Analysis Of Woolworths: Strategy Planning Workbook

Company background

Strategic management, in an organizational context refers to the perpetual planning, monitoring, and evaluating the alternatives available for attaining the predetermined goals and objectives. Moreover, it means the formulation and implementation of major goals and initiatives, by assessing the internal and external environment of the organization. It provides the direction for the overall functioning of the organization. Strategic management involves strategic planning to be carried out by the top management establishing the short-term and long-term goals, plans and policies, then devising the strategies to achieve them. The process of implementing strategies is a continuous and time- consuming in nature, which further involves a certain element. The strategic marketing planning has done in the context of an Australian company ‘Woolworths’. The report further describes the strategic management, including the porter’s forces analysis and Pestle and SWOT of the organization, i.e. environmental analysis. The report will conclude upon determining the available opportunities for the company after an in-depth analysis of the relevant factors (Techtarget, 2018).

Woolworth (also known as Woolworth’ or Woolies), headquartered in Bella Vista, Australia is a grocery/supermarket store initially started business operations in 1924, as a bargain basement outlet. It has 202,000 employees working in the organization. Key founders are Gordon Cairns, the chairperson, and Brad Banducci, CEO. In the year 2012, Woolworths became the largest supermarket chain in Australia and New Zealand. Woolworth constituted duopoly of the Australian retail supermarkets, forming about 80% of the Australian market (Grimmer, 2018). The company deals in selling the groceries items, vegetables, fruits, meat, packaged foods, bakery items, clothing, footwear, accessories, beauty products, household products, alcohol products, stationery items, and financial services to their customers (Roy Morgan, 2017). At present, it is operating 1000 stores across Australia, 976 supermarkets and an additional 19 convenient stores under the same vision ‘The Fresh Food People’, dedicated to providing their customers the best services. In addition, Woolworths identifies the problems of the workers providing them with a healthy working environment and aims towards developing and offering the quality and freshest food quickly, through the fastest supply chain, the vision of the company includes direct sourcing for increasing the quality of their produce. Woolworth’s environmental analysis has been done, with their Pestle and Swot analysis which describes the strengths and opportunities of the company used to gain the competitive edge in the industry (WHL, 2018).

Pestle Analysis refers to the framework or tool used by the marketers or management of the organization to analyze and assess the impact of external influences on the businesses and their working. By understanding and evaluating the external environment, an organization can strengthen the opportunities and reduce risks to attain positive outcomes and increased profits (Process policy, 2018). This tool is used for the strategic planning of the business, which includes many macro-environment factors such as new laws, tax charges, interest rates, economic growth, per capita income, trade barriers, population growth, health consciousness, and technological changes, affecting the performance, and working of the organization. Therefore, PESTEL stands for Political, Economic, Social, Technological, Economic, and Legal factors. PESTEL analysis in the context of the company ‘WOOLWORTHS’ is explained as below in the form of a table (S&P, 2017).

PESTLE Analysis

Source:  (EDRAW, 2018).

Five forces analysis is a tool or the framework designed to shape a firm’s competitive strategy to analyze the industry attractiveness and profitability. In the context of Woolworths Limited, Porter’s five forces help to understand these force, and how they influence the profitability of the business.

• Bargaining power of suppliers (high) – According to the Porter, the higher importance given to the suppliers, the stronger they gain dominance in the industry. Therefore, Woolworths have low dependence on their suppliers, which ultimately means weak bargaining power of their suppliers due to the major stake or share in the retailing market in Australia and New Zealand. In addition, the products are manufactured at large-scale in the industry. Hence, a single seller or sellers will have no significant influence on the price of the goods sold by the firm.
• Bargaining power of the buyers- Woolworths has a large number of individual customers who have strong bargaining powers. As a result, they are in a position to significantly influence the price of the products and compelling the seller to decrease the price of the product. Moreover, it is an important strategy of the Woolworths to satisfy the needs of their customers by selling their products at an affordable price (Flax, Bick & Abratt, 2016).
• The threat of new entrant – Woolworths do not have the possibility or risk for the new firm because the company has a large number of stores, which can be a huge investment for any other competitor also. It acts with access to numerous distribution channels being one of the trusted and loyal brand, therefore it becomes risky for other business to operate at such a level.
• The Threat of substitutes – It is high, as Woolworths faces high competition because substitute products are supplied to a major part of Australian supermarkets. Hence, in order to gain attractiveness, the supermarkets have to be innovative in their goods and services maintaining their retailing principles of doing the business (Fernie, Fernie & Moore, 2018).
• The rivalry among competitors- The market share is likely to be limited by some competitors in the Australia grocery industries like Coles, and their presence induces to implement the effective strategies to differentiate themselves from other firms in the industry (Edraw, 2018).

Competition between the retailers in Australia has been always emphasizing towards meeting the needs of customers. It is essential to analyze the competition of any organization with the other present competitors in the industry to devise effective strategies to attain goals meeting the requirements of the customers. Achieving maximum consumer satisfaction has further led to the reasonable pricing of products, easy access to the facilities, and innovation. Australia has some unique features such as small and dispersed population and relatively strong and efficient presence of specialist food retailers. Competition for the customers means how they are benefited, what they think of the suppliers or the retailers in the market. Some of the competitors are TESCO, ALDI, Coles, Walmart (West, Ford, &Ibrahim, 2015). The competitor analysis is done with the view to identify and evaluate the competitors brand, current strategy, the strengths, and weakness of their products (Woolworths Group, 2018). The pace of competition among the customers will intensify due to the awareness among customers about the changes in prices, the presence of more retailers. Woolworths stand out in comparison to other supermarket retail businesses, as it has become Australia’s biggest supermarket with maximum market share. USP of Woolworth is ‘Bringing middle-class products into working-class homes’ targets upper class and working for population whereas competitors such as Coles targeting middle class and premium households (Australian Food News, 2017).

The analysis of the Woolworths can be described in the form of a table below-

Determination of a position is determined by the variables or the standards that are particularly important for the customers such as price, service level, and the quality that are particularly important for the customers such as price, service level, quality, reliability, and the value for the money. Positioning starts with the product, service. It converts the preferences of the consumers and maintains a different entity in the market. Positioning facilitates the retention of the brand image in minds of the customers, through some brand initiating techniques or methods. The positioning strategy of the Woolworths is effectively strong, introduced loyalty schemes as everyday rewards through issuing shopping cards that enhance the shopping experience of the customers.

Porter’s Five Forces Analysis

Market segmentation, targeting, and positioning are the forces determining the competitive advantage of the company. High growth companies succeed by assessing and fulfilling the needs and expectations of their targeted customers. Segmentation can be defined as the segregation or the division of the total market into several sections or segments based on numerous criteria such as demographic features, socio-economic. Gender plays a vital role in the market segmentation of Woolworths products. Each segment representing the demographical features of the consumers with their preference for the goods and services comprises the analysis of their age. For example, the infants below the age group of 5 years are supplied with large sets of infant food products. Similarly, the company focuses to cater to the different needs of the people in different age groups that further affect the income levels and the product purchasing of the consumers. In Woolworths, segmentation strategy is quite specific to the type of customers present in the market. It describes that the gender and age group are important to determine the development of services and products in the market. For an instance, Woolworths, based upon the deviations in the consumer’s preference, have manufactured clothing and home-care products. Woolworth’s targets market or their products for the high-level income earners, and planning to target a growing black middle-class population. The company does retailing in such a manner so that they could attain maximum benefits in terms of larger market share with maximum customers. In a broader sense, Woolworths aims at achieving maximum profits by satisfying their customers through their retailing services, thus creating a sustainable competitive edge (Track Maven, 2018).

Woolworths being the leading retailer of the grocery and liquor in the Australian market has become the synonym of the ‘fresh food’ for the consumers. Woolworth has identified the market opportunities and has grown over years in the retail sector. Extensively focusing on offering a wide range of fresh fruits, vegetables, dairy products, drinks, and many other and the company is emphasized towards extending the leadership in fresh foods and liquor, thereby establishing new business opportunities for the sustainable growth of the concern (Booth & Coveney, 2015). Potential opportunities describe the strategies implemented for enhancing the growth of the company in the near future that would further lead to success in the long-run (Woolworths, 2018). Although Woolworths has been the best performer for years the entrance of the German retailer ALDI, has started gaining a significant popularity and attention thus, posing a threat to the leading retailers in the market. Hence, Woolworth has to become more competitive and need to focus on the market opportunities to compete with the other competitors. The strategy is devised to focus on three principles that are starting from offer then efficiency, and the growth facilitating convenience, innovation, freshness, and an appealing range of products to achieve maximum customer satisfaction amongst other suppliers (Australian Food News, 2018).

Conclusion

To conclude from the above analysis the strategic management of the company Woolworths the Australian’s second largest retailer after Coles has some strengths and weaknesses affected by the external factors in the environment. These factors are political, legal, technological, and others and it has found that the company has a high buyer’s significance over the industry affecting the prices of the products. Woolworths being at a well-known market for the consumers has exploited some of the major opportunities in the growing retail sector as demonstrated by the Pestle and Swot analysis of the company. The competitors of the Woolworths pose threats to the effective functioning and gaining the market attractiveness. Woolworths has segmented the society in different parts fulfilling their demands accordingly. In addition, the company has achieved the greater strategic position in the Australia market, and Woolworths is heading towards improving their operations, by maintaining competitive pricing and effective strategic importance in the industry. Hence, it has been found that the company is able to manage and sustain growth and competitive advantage in the future years.

• One of the recommendations for the company, Woolworths is the implementation o strategies in a proper way. In addition, consideration of external factors is another solution.
• In order to gain a competitive edge over another retail supermarket in Australia, Woolworths should focus on gaining customer attraction by fulfilling their needs and demands.
• The company should exploit new market opportunities would maintain and enhance the goodwill of the company.
• German retailing giant, i.e. Aldi has put pressure on Coles and Woolworths by making huge investments in reducing the grocery prices. This had led to increasing or double-digit sales of Aldi in comparison to the other two companies i.e. Coles and Woolworths. Therefore, Woolworths must aim at devising effective strategies to beat intense competition from the other companies in the retail market.

References

Australian Food News. (2017). Coles market share in Australia has declined. Retrieved from: https://www.ausfoodnews.com.au/2017/10/18/coles-market-share-in-Australia-has-declined.html

Australian Food News. (2018). Woolworths announces new strategies to win over grocery shoppers, AFN reveals full detail. Retrieved from: https://www.ausfoodnews.com.au/2015/05/06/woolworths-announces-new-strategies-to-win-over-grocery-shoppers-afn-reveals-full-detail.html

Booth, S. & Coveney, J. (2015). ‘Big Food’ The Industrial Food System. In Food Democracy (pp. 3-11). Singapore: Springer.

Edraw. (2018). Porter’s Five Forces Analysis. Retrieved from: https://www.edrawsoft.com/five-forces-chart.php

Fernie, J., Fernie, S. & Moore, C. (2015).Principles of Retailing. United Kingdom: Routledge.

Flax, J., Bick, G. & Abratt, R. (2016). The perceptions of supplier-buyer relations and its effect on the corporate brand. Journal of Brand Management, 23(1), 22-37.

Grimmer, L. (2018). The diminished stakeholder: Examining the relationship between suppliers and supermarkets in the Australian grocery industry. Journal of Consumer Behaviour, 17(1), 13-20.

Process Policy. (2018).What is Pestle analysis? Retrieved from: https://processpolicy.com/pestle-analysis.htm

Roy Morgan. (2017). The Australian Alcohol retail market in the review. Retrieved from: https://www.roymorgan.com/findings/7181-liquor-retail-australia-201703201051

S&P. (2017). Woolworths Limited SWOT & PESTLE Analysis. Retrieved from: https://www.swotandpestle.com/woolworths-limited/

Tech-Target. (2018). Strategic Management. Retrieved from: https://searchcio.techtarget.com/definition/strategic-management.

Track-Maven. (2018). Market segmentation. Retrieved from: https://trackmaven.com/marketing-dictionary/market-segmentation/

West, D. C., Ford, J. & Ibrahim, E. (2015). Strategic marketing: creating a competitive advantage. Oxford University Press, USA.

WHL. (2018). Our purpose, vision, and values. Retrieved from: https://www.woolworthsholdings.co.za/overview/our-purpose-vision-and-values/

WOOLWORTHS GROUP. (2018). Strategy and Objectives. Retrieved from: https://www.woolworthsgroup.com.au/page/about-us/our-approach/strategy-and-objectives

Woolworths. (2018). Development opportunities. Retrieved from: https://www.woolworths.co.za/store/fragments/corporate/corporate-index.jsp?content=/article/article&contentId=cmp100617

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