Running head: MACRO-ENVIROMENTAL ANALYSIS OF COLES 1

Macro Environmental Analysis of Coles

Student’s Name

Institutional Affiliation
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Executive Summary

This report will conduct the macro-environmental analysis of the Coles group, an

Australian organization whose headquarters are located in Melbourne. The report will analyze

the different macro-environmental factors and assess the different challenges that affect the

operations of the organization. Nonetheless, the report will look at the solutions to these

challenges by giving various recommendations that will be used to solve these challenges and

enhance the organization’s productivity, profitability, and performance. The report will also look

at the significance of conducting macro-environmental analysis in developing an appropriate

strategy that would enhance the organization's performance for sustainable growth opportunities. 

Table of Contents

Executive Summary.....................................................................................................................................2
MACRO-ENVIROMENTAL ANALYSIS OF COLES 3

Introduction.................................................................................................................................................4
Identification and analysis of macro-environmental factors........................................................................4
Political Factors...........................................................................................................................................4
Economic Factors........................................................................................................................................5
Social Factors..............................................................................................................................................5
Technological Factors.................................................................................................................................6
Environmental Factors.................................................................................................................................6
Legal Factors...............................................................................................................................................7
Challenges and Solutions.............................................................................................................................7
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10

Introduction

The macro-environmental analysis is one of the critical issues that organizations should

consider in their business life on the global market. The future of individual businesses and the
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entire industries are shaped by the external environment in which the businesses operate. The

senior management staff of organizations should continuously make amendments to their

strategies to reflect the environment in which they operate. Conducting a macro-analysis is very

important because it provides information that would indicate whether the business has

opportunities to sustainably grow or expand. Performing macro-analysis is a critical exercise at

the start of the strategy review process. In this report, a macro-environmental analysis will be

conducted in the Coles Supermarket to understand the challenges that the organization faces in

its external environment and give possible recommendations on how these challenges can be

addressed.

Identification and analysis of macro-environmental factors

Political Factors

Several macro-environmental factors affect the operation of the Coles organization. The

first set of factors that affect this company are the political factors that significantly affect the

company’s chances of survival as well as profitability. One of the political factors that affect

Coles is the constant changes in the current political regimes which have impacted the major

decisions that the government makes (Sammut, Bonnici & Galea, 2015). For instance, these

changes have affected government decisions on taxation. In some instance, the government has

imposed higher taxes on businesses; this decision affected Coles by reducing its profits.

Nonetheless, the political stability in Australia presents a great opportunity for the company to

grow and expand its retail chains. This is because the political stability encourages the foreign

investors to invest and engage in business practices with the organization.

Economic Factors

The second macro-environmental factors are the economic factors which concern the

economy of the country that Coles operates. Some of the economic factors that affect the

business are the high inflation rates which have increased the cost of living in Australia. These

inflation rates have reduced the purchasing power of consumers in the economy of Australia.

Other economic factors include the current stage of the economic cycle, the gross domestic

product, and the interest rates. These economic factors have the capability of making Coles

highly profitable or make it incur losses.  

Social Factors

The third macro-environmental factors that affect Coles’ external environment are the

social factors that directly reflect the society in which this organization operates. Customers are a

priority of every business. Therefore, it is important for an organization to identify the needs and

preferences of its customers when designing a product. Social factors that affect the needs and

preferences of customers include attitudes, culture, values, and beliefs that are held by a majority

of the individuals in the community. Social factors influence both the market aspect of the

company as well as its operational aspect (Sammut‐Bonnici & Galea, 2015). For Coles to remain

profitable in this macro-environment, it has to understand the societal and cultural beliefs,

lifestyle, and the level of the educational background of its customers. This information would

help the company to develop strategies that resonate with these factors to enable the business to

achieve its desired success. 

Technological Factors

Technological factors also affect the environment in which Coles operates in. Technology

has shaped the way businesses conduct their operations and hence shaped the competitive

landscape of the business environment. Organizations such as Apple and Amazon have

embraced technological advancement and have obtained a competitive edge (Rastogi & Trivedi,

2016). For the sake of becoming a market leader and maximizing the possible available profits, it

is important for Coles to constantly and consistently become innovative in its production and

delivery of services and products. Being innovative will not only help the company to be

profitable but also prevent obsolescence in the future. 

Environmental Factors

The company is also affected by the environmental factors which are associated with the

general environment in which the business operates. Different organizations hold different

standards and norms for environmental protection. Lack of environmental consciousness affects

the productivity, performance, and profitability of an organization because it can lead not only to

boycotts by the customers but also to legal measures that can incur huge legal costs on the

company (Gupta, 2013). The ethical standards of an organization are determined by the measures

that the organization takes to ensure that it does not cause environmental harm. Since Coles

operates in the retail industry, it has to ensure that its operations do not cause environmental

pollution and degradation. Having environmental protection standards will enable the company

to remain profitable.
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Legal Factors

Lastly, Coles is also affected by legal factors which include the legal frameworks of the

government institutions in which the company operates. The legal factors also technically

include the political factors of the country in which a business operates (Besley, 2015). The

Australian regulatory obligations are essential for the operations of every business operating in

Australia. The Australian business law formulates the policies that do not only protect the

workers but also the company. Another part of the basic legal framework that guides the

operation of Coles as a retail industry is the recruitment and employee management regulations.

For Coles to retain skilled and talented workers, it has to maximally observe the legal policies

that protect the employees. Also, observing legal policies enables the company to avoid legal

suits that might cost the company’s finances and reputation. Nonetheless, since Coles Inc. deals

with food and groceries, this organization has to ensure that the products offered in its retail

chains comply with the food licensing requirements.

Challenges and Solutions

One of the challenges that the company faces in its external environment is the high

inflation rate. Reports indicate that the inflation rate in the Australian economy has increased by

2.1%. These inflation rates have reduced the purchasing power of consumers in the economy of

Australia. The reduced purchasing power of customers has affected the profitability of Coles. To

solve this challenge the Coles needs to come up with a cost leadership strategy that would enable

customers to continue purchasing its products even if the rate of inflation is high (Aithal, 2017).

This strategy will enable this organization to cut the costs of its products to a minimum possible

level so that buyers can purchase the products at lower prices. This will enable Coles to remain
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profitable even in times of high inflation rates. Another economic challenge that impacts Coles

operations in is the increased cost of materials. As a retail company, Coles needs to identify and

manage this risk factor. An increase in competition on the market leads to an increase in the cost

of production. Since customers expect to pay consistent prices, the increase in the cost of

materials can lead to a possible loss in profits.

The third set of challenges that the company experiences in its external environment are

the differences in social and cultural beliefs among the customers. This has caused the target

customers to lose interest in some of the products that the company offers. To manage this

challenge, I recommend that the company should develop a differentiation strategy (Rastogi &

Trivedi, 2016). This can be done by understanding the cultural beliefs of the target market and

differentiating the products to ensure that the products resonate with the cultural beliefs of every

target group. This challenge can also be managed by recruiting marketers from diverse cultural

backgrounds.

The fourth challenge that Cole faces in its external environment is technological

development. The business environment is currently shaped by technological advancements.

Companies that have embraced technological advancements such as Apple have achieved a

competitive edge (Shabanova et al., 2015). Coles still lags in terms of innovation and

technological advancements. This has made the company to lose its competitive edge. To

manage this challenge, I recommend that the company should monitor the level of technological

advancements and how quickly it is growing. This will enable the company to know the type of

technology that will disrupt its competitors (Xu, 2018). Also recruiting talented employees who

can help the company to match technology with the changing trends in the business environment

will enable Coles to manage this challenge.

The environmental challenge that affects the operation of this company is the inability to

properly manage its wastes. The company produces large amounts of waste products that are not

properly managed. This has made the company contribute to the endangerment of the

environment (Shabanova et al., 2015). Due to its environmental unconsciousness, the company

has faced a backlash from the public which has led to boycott. 

Conclusion

From the above discussion, it is evident that conducting a macro-environment analysis

can help an organization to identify challenges that affect the operation of a business. The above

report has identified some of the challenges that the company experiences in its external

environment. These challenges are mainly associated with the economic, environmental,

technological environment in which the business operates. Analyzing the external environment

and understanding the challenges in this environment is important because it will help Coles to

design appropriate strategies that would enable it to remain profitable on the market.
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References

Aithal, P. S. (2017). Company Analysis–The Beginning Step for Scholarly

Research. International Journal of Case Studies in Business, IT and Education

(IJCSBE), 1(1), 1-18.

Besley, T. 2015. Law, regulation, and the business climate: The nature and influence of the

World Bank Doing Business project. Journal of Economic Perspectives, 29(3), 99-120.

Gupta, A., 2013. Environment & PEST analysis: an approach to the external business

environment. International Journal of Modern Social Sciences, 2(1), pp.34-43.

Rastogi, N. I. T. A. N. K., & Trivedi, M. K. (2016). PESTLE technique–a tool to identify

external risks in construction projects. International Research Journal of Engineering

and Technology (IRJET), 3(1), 384-388.

Sammut‐Bonnici, T., & Galea, D. (2015). PEST analysis. Wiley Encyclopedia of management, 1-

1.

Shabanova, L.B., Ismagilova, G.N., Salimov, L.N. and Akhmadeev, M.G., 2015. PEST-Analysis

and SWOT-Analysis as the most important tools to strengthen the competitive

advantages of commercial enterprises. Mediterranean Journal of Social Sciences, 6(3),

p.705.

Xu, J. (2018). Research on the Strategy of Improving the Effect of Enterprise Marketing in the

Context of Consumption. In 2017 7th International Conference on Education and

Management (ICEM 2017). Atlantis Press.