A NALYZING THE C OMPETITIVE E NVIRONMENT AND

C ORPORATE O RIENTATION OF C OLES G ROUP IN AUSTRALIA : A

B RIEF PESTLE AND C ORPORATE S OCIAL R ESPONSIBILITY
A SSESSMENT

A P REPRINT

Rohan Malik

The University of Sydney

Sydney, 2006, Australia.

July 21, 2023

A BSTRACT
This research paper provides a brief analysis of the Coles Group, one of Australia’s leading retail
corporations. It delves into two main areas: an assessment of the company’s dominant orientation
towards society, and a PESTLE framework-based evaluation of its competitive environment. The
paper challenges the notion that Coles Group’s dominant orientation is primarily Corporate Social
Responsibility (CSR), arguing that their active engagement in CSR practices may serve the funda-
mental objective of profit maximization. This argument is based on Coles Group’s strategic alignment
with Baumol’s (1958) theory, along with its potential use of CSR initiatives as a tool for customer
attraction and sales increase. The paper also examines the less dominant role of Creating Shared
Value (CSV) in Coles Group’s business model.
In the second part, the research employs the PESTLE framework (limited focus on the “Legal" factor)
to analyze the external factors influencing Coles Group’s business landscape. While political and
social factors seem to hold minimal significance in the company’s success, economic aspects like
inflation and unemployment appear to generate both opportunities and threats. Technological advance-
ments are viewed as a significant component in sustaining the company’s competitive advantage and
mitigating environmental changes. Legal considerations pose certain challenges but also incentivize
strategic approaches like outsourcing labour to regions with relaxed laws.
The paper concludes that while Coles Group leverages CSR initiatives for profit maximization, it
operates within a complex macro-environment characterized by various political, economic, social,
technological, legal, and environmental factors. The findings offer valuable insights into how
companies in oligopolistic markets, like Coles Group, navigate their competitive environments while
balancing profit maximization with social responsibility.

Keywords
Part 1: Brief assessment of Coles’ dominant orientation towards society
Introduction:
In Australia’s oligopolistic retail market structure wherein four major companies (including Coles) hold “the largest
market share" (Kampen & Kirkham, 2020), it comes as no surprise that the dominant role of Coles Group (parent
organization of “Coles") is profit maximization, aligning with Baumol’s (1958) suggestion that corporates operating in
spaces such as retail sectors (Coles Group’s primary operational market) within oligopolistic markets strive to maximize
profits (alongside sales revenues).
Profit Maximization Through CSR Engagement:

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Analyzing the Competitive Environment and Corporate Orientation of Coles Group in Australia: A Brief PESTLE and
Corporate Social Responsibility Assessment A P REPRINT

However, Coles Group simultaneously pursues various projects showcasing their Corporate Social Responsibility
(hereafter referred to as, “CSR") conceivably indicating prioritization of CSR over profit maximization. Nonetheless, as
discussed below, these projects may serve to capitalize on the fact that a firm’s CSR engagement can “affect consumers’
intentions to purchase its products" (Sen, & Bhattacharya, 2001, p.238), suggesting Coles Group likely continues
to strive to increase product sales, consequently maximizing profits and shareholder returns in accordance with the
Australian law.
A noteworthy highlight from the Coles Group 2021 sustainability report is their Climate Change Position Statement,
demonstrating commitments to renewable energy investments, thereby reducing greenhouse gas emissions “by more
than 75%" by 2030 and achieving net-zero status by 2050. Contrastingly, Coles Group’s direct competitor, Woolsworths,
targets a 63% reduction in emissions by 2030 (according to their website), and alternative competitors such as Aldi
and Wesfarmers, have not publicly announced goals and timelines to achieve net-zero status. These statistics seem to
suggest the notion that Coles Group is a leading corporate in CSR within its primary operational sector (retail).

However, although Coles Group’s policies appear to communicate their dedication to CSR by purchasing renewable
energy at a premium (potentially lowering net profits), research indicates that there emerges “no impact from renewable
energy use" in relation to a firm’s profits (Hulshof, & Mulder, 2020). The same study concludes corporations likely
“do not have objectives beyond profit maximization". Furthermore, it is likely that Coles Group’s shift to renewable
energy is a key element of their strategy involving a “configuration of resources" in the world’s “changing environment"
(Johnson et al., 2011). The investment in renewable energy makes their supply-chain processes sustainable in the long
run, permitting them to maintain their competitive advantage.
Therefore, considering research suggesting that firms such as Coles Group are only willing to engage in CSR when
their profits remain unaffected in combination with the fact that Coles Group CSR engagement may be key to their
sustainable strategy and competitive advantage, the notion that Coles Group’s dominant orientation towards society is
that of CSR is strongly challenged. It holds likely that Coles Group prioritises profit maximization.
CSV Engagement:
However, our previous conclusions are derived primarily from considering Coles Group’s operations in the retail sector.
A minority of Coles Group’s subsidiaries (e.g., Loyalty Pacific) operate outside the retail space.
Therefore, within the capacity of such subsidiaries, a case can be made for Coles Group potentially prioritizing the
Creation of Shared Value (CSV), defined as corporate practices which advance “the economic and social conditions in
the communities in which it operates" (Porter et al., 2020).
An example of such CSV is promoting gender equality. However, according to Coles Group’s 2021 sustainability
report, 36.5% of Coles Group’s leadership positions were occupied by women, relatively low compared to direct
competitors such as Woolsworths where women held 42% of their managerial positions, and Wesfarmers where 42% of
their leadership team consisted of women (statistics from respective websites). This indicates that Coles Group’s CSV
practices within the organization (as a whole) are relatively underperforming, making it unlikely that CSV is Coles
Group’s dominant orientation.
Conclusion:
Through analyzing Coles Group’s business practices, it appears highly likely they are “aware that their customers are
increasingly evaluating them according to their socially responsible behaviour" (Schramm-Klein et al., 2015) – and
therefore their industry-leading CSR practices are fundamentally oriented towards increasing sales, and consequently
maximizing profits.
Part 2: PESTLE Framework analysis of Coles’ competitive environment
Introduction:
The PESTLE framework was formulated by social scientist Francis Joseph Aguilar in 1967 to analyze a firm’s
competitive environment from a macro level. PESTLE stands for Political, Economic, Social, Technological, Legal,
and Environmental – each a factor potentially influencing a firm’s operational environment. The upcoming sections are
dedicated to examining the competitive environment of Coles Group through the proposed PESTLE factors.
Political and Social:
Political and social factors such as rising activism for or against corporations may alter consumer purchasing behaviour
and loyalty, with research indicating brand image as a company’s “most valuable asset" (Sasmita & Mohd, 2015).
However, firms primarily within the retail sector appear relatively less susceptible to consumer activism’s impacts

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Analyzing the Competitive Environment and Corporate Orientation of Coles Group in Australia: A Brief PESTLE and
Corporate Social Responsibility Assessment A P REPRINT

considering the majority of their goods sold at retail stores possess relatively low elasticities of demand due to their
nature as necessities/household items.
In 2017, Coles announced the shutting down of three distribution centres as it advanced towards automation through
technological development. Political backlash through activism occurred in December 2020 as “more than 350 Coles
workers" (Vinall, 2020) protested losing their employment status. Such protests are not only politically driven as calls
for policy adjustments, but they also stem from foundational social outlooks adopted by consumers towards corporations.
Indeed, 83% of Australians “considered companies to be greedy" (Birch, 2004).
Despite this, there has been widespread success of corporations in Australia, with two Australian cities (Sydney and
Melbourne) being in the world’s top 20 financial centres in 2018, as per GFCI 24 standings. Considering Coles Group
specifically, despite the weakening of their brand image, they experienced a 3.1% increase in their annual sales revenue
to AUD $38,562 million in FY 2021 from FY 2020, a fact seemingly even more impressive when considered they
suffered a 2.0% decrease in sales revenue the previous fiscal year, as reported on their annual financial reports.
It would therefore seem the Australian population’s social and politically driven outlook on corporations does not
serve as a severe threat, but rather more as an opportunity for firms to differentiate themselves and appeal to the public
outlook through adoptions of ethical and respectable business practices.
Overall, considering Australia’s strong political and social stability indicating consistent governmental policies, political
and social factors plausibly hold relatively low significance to Coles Group’s and its industry’s competitor’s financial
success.
Economic:
Numerous economic factors ranging from inflation to unemployment may lead to the creation of opportunities (increased
consumer spending) and threats (decreased productivity and strength of workforce) within the consumer staples industry,
as discussed in detail below.
As mentioned previously, firms operating within the retail market primarily sell goods possessing relatively low income
elasticities of demand, due to their nature as necessities. Considering this, it may seem in the best interests of retail
firms to raise nominal prices of their goods and services as hedges against inflation, with the knowledge that consumers
purchasing behaviour is likely to remain relatively static.
However, household products possess another trait; when the general population is questioned on inflation, “64.4% of
subjects reported trying to recall prices of specific products", a figure “twice as much" in comparison to subjects “trying
to recall inflation statistics" (Cavallo et al., 2017, p22). Analyzing this, majority of a country’s demographic may be
highly sensitive to price adjustments of common household items, in that although they may continue purchasing them,
they are likely to switch to alternative providers for better value should opportunities arise.
It would naturally follow that major retail firms would engage in direct competition to provide goods and services at
the lowest costs possible. Considering Coles Group’s recent efforts towards achieving economies of scale through
“significant progress" in its “major technology projects" (as mentioned in the Chairman’s message), such a situation
would favour Coles Group permitting it to potentially initiate cost-leading pricing of goods.
Lastly, economic factors such as high unemployment rates pose threats to the consumer staples industry’s firm’s
workforces, and consequently, firms (such as Coles Group) are reallocating their profits towards automation as hedges
against unemployment, the opportunity cost of which is potentially experienced by shareholders receiving lowered
dividends on their shares, consequentially disincentivizing investments.
Technological and Environmental:
Technological developments are often integrated into securing the sustainability of a firm’s competitive advantage
within its dynamic environment, and the scope of their impact can be especially broad as further discussed.
According to the Australian Bureau of Statistics, the COVID-19 pandemic brought significant impacts on the retail
industry, with Australia’s unemployment rate spiking to 7.4%, causing a decrease in the strength, and overall productivity
of the national workforce. Within such an ever-changing environment, firms have recently increased technological
advancements (such as Coles Group’s automation investments, as discussed earlier) to mitigate the impact of sudden
environmental changes. Technological solutions within fields of data science specifically designed for retail stores’
utility in “automated replenishment" have generated results similar to that of human performance, though slightly
disadvantaged in that they may decrease “0.5 days of inventory", 9.6% lower than manual restocking (Donselaar et al.,
2010).
It is critical to note, however, that the Australian technological sector has rapidly developed over recent years, with a $167
billion (26% YOY increase) contribution to Australia’s 2021 GDP (as per Consultancy.org). There is therefore arguably

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Analyzing the Competitive Environment and Corporate Orientation of Coles Group in Australia: A Brief PESTLE and
Corporate Social Responsibility Assessment A P REPRINT

strong potential for technological automation alternatives to surpass human workforce productivity in upcoming years,
thereby shielding firms from drastic environmental impacts.
However, this proposed solution of Coles Group’s technological automation investments as a potential replacement
for its human workforce (due to its susceptibility to environmental changes) may not be a straightforward process.
Research suggests humans tend to perceive human leaders “more favourably" than robot leaders (Gombolay et al., 2015).
Therefore, adequate leadership training of human employees arguably remains crucial to a firm’s optimal functioning.
Overall, it would therefore potentially be more beneficial for firms to capitalize upon technological advancements
in improving operations such as transport infrastructure and communication efficiency, which would not replace
humans from workforces as extensively or place them under robotic authority. Such a scenario would strike an optimal
balance between technological development to mitigate impacts from dynamic environmental factors, and workforce
productivity/worker satisfaction.
Legal:
The strict Australian consumer and competition laws ensure fair business practices by firms in accordance with proposed
rules and regulations. According to the Australian Competition and Consumer Commission (ACCC), the Federal
Court’s 2014 proceedings charged Coles Group “combined pecuniary penalties of $10 million" due to misconduct
through “misuse of bargaining power". While such heavily reinforced regulations ensure fair and direct competition
between firms, they may incentivize outsourcing of labour to regions with relaxed laws, a situation favouring larger
firms such as Coles Group with the resources and infrastructure to do so.
Conclusion:
In conclusion, our brief analysis of the Coles Group, one of Australia’s largest retail conglomerates, illustrates a
multifaceted organization navigating through a complex and competitive retail environment. Our evaluation indicates
that while Coles Group engages actively in Corporate Social Responsibility (CSR) initiatives, profit maximization
remains its primary organizational orientation, strategically using CSR as a means to fortify its position in the market,
boost sales, and consequently, enhance shareholder returns. This aligns with our understanding of businesses functioning
in an oligopolistic market such as Australia’s retail sector.
When extending our scope to assess Coles Group’s various subsidiaries operating outside the retail sector, there was
minimal evidence to suggest a dominant orientation towards the Creation of Shared Value (CSV). The firm’s CSV
practices, as seen in its efforts towards promoting gender equality, have shown to be underperforming in comparison to
its direct competitors.
Applying the PESTLE framework to examine the macro environment in which Coles Group operates allowed us to
unravel a multitude of factors influencing the corporation’s competitive strategy. Despite political and social upheavals
affecting its brand image, Coles Group demonstrated resilience, posting robust financial growth, suggestive of the
Australian consumers’ relatively low susceptibility to activism against corporations. Economic factors unveiled a
strategic move by Coles towards achieving economies of scale and cost leadership via technological advancements.
However, the potential repercussions on employment and subsequent societal backlash highlight a delicate balance that
needs to be maintained.
The future promises to be an intriguing playfield, with the increasing integration of technology posing both opportunities
and challenges, emphasizing the need for a balanced approach that incorporates technological advancement without
wholly eliminating the human element. This balance is particularly relevant in a country like Australia, where the
technological sector’s rapid growth promises substantial advancements.
The stringent legal framework in Australia underscores the importance of maintaining ethical business practices, and
at the same time, it potentially incentivizes larger corporations like Coles Group to explore outsourcing strategies to
regions with less strict regulations.
Overall, this paper underscores the complexities inherent to a company operating in an oligopolistic market like Aus-
tralia’s retail industry, with a dynamic blend of profit maximization strategies, CSR engagement, macro-environmental
influences, technological advancements, and legal constraints. As we move forward, the evolving landscape will
undoubtedly necessitate adaptability and strategic foresight from corporations like the Coles Group, underscoring the
importance of continuous analysis and assessment to understand their practices and predict their trajectories.
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Corporate Social Responsibility Assessment A P REPRINT

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