About Woolworths
Question:
Discuss about the Orientation Strategy and Innovation Performance.
Strategic management is one of the major considerations for the contemporary business organizations due to the reason that they face diverse complexities in their daily operations. In addition, with time, the rate and intensity of the completion in the market is rapidly increasing. Initiation of the strategic management also helps the business organizations in having effective business strategies in order to survive in the intensely competitive business scenario (Wheelen et al. 2017). In the present time, one of the major business sectors, which are witnessing the growth of competition, is the retail business of the consumer goods. Especially in the Australian market, the competition in the retail business is much higher with the presence of large number of global brands (Zakaria et al. 2014). Among all the available brands in the Australian retail market, one of the major brands is the Woolworths.
Woolworths is chain of supermarkets operating mainly in the New Zealand and Australian market. They are founded in 1924 and having a major portion of the market share with them in the Australian market. According to the reports, they are only second to Wesfarmers in the Australian market in terms of market share (Woolworths.com.au 2018). They are having diversified product portfolio ranging from groceries to household products. Currently, they are having more than 1000 stores across Australia. Their prime objective is to be the market leader in its sector overtaking Wesfarmers by attracting more number of customers.
As per the reports, currently Woolworth group is having more than 75 percent of share holdings followed by ALE Property Group with having 8.72 percent share holdings. Another prominent shareholder in the company is Perpetual Investment Management Ltd.
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Political |
· Political environment of the operating country determines the business environment of the organization (Amore and Bennedsen 2013). · Australia is having fairly stable political scenario in the market. This helps Woolworths in having favorable business environment in the market. · However, stable political scenario of the country is also attracting number of global competitors. |
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Economical |
· Australia is having favorable economic environment in the country, which helps Woolworths in having more market potentiality. · Rate of unemployment also increasing, which is creating more opportunities. · However, emergence of the economic recession is having negative impact on the business potential of Woolworths (Rollins, Nickell and Ennis 2014). · Huge intensity of the competition in the retail market is limiting the profitability of Woolworths. |
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Social |
· Woolworths cater to the end customers. Thus, they are having huge diversity in their product category to meet the diversified requirements. · However, it is challenging for Woolworths to provide added services due to the fact that presently customers expects more than just shopping. · However, the rapid change in the social trend is difficult for Woolworths to cope up with. |
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Technological |
· Retail sector is witnessing huge development in terms of technology. · Woolworths initiated technologies such as online shopping portal and self service check out (Prashar, Vijay and Parsad 2015). · However, it is important for them to determine the customer requirement and preference before initiating technological development. |
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Legal |
· Woolworths also offers food items. Thus, they need to adhere to the food standard legislations in Australia. · In addition, they also need to comply with the business legislations in operating their business in Australia and New Zealand. · However, emergence of more stringent rules and regulations are creating issues in the business operation of Woolworths. |
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Environmental |
· Current business scenario is heavily determined by the environmental factors. · Woolworths follows different sustainability activities such as reducing the carbon footprint from their operation and waste management (Benjaafar, Li and Daskin 2013). · With the increase in the environmental concerns, it is important for Woolworths to update their strategies. |
The previous section discussed about the external factors faced by Woolworths in their business operation. However, it is also important to determine the competitiveness of the industry Woolworths operates.
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Threat of new entrants |
· Threat of entry in the retail sector is moderate. · This is due to the reason that retail business can get started with low capital (E.Dobbs 2014). · However it is not easy for the new entrants to match the brand value of Woolworths and achieve their economies of scale. · The area of business for Woolworths is huge and it is not possible for new entrants to match. |
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Threat of substitutes |
· Threat of substitutes in the market is huge due to the presence of good number of similar players. · Coles and Aldi is offering same products as Woolworths. · Switching cost is also low for the customers. |
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Bargaining power of buyers |
· Bargaining power of the customers is also high due to having more options (Haucap et al., 2013). · Buyers will opt for the brand, which is more value creating. · Customer loyalty is less in this sector due to the wide availability of similar products. |
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Bargaining power of suppliers |
· Bargaining power of the suppliers is also high. · Woolworths sells only the end products and not manufacturers any item. · Thus, they are largely dependent on their suppliers for their sourcing of the materials. · However, the brand value of Woolworths and their large number of suppliers ensures the low intensity of the bargaining power of the suppliers. |
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Competitive rivalry |
· Competitive rivalry is high due to the presence of huge number of competitors. · Aggressive marketing campaigns are being initiated in order to stay ahead in the competition (Kurt and Hulland 2013). · It is the brand value and distinctiveness of the Woolworths, which helps them to cut off the competitive rivalry |
The earlier sections discussed about the external market factors being faced by Woolworths. However, there are some internal factors also being present for them, which determine the effectiveness of their business operation.
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Strengths |
· Woolworths is one of the oldest retailers in Australia. Thus, they are having huge brand value with them. · Business process of Woolworths is favorable enough to deal with the marker challenges. · Having huge diversity of products that helps in catering to more number of customers (Park and Han 2013). · Huge market reach and penetration in their operating areas ensures higher market share. |
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Weaknesses |
· Not having the status of market leader is making them trail behind the competitors. · They are mainly having their presence in Australia and New Zealand. Thus, global presence is lower for them. · Coles are taking away the major businesses of them. |
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Opportunities |
· Retail sector is growing at a rapid pace. Thus, the opportunities are increasing for Woolworths. · Leveraging the online marketplace more will help due to the reason that online customers are rapidly increasing (Wang et al. 2013). · Sales of private level brands of Woolworths are also increasing. |
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Threats |
· Offering more discounts in competition with others will reduce the business growth for Woolworths. · Threat of having new entrants will further reduce the profitability. · Frequent change in the market trend and requirements may change the business approach of Woolworths. |
In terms of the marketing strategies being initiated by Woolworths in order to gain competitive advantages, Porter generic strategies will be used. According to this theory, there are mainly three elements or aspects to be followed by the organizations in gaining competitive advantages (Tanwar 2013). The following sections will discuss about the generic strategies initiated by Woolworths.
Cost leadership is being initiated by Woolworths in order to offer their products at minimal price in the market. The less will be the price, the more will be the attraction of the customers. In the case of Woolworths, they initiate the cist leadership strategy by locally sourcing their raw materials. For instance, grocery items of them are being sourced from the local farmers directly (Kaliappen and Hilman 2013). Thus, it helps Woolworths to reduce the cost of intermediaries and transportation. Another strategy they practice is having large number of suppliers. Having large number of suppliers helps Woolworths to increase their bargaining power in the market. This also helps them to source their materials from the suppliers with less quoted price. All these strategies are reducing the cost of operation for Woolworths and helping them to gain cost leadership in the market.
External Analysis of Woolworths
Initiation of the differentiation strategy helps the organizations to have distinctive image in the market. This is beneficial in attracting more customers in the intensely competitive market. Woolworths initiates differentiation strategy by having distinctive approach in their service delivery. Initiation of the practices such as carbon neutral stores and self service check out process is helping to have distinctive image in the market. Another differentiation strategy being practiced by them is by offering private level products. With the help of the private level products, Woolworths is being able to offer the products according to the current trend of the market (Zehir, Can and Karaboga 2015). These private level brands are only available in the stores of Woolworths and thus, customers will have different and distinctive experience in using these products.
Woolworths do not initiate market focus strategy due to the reason that they do not have niche marketing approach. They are having mass market approach and cater to maximum number of customers possible. Thus, they do not possess market focus strategies.
According to the above strategic group diagram, Woolworths is mainly having Coles as their main competitor. This is due to the reason that in the above diagram, the level of product diversity for Woolworths and Coles is in similar level. However, on the other hand, the price level of Coles is relatively higher than that of the Woolworths. Aldi is also competing in the Australian retail sector but their product diversity is much less than that of Woolworths. Thus, it can be concluded that the point of differences for Woolworths are the product diversity and price level.
In doing the strategic group map for Woolworths, there are some assumptions being made. It is assumed that all the three competitors are similar in terms of product offerings and they do not have any differences. Another assumption being made is that all the three organizations are having their vast presence across Australia.
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Primary activities |
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Inbound logistics |
Inbound logistics of Woolworths are effective and efficient in nature. They are having distribution centers across Australia where the products are being stored. They also maintain efficient procurement strategies that enable them to have no intermediaries in between. They directly deal with the producers (Chuang, Liao and Lin 2013). |
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Operation |
Updated and latest technologies are being initiated by them in their operational activities. This helps them to enhance the effectiveness of their entire process. In addition, their mechanism in operation ensures that the flow of the inventory is seamless and accurate. This also helps Woolworths to have fewer products in transaction. |
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Outbound logistics |
Outbound activities of Woolworths are also effective due to the fact that they are having distribution centers across Australia and all the distribution centers are well connected with their stores (Hiremath, Sahu and Tiwari 2013). It helps in having the flow of the inventory across every store. Their outbound facilities also ensure that seasonal products are properly stored and are being offered around the year. |
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Marketing and sales |
Woolworths initiates Omni channel marketing process to cater to larger section of the customers. Social media marketing and television commercials are the most effective and efficient forms of marketing for Woolworths. Promotional activities include the branding and discounts for their customers. Their entire marketing and sales activities are targeted at retain the existing customer base and also attracting the new customers. |
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Service |
Woolworths is having dedicated customer care service for the round the clock service to their customers. This also includes the replacement offers for their products. Having the effective customer service ensures that Woolworths is having high retention ratio of the existing customers. It also generates positive word of mouth for Woolworths in the market. |
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Support activities |
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Firm infrastructure |
As the reports, Woolworths is having more than 1000 stores in Australia and more in the New Zealand. They are also having more than 20000 employees in place to serve the customers. Apart from all these stores, they are also having huge number of distribution centers. All their stores are strategically located in the main city to provide ease to their customers in transportation. |
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Human resource management |
Woolworths is having right and skilled employees in right place. They practice effective process of human resource management in their organization. Their human resource management approach starts from the recruitment process. All the new employees are being selected based on the particular criterion of the organization (Alfes et al. 2013). In addition, training programs are being conducted periodically in order to equip and train the employees according to the present market trend and requirement. The policies of human resource management of Woolworths ensure that they are having motivated and engaged employees in place, which will reflect in having positive customer service. |
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Procurement |
Procurements are being done directly from the producers rather having any intermediaries in between. This ensures that the producers are getting right value and cost of materials for Woolworths is low. Sustainability is also being followed in procuring the materials in order to have a sustainability approach in the entire process. |
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Technology |
Woolworths initiates latest technologies in place in order to offer their customers enhanced experience and value. They are having their own mobile apps for their customers to shop from their conveniences. In addition, initiation of the latest technologies also helps in having automated logistics and supply chain process. |
Thus, from the above value chain analysis, there are various sources of competitive advantages for Woolworths identified. However, these sources will be effective only when they will be sustainable. Hence, determination of the sustainability of the identified sources is important (Knott 2015). In this case, VIRO analysis will be used to determine the sustainability of the sources of competitive advantages.
Valuable resources are the resources, which enhance the value for the company and also for the customers. In the case of Woolworths, human resources are one of the major valuable resources for them. This is due to the reason that having skilled and trained employees in place will ensure the organizational productivity (Bondarenko et al. 2017). On the other hand, having skilled and trained employees will enhance the level of customer service quality. This will act as added value for the customers. Another valuable source of gaining competitive advantages for them is the technology. This is due to the reason that in the above value chain analysis, it is determined that technological development is helping Woolworths to create more value for the customers. This is also creating value for Woolworths by enhancing the effectiveness of their logistic and supply chain process. Outbound logistics is another valuable source for Woolworths due to the reason that this is helping in having smooth flow of the inventories. This is ensuring that customers will be able to have products available at very point of time.
Political Factors
Inimitability is also an important criterion to determine the sustainability of the sources of competitive advantages. This refers to the extent to which the resources can be imitated. In the case of Woolworths, the brand value of them is one of the resources that cannot be imitated. The brand value gained by Woolworths involves huge investments and promotional activities. This cannot be imitated by others (Lin and Wu 2014). The skills of the employees are also inimitable due to the reason that the skills of the employees along with the training being given to them are unique and limited to Woolworths only. This will help in effective determination of the social environment and offering products accordingly.
Rarity refers to the extent to which the resources for the business organizations are rare in nature. Rare resources for Woolworths are financial resources. This is due to the reason that the financial resources accessible to Woolworths are huge and cannot get accessed by their competitors. Moreover, financial resources are not abundant and freely available. Other competitors may not able to get the access to the financial resources even by performing as per to Woolworths. Having financial resources will ensure that they will be able to rapidly develop newer technologies in the market.
It is already being discussed that Woolworths is having huge number of stores, distribution centers and employees in place to operate in the market. In addition, they are having effective policies of training activities and development program in place to further enhance the effectiveness of their organization. Effective management of the internal organization also contributes in having competitive advantages in the market. This will help them to effectively adhere to the legal challenges in the market.
- It is recommended that diversity in the workforce should be increased. This is due to the reason that the more diversity will be there in the workforce, the more effective will be the determination of the diverse requirements of the customers. Currently, Australia is having population from different social and cultural groups. Thus, proper representation of them in the organization will ensure that all the needs will get fulfilled.
- The online marketplace should get aligned with the distribution center so that the time in transporting the goods to the customers will be less. The less will be the transportation time in delivering the goods to the customers, the more will be their competitive advantages in the market.
- Woolworths can enter in the foreign countries mainly in the Asian developing countries. These countries are having huge market potentiality. Moreover, this will also ensure that the brand value of Woolworths will get enhanced and it will help them to tap the new and existing markets effectively.
Conclusion
Thus, from the above discussion, it can be concluded that Woolworths is having different and complex business factors in their operation. These factors are having direct impact on their business performance. In view to these factors, the sources of gaining competitive advantages are being identified in this report. In addition, the sustainability of these sources of gaining competitive advantages is also being determined. This report concluded a few recommended steps, which will further enhance their market position compared to what is identified in this report. Woolworths will gain more competitive advantages in the market with the implementation of these steps.
Reference
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