PESTEL Analysis And Porter’s Five Forces Analysis Of Woolworths

External Environment Analysis

Woolworths is one of the biggest Australian grocery store which is owned by the company in the year 1924 (Woolworths.com.au, 2018). Woolworths specializes in selling different kinds of groceries such as packaged food, fruit along with meat as well. The number of locations in which Woolworths is operating their operations in more than 995 locations and the revenue earned by the company is A$42.132 billion till the year 2015.

The number of employees working in the organization is 111,000 in different stores of Woolworths and the headquarter of the company is situated in New South Wales, Australia. Furthermore, there are different other product lines of Woolworths which is inclusive of selling different DVDs, health and beauty products and magazines in different stores.

Lastly, there are different other major competitors of Woolworths which is inclusive of the Coles, Walmart, IGA and Tesco. However, Woolworths is the major and largest store in which this is one of the premium brand stores in the entire market in which there are more than 976 supermarkets.

The main purpose of the PESTEL analysis is required to be conducted for Woolworths which will impact retail company along with the entire industry inclusive of Political, Economic, Social, Technological, Legal and Environmental factors.

Political Factors is one of the factors in which this has been seen that Woolworths is notable name in the entire retail market which fulfils the needs of the different customers through various retail outlets. In the entire Australian market, there is huge political pressure against the duopolistic nature of the retail market inclusive of Woolworths (Foxall, 2014). Therefore, the conclusion is that there is financial instability in market, the government of Australia helps in encouraging retailers to create different jobs for domestic kind of population.

Economic Factors is other factor in which Woolworths needs to be aware of the various kinds of changes in different policies which is inclusive of different kinds of tax policies and this affects the accessibility of the finance. Diversification and internationalisation are the two major strategies which has been adopted by Woolworths and this can be a reason for the success. However, the conclusion is that there has been decline in the disposable income of the individuals which helped Woolworths in shifting their focus on the advertising the valuable brands rather the different items which are luxurious in nature.

Social Factors is inclusive of different social changes along with trends which indicating the customers in Australia have moved their focus on one stop shopping and bulk shopping. Woolworths has tried to increase number of the non-food items which are being offered by the company to customers. It has been seen that the customer preferences are changing and there are different kinds of health consciousness issues, the conclusion is that Woolworths is trying to adopt to different kinds of changes as to accommodate demands for the organic kind of products (Chambers & Humble, 2015).

Macro Environmental Analysis

Technological Factors is the other factor in which advancement in technology have created new avenues for Woolworths in which firstly, the company introduced self-check out system has been introduced in several stores of Woolworths which helped the company in becoming successful in nature. Moreover, the conclusion is that Woolworths has introduced some amount of energy efficient projects as to fulfil long term objectives (Armstrong et al., 2015).

Environmental Factors is the other factor in which there has been increased pressure on Woolworths to address issues of environment and adoption of new operations has been analysed for welfare of the company effectively. Woolworths tried to commit themselves towards reducing carbon footprint by more than 55% in the year 2020. Moreover, the conclusion is that Woolworths is trying to reduce the wastage of the different wastes and other plastic bags and this helped in reducing the emissions effectively as well (Kleinaltenkam, Plinke & Geiger, 2016).

Legal Factors is inclusive of the different kinds of government rules and legislations which impacts performance of Woolworths. The changes in the prices has been conducted in which Woolworths tried to gain huge profitability and this helped them in gaining more customer base in the entire market. Therefore, the conclusion is that there were different kinds of practices which were adopted by Woolworths in which they tried to include different types of promotional offers for the customers who were the target customers of Woolworths.

The purpose of Porter’s Five Forces Analysis is required to understand the underlying levers of profitability in entire industry. Woolworths managers can utilise the Porter’s Five Forces Analysis as to identify how the five forces influence the overall profitability of the organization and developing different strategies to enhance their position and gain competitive advantage in the market as well.

Threats of New Entrants is the first factor in which there are new entrants which is required to be analysed effectively and this will create pressure on Woolworths as well. Woolworths needs to manage the situation as this will lower their profitability. Proper innovation of products and services by building economies of scale and spend money on research and development to become competitive.

Bargaining Power of Suppliers is the other factor in which this has been noticed that there are less suppliers in the entire market and they are in the dominant position as well (Charter, 2017). The powerful suppliers in retail industry use their negotiating power to extract higher prices from the firms. The profitability will be low in this case as there are new entrants in market which will be extracting more suppliers in the market and this will lower the profitability of Woolworths. Woolworths can tackle situation by building efficient supply chain with different suppliers along with developing dedicated suppliers as to gain competitive advantage.

Political Factors

Bargaining Power of Buyers is the other major force in which there are different buyers in the market who prefer purchasing the products from the store which offers them at cheap pricing strategy (Armstrong et al., 2015). The more powerful the base of the customers of Woolworths, this will higher bargaining power of the customers along with improve bargaining power of the buyers as well. This will help Woolworths in gaining huge profitability by tackling the situation by building large base of customers and rapidly innovating the products with advancement in the technology (Di Benedetto & Lindgreen, 2018, p.5).

Threats of Substitute Products is the other force in which there is huge threat to Woolworths for the substitute products and companies in the market (Baker, 2016). There are different other supermarkets in Australian market in which this has been analysed that they offer similar products to customers at a cheap price. The threat of the substitute products is less and this helps the company in gaining huge profitability. Woolworths tackle the threat of substitute products by offering service-oriented products and not being just product oriented (Wagner & Eggert, 2016, p.27).

Rivalry among Existing Competitors is one of the forces in which Woolworths operates their business in very much competitive food retail industry and the entire competition takes toll on long term profitability of the organization (Huang et al., 2015). The rivalry among existing competitors is high in nature and Woolworths can tackle this by building sustainable kind of differentiation technique along with building scale which will help them in competing better than the other competitors in the market as well. Moreover, Woolworths can collaborate with the different kinds of competitors as this will increase the share in market as well.

From the above, this can be analysed that the game changing trends of Woolworths has been identified and they tried to respond towards the exploiting emerging opportunity of the market effectively as well.

The VRIO analysis is required to be conducted as this will help in providing a brief overview on key competencies of Woolworths as to gain competitive advantage in the market. The key contributing factor in success of Woolworths is the approach of customer centric and this has helped the company in localising their needs as per the demands of the customers in the host country (Hutchinson et al., 2015, p.467). Moreover, this has been noticeable that Woolworths always remained one step for their customers in the entire market in comparison to the different kinds of competitors in the market.

Economic Factors

Value of the Resources can help in eliminating the threat or reduce the impact of the same effectively (Fulker et al., 2016, p.72). The stakeholders of Woolworths help in determining the value whether the different resources such as tangible and intangible resources are beneficial for the success of the company in an efficient manner. Resources has helped Woolworths both externally and internally and this has been crucial in development of the firm as well (Keller & Kotler, 2016).

Rarity of the Resources is the other factor in case of Woolworths, this has been seen and analysed that rarity of the resources has been the biggest strength of the company and this has helped them in becoming advantageous for the firm as well.

Imitability of the different resources is the other factor in which the resources which are being used and adopted by Woolworths are hard to be imitated by other competitors in the market and this is the biggest competitive advantage gained by the company in comparison to the different competitors in the market effectively (Chernev, 2018).

Value of the Organization such as Woolworths is the final step in the analysis in which the rarity, imitability and value of the products and resources are taken into consideration. The company can gain competitive advantage in managing the different resources effectively and this helped the company in gaining full advantage in comparison to the different competitors in the market effectively as well (Sheth & Sisodia, 2015).

Woolworths has tried to keep the pricing of different food items low and this has assisted in enhancing the efficacy of the different employees and designing the effective kinds of delivery system and avoiding the wastage of the different products and services. The website of Woolworths is the other strategic ability which has helped the company in becoming more effective in nature and this will help in providing comfort to the different customers who are the target customers in the entire market (Miquel-Romero, Caplliure-Giner & Adame-Sánchez, 2014, p.667).

The other prominent competency of Woolworths is the strong kind of financial assets of the company along with the goodwill of the company in the entire market. The different tangible and intangible resources of Woolworths are inclusive of the various kinds of raw materials along with the skilled workforce and machinery which are required in the company for the growth (Kotler, 2015). Additionally, there are different customer-oriented services which are intangible in nature and this helps the company in becoming more competitive than the other competitors.

Social Factors

From the above VRIO analysis, this can be analysed and identified that there are different kinds of resources and capabilities of Woolworths which have made them successful in the different kinds of approaches which are being adopted by the company. VRIO analysis has helped Woolworths in strategic planning and this allows the firm to make strategic decisions in an appropriate manner as well.

There are different key issues which have been identified based on external and internal environmental analysis of Woolworths. This has been seen and identified with the help of SWOT analysis summary which has been provided below in the box.

Therefore, this can be recommended to Woolworths needs to:

• The company needs to aim at framing strategy which is consistent with political conditions prevalent across the country along with adoption of fair price policy.
• Woolworths should aim at continuous innovation and this will help in analysing the different preferences of the customers effectively.
• Lastly, Woolworths needs to enhance the support from skilled employees through providing additional training and development mechanism towards fulfilling the needs of customers.

Conclusion

Therefore, this can be concluded that proper internal and external environmental analysis which have been conducted on Woolworths has helped in learning about the factors which can affect the growth of the firm in a negative manner. PESTEL analysis of Woolworths has assisted in understanding various types of factors which can hinder the growth of the firm and proper strategic recommendations and implications has been provided as well. On the other hand, Porter’s Five Forces Analysis assisted in understanding the threats of the substitute products and other suppliers in the market.

Moreover, this has been seen and identified that the VRIO analysis has assisted in understanding the value, rarity, imitability and the Organisationable of the different products which are being sold by the company to their customers. Lastly, with the SWOT summary, there has been different recommendations provided which included the fair pricing policy along with adoption of innovative techniques which can help in sustainable growth of the firm in comparison to the other competitors in the entire market.

References 

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Woolworths.com.au. (2018). Woolworths.com [online] Available at: https://www.woolworths.com.au/ [Accessed 17 Aug. 2018].

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