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  • University : Charles Sturt University
  • Subject Name : International Business Management

Market Entry Strategy of Coles in Pakistan

Table of Contents

  1. Introduction.
  2. Brief Background to Coles and Pakistan.
  3. SWOT Analysis.
  4. PESTEL Analysis.
  5. Competitive Strategy Analysis.
  6. Market Entry Strategy Analysis and Preferred Option
  7. Marketing R&D Consideration.
  8. Recommendation regarding production.
  9. International HRM issues and Considerations.
  10. Conclusion.
  11. References.

1. Introduction

The focus of this particular report will be on market expansion of Coles in Pakistan. After operating 1502 stores that include Coles and Coles Express petrol stations around the world, now, the management of the organization has decided to focus on Asian market, especially in Pakistan. This report after providing a brief background about Coles and Pakistan will present a SWOT analysis of Coles and PESTEL analysis of the selected market Pakistan. Then this report will provide a detailed background about how competitive the retail industry of Pakistan is and what would be the best market entry strategy of Coles in Pakistan. Then this report will focus on marketing and R&D tactics that Coles will have to follow in Pakistan along with international HRM issues that Coles will face in this country.

2. Brief Background to Coles and Pakistan

Coles Supermarket Australia Pty Limited, known as Coles is a famous Australian retail, consumer service and supermarket chain, headquartered in Melbourne. In 1914 first Coles store was opened by George Coles. Excluding its Coles Express petrol stations, Coles is operating through its 807 supermarket stores in Australia that includes its re-branded BI-LO Supermarkets (Hardaker 2018). Coles has over 100,000 workers and along with Woolworths this organization accounts for 80% of the Australian retail industry. The organization also has its own online shopping site named as Coles Online that provides “click and collect” and home delivery services to its customers. Till 2006 from 1986, Coles Supermarkets was a brand of Coles Myer Limited however in 2007 Wesfarmers purchased Coles Group. However, again in 2018 Coles became a subsidiary of Coles Group after Wesfarmers spun-off the business in November of the same year. With a revenue of AU$40billion and net profit of AU$1.5billion, Coles is considered as one of the major retail supermarket brands in the world (Henryks et al. 2016).

Pakistan, also known as the Islamic Republic of Pakistan is a nation located in South Asia. Pakistan is considered as the world’s sixth largest nations in the world in terms of population. In terms of area, Pakistan is considered as the 33rd largest nation with a span of almost 882,000 square kilometers (Aceto et al. 2016). Pakistan is a nation that is highly diverse in terms if ethnicity, culture and language. The economy of the country is semi-industrialized with a well-aligned agricultural sector and a rapidly growing service sector.

Pakistan is also considered as one of the emerging and growth-leading economies around the world. However, the economic growth and industrialization of the country is again and again halted by terrorist attacks and the government’s continuous support to some wanted terrorists around the world. Pakistan is again and again accused for providing monetary investment and weapons to some fearsome terrorist groups and as a result, most of the leading companies around the world are not considering expanding their business in Pakistan due to security issues (Anwar 2016).

3. SWOT Analysis

Strength of Coles: There are a huge number of outlets of Coles in every state with the help of huge support from the customers or a strong distribution network. It is clearly stated that its products or services are easily available within a huge number of customers along with proper timing (Campbell 2017). Low cost structure of Coles is helpful for its own production. Therefore, it can sell its own products at very low price. It can make the customers happy. There is a strong relationship between Coles and its dealers. The dealers is not only responsible for providing the raw material but also focusing on the promoting the products and training of this company. There is a strong financial prospect in Coles along with the continuous profits over the last five years. 

Weaknesses of Coles: Coles is responsible for spending more rather than the average development and research expenditure. It is spending approach less rather than a small number of players with the industry which have had an important advantage as a conclusion of their innovative products. Most of the important properties of Coles are rented rather that its own purchased (Mortimer 2016). Therefore, it has to pay huge amount of rent which is one of the most effective adding costs or extra costs. The ratio of current shows the ability of this company in order to meet the financial obligations in the short term prospects that is lower than industry average. Coles has very low levels of present assets rather than the present liabilities. This can make the liquidity related problems for own operation.

Opportunity of Coles: The number of internet users has been increased in current days. Therefore there is an opportunity for Coles to expand its business through online by utilizing the internet in order to interact with its target customers. Nowadays, e-commerce is one of the trendy and growing industries for selling purpose. There is an opportunity for Coles to maximize its revenue after opening online stores and selling its products through online. Numerous technologies come with several benefits over many departments (Addis 2016). Coles’ operation can be automated in order to reduce costs. Technology is responsible for enabling better data that to be gathered on customers and improving on the marketing efforts. Another opportunity is social media platforms to interact with new and existing customers along with the present and upcoming products.

Threats of Coles: The developments of new technology can create few competitors. The main threat foe Coles is that the customers can be attracted with the new technology by the competitors. Therefore, Coles can decrease overall market share. The suppliers increased their bargaining power over past few years along with the decreasing number of suppliers. Therefore, Coles can face increasing cost of production (Ruthven 2018). The allover selling cost can be increased also. There have been several players which have entered into the market. They have gaining market share with the help of increasing market share of existing companies. This is the most effective threats for Coles in order to lose the target customers.

4. PESTEL Analysis

Political Factors: Pakistan does not have the strong political system due to it corruption factors. As well the government of Pakistan does not able to make the effective legislation in order to nip the corruption related evil (Raghavan 2016). The government of Pakistan is seriously involved in severe cases such as corruption, money laundering, and commission as well serious allegations. In this country, the law and other legislation are not exemplary. In Pakistan, there is continuous danger in terrorist attacks. The citizens of this country are not happy with the circumstances and policies as it should be different from the masses. The priority list of Pakistani citizens is not up to the marks or expectations. Imposing tax is the main concern among the Pakistani people even the government is imposing tax in the eatable product also.

Economic Factors: The economic condition of Pakistan is very poor. However, the government is willing to take loans from the universal monetary organizations with high interest rate. This is one of the heaviest burdens for Pakistan over the economy of this country. This condition affects badly to life of general Pakistani citizens. The poor economic policy affects the total economic factors of Pakistani government. The net loss of this country is still raising and the government is seeking for loan with high interest rate (Burki 2018). Due to the corruption factors, most of the higher authorities of the government do not pay taxes that are responsible for increasing the diverse situation of the economic policy of government.

Social Factors: Education and health are two most important issues in Pakistan that require special attention by the government. The legislation based on the quality education must be implemented by the Pakistani government along with the high subsidy rate (Waqas et al. 2015). The government should make education compulsory for each and every child. It is one of the most important responsibilities for the government in order to provide the health care related facilities along with they need to provide costly medicine at free of cost or at nominal rate for deadly diseases.

Technological Factors: IT technology and mobile phones are used at high rate in Pakistan. Several mobile phone organizations are providing their latest tablets, It products and mobile phone in the Pakistani market. They are growing their business through importing the innovative and fresh smart phone models. Pakistan is seeking for the new industries as well as new technologies that are being introduced for the producing or manufacturing of sports goods, garments, fabrics, and crockery. Sialkot is famous for the sport industry and most of the sports related products are being imported from the Middle East countries, America and European. Therefore, it earns huge profits (Akhlaq and Ahmed 2015). Faisalabad is a renowned area for textile manufacturing. It is also known as Manchester of Pakistan. On the other side, Sialkot is also famous for leather products along with international reputation.

Environmental Factors: There are severe environment related issues. These issues are becoming most dangerous factors and that affect the industrial areas. The industries are not responsible for complying with the environmental policies and environmental laws of the Pakistani government which are not effective. The solid waste related removal is not strongly adhered. As well the government is not willing to pay attention over these issues (Javed et al. 2015). The government does not focus on the corruption system for the garbage or dust related removal from center cities. That is the reason for smelling and spreading several diseases.

Legal Factors: The legal policy of Pakistan is also week. However, the government does not focus on legal policy and developing new laws and legislations to run the country on a right track (Maqbool and Sudong 2018). The government is not able to focus on the growing corruption or tackling this situation. They do not make any effective laws to remove all evils from society. However, the parliament does not create any laws or legislations in order to overcome the crimes. The government needs to make immediate new strict laws and legislations in order to reduce corruption and overcome all the crimes. Therefore, Pakistan becomes a corruption free country in the whole world.

5. Competitive Strategy Analysis

The retail industry of Pakistan is considered as one of the fastest growing industries around the world. It is expected that the retail market of Pakistan will grow at a rate of 8.3% per year through 2019-2021 as the nation’s disposable income has doubled since 2010. On the other hand, it is also found that the size of middle class people in Pakistan will surpass the size of middleclass people on the UK and Italy. Small but steady economic growth of the nation and cheap consumer prices are motivating buyers to spend more in the retail industry. In 2013, for the first time seven Pakistan’s local retailers were nominated for the World Retail Awards that was hosted by Paris. On the other hand, in 2017 nine retain companies of Pakistan took part in Southern African International Trade Exhibition for Retail Products and African Big Seven.

Due to this growth and support from local and federal governments, it is expected that retail stores in the nation will increase by 50% and will reach to 1million outlets within next five years. It shows that how highly competitive retail industry of the country is. It also shows that Coles will have to deal with strong competition from local retail stores of Pakistan. In this condition, the best strategies for Coles to become successful in Pakistan would be strong marketing through social media and traditional media and localization.

6. Market Entry Strategy Analysis and Preferred Option

Some famous and most effective market entry strategies are licensing, direct exporting, Franchising and Join Venture.

Licensing: An international licensing agreement will allow Coles under intellectual property laws to authorize one retail company of Pakistan to sell products and services of Coles to the people Pakistan. The activities that the local firm will be able to conduct after gaining license from Coles would be using, selling, offering for sale, importing a patented product of Coles.

This strategy is not recommended for Coles in Pakistan as it will allow the local company to have a strong control over the marketing and other strategies related to the products of Coles (Collinson 2015). If the local firm makes a mistake it will hamper the brand image of Coles, not only in Pakistan but also around the world.

Direct Exporting: Direct exporting means Coles will export its products directly to the market of Pakistan. In this scenario, Coles will be responsible for conducting market research, foreign distribution activities, and logistics and invoicing (Naidoo et al. 2016). The biggest advantage of this strategy of Coles would be lack of man power to cultivate base of customers in Pakistan. On the other hand, as this method will also require a lot of money and time, this method is not recommended for Coles.

Franchising: Franchising is known as a strategic alliance between companies that have particular connections and accountabilities with a common goal to dominate a particular market and to gain more customers that the competitors.

If Coles follows this method then it will be inevitable that franchise agreement will include restrictions about how Coles can run its business in Pakistan. Besides, after sometime Coles will also find that franchisees are making major decisions and sometimes those decisions will impact on brand identity and brand reputation of Coles (Surdu et al. 2018). Besides, as the method of franchising is highly inflexible, it will prevent Coles to make changes in the business for the purpose of future growth.

Joint Venture: A joint venture is a market entry strategy where two or more companies agree to combine their resources for the purpose of achieving a common goal. In Pakistan, joint venture would be the best strategy for Coles (Grant 2016). First of all, it is already mentioned that Pakistan is a county with a culture and religion that is highly different from Australia. If Hofstede’s cultural model is analyzed between Australia and Pakistan then it would be found that Pakistan is a nation with high power distance, low individualism, high uncertain avoidance, high long term orientation and zero indulgence. On the other hand, Australia is country of low power distance, strong individualism, low uncertainty avoidance, low long term orientation and high indulgence (Figure 1). Both nations are almost same in terms of masculinity only. It shows Coles will face serious cultural differences in Pakistan and collaborating with a local firm through joint venture will allow Coles to use their resources to understand the market and customers and then to make right decisions.

graph shows Hofstede’s Model: Australia vs. Pakistan

Figure 1: Hofstede’s Model: Australia vs. Pakistan

(Source: hofstede-insights.com 2019)

7. Marketing R&D Consideration

Social media marketing: As of January 2019, Pakistan had a total of 37million social media users that is 18% of the nation’s total population. It shows Coles will have to focus on social media marketing to reach to a huge group of potential customers in Pakistan. The second most feasible marketing option for Coles would be marketing through newspapers. Pakistan is known as a country that has the world’s 10th highest newspaper circulations with average daily circulation is over 7,500,000. Therefore, Coles can use newspaper companies such as Jang (circulation of over 860,000), Nawa-e-Waqt (circulation of over 520,000) and Khabarain (circulation of 232,000) to reach to its potential customers (Tuten and Solomon 2017).

R&D: Research and development activities in Pakistan will be simple and it will be to find out current trends in retain market and possible future trends (Chen et al. 2016). Besides, R&D will also be used to identify which technologies are preferred by Pakistani customer at the time of shopping such as self-service kiosks or online shopping or others.

8. Recommendation Regarding Production

In terms of product changes, Coles must remember that economy of Pakistan’s rank is 40 and Australia’s rank is 10th in terms of GDP and therefore, pricing strategies must be updated while doing business in Pakistan. If Coles works with its current suppliers in Australia to sell its products in Pakistan then the cost of importing will not allow Coles to provide its products at a cheaper price that the local retail stores. Therefore, Coles will have to search for local suppliers who can provide require products to Coles at a lower price but in a sustainable manner. Coles has a direct relationship with the farmers of Australia as it helps the organization to acquire products at a lowest possible price. Coles will have to do the same in Pakistan to gain competitive advantage to its potential rivals.

9. International HRM issues and Considerations

Some international HRM issues that Coles will face in Pakistan are leadership development, adapting to innovation and work culture.

Leadership development: The management of Coles strongly focuses on developing leadership capabilities within its employees. In Pakistan employees are habituated to follow traditional work processes and they never like to take risks or to take responsibility of others (Komives and Wagner 2016). In this condition, getting a leader out of an employee will be tough.

Adapting to innovation: Due to low uncertainty avoidance score, it is obvious that Pakistani people does not like to innovate (Thite 2019). They love to follow traditional methods and approaches. Therefore, for an organization such has Coles that leverages innovation, it will be tough to teach its employees about how to become innovative.

Work culture: Coles includes a somewhat informal working culture where flexibility and employee preferences are respected. Besides, Coles also has its policy of gender equality and gender diversity where in Pakistan women are still forced not to work. In most of companies in Pakistan women are paid less than their male colleagues (Brewster and Cerdin 2018). If Coles decides to provide equal pay to women employees, it might cause backlash from male workers.

In order to deal with these issues Coles can take the steps mentioned below.

  • Coles will have spent a lot in training and development as the purpose of training and development will not only be to improve skills of the workers but also will be to implement innovation and leadership in the Pakistani employees
  • Counseling sessions along with different training and development methods must be applied to ensure male employees understand the important of equal pay and gender diversity

10. Conclusion

In the end, it can be stated that in spite of the fact that Pakistan is a lucrative market for retail companies, Coles will have some problems due to several constraints and issues within the nation\s economy, political landscape, social structure, condition of technological growth and legal boundaries. Besides, due to huge cultural gaps between Pakistan and Australia, Coles will have to develop joint venture with a local company to learn about the market in an effective manner. Even in terms of HRM, Coles will face some major issues that the organization will have to solve by investing heavily through training and development. If all these problems are mitigated, it can be stated that Coles can enjoy a huge market share due to its experience, expertise and available resources.

References

Aceto, G., Botta, A., Pescape, A., Awan, M.F., Ahmad, T. and Qaisar, S., 2016, September. Analyzing internet censorship in Pakistan. In 2016 IEEE 2nd International Forum on Research and Technologies for Society and Industry Leveraging a better tomorrow (RTSI) (pp. 1-6). IEEE.

Addis, J., 2016. Retail sector wrap: One opportunity and plenty of worry. Equity30(3), p.6.

Akhlaq, A. and Ahmed, E., 2015. Digital commerce in emerging economies: Factors associated with online shopping intentions in Pakistan. International Journal of Emerging Markets10(4), pp.634-647.

Anwar, M.A., 2016. Pakistan Library Association 50 Years Ago The Sixth PLA Conference held in 1965 at Lahore. Pakistan Library & Information Science Journal47(1).

Brewster, C. and Cerdin, J.L., 2018. HRM in Mission Driven Organizations.

Burki, S.J., 2018. Pakistan: fifty years of nationhood. Routledge.

Campbell, J., 2017. Insights from the company monitor: Wesfarmers. Equity31(8), p.16.

Chen, P.C., Chan, W.C., Hung, S.W., Hsiang, Y.J. and Wu, L.C., 2016. Do R&D expenditures matter more than those of marketing to company performance? The moderating role of industry characteristics and investment density. Technology Analysis & Strategic Management28(2), pp.205-216.

Collinson, S., 2015. Foreign Market Entry Analysis. Wiley Encyclopedia of Management, pp.1-1.

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Hardaker, S., 2018. Retail format competition: The case of grocery discount stores and why they haven’t conquered the Chinese market (yet). Moravian Geographical Reports, 26(3), pp.220-227.

Henryks, J., Ecker, S., Turner, B., Denness, B. and Zobel-Zubrzycka, H., 2016. Agricultural Show Awards: A Brief Exploration of Their Role Marketing Food Products. Journal of International Food & Agribusiness Marketing28(4), pp.315-329.

hofstede-insights.com., 2019. Country Comparison - Hofstede Insights. Retrieved from https://www.hofstede-insights.com/country-comparison/australia,pakistan/

Javed, M.R., Amin, A. and Azim, P., 2015. Comparison of standard of living between Pakistan and Bangladesh. Int. J. Asian Soc. Sci5, pp.71-724.

Komives, S.R. and Wagner, W. eds., 2016. Leadership for a better world: Understanding the social change model of leadership development. John Wiley & Sons.

Maqbool, R. and Sudong, Y., 2018. Critical success factors for renewable energy projects; empirical evidence from Pakistan. Journal of cleaner production195, pp.991-1002.

Mortimer, G., 2016. How Kmart ate Target: a story of retail cannibalism. The Conversation, (31).

Naidoo, V., Donovan, J., Milner, T. and Topple, C., 2016. Entry modes as a component of international marketing strategy: a mixed-method analysis of higher education services. In International Marketing of Higher Education (pp. 47-82). Palgrave Macmillan, New York.

Raghavan, P., 2016. Book Review: On the quest for Pakistan.

Ruthven, P., 2018. The strategist: Jack of all trades. Company Director34(5), p.32.

Surdu, I., Mellahi, K. and Glaister, K., 2018. Emerging market multinationals’ international equity-based entry mode strategies: Review of theoretical foundations and future directions. International Marketing Review35(2), pp.342-359.

Thite, M. ed., 2019. e-HRM: digital approaches, directions & applications. Routledge.

Tuten, T.L. and Solomon, M.R., 2017. Social media marketing. Sage.

Waqas, A., Raza, N., Lodhi, H.W., Muhammad, Z., Jamal, M. and Rehman, A., 2015. Psychosocial factors of antenatal anxiety and depression in Pakistan: is social support a mediator?. PloS one10(1), p.e0116510.

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