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Introduction : Confidential Agenda Item Board Meeting
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Strategic and contemporary issues are common phenomena for a business firm while operating inside an industry. This report has analyzed the issues that Cole's Australia faced in both the supermarket and petrol industries. In addition, this report has analyzed the strategic choices that the company chooses to incur for increasing its financial and business performance. The company's evaluating strategies have also been effectively linked with the respective industry. The CEO and development board of the company have made advanced strategic and evaluating choices for shifting the company's overall business operations consecutively to neglect the losses that are currently recurring inside the supermarket retail and petrol business in Australia.
Recommendation
The report is also going to analyze the implications for the organizations and what the effective strategy that the other business firm’s operating inside the similar market are recommended to implement into their financial and business plans during an accounting period.
Part 1:Background
Strategic issues are often reflected to be the most formidable and effective notion that a company is required to undermine in their financial plans for overcoming any forms of losses. On a very brief notice our company’s CEO Mars Australia came up and asked how and why did Cole’s Australia decided to switch their modes of business from one industry to another one. As per my knowledge and research, I think that due to the reflective demands and profits in the industries the company kept on changing their business platforms for avoiding any form of losses. After incurring this knowledge, the chief executive asked me about the reflective implications which the company is designated to undermine for getting benefitted and the report is going to pass onto the company’s board members. The implications are going to be discussed in the next sections by highlighting Cole’s Australia’s overall strategic and financial implications in their respective business industries.
Cole’s Australia which is regarded as the second-largest business of supermarket in the world previously operated under the fuel business after following the reflections of Woolworth inside the petrol business. In current times, the company decided to leave the fuel business after a major shift in ownership which has been brought forward by the Wesfarmers during 200 financial years and then again changed its operations as a new ASX company during the 2018 financial year. This report focuses on the decision of the company's fuel business and what this move suggests about the company. In addition, this report is also going to analyze the challenges that are currently incurred inside the supermarket industry and the effective future of the petrol business in Australia.
Part 2: Implications
Financial Implications
Coles decided to sell its "710 Coles Express" sites to diesel and petrol supplier Viva Energy for $300 million. From a financial perspective, this deal is going to help in allowing the company to focus on its core business operations for the liquor and supermarket business (Koehn, 2022). The decision of exiting the space is going to see $816 million in leases transferred from the company's balance sheet. On the other hand, with the continued business operations for its products and keeping its fuel and "discount docket program" moving, this is going to help the "Coles Express" brand effective in the next financial years. During the 2020 financial year, the company reported major losses worth $42 million due to the extensive impact of Covid-19 in Australia. From the viewpoint of the company's executive leadership team and their board of directors, they feel that 2021 is the best period for selling off the fuel business is going to be a profitable determination. The company’s chief executive Steven Cain is effectively going to get capital management worth $1 billion after selling $816 million worth of lease liabilities.
Cole’s expressive deal with Viva is reflected to be a form of microcosm of what is currently being practiced around the Australian economy. As business firms and companies that incur sustainable investment strategies are handing out their gas, fuel and coal-burning assets to other qualified companies (Boyd, 2022). As per the viewpoint of the company’s strategic leaders, they believe that by selling off the fuel business the company can effectively strengthen the supermarket business which is reflected to be the country’s most sustainable and valuable group. The chief officer of Viva has labelled this new contract with Cole’s to be an excellent step for the relationship and business derivations. This deal is going to make Viva, Australia’s largest convenience and fuel network which is run by a single operator in the retail sector (Tabassum, 2022).
The average "retail petrol price in Australia" during the 2022 second quarter has been reflected to be 188 cents for one liter (Granwal, 2022). In addition, the prices of petrol are designated to increase by more than 30 per cent in every accounting period. Based on this determination, it can be reflected that the rise in fuel prices has made the business owners consider the decision of selling their company. However, Viva is designated to be very effectively placed to incur the most reflective and advantageous opportunities for growing the express business in the future financial years. This acquisition is going to be a reflective benefit for both Cole's and Viva where Viva is going to retain a top and classified position in being one of the largest and biggest fuel chain companies. On the other hand, Cole's can effectively focus on the supermarket industry and the retail sector for attracting customers and other investors inside the Australian environment.
Policy Implications
The reflective challenge that is currently present in the Australian supermarket industry is the absence of an Omni channel strategy for promoting and selling qualified business and retail products to clients and customers. This made the company sell off the supermarket industry in 2018 and be listed under the ASX Company in the same year. As per the view of (Howe, et al., 2019), the extensive impact of Covid-19 in Australia has led to the proximity rules and trading conditions worsening in the country. Furthermore, every business firm in the supermarket industry in Australia has been forced to adapt to the norms of digital market presence and online shopping norms. This has made offline business operations shut down and many business firms such as Woolworths, Aldi and IGA shut their offline business stores and resulting in huge losses in the customer base. On the other hand, there has also been a massive shortage in labor that has been fueled by "socioeconomic factors" which has been reflected to be one of the major issues in the Australian supermarket industry during the 2020 financial year.
"The Australasian Association of Convenience Stores AACS" has reflected that the maximized recruitment efforts that have been progressed and performed by the supermarket companies have massively failed because there have been no results have been put forward (AACS, 2022);. In addition, due to the closing of the country's borders, the availability of staff became rarer and the companies that were operating in the supermarket industry were left with no choice rather chose to progress with online business operations. This issue has been reflected to be a complex derivation and the higher costs in recruitment have also resulted in weaker service for the consumers and clients. This issue is reflected to be a major blow that any supermarket company cannot afford. In addition, the purposes of quiet quitting and "the great resignation" due to the labor shortages have been reflected to be the major challenge that is currently faced by the Australian supermarket and retail industry.
The recent spikes and strategic issues in the rates of inflation, "Cost of goods", rentals, and cost pressures in Australia have effectively created major challenges for supermarket companies in Australia (O'Neill, 2022). During these instances, the companies are recommended to find ways to organize success and by reducing the costs of operations. Furthermore, important and regulated strategies such as quality control and training costs are designated to be some of the qualified derivations that are required to be performed by these companies. In addition, the "cloud-based solutions" are also reflected to be an easy and integrative process that is within the existing systems which are also going to help in enabling and creating effective training materials that go beyond compliance rates and generate effective values for the employees and workers (IR.au, 2022). Linking to the above reflections, Cole’s board of directors and strategic leaders incurred their reflective strategic choices and recommended finding effective and profitable ways for being competitive inside the supermarket industry in Australia. Furthermore, the company is also required to evaluate the strategies and norms by cutting off their additional costs and on boarding time which are going to help in closing the skills gaps that are within the workforce. In addition, these forms of strategic choices are also going to help in elevating the brand in general and increase the levels of customer awareness within the company’s teams.
Petrol prices are reaching their highest record levels in Australia and are also set to rise to the $100 USA barrel mark due to the ongoing war between Ukraine and Russia. The prices of oil are increasing by 2 per cent overnight and the petrol prices in the country now average 176.0 cents every liter as reported by "The Australian Institute of Petroleum" (Hannam, 2022). In addition, Peter Khoury who is the head of media in “New South Wales” reflects that the average prices are designated to increase to 180 cents every liter in the upcoming days.
Figure 3: Rise in electric vehicles sales in Australia
Source: (PV.au, 2022)
The local service stations in the country are also expected to incur a downturn of 80 per cent worth of losses by the end of the 2025 financial year due to the ongoing demand for electric vehicles. As per the "Boston Consulting Group BCG," it has been reflected that every petrol station is required to be prepared for the surge in losses due to the outburst of electric vehicles in the world. (Purtill, 2021). In addition, the electric vehicle share of the market is also expected to reach 65 per cent by the end of the 2022 financial year. Furthermore, a dominant brand such as Tesla is expected to be the market leader in Australian premises and inside the automobile market in the upcoming financial years (PV.au, 2022). The future of the petrol industry is going to be bleak if the prices are not sustained effectively. The prices of petrol are required to be within the $120 per liter mark for incurring profitable numbers shortly. In addition, the country's government officials and their regulated bodies are also required to check the prices of fuel and maintain them as per the average needs of the industry. Shifts are designated to take place as the EV products are more focused on decarburization which can effectively replace the derivations of gases and oils soon.
Linking this derivation to Cole's Australia, the company opting out of the fuel business is a profitable derivation which is going to help the company in being stable and active. The petrol and fuel business in the country is designated to be shut down any time soon due to the sudden rise of EV products and vehicles. The gas stations in the country have also started to experience major losses and the ongoing war between Ukraine and Russia has resulted in an extensive rise in fuel and gas prices in the country. On the other hand, the company is currently required to progress their business operations also through e-commerce platforms. The company's executive team development procedure is recommended to be in accordance with the current business norms and practices that are recurring inside the supermarket industry in the country. Furthermore, this derivation is effectively going to help the company to compete and incur an advanced consumer base to their existing business plans during an accounting period.
Risk Impact/ Management
Neither primary implication on strategic position have been reflected that neither the fuel nor supermarket industry in Australia is qualified to be stable business sources in the country. The rise in fuel and petrol prices in the country has made the overall automobile industry in the market more inclined towards electric vehicles and products. Furthermore, the gas stations are expected to incur losses of more than 85 per cent by the end of the 2035 financial year. In addition, the ongoing war between Russia and Ukraine has also laid a negative impact on the overall prices of gas and fuel prices in the country. Hence, following the footsteps of Woolworths and exiting the fuel business in Australia is deemed to be a profitable implication for Cole's Australia. However, after being into the supermarket industry in Australia, the company is also designated to face major challenges such as a shortage of labors, more focus on e-commerce platforms in comparison to the offline retail shops and high costs of operations and rentals due to the constant increase in the country's inflation and cost pressures. The challenges faced by the company have been maximized inside the supermarket industry in the country and hence following the footsteps of Woolworths again during 2018 has reflected to be a profitable implication for the company. The company’s current strategic position in being listed under ASX Company is reflected to be a qualified move by the company. After getting registered under the ASX, the company is designated to enjoy the services of “free trade agreements”, and the government can also roll out “foreign investment liberalization schemes” for the company and increase its overall financial and business performance (Swan, 2022).
Conclusion:
The report has helped in concluding that neither the petrol business nor the supermarket industry in Australia is deemed to be the most profitable industry in the country. Cole's Australia has proved to perform qualified operations by leaving both industries and is now effectively being listed under the ASX Company. The report has concluded that a major shift in the petrol business in the country is due to the rise in demand for electric vehicles and products. On the other hand, the rise in fuel prices has also been a consequence due to the ongoing war between Russia and Ukraine. On the other hand, the supermarket industry in Australia has also been concluded to be a minimized business opportunity due to the shortage of labour and the rise in operating costs inside the industry. Hence, following the footsteps of Woolworths has reflected to be a qualified strategic choice by Cole’s Australia board members and strategic leaders.
Attachments
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