External Environmental Analysis: PESTEL Analysis
The following report is based on the strategic management of Woolworth’s organization which is an Australian Supermarket. It is the largest supermarket of the country and has the largest share of market share in the retail sector of the market. The huge competition in the Australian supermarket zone has been a challenge to the organization and the management lives up to the challenge by ensuring the implementation of some unique set of strategies that helps the organization to survive in the market. The management of the strategies of the organization helps to make the operations of the business much smoother and increases the productivity rate of the organization. The strategic analysis of the organization will be helpful to get a clear information on the following topic.
The PESTEL Analysis of Woolworths Organization gives a clear picture of the external business environment and helps the management to determine the strategies accordingly. The strategies are determined by formulating the business in the proper way.
- Political- The political environment of Australia has a direct impact on the business operations of Woolworths Company. The federal Government of Australia provides the much needed internal as well as the external support to maintain a stable and pressure free environment for the business to carry on their operations smoothly and attract foreign investment and also the local investors (Wheelen et al. 2017). The absence of any high risk in Australian market ensures the success of the business operations.
- Economical- The high rate of unemployment in Australia has an impact on the rapid growth of the business in Australia. The recession and the inflation period in Australia saw a dip in the turnover and the sales of the company. The economic reforms and the own guidelines of the company helped the management to maintain a stability in the market.
- Social- According to, Scarborough (2016) the customers are the main focus point of Woolworths Private Limited. The changing trend in shopping from the traditional retail based to the modern e commerce based has made a large impact on the style of business followed by the Company. The maintenance of a cheap and wide range of products by the organization for the customers helps them to attain huge profits for the business and surpass their nearest rivals Coles. Apart from this the social exchange programs, Customer Loyalty programs also serves a key role in the success of the business in the market.
- Technological-Technological advances in the modern day market have forced the company to implement and adapt to cutting edge technologies to be able to hold the large market share. The use of technology like online shopping, e commerce, websites, digital information of the products and also using robotics to decrease man hours has helped the management to increase sales and productivity.
- Environmental-The environmental friendly policies of the business organization along with the use of green technologies to reduce the carbon footprint of the business organization helps them to address the environmental issues. The organization has also strict environmental policies of its own and ensures green packaging for most of the products that they sell to the customers.
- Legal-The federal Government of Australia supports the growth of the business and has ensured moderate policies for the business to follow (Methner, Hamann & Nilsson, 2015). However some strict legal obligations have to be fulfilled by the organization to perform employee recruitment and to manage the employees. The company also needs proper Legal clearance from the Australian Government to open new stores and outlets in new areas of Australia.
Porter’s Five Forces will be essential to identify the external forces that have a direct impact on the business operations of Woolworths Limited.
- Bargaining Power of Suppliers- The large scale business of the organization in Australia forces them to be dependent on a large number of different suppliers. The suppliers have the power to bargain with the management of the mentioned company as they are the ones who supply the products to the company (Methner, Hamann & Nilsson, 2015). Therefore the bargaining power of the suppliers makes the organization much weaker in nature.
- Bargaining Power of Customers- The huge base of customers of Woolworths Limited is one of the major reasons behind the powerful bargaining power of the consumers. The customers generally have the tendency to bargain for all the different products and thus forces the organization to have a control in their pricing strategy.
- Threat of New Entrants- As mentioned in the introductory part Woolworths Private Limited is the largest retailer and has the largest market share in Australia. The immense power of the organization in the market provides a safe platform for the business and thus does not provide them any kind of threats that may make them prone to threats from new organizations entering the market of Australia.
- Threat of Substitutions- Substitution is one of the largest threats to the productivity of the mentioned business unit. The operational performance of the business in the markets of Australia. The availability of cheap products which offers the same kind of characteristics has affected the smooth performance of Woolworths (Madsen & Walker, 2015).
- Rivalry among the existing Customers- The only big rivalry of the company is with Coles Supermarket as both of them holds more than 50% of the market share of supermarket in Australia. The limited rivalry helps the business in their quest to become the undisputed leaders of the following sector in Australia.
Operational Strategy of the business is a function of the organization which is mainly linked to the supervision, designing, implementation and then further redesigning of the different types of business operations. As said by Madsen & Walker (2015) the company has the responsibility to design an effective and efficient system for using the resources and the work processes with the help of advanced technological machineries and hiring of different types of expert staffs. The main operational objective of Woolworths Private Limited is to reduce the cost of the products, maintain the quality of the products, step up the speed of the delivery process and ensure flexibility in the business process.
The main strategies of the organization include a number of different characteristics;
- First team and Culture- The first team and culture of the organization is one of the brightest spots of the organization. The culture of the organization has been one of the best in Australian market. The superior culture of the organization helps the management to retain the employees and make them the best in the organization.
- Step Change Store Renewal Program-The store renewal program is one of the most recent items to be added in the list of strategic changes made by the organization. The inclusion of new technologies and attractive display boards in the stores helps to attract more and more customers.
- Proper Prices and range-The management of Woolworths takes pride in offering the correct price for a varied range of quality products and claims to be the best in the market in such kind of transactions (Hill, Jones & Schilling, 2014).
- Great Service-The enormous service provided by the employees of the organization helps the management of the company to retain all the customers and provide them loyalty programs and additional bonuses for each and every product in the market.
The strategic performance of the business is gradually changing and the company is adapting themselves to new technologies and attractive strategies that are useful for the different kinds of business transactions. The main kinds of business include the likes of;
- Working hard for customers
- Rewarding both the customer and the employees
- Listening to the people
- Meeting the demands and wants of the customer
The financial health of the company is satisfying and the strategies to earn the targeted profit for the current year are on the right track. The financial summary fo the company is provided in the below table;
Table No 1: Financial Statement of Woolworths
Source: (Elmes & Barry, 2017)
The new customer policy includes;
- Placement of the Customer first policy
- Clear listening to the needs of the customers
- Creation of new and innovative ways to help the customer transact and do business with Woolworths
Woolworths being the largest retail store of Australia faces a number of different strategic issues that tend to hamper the growth and the operations of the company (Ethiraj, Gambardella & Helfat, 2018). The company enjoyed a golden period of growth where the annual report showed a strong sales growth, Strong research and development of strategies and products, margin expansion, investment from local and foreign markets and most importantly large number of customers. Some of the main strategic issues of the company are as follows;
- Customer Centric Innovation-The new age marketing has transformed totally and retailers have transformed their roles from just selling the products to engage themselves in both selling the products and improve the customer experience. The management of Woolworths must take care in gathering data from the customers, improve the type of merchandising and in turn reduce the different kinds of costs incurred by them. As mentioned earlier online selling can help them turn the tide and stay competitive in the new age market (Hill, Jones & Schilling, 2014).
- Budgeting and Push Expectations-The main strategy for the organization is the budget and proper allocation of the funds. There are complaints of wastage of too much work hours and man hours with unfeasible budgetary allocations and integration of useless and expensive legacy systems in the organization (Hill, Jones & Schilling, 2014). The budget allocation for Woolworths must be constructed in such a way that it helps the organization to be at its very best and helps to retain the value of the investments and utilize the funds in an efficient manner.
- Customers must be provided large number of Brands-The better the service of the organization the higher will be the chances of the company to have success in the market. Woolworths provides excellent service to the customers of the organization. The company however has to ensure that they provide expertise training to their staffs to make them more dedicated and inclined to the duty of the customers. The customers can also be loyal to the organization in the presence of large number of different brands under one roof.
- Deployment and Empowerment-The customers of the modern days find pleasure and satisfaction in interacting with the employees of the retail stores in their own terms (Belton, 2017). They generally have the tendency to question and ask the employees about different kinds of products, their uses, market values and many more things. The introduction of the social media has further enhanced them to formally lodge complaints and provide ides to change some products. Thus the employees of Woolworths need to be trained properly to interact with the customers.
- Blending Technology- The creation of technological mixture along with the providence of proper and efficient service and products to the customers on a regular basis must be started to ensure the success of the retail company in the Australian Market.
The power of the organization lies in its strength in the market. The more the ability to dominate the market, the more is the chance of generating better revenue and attracting people. Some of the main strengths of the mentioned organization are as follows;
- Strong Brand Portfolio of the organization is one of the main strengths. The company has invested huge funds to the growth of a proper brand portfolio. The expansion of the industry is mainly helped by the presence of a strong brand portfolio.
- The presence of reliable suppliers of raw materials, products and quality services helps the organization to deliver the different kinds of products as well as services to the customers at the correct time and also helps them to meet the demands and needs of customers of the organization (Belton, 2017).
- The presence of highly skilled expertise and well trained employees are a large asset to the development of the organization. The training provided by the company helps the employees to be skilled in every task and thus can help the organization to be the very best.
- Woolworths has a reputation of performing much better in new and uncapped markets. The creation of a new revenue stream helps the organization in their quest for growth and external and internal support for the organization.
- The use of the technological measures and implementation of new kinds of technology has helped the organization to enable and promote the highest quality of different types of the products and have a large market share in Australia.
Porters Five Forces
Similar to the strengths of the organization, the retail company also has a number of different limitations which limits the firm’s ability to meet the expectations of the customer. Some of the limitations are as follows;
- The presence of some gaps in the product choices of the company makes them vulnerable enough for the customers to choose other retailers. The absence of a strong product line can sometimes affect the performance of the business firm in the market.
- The long term growth of the company suffers as because the day inventory is much higher compared to the other competitors in the market. Coles and Aldi have much lesser daily inventory than that of Woolworths. This is one of the biggest setbacks for the company.
- The absence of a proper marketing and promotional policy and over dependency in the traditional set ups of marketing is another main limitation of the business organization. The inability of the management of the company to present the products and services of the organization by a proper channel of marketing makes them vulnerable to attain success. Apart from this the organization also has started to implement some technological reforms in the marketing channels which should have been implemented much earlier.
Strategic management of the organization stands on a solid base of ethical and social considerations. Ethics is one of the main pillars in the strategic formulation of Woolworths. The absence of ethics and social considerations will lead to the failure of the business in the market. Ethical marketing has been a hot debate since the recent past (Belton, 2017). The following has been mainly attributed to the economic downturns which sometimes threaten the profits of the companies. Woolworths being a giant among the supermarket sector of Australia is expected to perform and lead the role of a leader in practicing ethical marketing in business. However, the company has received severe criticism for some of its major unethical practices. The absence of expensive advertisement campaigns always does not help the customers. The food stuffs which they sell are seen to be of lower quality than the products offered by their rivals in the market. Apart from that the company has also failed to the legal policies of the federal government in recent years which have been a problem for the organization. However there are also a large number of ethical practices by the company which have made them stand on a solid ground. This includes the likes of buying green vegetables directly from the farmers and also providing the food products at a cheaper price that helps everyone to afford the products. Apart from that the employees have been provided basic level of training which helps them to make the customers understand the different elements related to the product (Elmes & Barry, 2017).
Social impact also has a major role to play in the market as because the presence of a sound social policy is useful for the business to gain the maximum amount of profit. A business strategy may call for finding the most cost effective solutions to provide goods and services for the company. The company can develop and operate in a large arena and the amount of resources they control makes them more powerful. The presence of the organization in the social arena helps the organization to be one of the best in the area. The social impacts of the organization have a huge impact in the success of the organization.
Conclusion
The following report presents a clear picture of the strategic issues and limitations that re present in an organization. The choice of Woolworths as the example of such an example has helped in the construction of the report in a proper and effective way. The report has presented the different areas of strategy and its development by the organization. The mention of the issues, limitations and strengths of the organization is an enriching experience for the organization. The following types of information along with the mention of the performance, sustainability, strategy and other elements have made the report more compact in nature. The efficient presentations of the strategic issues in the report have helped to increase the scope of the report which will help the future researches on the same subject easier for the researchers. The inclusion of the recommendations is also an additional feature of the following report.
After a thorough analysis of the whole reports some of the main recommendations on the following topic are as follows;
- The company can change the pricing strategy and the decision making process to help meet the different needs and demands of the customers of the business
- The decision making process that is currently practiced by the organization must be changed accordingly. A thorough analysis with the stakeholders and the related parties must be done before coming to any decision
- The company must concentrate of the market development strategy and implement latest technological measures to improve their productivity and gain success in the market
- Product Development must be one of the main concentrations of the following company.
References
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