Strategic Marketing on the Coles Supermarkets’ Case

Introduction

Strategic marketing is a variable and complex process, oriented, and competitive by its nature. Strategic marketing may be seen on many bases including the domain being analyzed, their scale (small, medium, or large organizations). To appreciate them, the retail company should comprehend such concepts as coordinate, linkages, ruling, maintenance, change, decline, and decay factors. The company selected for analysis and evaluation is Coles Supermarkets Australia founded in 1914. The company operates 740 stores around the country and employs 92,000 pe

rsons. Coles Supermarket is a leading supermarket chain in Australia (Coles Supermarkets Home Page 2009). The remarkable feature of the industry is that the internationalization of retail companies is happening at an ever-growing pace. In the past 15 years, retail companies have distorted their direction from domestic to international; they have shifted from multi-domestic retail marketing to international marketing (Dobson and Starkey 2004).

The emergence of the international and international market has been enthused by the speedy globalization and mixing of countries; the configuration of local trading companies; the formation of market economies; and advances in manufacture and communications technologies. Today, retailing is proving to be of ever-increasing importance to retail companies of all sizes, to their customers, and to national economies. Worldwide, most retail companies are now selling to, using materials or equipment from, or competing with products from other nations (Drejer, 2002).

Australian market provides profits and is all that enable some companies to make any profits at all. National and regional economic health and development have become increasingly dependent upon sales as an engine of economic growth and stability. Coles Supermarkets has four basic functions:

1. marketing planning,
2. product and market management,
3. advertising and promotion,
4. market and marketing research.

Marketing channel members have a great impact on how Coles Supermarkets can or should manage these functions (Coles Supermarkets Home Page 2009). Australian society desires the preservation of retail business, yet craves the benefits of efficient mass retailers and distributors. Current laws and regulations in Australia limit retail competition but seek the low prices of vigorous competitive effort. The state wants the lowest prices for consumers but high wages for employees. The aim of the paper is to analyze the internal and external environment of the company and industry Coles Supermarkets operates in. The paper is based on two main strategic management analyses: SWOT and PEST, and uses such strategic models as a resource-based view and blue ocean strategy to evaluate Coles Supermarkets’ position on the market.

Internal environment analysis

Internal environment analysis is a widely used thinking frame for identifying Strengths, Weaknesses, opportunities and Threats of a company. SWOT analysis shows that Coles Supermarkets obtains a strong position in the Australian market because of its unique vision and product mix proposed to customers. SWOT shows that Coles Supermarkets successfully identifies the main advantages and threats of correct market position and current financial changes in operations (Coles Supermarkets Home Page 2009). The current market share of Coles Supermarkets is 25 %. It is positioning itself as a market leader and pioneer in this industry (Grant 1998).

Strengths

The strengths of Coles Supermarkets are strong brand image and expert system, excellent website and customer support. Resource-based philosophy and innovations create new opportunities for market development and brand recognition. Customers’ loyalty can be achieved through the people who are employed by Coles Supermarkets. The strengths are strong brand image and expert system, excellent website and customer support. Resource-based philosophy and innovations create new opportunities for market development and brand recognition.

The unique vision of the customer needs becomes the responsibility of R&D, which is staffed by specialists in visualizing and realizing trivial or main product changes. Since senior management is accountable for planning and control throughout the company in retail firms, it follows that they must adopt a leadership approach that is fairly directive. In most Coles Supermarkets stores, managers adopt either a democratic, consultative, or participative style. Retail service makes an emphasis on people as a unique target audience (Dobson and Starkey 2004).

Opportunities

The opportunities of Coles Supermarkets include the high potential for growth and profitability, a professional management team and unique corporate culture, customized order system and discounts. There is a great opportunity for supermarkets in this field, because specialized shops, throughout the world, are interested in goods produced in an environmentally friendly manner.

The opportunities include the high potential for development and expansion, a professional approach to management and a wider product range. Retail service assesses the areas in which the organization can benefit the most from greater emphasis on creativity and innovation. Competitive advantage serves both as a way of identifying what creative and innovative things competitors are doing as well as finding out for each of the areas requiring imagination and innovation who is the best (Drejer, 2002; Coles Supermarkets Home Page 2009).

Weaknesses

The main weaknesses of Coles Supermarkets are low market potential in some geographical areas. Competition is the main threat for Coles Supermarkets. In spite of weaknesses and threats, Coles Supermarkets has an attractive position based on a combination of cost management and customer services. In spite of weaknesses and threats, Coles Supermarkets has an attractive position based on a combination of cost management and customer services. Global trends establish challenges for generating creativity and innovation for large companies like Coles Supermarkets. They also provide research challenges from a creative and innovative management perspective. Research challenges fall into two major approaches of further success: one deals with methodologies and the other deals with issues to rethink, realign and reorganize large-scale retail companies (Dobson and Starkey 2004).

Threats

Limited geographical market and increased competition are the main threats for Coles Supermarkets. The main threat for Coles Supermarkets is increased competition and the near-monopolistic position of other retailers on the market. New methods of accountability will be needed to ensure that creative and pioneering activities are truly better than traditional ways (Drejer, 2002).

Competitive advantage

Following Porter, Coles Supermarkets has a competitive advantage based on the strategic position of the company against its competitors. Differentiation is the main factor of this strategy. In the retail industry, the threat of new entrants is high because entry barriers are low but competition among companies is strong. The problem is that volume size does not considerably change the cost base. Competitors give products with little differentiation and customer loyalty is changing. In addition, high inventory costs and competence barriers prevent many companies to enter this market (Drejer, 2002).

The bargaining power of suppliers is high because Coles Supermarkets relies heavily on high-quality products and on-time delivery. Coles Supermarkets suppliers have a unique accessibility product they can exert a strong influence over prices and conditions of supply, so potentially putting pressures on the businesses purchasing their product. as the most important, there is a limited number of suppliers in this industry. Many of the direct competitors follow the same strategies as Coles Supermarkets relying on product differentiation and cost leadership (Dobson and Starkey 2004; see appendix 2).

External analysis

Today, the political situation in Australia is stable marked by democratic processes and liberalization reforms introduced by the government. Strong political traditions have a great impact on the Australian market. Political interference and corruption are the main risks for a foreign company.

Legal Factors

Australia introduces laws and regulations in order to support foreign subsidies and attract FDI (foreign direct investments). In order to support the national economy, the government prevents price rises, or even to rolls them back in main national industries such as steel. Governmental involvement seems to relate price increases to the impact on inflation and increased productivity. Government has the influence to block or roll back price increases (Drejer, 2002).

Economic situation

The current economic situation in Australia is marked by low inflation rates and high income per capita. Thus, liberalization and a high level of investments can be considered as opportunities for a company to enter this country. For a retail company, there are also the necessities of making long-run capital commitments, meeting the requirements of joint ventures with nationals, and the imposition of special income taxes and import duties on necessities, as well as differences in social legislation, location considerations, protection of home products, governmental attitudes and control, laws affecting labels and standards, transportation and communications problems, and the risks of inflation, currency depression, and expropriation. All these create many additional risks to those encountered in national marketing.

Social-demographic factors

Social-demographic factors suggest fast population growth and decreased mortality rates in Australia: both in physical geography and in most aspects of their culture-mainly, their language, their traditional form of administration, and their religion. It is the northern half of Australia which has the larger population, and, in spite of supplies for moving refugees to the south, this distinction is not likely to disappear entirely (Dobson and Starkey 2004; Coles Supermarkets Home Page 2009).

Technological factors

In Australia, technological factors involve the Internet access and development of the telecommunication industry, new methods of doing business and information availability. Such factors as continued economic growth, increased disposable profits, dynamic domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and novelty will spur the appearance of this new marketing form in the retail industry. The application of computer technology and the use of new analytical techniques have added greatly to the efficacy of planning activities in retail companies and in their relations with suppliers around the country (Drejer, 2002). Technological changes changed the nature of the retail business and ordering process.

The resource-based model

The resource-based model allows saying that Coles Supermarkets has a unique and efficient combination of materials and human resources. When the product is standardized it becomes introduced for minimum quality and features, competition shifts to a greater emphasis on cost and service. Consumer electronics marketing strategies are the broad approaches intend to adopt in the longer term to achieve its marketing objectives in accordance with its marketing policies. The resource-based model takes into account increased competition (Moore, 2001).

The model includes new products, prices, promotion, packaging, advertising, field sales and distribution. The management goals will be to penetrate all regions in three years and double sales volumes in 4 years. The market skimming pricing strategy is part of an intentional attempt to reach a market segment that is willing to pay a good price for a particular product. Coles Supermarkets seeks competitive advantage by positioning its products in the premium segment often use market skimming. The resource-based model is appropriate in the introductory phase of the product life cycle when both production capacity and competition are limited (Dobson and Starkey 2004. see appendix 2).

The resource-based model of Coles Supermarkets is based on value propositions and product differentiation is well developed. The main strength of the resource-based model is the clear identification of the product advantages and potential target audience. This model will result in a plan that can assist the company in selecting and positioning the product. The resource-based model helps Coles Supermarkets to create an entry barrier for other companies and creates a unique market proposition.

This strategy makes sense because of a product’s perceived individuality. Differentiation is achieved as a result of exceptional product attributes and effective marketing exchanges. In the case of Coles Supermarkets, the resource-based model and brand loyalty increase for would-be industry entrants who would be required to make substantial investments in R&D or advertising. As with the selling philosophy and relationship strategy (Thompson and Martin 2005), Coles Supermarkets must include comprehension of the target market’s characteristics and the fact that prevailing needs and wants may mandate products that are different than those offered in the home country. As the first marketing tactic element, the resource-based model creates a truly different and unique product for customers.

Coles Supermarkets not only has to be perceived differently by customers (positioning), it has to be really different in content, context, and infrastructure (differentiation). In addition to the resource-based model, product positioning will help to establish trustworthiness, confidence, and competence for customers. If Coles Supermarkets has those elements, consumers will then have the “being” of the company within their minds. It is about earning consumers’ trust to make them willingly follow Coles Supermarkets So positioning is not just about persuading and creating an image in the consumers’ minds, it is about earning consumers’ trust and loyalty.

The resource-based model supports differentiation strategy in order to widen product potential retail market. It helps the company to occupy the consumers’ minds with unique offerings and will lead the consumers’ credibly (Drejer, 2002).

The generic strategies make the statement that the retail organization intends to persist in a concentration mode, that is, limit its horizons to a single product/service or achieve a principal portion of its sales in one industry. Few large or medium-size firms confine their product horizons (Mintzberg et al 2004). Usually, it is retail businesses that start with such a focus. With success and growth generally come a desire to decrease dependence on any one product/market. Diversified retail companies have more stable sales and earnings.

Risk reduction undeniably helps enhance shareholder value. Most retail organizations have historically been uncomfortable about “sticking to their knitting” lest they knit a sweater that’s no longer in style or that someone else can make at half the price (possibly with the machine they’ve just invented). The reluctance to invest all resources in one segment is quite understandable since it could result in binding the Coles’ future to just one product, a product that might be rendered obsolete or substituted by alternate goods.

Also, Cole’s competitors could prove to be more competent at value formation by identifying the desired components of value more accurately or delivering them more effectively (Drejer, 2002). Continuous value improvement in a product lime is certainly creditable, but carefulness dictates that other stakeholders’ needs (shareholders, employees, creditors, and suppliers, for example) also be taken into consideration. The resource-based model is an important strategy in assuring that the needs of a variety of social groups are given careful enough attention to merit their strong approval.

Furthermore, expanding the product and retail market scope of the organization widens its spectrum of customers, providing even more opportunities for delivering value in completely novel ways. The resource-based model has, of late, come under fire for being the cause of many firms’ declining capability to compete with domestic and foreign rivals. It is, though, conglomerate changes that distract Coles Supermarkets from its mission of value. When the retail company has numerous product and service offerings, few of which have any relationship to each other, the objective becomes to maximize shareholder value (stock price and/or dividend). Commitment to a product line or to its consumer is conspicuously absent at the corporate level (Dobson and Starkey 2004(; Coles Supermarkets Home Page 2009).

Blue ocean strategy

Blue ocean strategy proposes great opportunities for organizations like Coles Supermarkets to tract new target markets and attracts wider target audiences. An occasion involves viable change, in a favorable direction, to arrive at a desired future state. Viable refers to technical and economic issues, whereas attractive involves more subjective preferences. Coles Supermarkets followed a blue ocean strategy creating a new industry for its [products. The approach selected by Coles Supermarkets can be characterized as: “the set of managerial actions and decisions involved in making a major market-creating business offering” (Kim and Mauborgne 2007).

The case of Coles Supermarkets shows that opportunity is obviously a relativistic concept: what is attractive or viable for one person or Retail Company may not be desirable or feasible for other retail organizations or companies. First of all, from an advertising and entrepreneurship viewpoint, the blue ocean strategy must be defined as having sustainable profit potential, beyond pure extra profits, and “one-shot” deals.

Second, the blue ocean strategy must be defined as a market position, that is, a field of activity in which a company is competitive away from the short run, and able to reap a profit. A market position can be viewed both from its value context and from the perspective of rivalry. For Coles Supermarkets, the marketing difficulty is to find the shortest way from natural resources to finished goods, that is, the optimal mixture of sorts and transformations. The transvection is a useful concept in this case because it encompasses what is needed in the total marketing process disregarding possession factors. Often exogenous technological progress or changes in market structures create opportunities that can be exploited through consumerist behavior. This retail company does not create a new retail market for its products but follows the same product design and market strategy developed by Coles Supermarkets.

Actually, the resource requirements can be limited by using external material resources and internal human resources in this way. The ability to use external resources also tends to enlarge the opportunity space by making more opportunities possible. Personal networks often play an important function in making external resources available Coles Supermarkets creates a new market and new niche for its product (Drejer, 2002). In its turn, Coles Supermarket’s profit potential leads to a potential for more successful ventures.

These same barriers to entry take on another role when considering the initiation of a new scheme in an existing market. It takes time, money, and energy, or a novel idea or concept, to surmount high barriers without a large expenditure of funds. The last consideration under the category of competitive dynamics is the product line growth path for the venture (Blue Ocean Strategy. 2008).

The blue ocean strategy follows by Coles Supermarkets allows the company to sell more products than its competitors. This strategy allows the retail company to become a market leader and occupy a new market niche in the video game console market. The importance of strategic thinking can lead one to expect that strategic development is found to be extremely important in the opportunity identification process. The blue ocean behavior in itself will not be enough, that is, behaving entrepreneurially in the way we have described is not a universal formula for identifying opportunities (Kim and Mauborgne 2007; Coles Supermarkets Home Page 2009).

Conclusion

The example of Coles Supermarkets’ strategic position shows that strong interdependence enhances value; a similar case can be made for value statement to customers through transportation, storage, routing, distribution, sales, advertising/promotion, public relations, and so on. The sequence of retail activities may be traced pretty much the way society and consumers did for conceptualization.

While the retail company shall not develop the full linkage, Coles Supermarkets do stress that tight linkages within and between the various practices in the retail market are essential to make for a strong and sustained production-customer connection. In this retail context, marketing is considered by Coles Supermarkets as an intervening variable which, to a large extent, joins the relationship between Coles Supermarkets on the one hand and consumers on the other. Beforehand, retail acetifies and practices were this variable.

Organization forms suited to retailing were developed. Now new forms are developed to reflect the role of marketing. These forms involve a resource-based view of the company and its blue ocean strategy. The strategic management approach, changes in retail markets, cost-price pressures, the evolution of the product and brand management concept, the shifting distribution structures, and changes in physical distribution, have resulted in the need for new views.

As goal-directed units, Coles Supermarkets have multiple objectives and the relative importance of their various aims changes. Sometimes strategic conflict; but it is desirable for them to be compatible. Since retail sectors vary, the relative importance of goals must be determined to attain organization and establish criteria for effectiveness. For Coles Supermarkets, the strategic aim of profit maximization, often assumed in the planning of economics, may not be the primary organization objective.

In the retail market where there are so many different retail organizations and forms of business, Coles Supermarkets cannot automatically establish its identity. The intentional action to accomplish this identity cannot be too sporadic. Coles Supermarkets, typically, have the tendency to increase its product proposal ion or heavily promote when the economy is in an upswing, and they cut down its main activities in times of economic slow-down.

However, Coles Supermarkets must continue with their total promotional program and make only a few adjustments at the edge as the economic conditions change or competitive conditions necessitate. Accelerating retailing activity may not be quite adequate to counteract the turbulence. Retail businesses in Australia are not quite so flexible. Many retail organizations like Coles Supermarkets take the orientation of business as usual.

The resource-based view accepted by Coles Supermarkets shows that once certain plans and financial decisions are made, retail business continues as usual. The essential flexibility and proactive behavior are not built into promotional plans. Also, it is assumed that business conditions are not likely to change considerably and that the best approach is to implement the plans as they were originally devised. This type of conservative and conventional point of view makes it impossible for the retail organization to cope with turbulence.

The case of Coles Supermarkets shows that retail organizations in Australia can behave this way because they are big and powerful. Therefore, they strengthen the survival of the fattest. Though, one must realize that by not being practical and not attempting to counteract turbulence business is likely to lose money in both the present and future. There are two critical issues for this: retail business is never as usual and best-kept secrets never win. Organizational boundaries in the retail industry are dynamic and adjust to meet the changing needs of their environments. As a result, Coles Supermarkets has a life and style of their own, and at certain periods, the power of different groups may increase. Also, retail organization structures may change in periods of surplus from their form in periods of making shortages. Coles Supermarkets are patterns or arrangements designed to achieve goals.

Coles Supermarkets transforms a society of unrelated marketing activities into an organized system. As the retail environment in Australia is dynamic, Coles Supermarkets focuses on actual authority structures, communications networks, interrelationships of fundamentals, and the functioning of a group and its process, rather than on the retail structure portrayed by static organization charts and the organization attributes capable of achieving strategic aims. Coles Supermarkets emphasizes the integration and coordination of functions and services, the adjustment to organizations to their internal and external environments, the impact of changes in one part of the organization on others, the material and human resources necessary to support the organization system itself, the resources necessary to achieve strategic goals, and the end relationship.

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Appendix

Figure 2. Competitive advantage.