20th September 2006
What is "objective analysis"?



KKR (Of "Barbarians at the gate" fame) have made an offer for Coles, which is one of the three largest retail groceries in Australia.  Coles CEO Fletcher has stated that the offer of $14.50 is too low, stating that the value is between $17 & $20.

Personally, I like Coles.  They provide the specialty Cheese that I like, and Kangaroo.

About a decade ago there were three large grocery retailer chains in Australia.  The smaller of the three then was Franklins "no frills", which by far offered the cheapest groceries.  A Singaporean moneybags purchased Franklins and attempted to move it upmarket (in price) but the Franklin's franchise with it's customers derived from low price, and he bombed out, eventually selling his stores to Coles & Woolworths.  (You could see Coles & Woolies rubbing their hands at the prospect of acquiring all of those Franklins customers.)  The empty space at the cheapest end of the market was soon filled by German company Aldi.  Aldi specializes in providing a very cheap line of good quality grocery in each category.  Their policies appear to be causing some angst at Coles & Woolies.

As an impartial? observer I am not happy with CEO director Fletcher.  Coles took over Myer Department store of Melbourne in a share swap which resulted in Solomon Lew (Previous owner of Myer) exerting management control  of the group.  Coles seems to have performed less well since Lew was removed from the board.  (by Fletcher perhaps?  Fletcher seems to be more the political genius, less the business genius.)  One of the Fletcher initiatives that I believe was ill advised was the initiative which removed the policy that gave shareholders a discount.  A shareholder could apply for a certificate, and on presentation of that certificate at the checkout would obtain a 3% discount on the account.  Another ill advised initiative was the "follow me" venture into petrol discounting.  (A petrol discount of 4c/liter up to 100 liters, which is around 16c per US gallon up to 25 US gallons, is provided to customers of Coles & competitor Woollworths who spend $30 in a company store.)  It would have been better to follow the IGA initiative, and offer a 4c/liter refund on a petrol receipt when grocery purchases exceeded $30.

Fletcher has recently discarded the Myer chain, and has mooted a development that includes a Coles metamorphosis to Wal-Mart like Supercentres.

Wal Mart in the USA has a formula.  From observation & inference that formula includes (1) lowest cost (& huge) premises. (2) lowest cost wages. (3) lowest cost goods acquisition. (4) A large pool of customers within (about) 15 minutes drive.  Those low cost premises are frequently an empty 10 hectare paddock in the middle of a farming district, with the sole proviso that it be within 20 km of about 30,000 potential customers.  Lowest wages are now possible (thanks to J.Howard PM for the enabling legislation) and lowest cost goods are essentially a function of buying power.  Wal Mart does not compete for the top end of the market.  Wal Mart is Aldi with multiple brands in every category.

The Wal Mart formula is not readily applicable to either closely settled or sparsely settled regions.  There is no Wal Mart store in Manhattan.  Wal-Marts are few and far between in Maine.  A large Wal-Mart supacentre is a factory like shed about 180 meter long, 120 meters wide, located in the middle of a 2 - 10 hectare (5 - 25 acre) block of land that is sealed & marked and provides free, unlimited parking.  Just inside the entry to the store there might be a few concession shopfronts (McDonalds, medical) and then a row of (sometimes automated) checkouts.  Behind the checkouts are rows and rows of shelves containing goods.

Typically, everything is cheaper (by about 20%) than anywhere else.

So if Fletcher does a Wal-Mart, what is he going to do with his small, high cost Coles locations?

My suggestion to the Coles board is dump Fletcher, and find someone like Sol Trujillo to run the company.  Otherwise (I fear) KKR will win, and we (the people of Australia) will end up paying higher prices.

Alternatively, the board could consider restoring the 3% checkout discount to shareholders.


In general I have no respect whatsoever for liberal writers, most of whom I consider to be disseminators of unresearched and frequently lethal "facts".  For instance, in Australia Phillip Adams and
Richard Neville spring immediately to mind.  I wonder how many people Adams has killed by declaiming back in the '90s words to the effect that "AIDS was a disease transmitted exclusively between homosexual men and IV drug users".  Even then, medical science was warning that heterosexual transmission could and did occur.  Richard Neville is more innocuous, although I found his fascination with serial uxoricide (or was it just femicide?) Sobrage to be somewhat bizarre.  (If these examples are rather old it is because I have since avoided wasting my time reading columns over their byline.)

That said, it must be said that many conservative writers are also disseminators of unresearched garbage.  These writers can often be spotted because they adopt the label "neocon".  Mostly they are ex-liberals who have changed their stripe to keep in fashion.

Chomsky is different brand of liberal.  A few weeks ago I borrowed from a local library a copy of his most recent book, "Failed States"(HH&C.FE2006).  He erupts facts, (most of which seem accurate).  He does not always hew to the traditional liberal line.  Like myself, he knew that (just like Bush's claim of Saddam's WMD) the Clinton claim of Kosovo persecution was unfounded, and the bombing of Kosovo by NATO was therefore unjustified. 

Chomsky has the intellectual rigor to admit & try to integrate data that are inconsistent with his own politics.  For instance he castigates the US as committing war crimes, but quotes Kissinger with approval for understanding and  honesty (p87) in recognizing the de jure situation, which is that the US is the only state that can initiate force against states that pose a threat to world peace.

Chomsky's objection to the Iraq invasion is that the US is riding steelshod over progress towards an international system based on cooperative security, multilateral decision making, collective action, agreed norms and steadily growing fabric of law.    I recognize that as a desirable objective, however have some impatience with the way that individual corruption of world leaders and a defective UN security council seem to be interfering with the process of establishing
cooperative security, multilateral decision making, collective action, and agreed norms.

I also condemn the invasion of Iraq, but from a different viewpoint.  I take Kissinger's view, that the US should intervene to right wrongs.  Admittedly, the US has not got clean hands, as instanced by Haiti and various other central & South American adventures.   However I do not condemn the Iraq invasion because there were no WMD, but because the war has not succeeded in establishing a stable government in Iraq.  Iraq is a strategic objective, located as it is between Iran and Syria.  I condemn the invasion because it was ill prepared.  Somebody with intelligence and foresight was not directed to foresee the difficulties which might (and have) emerged.  After Vietnam, one would have thought that military & political planners would have anticipated the eventuality that occurred.

I believe that to win the war against terrorism, we must redesign our democratic system.  We do not have democracy, we have democratically elected dictators.  If we the people (of the so called "liberal democracies") had real democracy, we would have the power to directly legislate, and we would also have the power to remove our elected representatives at any time.  In most ways, there is little to choose between the dictatorships in Muslim countries and the democratically elected dictators of the so called "liberal democracies", except that our dictators are governing wealthier, more powerful nations.

We need real democracy.  Just like the people of California.  Californians removed Grey.  Californians make their own laws.

Politically, Californians are probably the most enlightened people in the world.

Waaay ahead of those noo yorkers, or us in the land of oz.