Introduction
This business case study examines various factors affecting Coles Group Limited, an Australian-based retail company. A particular emphasis shall be placed on the government structure of the organization and how its leaders seek to ensure effective organizational governance. In addition, the study shall explore the external environmental factors affecting Cole Groups’ performance and decision-making. This case study will evaluate several factors affecting the group, including the scope of its work, business needs, alternatives, benefits, costs, and financial factors. The research concludes that the good decision-making and performance of Coles Group Limited have been contributed to by various favorable internal and external factors, as discussed.
Company overview
The first Coles Group store was opened in Melbourne, Australia in 1914. Since then, the company has continued to grow, becoming the second largest retailer in the country, only second to its major rival, Woolworths. The company produces a diverse range of products, including fresh food, liquor products, and groceries (Coles Group, 2022). As of today, Coles Group has more than six million customers, representing double figures in the market for the products it retails (Jie & Gengatharen, 2019; Keith, 2012). The company has also expressed that it seeks to ensure its customers lead healthier and happier lives by producing organic products through its mission statement.
Scope of OperationsAustralian organizations
Coles Group Limited’s business scope is wide as the company has continued to diversify its activities. The company’s supermarkets initially offered food and grocery products, but the business has since transitioned to various activities (Coles Group, 2022). One of the key sources of profitability for the Australian organization is the distribution of liquor and petroleum. The company further offers financial services such as advancing credits, insurance, and hospitality (Coles Group, 2022). Cole has also responded quickly to the changing nature of business and now offers online services where customers can access goods and services at any time they wish. The return on investment Cole receives when it invests in online services is higher than in traditional supermarkets due to reduced office overhead and store rent costs. Therefore, it can be argued that favorable internal decision-making combined with good environmental factors have positively impacted Cole and enabled it to expand the diversity of its investments.
Theoretical Concept
Analysis of the Coles Group Limited can be done using the PESTEL framework to understand the external environment factors influencing the organization and how the group’s governance structure addresses this problem. Initially, the PESTEL framework was referred to as PEST, but contemporary scholars have added environmental and legal factors to the framework (Yüksel, 2012). The first four are political, economic, social, and technological frameworks. The Pestel framework is popular with many management boards and particularly useful in strategic planning. It is also easy to incorporate the framework into other key strategic strategies such as the SWOT analysis and the Potters 5 forces. “P” in PESTEL stands for political factors, which comprise actions forced by governmental or legal policies. When analyzing political factors, one has to consider tax policies and procedures, financial and fiscal policies by the treasuries, and trade blocks a country belongs to, among organization factors.
The “E” in the PESTEL framework symbolizes the economic factors facing an organization. As a company based in Australia, some of the economic factors it is likely to face are changing interest rates, level of education and talent in the job market, the country’s inflation rates, and the exchange rates. For instance, a country with poorly skilled employees could negatively impact the company’s return on investment (ROI). Another external factor influencing the success or failure of an organization is social influences, which are demonstrated by “S” in PESTEL. Social factors are hard to measure as they involve a shift in how people live (Yüksel, 2012). For instance, if consumers believe purchasing products online is “cool” this could result in a higher profitability index (PI) because online sales are generally less costly than conventional retail sales.
Technological factors can also be explained using the example listed above. A company that takes advantage of technological accelerators will likely have a higher IRR and NPV in a particular period (Aljaloudi & Battah, 2018). Environmental factors influence the way stakeholders perceive an organization (Abbas et al., 2019). If a company focuses on ensuring that it safeguards and contributes to the environment, it may get compensated by having many clients. This strategy is difficult for most organizations since the payback period for such acts of charity could be long. The “L” in PESTEL stands for the legal factors (Yüksel, 2012). In the retail business, external factors that organisations deal with include; operation licenses, consumer protection laws, and regulations into ventured industries, among others. All states in Australia follow common legal laws, but if Coles Group wants to diversify into international markets, it would need to reconsider its laws and regulations.
Governance Structure
Coles Group limited has a bureaucratic governance structure with a board comprising the audit and risk committee, and nomination committee, in addition to the people and cultural committee, oversight over the executive leaders and team members. The managing director and the chief executive member lead the executive committee team (Coles Group, 2022). Below them are the executive leadership team, the departmental team members, and the Coles team members. All the different departments joined together to form Cole’s board. The board is headed by eight members tasked with ensuring that the company follows the correct strategic direction.
The board of the company has various roles and responsibilities it has to perform. One of its most important roles is guiding the organization’s direction by setting strategic objectives and long-term goals. In the company’s charter, the board, comprised of eight members, has the mandate to implement the company’s mission and vision statements. It also dictates the level of risks the company will tolerate. If some of the set policies and procedures are not working as expected, the board has the authority granted by the charter to implement new policies (Coles Group, 2022). Furthermore, the board is expected to oversee that the organization obeys the government’s policies and procedures.
Under the charter, the board delegates the day-to-day activities to the company’s CEO. These roles include maintaining and creating a sustainable culture in the organization. He/she also ensures that social and moral obligations, as expected by society, are maintained within the work environment (Coles Group, 2022). Allocation of annual and monthly budgets is also the responsibility of the CEO, and it is his role to ensure that the organization’s expenses are sustainable. The CEO should also ensure he/she maintains risk and guarantees to the board that there is internal compliance within the organization. All the roles mentioned above should be reported to the board, which acts as the oversight to the executive operations.
The effectiveness of the organization’s corporate governance is also ensured through good reporting and inclusion policies. Cole’s communication is done in a precise, clear, and timely manner, meeting its goal of ensuring satisfaction for its shareholders (Coles Group, 2022). Disclosure policies established by the company in 2022 ensure all cotemporally legal and regulatory framework is met (Coles Group, 2022). The company ensures that communication with shareholders is achieved by ensuring that those members attend annual general meetings. A reliable, independent external auditor is also appointed to ensure that the financial disclosers done at the annual general meetings are correct. The company also has investor programs that seek to inform the shareholders about how the company is doing. The company’s website has been the most effective and reliable form of communication for the organization in the last five years (Coles Group, 2022). Its importance is significant because of the timely information it provides to people, ease of access, and one does not incur any costs to access.
External Factors Influencing Performance
Coles Group management uses the PESTEL analysis to identify the external factors affecting the organization. A sustainable political environment is one of the external factors that have contributed to the continued growth of the group (Merrett, 2019). Since the Cole Group was formed in 1914, the country has not experienced any political tensions that could bring instability to businesses. The political climate is such that it encourages duopoly in the market (Jie, & Gengatharen, 2019). Likewise, the Australian Government is not known for corruption and bureaucracies, which sometimes hurt economies and businesses (Merrett, 2019). However, the management should always be careful to observe the political climate of the region since instabilities could fail in the business. The government of Australia frequently changes business and taxation policies (Merrett, 2019). However, the company has quickly adapted to the changing times and laws.
Coles Group operates in Australia, a very concentrated market with only two major supermarket retailers. The country’s economy and GDP are also high, meaning people have a higher disposable income (Merrett, 2019). Therefore, the threat from consumers is low, and the company can sell at higher prices. Therefore, for a long time, Coles Group and its long-time competitor Woolworths have enjoyed a higher cost-benefit ratio (CBR) for most of their investments. The two supermarkets therefore enjoy a larger market share because of their famous brands (Dwivedi et al., 2012). The demographics of most Australian consumers have shifted from a younger generation who are not afraid to purchase products online (Janssen et al., 2017). This has resulted in higher consumer spending and huge revenues for the company under review. The company has used technological advancements to market its products through social media and invent new desirable selling technologies that have made consumers purchase more (Coles Group, 2022). Conversely, legal factors such as employee protection laws and regulations have caused organisations to pay a huge sum of money, thus reducing their NPV.
Conclusion
The board has delegated the most crucial activities to the CEO, which is oversight by a non-executive team. Furthermore, the management body designed a charter where the functions performed by each department and individual are well stipulated. This has resulted in a good internal structure. Coles Group moreover has a favorababove-mentionedle external environment where political, economic, social, technological, environmental, and legal factors do better than harm the organization. Based on the above mentioned aspects, the company has managed to perform effectively in the respective market. The arrangement of the organization’s teams is central to the proactive nature of the corporation.
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