Executive Summary
Woolworths Company is the leading supermarket chain in Australia with around 31% market share. The company’s strategy is characterized by it will to achieving a higher level of its business development and growth. This paper outlines Woolworths’ current business strategy analysis so as to determine the company’s stand regarding business development, growth and service delivery. This analysis will use Porter’s Five Forces that helps an analyst determine the state of Woolworth’s business model. Moreover, there will be an analysis of the external and internal conditions of the company to determine how these factors affect the company’s performance (Peters, 1998). The paper will also discuss a little background and the Woolworth’s company structure. All these aspects will give the research a remarkable progress on the strategic business standpoint of Woolworth Company.
Introduction
This research mainly focuses on the critical business strategy analysis of Woolworth organization. It is the leading Supermarket chain retailer in Australia. The company has achieved a high growth rate over the years due to its continued effort in striving to achieve the best in its operations. Despite the tragic incidence that happened in 2016, the company has maintained a high business profile. Certain strategic tools will be usedin accordance with the current business strategy analysis of Woolworth. They include the analysis of internal and external forces, Porter’s Five Forces, Value chain analysis, and PESTEL analysis.
Company Structure
Woolworth Ltd was started back in 1928 with its headquarters located at Bella Vista, Australia. It is a public company that services in the food and groceries and liquor retail industry are making it emerge as the largest retail chain company in Australia (Soldo et.al 2013). Woolworth’s main focus is the supermarket industry which has proofed to be the best and prosperous venture in its chain of operations. The company has around 3200 stores, 840 supermarkets in Australia and around 156 supermarkets in New Zealand. In 2015 fiscal year, the company made a total of $15 billion in sales. This was a 3% increase from its previous year’s total revenue. However, the 2016 fiscal year was a bad year for Woolworths. The supermarket industry went down from $2.628 billion to $2.146 billion. This was because of the company’s exit from the hardware sector and the underperforming Big W stores. Additionally, it was also affected by the interests and tax policies from the Australian food and petrol where the net sales dropped from $2.97billion to $1.76 billion. The decrease happened due to the lower prices and a decline of items per basket (Danieltrifkovic, 2016). This marked Woolworth’s first loss in its 23 years operations as a public company.
Mission and Vision Analysis:
Woolworth’s mission is “To deliver to customers the right shopping experience each and every time” while its vision is “To have their customers put them 1st across all their brands” (Bruwer, 2002). These statements are of high value towards achieving the company’s targets in its operations. The company has a dedicated team of players who wants to see that each and every aspect of Woolworths is worthwhile and committed to achieving the correct business value. They lead their customers through a wide and deep knowledge about their products. Their high option is to retail regarding quality products, low prices and ease of access to their outlets so as to satisfy their customer’s needs. According to (Woolworths Limited, 2017), to achieve its mission and vision, Woolworths is following various key strategies which include: building a customer store-led team and culture, generation of sales stability in food and evolving their drinks so as to give more convenience and value to their clients. They are also empowering their portfolio businesses so as to pursue their strategies and deliver a positive shareholder value. They want to be a “Lead Retailer” through they systems and end-end process excellence.
Strategic Analysis of Woolworths
Research on the company’s strategy in the Australian retail industry shows that it has achieved a tremendous growth since its operations as a public company (Smith, 2011).As per Woolworth’s growth plans; it has specific growth strategies put in place with its priorities being the extension of its leadership in all its market segments. They have also focused on maintaining their shareholder value at a maximum level, with a higher level of its overall growth in its future business. The main company’s strategy is to maintain amore senior portfolio in its employee’s maintenance, innovation and customer satisfaction (Dos Santos, Svensson&Padin, 2013).
External Analysis of Woolworths
This review will focus on the external environment conditions of Woolworths in its current business operations. There are scores of tools that will be used to perform the external environment analysis. This analysis will be using Porter’s Five Forces and PESTEL analysis to determine the impact of macro environmental factors in the industry conditions.
Porter Five Forces
This tool helps in analyzing the company’s current position in the industry with the ways in which each different factor affects its performance status. This analysis is performed as follows:
Bargaining Power of Buyers: The bargaining power in Australian retail industry is high due to a large number of supermarkets in the region (Johnson &Bruwer, 2003). Customers have a large base of wide supermarkets to purchase from hence raising its bargaining power. This condition has affected Woolworth significantlyregarding customer retention. Despite it being the leading supermarket retail in Australia, customers, on the other hand, have the freedom to purchase their items from other supermarkets hence reducing customer retention rate in Woolworths. However, delivering low-priced items to the customers is one of Woolworth’s major strategies.
Bargaining Power of Suppliers: major suppliers are stronger in terms of business delivery. Since Woolworth’s retail supermarkets havelow dependence on the suppliers, the bargaining power of suppliers tends to be low. The main reason behind this is the amount of retailing supermarkets and products being sold in the industry.
The threat of New Retailers: The threat of new entrants in Woolworth’s industry can be termed to be significantly low. This is because putting up stores all over their market strongholds would require a lot of capital for a start-up to have a say in the market. Additionally, the existing competitors also have strong brands and products that a new entrant might not be able to satisfy the existing number of customers.
Threats of Substitute Products and Services: In terms of rivalry, there is already a higher competition among the key players in the retail industry in Australia. Substitutes are offered in the main supermarkets hence the need for new products so as to win and attract more customers while building their brand reputation. The major factor in retailing industry is a competitive price strategy (Pritchard, 2000). Coles, the major Woolworth’s competitor, has also revised their pricing strategy for their customers. This shows that there is a higher threat rate in terms of substitutes and services threat in Woolworth’s business.
Rivalry among Competitors: Due to Australia’s strong competitors in the retail grocery industry, Woolworth’s market shares are likely to be limited. The major Woolworth’s competitors include Coles, Myer, and West farmers. Due to high competition, Woolworth’s main work is to improve its products, be efficient and create competitive strategies so as to differentiate themselves from their competitors.
PESTEL Analysis
Political: Due to various reforms and policies put across by the Federal government, Woolworth’s business and its competitors are significantly affected. The recent policy on competition policy has brought a stumbling to retail key players such as Woolworth in eliminating competition.
Economic: The decline in Australia’s economic market conditions has influenced Woolworth’s business in a great way. This resulted in a decline in economic activities in Australia and New Zealand, Woolworth’s major markets. Economic indicators such as currency exchange rate fluctuations, weakening of the Australian dollar have in a major way impacted Woolworth’s international retail businesses.
Social: Due to international business operation expansion, social factor happens to be a great impact in Woolworths (Jones, 2005). This is because Woolworth has to establish a strong and higher societal and community development. With successful societal activities, Woolworths can be in a position to create substantial impact on its customers.
Technological: Technology has played a major role in the world's business. As for Woolworths, they have considered applying the green refrigeration technology for them to store the perishable products, so they stay longer as fresh produces.
Environmental: The environmental factor affects Woolworths in a great way as their petrol and winemaking industries have been taken to have adverse impacts on the environment conditions (Pritchard, 2000). This has affected its profitability performance from those business areas of the company.
Legal: Due to the carbon tax implementation across Australia as a legal factor, the retail industry has been affected and Woolworths in particular. Additionally, the adaptation of affair policy will also have a blow on Woolworth’s performance in its business operations.
Internal Environment
The internal environment analysis will majorly focus on the strengths and weakness of Woolworth's operations towards achieving its target in their business performance. The primary determinant is the availability of resources, coordination and capabilities of the resources for efficient and productive use. In Woolworth’s case, the competitive advantage in capabilities and usage of resources has been applied effectively. At the end of 2015 fiscal year, Woolworth’s operations were undertaken in around 3200 major outlets with over 192,000 employees. For the company to be the leading player in the retail industry, it employs experienced employees who bring the competitive advantage over their competitors.
Woolworths has also adopted better and effective strategies to retain their employees, build in more in-store services and values for their clients than the major competitors. Woolworth’s supermarket has more efficient workers compared to its competitor Coles. The company focuses on employing middle-aged experienced workers instead of young employees like Coles. They organize training and development events for their employees so as to equip them with the majorcompetent skills in the industry. Hiring the top talent from Australia and the world gives the company of retaining its success and being way ahead of their competitors thus achieving their targets.
The major weakness in Woolworths’ is their significantly increasing debt. The company has made various acquisitions which havegreatly affected the company. In 2012 fiscal year, the company’s debt increased from $513 million to $4,316 indicating a high level of debt. This brings a risk in the financial health of Woolworths despite their sales growth getting higher. The other weak factor is the limited geographical market share. It is obvious that Woolworth’s main operations are in New Zealand and Australia (Wright & Lund, 2003). The company has to consider their limited market share in the global markets so as to win the competition with international retailers such as Wal-Mart.
Appendix
Woolworth’s Market Conditions
Woolworths has various niches that it operates in different parts of Australia and New Zealand. It operates in petrol, food and groceries and home development appliances (Harris, Swatman&Kurnia, 1999). The major brands include Dick Smith Electronics, Big W, Tandy, Dick Smith Powerhouse, BWS and Dan Murphy’s. The supermarket is the major chain in Woolworth’s business operations. It was one of the ten largest companies listed on ASX on 14thOct 2011 with a capitalization market share of $29.9 billion.
Conclusion
Woolworths Company is the leading supermarket chain in Australia with around 31% market share. It characterises the company's strategy will to achieving a higher level of its business development and growth. This research focused on the critical business strategy analysis of Woolworth organization. The company has achieveda strong growth rate over the years due to its continued effort in striving to achieve the best in its operations. Their high option is to retail in terms of quality products, low prices and ease of access to their outlets so as to satisfy their customer’s needs. To achieve its mission and vision, Woolworths is following various key strategies which include: building a customer store-led team and culture, generation of sales stability in food and evolving their drinks so as to give more convenience and value to their clients. The critical business analysis outlined in this study has helped in knowing Woolworth’s company’s stand in their business model. There has been a great blow to its business operations in 2016 fiscal year which has made the company lose more in its revenues. The major challenge with Woolworths is getting into international markets due to its limited market share. It would be great if the company maintained its strategies and focused more on technology so as to reach a large client base. Their competitive advantage is the driving factor to its stability in terms of quality products and services. External and internal environments’ has shown how the company stands when the entire major forces have been taken into consideration. The main suggestion for Woolworth’s operations would be for them to be people-focused, enhance their costleadership strategies, and form strategic alliances and product proliferation development.
References
Arli, V., Dylke, S., Burgess, R., Campus, R., &Soldo, E. (2013). Woolworths Australia and Walmart US: Best practices in supply chain collaboration. Journal of Economics, Business & Accountancy Ventura, 16(1).
Peters, R. E. (1998). The broader application of HACCP concepts to food quality in Australia. Food Control,9(2), 83-89.
Pritchard, W. N. (2000). Beyond the modern supermarket: geographical approaches to the analysis of contemporary Australian retail restructuring.Australian Geographical Studies, 38(2), 204-218.
Pritchard, W. N. (2000). Beyond the modern supermarket: geographical approaches to the analysis of contemporary Australian retail restructuring.Australian Geographical Studies, 38(2), 204-218.
Dos Santos, M. A., Svensson, G., &Padin, C. (2013). Indicators of sustainable business practices: Woolworths in South Africa. Supply Chain Management: An International Journal, 18(1), 104-108.
Woolworths Limited, (2017). Strategy and Objectives. Retrieved From:
http://www.woolworthsgroup.com.au/page/about-us/our-approach/strategy-and-objectives
Jones, E. (2005). Liquor retailing and the Woolworths/Coles juggernaut.Journal of Australian Political Economy, The, (55), 23.
Harris, J. K., Swatman, P. M., &Kurnia, S. (1999). Efficient consumer response (ECR): a survey of the Australian grocery industry. Supply Chain Management: An International Journal,4(1), 35-42.
Wright, C., & Lund, J. (2003).Supply chain rationalization: Retailer dominance and labor flexibility in the Australian food and grocery industry.Work, Employment, and Society, 17(1), 137-157.
Bruwer, J. (2002). The importance and role of the winery cellar door in the Australian wine industry: some perspectives. Australian and New Zealand grapegrower and winemaker, (463), 96.
Smith, D. (2011). Dick Smith's Population Crisis: The Dangers of Unsustainable Growth for Australia. ReadHowYouWant.com.
Johnson, T., &Bruwer, J. (2003).An empirical confirmation of wine-related lifestyle segments in the Australian wine market. International Journal of Wine Marketing,15(1), 5-33.
Danieltrifkovic, (2016) Is a lack of Integrated Marketing to blame for Woolworth's recent
downturn?. Retrieved From:
https://mpk732t12016clustera.wordpress.com/?s=woolworths