Challenges faced by Coles in the Australian Market

In achieving competitive advantage in the market, it is important to introduce strategic innovation for the services as well for the products provided by an organization. It is considered as the critical factors in improving the productivity as well as the competitiveness of the organization.  In addition to that, Innovation is also important as it allows the business organizations to adapt to the changes in the business environments, customer demands and global economics.   According to ausfoodnews.com.au (2018), there is sales slowdown in the different segments of Coles in the first quarter of the financial year 2018.  For this quarter, the total sales figure is given by $7,968 million. With its decline the, the Woolworths became the largest super market chain beating the Coles; even though the Coles tried to attract the customers by providing exclusive discounts on different products.    

Innovation is important for improving the customer experience well as better profitability from the market. This innovation may include better design of the stores that make it easy for the customers to find out the required product while reducing the customer’s effort to find the products throughout the web site or store.  With the rapidly changing the global business environment and to meet the challenges in it, it is important to introduce products, reduce the productivity and operational cost to gain the competitive advantage for the organization. According to the different researchers, it is found that the organizations with the service or product innovation at the place are more successful compared to its competitors.      

 The Coles supermarket is one of the largest retail chains in Australia with more than 800 stores throughout the country and headquartered at Melbourne.  Previously, it was one of the best super markets and online stores. With the emergence of the other supermarkets such as Woolworth, ALDI the competition in the market becomes more intense for Coles. Even though the organization is quite successful with the physical and online stores, but due to some issues in supply chain and service innovation it is facing some issues and reduced business performance.  

Chart1: Market share of different companies

(Source: ausfoodnews.com.au)

Compared to its competitors in the market we found that, due to the power of the customers and intense competition. Coles closed multiple underperforming stores as well as cutting the product ranges.   This leads to the loss of the customers as they did not find the products that are required from Coles.   Due to this Coles is facing slipping of profit margin from its business in the market with the decreasing number of customers.  For any business, the bottom line is the profit from it.  In the present business scenario, Coles is facing challenges to profitability due to the competition (Visnjic, Wiengarten & Neely, 2016). According to the companies own assessment, they found that, 1 out of every three customers is dissatisfied with prices of the products. In addition to that, one customer out of 6 is not happy with the freshness of the grocery products as claimed by Coles and 1from every five customers does not like service in the stores.

Importance of Strategic Innovation for Improving Customer Experience and Profitability

With the entry of the new players or the companies in the market, the discount chain Aldi, it becomes necessary for Coles to satisfy the customers with better service, the freshness of the products and improved service quality at the stores.  In order to compete with the new entrants in the market, it becomes necessary for Coles to proactively investment in the customer offer to stay in the competition.   

As the globalization enabled the business or organizations to import or export products from different corners of the world. This globalization of the business affects the local business as well as economy related to it. Therefore, the changes in the global economy and business environment also affect the business of Coles in Australia.

From the different sources, we found that, the Coles is facing continuous problems with its supplier of different products which downgrades the performance of its supply chain as well as its business (Lin, Tan & Geng, 2013). Due to this issues, it is possible that, the products may not be available on the racks or pickup stores due to this issues.  Therefore, one of the most important issues will be maintaining better inventory to ensure the availability of the products for the customers. 

There are mainly two types of innovations in the innovation space which includes, Product innovation and service innovation.  

Product innovation is related to the production and launch of completely new products. Therefore, the product innovation and process innovation is closely related as in order to launch a new product it requires a completely new process.   

For service, innovation is responsible for producing social goods. They are helpful in recovery of distribution process for the products delivered to the different branches or stores throughout the country (Visnjic, Wiengarten & Neely, 2016).  It is also related to reforming or improving a process that plays an important role in the business. Therefore, in case of the Coles, it may be reforming the supply chain process.   

For the Coles Super market, we recommend using the Product innovation framework. According to the analysis of the business of the organization, it is found that the organization in their stores throughout the country there are almost 10,0000 employees to complete different operations.  

 In addition to that, as the country is now populated with the people coming from multiple cultures such as Indian, Chinese, Sri Lankan etc. Thus, the organization can exploit the opportunity of acquiring new customers by providing the food or grocery items imported from their origin countries.

Types of Innovation – Product and Service Innovation

For this specific framework, it is suggested to survey the customers to get a clear idea about the products they need or require from the organization.

Generate and gather ideas:  At this stage, the ideas for the product innovation is collected by analysing the customer responses against some specific questions related to their expectations of products from the Coles.    

Identification of the issues and opportunities for the organization:  in this stage, the issues that are acting as ten hindrances in achieving the desired business results are identified (Hervas-Oliver, Sempere-Ripoll & Boronat-Moll, 2014). In addition to that, the opportunities for the collected ideas are also evaluated.

Assessing the business value of the ideas: After the evaluation of the ideas that may fit with the business opportunities, the business value of those business ideas are assessed. This is important in order to get the most of values after they are implemented.    

Establishment of the right principle that will support the innovation process:  One of the crucial factors that affect the innovation in any organization is the presence of the supporting principles and experts in the innovation process. With this highly-talented experts equipped with the extensive reach and business, connections can help in placing the framework with an efficient team in an organization (Lin, Tan & Geng, 2013). They will be responsible for promoting the powerful interchange of ideas for the challenges faced in the innovation process that will have the significant impact on the business of the organization.

Figure 1: Innovation Process Framework

(Source: Created by author)

 In order to manage the product innovation framework, it is important to efficiently manage the supply chain of the products of Coles (Hervas-Oliver, Sempere-Ripoll & Boronat-Moll, 2014).  It is found that small stores like, Elephant house in the Glen Waverley is mainly famous for the products mainly belonged to Sri Lanka.

Thus importing the products to attract the customers belonging from different regions can be helpful in increasing its customer base in the country. As the business of Coles does not depend only on the natives of the region but also on the customers of different cultures in the region.

Communicating the plan for innovation:   As the lack of communication is identified as one of the issues that are affecting the success of the business of Coles thus in order to make the framework to be successful it is necessary to communicate the details of the framework to everyone who will be involved in the process (Hervas-Oliver, Sempere-Ripoll & Boronat-Moll, 2014).  

Product Innovation Framework for Coles Supermarket

Design and implement: At this stage, the developed plan is implemented for innovation in a predefined way so that the input and the output for different processes can be easily maintained and tracked.

Evaluate and refine: This is the last stage, that asks for the evaluation of performance of the framework and refines different internal sub processes in order to meet and achieve the predefined objectives.

After a framework for innovation for the organizations is selected as well as applied it is important to manage the framework to make it fruitful for the organization.  In order to do this, it is important for the organization to identify the factors that are important in achieving the success (McIntyre, Melewar & Dennis, 2016). z loss of customers due to the immense competition in the market, trade barriers that impact on the supply chain from the other regions or countries.   

In most of the cases, it is found that the developed and deployed framework fails due to the inability of managing the uncertainty related to it. For this framework, the main input will be the financial resources required for the collecting customer responses. Availability of the resources will be important for idea generation process for the products that need to be imported.   

For any organization, the product innovations are considered as very risky as well as the expensive process. Whereas the success of the product available from the product innovation justifies the required costs and risk related to it (Visnjic, Wiengarten & Neely, 2016).  In order to make the product innovation process successful in the competitive market, it is considered as very important to manage complete process of launching the new product in its stores.

Currently, there are several theoretical principles and concepts in order to manage the product innovation process. For this, the Coles need to a clear mission, with well-defined objectives as well goals depending on the market (West & Bogers, 2014).  In order to manage or develop a fruitful strategy, it is important for Coles to determine its position in the market as well as possibilities of success in those markets.

In the present competitive environment, the retail industries or business today heavily depend on the product innovation for attracting new and profitable customers. Availability of the New products depending on the requirement of the customers makes the company’s successful in the market. Conversely, after some specific period, competitor organization can also launch the same type of products with better offer and quality. This forces the organizations like Coles to search for improved competitive advantages in the market (Hervas-Oliver, Sempere-Ripoll & Boronat-Moll, 2014).  Therefore, one of the best strategies to get a competitive advantage is to formulate a sustainable strategy.

Managing the Framework for Success

Therefore, in order to address the identified issues of Coles, it is suggested to introduce some loyalty programs for the newly launched product.  The launch and success of the new product are dependent on the effective and efficient supply chain of Coles.  

In order to address the slipping margin in its business, it is important for Coles, improving profit margin from the business should be one of the top objectives while taking the risk with the Product innovation process.

On the uncertain ground of global economy and ever-changing expectations of the customers, the retail industry is severely impacted. With the above issues maintaining the quality of the products and services while keeping in mind the price-sensitivity for the customers also affects the sales which consequently impacts on the total profit (Lin, Tan & Geng, 2013). Whereas the pressure exists to maintain the prices of the products low, the cost related to the supply chain and inventory is increasing.  Therefore, the above issues make it harder to remain profitable in such competitive market.

In order to mitigate the issues related to the profitability, it is advised to produce private label ranges with expanding sources of import for the different products.

In order to be a successful retailer in the country, the Coles needs to mitigate the pricing related issues. This weakness due to the pricing can mitigate by providing more choices for the customers (McIntyre, Melewar & Dennis, 2016). In addition to that more product ranges and for different customer segments should be added.  In this case the sourcing and supply chain activities also need to be optimized for better profitability.

Coles also needs to renegotiate with their different suppliers to rethink as well as redesign the distribution channels.  This helps in greater market visibility and product sales predictability throughout the product lifecycle will include which will improve the profit margin.

For any retailer managing rapid changes and complexity is considered as one of the most challenging things for any organization like Coles. Even though this is complex, but the organization needs to manage this efficiently in order to sustain in the market and maintain an efficient operation throughout its chain of stores. While doing this some of the main issues that may affect the process are, lack of collaboration, communication and consistency across the different operations (Hervas-Oliver, Sempere-Ripoll & Boronat-Moll, 2014).   In addition to that, it is also hampered by silos of information and lack of visibility across the functions.

In addition to that automation is another factor that should be considered while trying to make the operations efficient. As dependency on the manual processes is responsible for holding back the organization due to inefficient flow of information throughout the different parts of the organization.

Another problem is lack of information due to the lack of efficient communication between the different departments or stores. Consequently, this leads to lack of visibility into different operational processes. This issue can be mitigated by enabling accurate and timely information sharing of essential information by communication channel integration (Visnjic, Wiengarten & Neely, 2016). The newly launched products, processes and technology solutions will enable Coles to effectively understand the customer requirements, services and manage those demands efficiently.  

In order to mitigate the trade barriers in the different regions due to the compliance issues, taxes on import, the subsidy provided to the domestic goods and embargo, it is important to maintain compliance for the product, labour safety and pricing.

The business of Coles experiences hard business competitions as well as goes through an unusual change in the industry. Suppliers in this sector are routinely introducing new items as well as services for the clients whose requirements are consistently growing and changing.

Besides, with the changes in the business environment the customers of the business organization expect quick, customizable and cheap answers for their every retailing needs.  In this competitive environment contenders or the rivals of “Coles” are using improved strategies as the weapon to compete (McIntyre, Melewar & Dennis, 2016). Such as use of more than one distribution channel to attract the customers and reach out the new customers. For instance, offering the option for the users to order the required products on the web and get those ordered products from the nearest store or from a pickup point without waiting for the delivery of the products by the representatives.

In order to sustain in this competitive business environment and gain benefits, it is important for the organizations like “Coles” to consistently support innovation in the services and products provided to the customers with adequate human and financial assets so that the business opportunities can be exploited through these innovative services (Slater, Mohr & Sengupta, 2014). Innovation for the services and products can help in developing advantages that customers can acknowledge.  In addition to that, the organization needs to, continuously invest in generating value from the different business processes, better food or product quality, market leading service and innovation (Hervas-Oliver, Sempere-Ripoll & Boronat-Moll, 2014).

Services like the Tailored offers for the different type of customers can easily the organization to get more new customers as well as retaining the existing customers.   The tailored offers for providing a great shopping experience to their different customer segments can also help in improving the performance of Coles in the market (McIntyre, Melewar & Dennis, 2016). Systematic utilization of shopping data about the purchase or orders of the products and services can supports the vision of improving customers’ expectations from the organization’s product and services.

For Coles, as it is already using the different technologies to attract and retain customers, therefore in order to engage the customers with the organization it is suggested to crowdsource the generation of the ideas for innovation.  Like the organization should encourage the customer in order to play a greater role in introducing new products or services they provide to the customer.  

In this way, the organization will be able to meet the customer requirements by meeting the customer expectations. This also increases the likelihood of purchase of that product or services from this specific organization.

In addition to that, it is also possible to ask the customers to provide online reviews for the products and service they purchase at the Coles super market.  In this way, it is easier to collect reviews about the product and services while they are inside the store. These reviews are more effective compared to other reviews on the social platforms to attract and influence the other customers to buy the same product or service.

Conclusion 

Being one of the largest retail and customer service chain it is important for the organization to have innovation in place. Innovation provides competitive edge to the organization in order to penetrate markets with versatile customer segments. In this way, the organization can penetrate and exploit the opportunities in a faster and efficient manner. This provides a better connection in case of the developing markets leading to the better opportunities specially in the countries like Australia.   

 In addition to that, Innovation is also helpful in developing original ideas inside an organization while giving the organization a proactive as well as the confident attitude in order to take calculated risks for getting things done. This calculated risks can help the organization to achieve predefined goals and objectives by implementing above mentioned innovation process. 

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