Coles Myer Ltd
Background and Issues
In 1985 G.J Coles, primarily a Melbourne-based supermarket chain, merged with Myer Ltd, an upmarket Melbourne department store, becoming Coles Myer Ltd. The merger was brought on by an expectation of significant cost savings from sharing services and overheads such as purchasing, warehousing, information technology and property. However these benefits never occurred. Coles Myer was burdened with poor management, bad strategic decisions, and internal conflict. Their share price was faltering, and lagging behind their biggest competitor Woolworths, and profit had been stagnant for three years.
In September 2001 the board appointed John Fletcher as chief executive, well known for his part in turning Brambles into a successful international company. Fletcher’s first priority was to do something about Coles Myer’s share price, however he recognised that to be able to change it he must first deal with the companies strategic and structural problems.
This analysis of organisational design and effectiveness will discuss the issues experienced by Coles Myer, discussion of theories related to the these problems and possible solutions, an examination of what is being done, and what else could be done to improve the situation.
One of the biggest problems facing Coles Myer was organisational culture. With the Coles and Myer target markets being downmarket and upmarket respectively, compatibility of their cultures became an obstacle after merging. In order to achieve the anticipated merger benefits, Coles with their mass merchandising mentality would have to find a way to amalgamate many of their functions, tasks and processes with Myer’s, who dealt with chic, and more expensive luxury items.
In additi ...