing deterioration in growth in all areas. Its market shares had fell to a five-and-a-half year lows in its 2002-03 results. Because of the discount fuel scheme deployed by Woolworths, resulted in loosing a proportion of its customers, Coles Myer announced that even their Coles supermarket and Bi-Lo are not doing as well as they should be. In addition, one of their biggest brand, Grace Bros has been making a loss of more than twenty million dollars in just one year. Having Coles Myer in a position as such, it led to another internal problem.- MANAGEMENT LEVEL As the performance of Coles Myer has decreased in the past few years, the board had demanded that John Fletcher, the chief executive to bring the market share back to the top. In this incident, John had promised the board that if he cannot success in doing so, he would no longer have a job with Coles Myer. Also, due to some conflict within the board, a few other members will be leaving which means that new committee members would be needed.
Having a fluctuation in the management level, Coles Myer would have to deal with this matter carefully. – STRATEGIC PLANNINGJohn Fletcher’s strategy is to cut costs in order to meet the end of year profit result as he promised the board. Though in doing so, John had created many other problems. As labour power would be cut down accordingly, reports had shown that ‘often only one or two checkouts are open because of a hugh clampdown on employee costs’. Due to the large loss in the past years by Myer Grace Brothers and other not profitable brands, Fletcher also says that he cannot guarantee that the company will have all eight brands left by the end of 2006.
ORGANISATION APPROACHES TO THE ISSUESAs mentioned earlier, Coles Myer can be recognised as an open system. Due to their adoption of their competitor’s strategy of deploying discount fuel scheme, it shows that they are constantly aware of the environment around them. Although the deal with Shell has not yet assured, but it demonstrates that Coles are aware of the seriousness of the situation. With new members coming into the board, this would means that new innovative ideas could be proposed. This would then lead the transformation processes more effective, hence the output by the company should increase accordingly.
RECOMMENDATIONS At the moment, Coles Myer is taking a defensive strategy which means that they are achieving their goal through cost reductions. Yet, I believe Coles Myer should concentrate on the growth strategies. This means that they should rather focusing in delivering better quality and wider options for customers. Bargaining with Shell is a good start in order to try to bridge the competition gap with its competitors, but knowing that they have a head-start of five years, it is near impossible to overtake the market purely by this strategy.
Therefore, I believe porter’s competitive strategy would be prove useful in here. If Coles could apply the cost leadership strategy, that is, to provide products or service at a lower price than competitors, then a higher proportion of customers from the market would be interested in coming and shop at Coles Myer. Also, if feedbacks are taken carefully, Coles would understand that their discount cards for shareholders are also a major concerns for their customers. Finally, if Coles Myer could operate their business as theory Z suggested, that is to combine the positive aspects of American and Japanese management. Coles could easily win back their title as the leader for the retailer in Australia.
REFERENCES1) “Solomon Lew’s Counter Attack”, Business Review Weekly, Feb27-March 5, Pg. 29-31. 2) Angela Brown,”Coles prunes back for future growth”, Retail World, Oct 28-Nov 8, 2002; Vol. 55, Iss. 21; pg. 10 3) Anonymous “Coles crates to boost Foodbank”, Retail World, Rozelle; Sep 30-Oct 11, 2002; Vol. 55, Iss.
19, pg. 15 4) “Trouble in store at Coles Myer”, Barbara Drury in Sydney, Sunday Business, London (UK), Sep 29, 2002; pg. 1 5) Virginal Marsh “Coles Myer in talks with Shell”, Financial Times, London (UK); Feb 28, 2003; pg. 29