Coles Group Limited SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Private Label Strategy: Apart from the grocery sales the company is trying to make direct dollars from its consumers by selling private label goods to its customers. According to 2012 IBIS World Report, goods which are private label will contribute 33% of all sales in the supermarkets by 2018 an increase of approximately than 150% of what it was in 2008.

2. Growth opportunity in the National Liquor market: With Woolworths & Woolies controlling most of the liquor outlets, Wesfarmers which is the parent company of Coles control 20% of the National Liquor market. Huge opportunity lies for Coles to enter into more of private label liquor brands to capture more market share.

3. Insurance & Finance Sector opportunities to pull upon: With the presence of a huge database readily available through the retail and convenience stores Coles along with its competitors are trying to leverage the data and come up with customized insurance policies for the customers based on their standard of living which is again being estimated from the pattern of their purchase history. With the advance of data analytics this can be a huge opportunity for Coles to cater to its huge customer base with tailor-made insurance products that can be modified or customized or up/downscaled as per their needs. Coles have been issuing its own credit cards from 2010 which were almost 400,000 in number. But in mid-2014 it announced of its joint venture with GE Capital to sanction the customers for using wider range of products in the category of loans and advances.

4. New market scanning: Big retail players like Coles and Wesfarmers (Parent company of Coles) have already placed some of their researchers in actions to find the ripe grounds for expansion in some of the emerging sectors in Asia where they can leverage their sourcing & supply chain expertise to tap the markets.

Threat

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Political

1. Government regulations against the duopolistic nature of the market: Coles and Woolworths being the retail giants in Australia control the lion’s share and thus making the market duopolistic in nature. Federal government recently has taken steps to control this duopoly and Australian Competition & Consumer Commission has recently taken numerous steps to decrease the entry barrier and to lower the competition so that the new players can also operate and enter with ease. This can help in increasing the bargaining power of the customers as it would help the customers compare the prices before taking the purchase decisions.

Economic

1. Low spending Australian customers: Due to the economic downturn the Australian customers have become very price sensitive and that too they are also spending less on their shopping habits. In its constant endeavour to become customer friendly Coles has introduced a wide range of products and is trying to decrease the price of the products with the lowest margins possible. Through the use of the combination of various products available at Coles the customers can minimize their shopping cost and can buy products at a price even cheaper than 2009 prices. However this strategy of Coles is being adopted by many of its competitors and what has started is a “Price War” where only the deep pockets players stand a chance to survive and revive.

2. Bargaining Power of Suppliers have reduced drastically: As Coles & Woolworths control majority of the retail chain stores in Australia the suppliers are not being able to find any more intermediaries and thus the duopolistic nature of the market forces them to reduce their bargaining power and thus many of the suppliers getting wiped out financially. But with steps from ACCC the bargaining power of the suppliers are set to increase in the near future with the availability of new intermediaries.

Social

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Technological

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Legal

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Environmental

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