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SECTION 1

Question 1 a)

Ethics is an essential element in the performance and success of any business.

Organizations that embrace ethical behaviors succeed in their markets and create acceptable

brands that factor in the target customers' needs. Besides, such organizations execute their

activities within the confines of the law and ensure that they are achieving their profitability

goals ethically. In this context, ethics towards the suppliers and the competitors is evident. Coles

and Woolworths have been the major Australian retailer and have been able to control the market

for an extended time. However, the two giants feared a loss of market share upon learning of the

plans by the German supermarket powerhouse Kaufland to enter the market with the support of

the fourth biggest retailer in the world, Schwarz Gruppe. To maintain their share in the market,

popularity, and control competition, the two Australian giants made informal agreements with

the significant fresh food suppliers to withhold their supplies to Kaufland with the threat that

they would cut business ties if they made supplies to Kaufland. This is an unethical act toward

the suppliers and the competitors and goes against the legal requirements.

With reference to this assessment, Coles and Woolworths are not acting as responsible

retailers. Responsible retailers obey the law, and their actions do not harm any party. In this case,

the companies threatened the suppliers and ensured they were not making supplies to the German

supermarket powerhouse Kaufland. This is not ethical, and if they were responsible retailers,

they would compete fairly with Kaufland by providing the customer with the best quality retail

products and services. In addition, as responsible retailers, the companies would not engage in

threatening acts to make a profit and maintain their market share. Responsible retailers act
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ethically and ensure that they are making a profit by doing what is right and fair to the suppliers,

competitors, partners, and consumers.

Question 1 b)

The power shift from the suppliers to the retailers is now evident globally, with the

retailers having more control over the supply chain. Concerning this case, several factors are

driving this shift, including the long-term contracts with the suppliers and duopolistic powers

resulting from their established strongholds and reputation in the market. First, the two retailers

have entered into long-term contracts with fresh produce, meat, and dairy suppliers. In this case,

the suppliers are left with no option but to commit to the contract agreements, which in the long

run may limit them from making agreements with other retailers or adjusting product prices. This

gives the retailers the power to control the prices and the market. Also, because the two giants

are controlling the entire grocery market, they leave the suppliers with no option but to agree to

their terms. The retailers’ powers enable them to place large orders with the suppliers well ahead

of the customers' needs. With their ability to attract large numbers of customers, they can

negotiate with the suppliers for lower prices while making large orders and, in turn, provide

customers with low-priced products. The suppliers cannot risk losing large and continuous orders

despite low prices as the retailers might shift to other suppliers with better deals. As a result, the

retailers gain more power over the suppliers.

Question 1 c)

When a market is overstored and oversaturated, the retailers need to re-strategize to

remain relevant in the market. This calls for strategies such as acquisitions, mergers, market

remodeling, and adopting the latest technologies. In this context, the relative attractiveness of the

market is the fast-growing Australian economy. Kaufland believes that it is wise investing in this
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market and grow with it, as despite the market being dominated by market giants, the market is

ripe for exploitation due to the prevailing growth. By investing in a fast-growing economy,

Kaufland has an opportunity to gain a share in the market gradually and may later become a

major player in the market. On the other hand, stiff competition in the market hinders the entry

of new players such as Kaufland. First, the duopolistic powers exhibited by Coles and

Woolworths place a barrier to Kaufland's entry. Also, the long-term supplier agreement is a

significant barrier that inhibits Kaufland's entry into the market.

Question 2 a)

Creating a sustainable competitive advantage means providing unique activities

meaningful to the targeted customer and activities that differentiate from the competitors. Tesco

is aware that the retail market is changing fast, and the customers are well equipped with ample

information about what they want and have choices at their fingertips. Besides, customers have

differentiated needs. To meet these needs, Tesco has to embrace a portfolio approach in the UK

and the International markets to gain a sustainable competitive advantage. As seen in the videos,

Tesco always aims to leave their customers with a smile after every service or product they offer,

and this is done by trying to meet each customer's unique needs. This is an act not evident to

other rivals and makes the company unique. For instance, as seen in the video, in trying to meet

the customers' needs, Tesco invests in brands, loyalty, and large stores and makes them exciting

destinations worth customers' trips, tailors convenience stores to local customers, invests in

digital and online experience and technology in general. The video shows that Tesco ensures that

customers have a seamless experience by providing them with services, however, whenever, and

wherever they are. For instance, it is seen in the video that Tesco embraces multichannel and
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provides customers services in multiple countries. They ensure that customers can get the

products in their desired options.

Question 2 b)

Customers have different needs and shop differently based on their choices. Today,

customers are always connected and are more informed about the various products and services

they desire to buy. In this case, being more informed makes them have high trust and

expectations on what they buy, and retailers must effectively subscribe to offering their needs.

As a result, to meet each customer's unique need, Tesco has to embrace the omnichannel

approach. Tesco is leveraging this strategy to gain a sustainable competitive advantage by

helping their customers shop when, where, and how they choose, providing them with exciting

products, services, and new brands.

Question 2 c)

Although Tesco is embracing an omnichannel strategy to fulfill customers' needs, it

cannot make notable gains. However, through omnichannel, the company can realize its

profitability goals and remain competitive and relevant in the market. Tesco can utilize the

channel integration strategy to find a path to profitability across all its retail channels. The

company can integrate the channels to ensure that the customers' experience is smooth and

flexible and that they can easily move forwards and backward seamlessly. Besides, integrating

the channels will enable the customers to easily shift from one channel to another and find

consistent information, service, or products. In this way, the firm will be able to create trust and a

strong customer engagement leading to loyalty and profitability in the long run.

SECTION 2

Question 3 a)
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Carroll’s (1991) ‘Pyramid of CSR’ identifies four levels of responsibility: economic,

legal, ethical, and philanthropic. Based on the case study, Coles and Target are falling short of

meeting their responsibilities in the first three levels; economic responsibility, legal

responsibility, and ethical responsibility. First, according to Carroll (1991), for the economic

responsibility level, firms should be profitable as this lays a foundation for which all others rest.

However, in the case of Coles and Target, the two firms are struggling to make profits and end

up making illegal dealings to hide their losses. For instance, Cole faced accusations of bullying

small suppliers to pay rebates to bridge a shortfall in their profits. This is a similar case with

Target, where they are seen to entice their suppliers to pay rebates with fake promises to increase

cost prices in the future to bridge their falling profits. Also, Coles and Target fail to meet their

legal responsibility, especially in how they deal with the suppliers in the payment of rebates.

Carroll highlights that, at the legal responsibility level, firms should obey the law that governs

their businesses. However, the two firms do not obey the law. Cole is seen bullying small

suppliers with threats to delete their products in Cole's supermarkets if they fail to pay the

required rebate charges. This is against the law, and a similar act is seen with Target, where it

asked its suppliers to pay rebate charges with false promises to be paid back through increased

cost prices. Lastly, the two firms failed to meet their ethical responsibility. According to Carroll,

this level requires firms to be ethical by doing what is right without causing harm. However, this

is contrary to what Cole and Target did; for instance, Cole did not act ethically by bullying the

small suppliers and threatened to harm the suppliers that did not comply with their demand.

Question 3 b)

The retail management team is always faced with pressure to perform. This is because the

managers in these departments have to deal with the suppliers and think about the customers they
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are buying goods on their behalf and how they will meet the firm's profitability goals. In this

case, they have to ensure that they are procuring goods and prices that are low and those that will

lead to a profit for the firm and also ensure that the markup price is affordable to the customers.

Besides, they must ensure a profit for the company that aligns with the stated profitability goals.

As a result, this causes a lot of pressure on them as they try to balance everyone involved in this

equation. The major pressure placed on retail managers is finding suppliers of goods that will

provide the firms with low-priced products and, in the end, help the firm make a profit on the

sale of the products. Failure to find a supplier with low-priced goods, the retail managers are

expected to make rebate deals with potential suppliers to ensure low production costs to

guarantee profitability. The rebate, in this case, has a significant role in reducing the product

procurement costs as it aims at reducing the buying cost.

Question 4 a)

How Wesfarmers handled the Target rebate scandal differs from how Coles handled the

supplier bullying issue. First, Cole admitted to the accusations made by ACCC and agreed that

the firm had not been respectful to its supplier's needs for complete and timely transparency and

of the responsibility attached to its bargaining power. On the contrary, Wesfarmers took action to

distance itself from the disrespectful actions of these 10 Target senior managers. This action

aimed to isolate the managers from the company to defend its reputation and let the managers

suffer for their actions. Also, it is evident that Cole did not terminate any of their managers

involved in the acts, but in the case of the Target scandal, Wesfarmers ensured that these

managers were sacked or resigned. The actions taken by each retailer have implications for their

positioning and branding in the market. First, the action taken by Cole to admit their mistakes

shows that they recognized that the suppliers have their rights and need to be treated fairly and
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ethically. However, it would take a lot of time for the suppliers to regain the trust of the

managers who bullied them, destabilizing the retailer in the market. On the other hand, the action

taken by Wesfarmers to defend Target's reputation by disengaging the managers involved in the

scandal would create more trust in the investors and encourage them to invest. Wesfarmers

wanted to prove that the managers who were tarnishing the excellent reputation of the retailer

had no room to deal with the investors, thus creating an assurance to the investors that they are

safe.

Question 4 b)

Based on the case study, unlike Cole's situation, the suppliers seem to have not been

forced to pay the rebate charges in Target's rebate issue. They agreed to this deal based on how

good it was and believed they would be paid back as promised. To mitigate the unethical

business practice that occurred contrary to the agreement, I recommend that businesses remain

committed to their agreements with the suppliers. In this case, the suppliers will retain their trust

in the firm and agree to more future deals that will benefit the firm. Also, I would recommend

that firms be respectful of supplier needs for complete and timely transparency throughout their

business relationship and execute their responsibility attached to their bargaining powers.

Misusing these powers goes against the confines of the law and might cost the business its

reputation and lead to losses.