Cole's Value Chain Analysis

In this essay I am going to highlight the complex nature of an organisation and critically analyse management issues faced using two Organisation Theory lens. I will use Coles Supermarket as my case organisation to reveal how such theories can aid in bringing to light issues a business may face, and how to combat them effectively through appropriate managerial and leadership strategies. Firstly in section one, I will introduce Coles as the case organisation with the necessary statistics and facts informing you of it's nature and position. In section two I will summarise the key points and justify my choice of two Organisation Theory lens using relevant papers, namely: 1) Economic theory drawing on Daniel & Arce (2004) and Donaldson (1990)

and 2) Critical Management Studies (CMS) lens drawing on Akella (2008) and Prasad & Mills (2011). Upon understanding the characteristics of these theories coupled with the case study Coles, Section 2 identifies and analyses the issues brought to light in management practises when looking through these lens. At the same time the Economic and CMS lens also comes with certain limitations. In Section 3 I will explore these limitations and the differing perspectives stakeholders may have from a critical viewpoint, once again using Coles as the case organisation. The final section succinctly highlights the attributes of a successful and effective leader in today's environment. The conclusion summarises an overview on how organisation theories can shed light on issues in an organisation, define business goals & responsibilities and form strategic practises to successfully achieve these objectives.

Case organisation: Coles
Coles is huge supermarket chain in Australia and combined with rival Woolworths, account for 80% of Australia's supermarket market, making many Australians a shareholder in the common form of a consumer.

Coles is a business in the retail industry and prides itself with it's founding philosophy “The customers themselves really decide what goods we shall stock in our store” Coles (1928). Coles employs over 100,000 individuals in outlets such as Coles & BiLo supermarkets, First Choice Liquor, Liquorland, Vintage Cellars and Coles Express. Today Coles operates in over 2000 stores nationwide under Wesfarmers Limited who successfully acquired Coles in 2007. Wesfarmers Limited is the largest private employer in Australia and also one of Australia's largest public companies with a shareholder base of approximately 500,000. Coles has recently celebrated 100 years of growth, success and innovation with the first store opening in 1914. Statistics from the Coles Annual Report 2014 reveal the opening of 80 new format stores, 12.3% increase in profits of food & liquor, 4.7% increase in sales of food & liquor and boasts 20 quarters of industry outperformance. Coles has also analysed a sample basket to be 5.2% cheaper than 2009 despite rising inflation. Coles currently places as Australia's second largest supermarket chain in Australia holding a 33.5% share of the $82 billion grocery sector. Recent ventures by this thriving business include investments into “superstores”, partnership

with Taste.com.au, launch of Coles Life insurance and the Coles credit card. Above all Coles has managed to achieve it's business objectives as well as fulfil it's corporate responsibility to customers, the community and the environment.

Economic Theory & Critical Management Study lens: Why and key characteristics

Everyday and everywhere, everyone is affected in some form or another by businesses.

The vast majority of businesses that exist share the ultimate goal of maximising profits, even charities work towards producing profits for their cause. We are living in a Digital Revolution where technology has progressed at a phenomenal rate with corresponding rates of economic growth and globalisation. Knowledge and skills are being diffused across countries resulting in businesses adapting to the global arena. This growth is financially favourable by organisations who thrive with lower manufacturing costs, larger market shares, opportunity for innovation etc. For the more fortunate humans, this glorious era brings about benefits such as brighter career opportunities, incredible access to an impressive variety of goods and services, merging of cultures etc. I refer to individuals as “humans” as a reminder that you and I irrespective of nationality, country or socioeconomic status are all the same being. It is my view and others that every human life carries the same worth, however the world we live in today moves at a ruthless rate, benefiting some but not all. Many companies have been blinded by profits, failing to recognise social, economical , ethical and moral responsibilities. With this is in mind, I argue the importance of viewing organisation design through the Economic theory lens as it brings to light many challenges and opportunities for improvement. The Critical Management

Study (CMS) lens compliments the objective of managing organisations in a manner that recognises the importance of all stakeholders and aims to break free from the traditional theories of management. It is important to address the ongoing problem of business ethics which has manifested itself amongst corruption and breeches where profits are a business' sole responsibility. By looking through the CMS lens I am able to reflect critically upon the processes and techniques of management with the aims of encouraging progressive managerial forms.

Neoclassical economics state that in a competitive market, individuals behave rationally leading to economic efficiency. Economic efficiency is produced when no individual can be better off whilst another is worst off (Kanjilal, Bejou & Bejou, 2012). In the real world, I question the possibility of this occurring as we are surrounded by businesses obsessed with profit maximisation leading to opportunistic decisions by owners. It proves to be quite a dilemma to attend to employees, customers, the environment and society whilst firms are faced with competitive forces in a fight for market share and profits. This may remind you of the status quo: “It's a dog eat dog world”. Economics theory can be explored through two dominant theories. Firstly agency theory states that many social relationships can be illustrated as involving two parties: a principal and an agent (Donaldson, 1990). Under the principal's authority and permission, it is the agent's role to perform actions on behalf of the principal. Realistically the interests of the principal and agent are inclined to vary and the principal accommodates for this degree of under fulfilment of wishes, this is termed agency loss (Donaldson, 1990). Agency theory can be defined as the undertaking of strategies to minimise agency loss.

Secondly transaction cost economics (TCE) similarly deals with one party not producing a desired value to another. Transaction costs are those incurred during economic exchange such as bargaining and enforcement costs which TCE aims to eliminate. The main argument of TCE boils down to the recurring theme of trust, there is difficulty of assurance between two parties in delivering performance without compromising one another. These problems occur because in the real world situations arise where one party may gain its interests to the detriment of the other. It is in these scenarios where corporate responsibility and business ethics are compromised. It is very possible for an employee to experience dissatisfaction from a flawed and unethical decision (Daniel & Arce, 2004). TCE encourages the idea that management plays a positive role because transactions can be more efficiently achieved, nonetheless managers too can act in opportunistic ways at the cost of their employers.

The CMS lens can be defined as the critical and extensive critiques of management in an organisation, it aims to question and debate embedded assumptions of management. CMS reveals the role of power, control, politics, gender equality and other organisational practises in the form of efficiency and profitability (Akella, 2008). This world does not have to continue to operate within embedded and oppressive management. CMS seeks better managerial strategies where managers personally advocate moralistic values (Akella, 2008). Scholars have identified three fundamental pillars or boundaries of CMS I) performativity ii) denaturalization iii) reflexivity (Prasad & Mills, 2011).

“Performative intent” is the goal of producing maximum output with minimum input. CMS strays away from this approach and illustrates how socio-economic systems of inequality can manifest itself in such situations (Prasad & Mills, 2011). CMS through denaturalization has the intent of unmasking the inaccurate assumptions of the “natural” and reveals how organisation discourse occurs when individuals consolidate the authority of the status quo (Prasad & Mills, 2011). Critical management scholars differ from mainstream management researchers by remaining transparent about any philosophical and methodological bias that may undergrid their works and claims, in other words critical management scholars remain reflexive (Prasad & Mills, 2011).

Coles through the Economic and Critical Management Study lens

Using Coles as a case organisation paired with the economic and CMS lens, I will demonstrate and analyse the issues that these two theories bring to light. Upon looking at Coles through the economic theory lens I am able to unearth two major issues consistent with agency theory and TCE. Firstly the nature of Coles as a supermarket creates an interaction between suppliers and the retailer (Coles). It is advantageous for Coles to maintain a network of suppliers for a category of product in order to offer its customers its advocated wide range of choice. An issue I uncover is supplier opportunism. A lack of trust between Coles and its suppliers exists with the belief that suppliers may be unethical and deceiving to benefit themselves. Coles understands the potential for significant costs in this transaction and possible motives for suppliers to deceive in order to maximise their own economic goals. In this case Coles plays the role of the agent and suppliers place the principal. The more Coles is dependent on a particular supplier presents a great level of supplier opportunism (Morgan, Kaleka & Gooner, 2006). It is also important to realise if Coles was to utilise external suppliers which may be in the form of cheaper imports, this would make Coles the principal.

The TCE theory lens indicates that if suppliers relied heavier on Coles as a retail, this would reduce the chance of supplier opportunism. The supplier recognises that long term business goals with Coles outweigh the short term opportunism benefits that it experiences while potentially damaging its relationship with Coles. If Coles discovered a supplier to be opportunistic, it may choose to sever business ties which results negatively for both agent and principal. The abandoned supplier will lose a potential business partner and Coles itself may suffer as it may affect range it can offer of its products. These issues I have highlighted are one of the many that the Economic theory lens unveil.

To improve and facilitate effective and positive managerial strategies at Coles, it is imperative that we look at management from a critical perspective. Due to the characteristics of a chain supermarket, Coles is comprised of various department managers who account to the store manager, who in turn accounts to an area manager and the hierarchy continues. Department managers of Coles can be referred to as intermediate or middle managers, they are in an effective position to challenge embedded beliefs and implement change on a micro level. The nature of a department manager role allows them reflect actively on their actions and implications. A department manager in Coles experiences the pressures of maximising profits but also are able to empathise with employees at the bottom of the hierarchy as they play the day-to-day role of a team leader. By challenging and questioning existing practises, department managers can promote and bring about positive changes such as greater attention to occupational health and safety and the development of a pleasant work environment for employees where discrimination is discouraged. The CMS approach allows Coles to reflect critically on management on all levels and aim to be vigilant in deconstructing negative and deeply embedded concepts and supports the creation of positive redesign.

Limitations & conflicting perspective on theory

Though the Economic and CMS lens has notably produced promising opportunity for the progressive restructuring of organisational design, nevertheless these theories face several limitations in illuminating key organisation issues. Agency theory is limited due to its simplicity and its disregard to other research. Utilising agency theory fails to recognise several aspects such as ethics, disrespect of agents, distrust development etc. Additionally TCE is limited in its effectiveness as it focuses only on cost minimisation and neglects the aspect of corporate responsibility during transactions. The CMS approach assumes a certain level of logic and perception for it to be effective. All individuals are only human, we do not exhibit a flawless understanding of the world around us and naturally face difficulty as we endeavour to fulfil the sometimes conflicting economic and social objectives. The CMS approach can never be completely accurate as we all are guilty to some degree of personal bias and prejudices.

Despite the progression of organisational design and managerial strategies on the supermarket chain Coles, such actions can be predicted to be perceived differently by various stakeholders. Shareholders in particular are driven by monetary benefits and are more inclined to compromise ethics for personal wealth maximisation. In good judgement I note, shareholders can be generalised into two conflicting perspectives. In essence the first perspective can be summarised with a famous quote from Milton Friedman in 1962 , “ There is one and only one social responsibility of business- to use its resources and engage in activities designed to increase profits...” The second perspective encourages compassion as a vital philosophy and seeks to eliminate corruption and discrimination with the interests of society in mind.

In order to eliminate negative perspectives of various shareholders towards Coles managerial decisions, it is imperative that the organisation's leader exhibit communication skills in order to translate goals and reasoning to all stakeholders. The leader must effectively engage stakeholders on a personal level to adopt values such as sustainability and corporate responsibility. If successful this will aid in uniting all employees of various hierarchical levels to work together as a team to achieve business and social objectives. The leader must display skills such as the ability to think critically and without bias, creativity in innovating and devise of business strategies, sound conflict management and define his/her actions with the aim of serving society. A skill that must not be overlooked is the ability of a leader to successfully reflect and critically analyse the organisation. The leader must be a critical leader who is persistent and unrelenting in conjuring new practises and methods with the intent of improving the company. Lastly a leader must not abuse his/her power, instead it must be used empower, enrich and influence employees in a manner that facilitates personal growth. The personal growth and development of employees will only spur the company on towards achieving its objectives.

The Economic and CMS lens has demonstrated to be useful in guiding effective management as well as spurring change in the best interests of society and the organisation. Coles has without a doubt benefited impressively by recognising the importance of corporate responsibility and undertaken strategic forms of management to better achieve their business objectives. Their success is apparent through key indicators such as market share, rising profits, expansion and growth. I urge you all as employees or employers to question your thoughts about your role in the world. It must be remembered that both a garbage collector and a world leader are the of same species. In this fast paced and increasingly money driven world, I encourage you to empower others to recognise our increasingly forgotten ethics and responsibilities.