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COLES MYER OPERATION RIGHT NOW Case Study: Coles Myer Operation Right Now Summary The case

refers to the Australian company Coles Myer, which is not performing well. The company was formed in the year 1985, by merger of Coles supermarkets and discount stores and the department store chains of Myer and Grace Brothers. These included Coles supermarkets, Liquorland, Target, Kmart, Myer department stores and Officeworks. The whole objective was to create a large retailing group and take advantage of the economies of scale. It was expected that with one central purchasing department and a common supply chain management system, the costs would come down. However the results were not as anticipated.

The heads of stores were unwilling to give up their powers, there was too much bureaucracy and overstaffing at the head office. It became difficult to manage problems of large size and a variety of product range. One of the major businesses suffered losses, thus pulled down the overall performance of the group. The problems ranged from not having the right mix of merchandise and service, rising costs, excessive inventory, and distress sales of outdated merchandise. The management decides to appoint a new chief executive John Fletcher, to sort out the problems. By his own admission he had no experience in retail business. However he was of the view that the problems at Coles Myer were structural in nature related to the process and that specialist retailing knowledge was not needed to solve them. He named the plan 'Operation Right Now' and aimed to create a sharper focus for each business group, for which an entirely new top management was recruited who were from overseas and who brought newer ideas. He also created a shared service unit in areas such as warehousing, logistics, buying and supply chain management to bring about economies of scale by reducing the number of warehouses and reducing the movement of merchandise. He also attempted to reduce the size of bureaucracy at

COLES MYER OPERATION RIGHT NOW the head quarter and moved personnel to the operations. The changes brought some

improvements in the working but at the same time led to a lot of resignations which proved to be a set back to the strategic decisions. The idea of consolidation of warehouse was not as simple as anticipated and a lot expenses were incurred to introduce sophisticated information technology to bring about autonomy in operations. This in turn led to cost overruns and delays in implementing of program. Questions

1. Identify the ways in which the case illustrates the multidimensional nature of change. The whole idea of merging different types of stores was to bring economies of scale in the operations by converting Coles Myer into a large retail chain (Furnham 2005). The purchase decisions were to be centralized so that the company could get advantage in buying items or common use in bulk and thus get them at an attractive price. The centralized operations were to bring about better control on operations and reduce costs and overheads (Norman 1979). However the heads of stores were reluctant to give in their power of taking decisions over buying and warehousing. The large staff at the head office made it difficult to bring about structural change. The new Chief Executive John Fletcher decided to bring about drastic changes in the system by decentralizing the operations of the stores. There were issues of streamlining the supply chain, motivating the work force, and also changing the perception of people at the way the whole work is to be looked at.



Why would strong fiefdoms delay the implementation of a change program?

How did Fletcher overcome this problem? In any organization, it is very difficult to give up power. When power is given to people, they get enamored with it and consider domain as their own personal property. It says the power corrupts. The decentralizing plan of Fletcher brought about resentment from the existing head of stores. They felt that their power to control and take decisions was being snatched and this was not liked by them. This resulted into clash of views and in turn led to resignation of top people (Dunne et al 2007). In order to increase the efficiency of any organization, it is important to consider the fact that increase in the efficiency of production helps in achieving economies of scale. When a company achieves economies of scale, its average cost per unit gets reduced as the fixed costs are spread out and shared among all the units and number of goods produced. Fletchers plan was to bring about a structural change in the organization. He did not want to get bogged down by the mental baggage of the culture of existing executive. So to overcome this, he brought in entirely new set of people from overseas who had a different perception of looking at problems. This strategy was required to change the mindset of the people. 3. Why does this type of change take a long period to implement?

Change is always resisted by people even if at the outset it is for their good. In order to implement a change in an effective manner, organizations have to perform a set of activities in advance. These include the following:-


Identify the types of changes required (in the present case, it is the mind set of the people at the way they look at problems ) Find out the major issues present in the organization ( in the case study, these are decentralization of operations, concentration of people at the head quarter, bureaucratic behaviour of employees, failure of one business unit which has contributed to overall performance of the company ) Identify the key persons who need to be focused ( the case indicates the head of stores , who need to be explained the advantage of bringing about change and its benefits, the excessive staff at the head quarter who have to be moved to the operations ) Winning support of the individuals ( the affected parties are the people who will be transferred, head of the stores and new employees who are brought from outside to head the operations ) Identification of obstacles ( excessive inventory which is leading to erosion of overall profit of the company, resistance to change by the employees especially at the top, poor performance of one of the stores, loss of foresight of one of the stores which has started keeping high value items instead of budget items ) Determine the extent of risk and the cost of bringing about the change ( the risk in this case study is further fall in profit margin, excessive cost due to implementation of Information technology to streamline the store operations ) Find out why the change might be resisted and the strategies to manage the same ( the change would be resisted by the people because they are used to doing things in their

COLES MYER OPERATION RIGHT NOW own way and moreover, people at the helm of affairs are reluctant to give up power, by explaining benefits that they can gain the change can be managed ) The key factors in overcoming change are the people. Willingness and active operations of employees as well as management is essential for successful implementation of any new

methods of working. These new methods need to be integrated with the older methods and then implemented. Once people get used to working in a certain way, it becomes extremely difficult to bring about change. A kind of lethargy sets in. It is a known fact that people resist change, even if it is for their own good. One good strategy adopted by Fletcher was to bring entirely new set of people who could think out of the box and thus look at the problems from a different perspective which was totally unbiased in nature. The whole concept is good but since people resist change, it takes time to convince them (Betancourt 2004). If benefits of change are explained to the affected people, and if an inclusive approach is followed, the change becomes easier and faster. 4. Reflect on your learning from this case study analysis and how this may apply to your

own practice as a manager within your organization. There are several learning points from this case study, which can be applied in practice. The most important one is that merger of companies should be done by following a focused strategy and objective. In the present case, the stores that were merged had different target markets, ranging from people looking at budget prices, to premium products and prices. So merging such kind of businesses needs some business acumen. Secondly, bringing about sudden change in working is difficult even though the objective is noble; like in this case the objective was to reduce cost of operations by bringing about economies of scale. (Robbins et al 2006)

COLES MYER OPERATION RIGHT NOW Centralization and decentralization both have their own advantages and disadvantages. The process of change needs to be followed in a gradual way. Lastly, the new chief executive Fletcher had absolutely no experience of shop floor at all. This is some thing which should be avoided while selecting a top executive for a company, especially when its operations are to be

improved. Fletcher was experienced but his knowledge was theoretical in nature and one has to be practical also while implementing changes. Conclusion After thorough analysis of the case, it can be concluded that merger of companies should be done with some specific objective and there should be some similarities of operation among these companies. Change is a way of life, but motivating people to change from their existing way of doing work is a tough task and requires time and effort. The act of decentralization has specific advantages in terms of quick decision making and better control in operations at local level. Bringing people from overseas, without much knowledge about the local conditions is not a very wise decision and should have been avoided. Providing training to the existing managers and trying to bring about changes in their behavior and making them realize the importance of change and its benefits would have been a better proposal. Appointing a chief executive with just theoretical knowledge is not enough to run a large conglomerate stores. Some practical experience is also needed to have a quick start towards bringing about change.


References Robbins S.P., Neil Barnwell (2006). Organisation theory: concepts and cases Australia Pearson Education Furnham A. (2005).The psychology of behaviour at work: the individual in the organization. UK. Psychology Press. Norman G. (1979). Economies of scale, transport costs, and location. USA. Springer Betancourt R.R. (2004). The economics of retailing and distribution.USA. Edward Elgar Publishing Dunne P.M., Robert F. Lusch (2007). Retailing. USA. Cengage Learning