Strategic Analysis Woolworth Supermarket of Australia 2022

Running head: STRATEGIC ANALYSIS
Strategic Analysis
August 22
2019

STRATEGIC ANALYSIS 1
Table of Contents
Introduction................................................................................................................................2
Background of Woolworths...................................................................................................2
PESTLE Analysis...................................................................................................................3
Political Force....................................................................................................................3
Economic Force.................................................................................................................4
Social Force........................................................................................................................4
Technological Force...........................................................................................................4
Legal Force.........................................................................................................................5
Environmental Force..........................................................................................................5
Porter Five Force Analysis.....................................................................................................6
Threat of Substitute Products.............................................................................................6
Threat of New Entrant in the Market.................................................................................6
Competition among Existing Players.................................................................................6
Power of Suppliers.............................................................................................................7
Power of Buyers.................................................................................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................8

STRATEGIC ANALYSIS 2
Introduction
Strategic analysis is a procedure that is comprised of conducting research about the
business environment of a company in which it operates. Strategic analysis is very important
to frame the plan for the decision making procedure and smooth operations of the company.
With the support of strategic planning, the set goals of the business can be attained. In regular
strive to enhance, business should intermittently conduct the strategic analysis that will, in
return, support them in defining the areas that need to be enhanced and areas that are doing
well of the organization. For a business to operate effectively, it is essential to think regarding
how positive alterations in the business have to be executed (Rothaermel, 2013). The aim of
this report is to present the strategic analysis of Woolworths Supermarket of Australia in
order to analyse the factors that impact the performance of the company in the supermarket
industry.
Background of Woolworths
Woolworths Supermarkets is the supermarket/grocery store chain of Australia
handled and owned by Woolworths Group. The supermarket chain was established in the
year 1924. Coles and Woolworths create near duopoly in the supermarket industry of
Australia and covering around 80% of the market share. Woolworths majorly specialise in
vending groceries such as fruit, packaged food, vegetables, etc., but also sells magazines,
beauty products, stationery items, DVDs, baby and pet supplies, household and health
products. The supermarket presently has established over 1000 stores all over in Australia.
The 1000 store comprises 976 Supermarkets and 19 are the "Metro" convenience stores
operate under same logo (Woolworths Group Limited, 2019). The company also run
Woolworths Online in the Australian market with the website name Woolworths.com.au,
formerly called as "HomeShop", as the "click and collect" and home shopping service with

STRATEGIC ANALYSIS 3
delivery. In the year 2018, Woolworths has recorded the highest growth in its sales because
the chain reflected a lift of 12.5% in the entire year with the profit to $1.72 billion. This
growth of Woolworths is ahead of its nearer competitor that is Coles who recorded the
growth in the sales of around 2.1%, with comparable growth in the sales of 1.1% (Pash,
2018). But, Woolworths is presently dealing with increased competition from the discount
retail chain that is Aldi. In order to deal with both the competitors, company design its
products as per the demand of the customer by making them the priority of the business. This
has resulted in increasing the satisfaction level of the customers and traffic at the stores of the
company during the year. This has also led to the EBIT growth and a major decline in the net
debt (Pash, 2018).
PESTLE Analysis
Political Force
The political situations frame the environment of the business, offering the company
with appropriate opportunities of growth. However, the performance of the Woolworths
Supermarket has been influenced in numerous ways. The political factor has adversely
influenced the industry of retailing in the Australian market with the recently introduced
campaign of the government that focused to block the established companies such as
Woolworths and Coles from eliminating the small retailers from the market through unfair
competition. Hence, the fair policy of the business passed by both New Zealand and Australia
Competition and Consumer Commission has considerably influenced the Woolworth’s
performance (Australian Competition and Consumer Commission, 2013). But, due to the
capability of the management in establishing operative strategic trials, the organization has
successfully managed to survive in the market and further gain the major share in the market.

STRATEGIC ANALYSIS 4
Economic Force
The economic forces like high unemployment and recession has affected the financial
performance of the business in the market because these forces hold the power to reducing
sales, eventually causing financial downturn of the business. The economic condition of the
Woolworths has declined because of the global financial crisis that causes severe financial
issues in the business. Woolworths has experienced high losses during the phase of global
financial decline due to which company has to windup its few of the operations in the United
Kingdom that also resulted in increasing unemployment rate in the country (Hall, 2009).
However, in spite of huge loss in the United Kingdom market, Woolworths has successfully
maintained its financial stability in the other parts where it operates its business.
Social Force
The customer are said to be the main source of revenue for the company, due to which
it becomes very important to understand the need of the target audience and the creation of
the plan that concentrate on meeting the identified needs for the continuous profitability.
Woolworths is one of the organizations that have successfully identified the significance of
the experience of the customer as the portion of their profitability and sales (Fin 24, 2017).
Company has been involved in adopting different ways to meet the needs and satisfaction of
the customer. One of the ways is offering low cost products at its stores.
Technological Force
In the market the new form of technologies has been introduced that improve the
experience of the customer in the retail industry. The utilization of the RFID in the stores of
Woolworths has been a major part which has supported in proper inventory management and
maintaining the enough stock in the stores (Friedlos, 2008). Woolworths has also successfully
integrated the service oriented architecture in the business, focused towards supporting in
management of the supply of the products in the retail stores.

STRATEGIC ANALYSIS 5
Legal Force
The policies of taxation and employee management and recruitment are said to be the
basic part of the retail industry’s legal framework. Besides this, the requirement of food
licensing is essential in the industry because the companies dealing here have to adhere with
these laws. At the retail stores, Woolworths maintain the best food item quality as per the
regulations. In addition to this, the company take all the legal permission from the related
department while opening any new store.
Environmental Force
The retail industry’s environment aspect is highlighted in the form of utilization of
environmental friendly practices of the business along with participating in the events that are
focused towards decreasing the harm to the environment. Woolworths is regularly involved
in investing its precious resources in reducing its carbon footprint and wastage of the natural
resources like water (Woolworths, 2019). Company also participate in different recycling
activities for decreasing the wastage level in the landfill by making use of the recyclable
products in the process effectively.
From the macro-environmental analysis, it could be said that the higher market share
of Woolworths can support it in gaining different market opportunities such as acquisition of
different business and expanding in different markets. Besides this, the positive image of the
business in the eyes of society by meeting its social responsibility will support in sustaining
in the market for longer duration. However, the analysis also highlights some of the threats to
the business such as political pressure due to increasing competition for the small players can
result in impacting the financial performance of the company. Furthermore, the changing
demand and preference of the customer can be another threat for the company. But, company
can overcome this threat by maintaining the key eyes of the changing buying preference of
the customer and market trend.

STRATEGIC ANALYSIS 6
Porter Five Force Analysis
Threat of Substitute Products
Substitute products are those that can meet an alternative drive same like the existing
one. In the market the substitute products are always available. In order to overcome this
threat, the Woolworths Company has adopted the diversification strategy and has provided
consumers an opportunity to select from the range of offered products. Besides this, the
company is also focusing on its pricing strategy in the International market. The
differentiation strategy is supporting Woolworths to win the consumer and resulting in
increasing the sales (Woolworths Group, 2019). In addition to this, these strategies are
helping company in making the threat of substitute products low.
Threat of New Entrant in the Market
This threat talks about those companies that are trying to take entry in the retail
industry of Australia. It is known that the new entrant find it tough in the industry due to
presence of larger companies who have dominated the market (Farfan, 2018). Hence, the new
entrant threat is low for Woolworths. But, with the entry of Aldi in the market has majorly
impacted the profitability of Woolworths.
Competition among Existing Players
The main rival of Woolworths is Asda, Coles, and Aldi. All the players in the market
compete for the higher share and this result in increasing the threat of competitor in the
industry for Woolworths. The competition in the industry has majorly impacted the
profitability of Woolworths because customers are with time getting attracted towards low
cost product provider that is Aldi (Ryan, 2019).

STRATEGIC ANALYSIS 7
Power of Suppliers
In the retail industry, the major of the share has been gained by the key players which
results in increasing the power of bargaining of the supplier high. Besides this, the supply in
the food industry is influenced by the seasonal changes.
Power of Buyers
In the retail industry of Australia, the customer has broad range of choices of services
and products to select. This is because of the presence of supermarkets that offer required
products to the consumers which offer consumers high power of bargaining (Smith, 2006).
Besides this, the entrant of low cost retailers like Aldi has increased the power of bargaining
of the customers.
From the above analysis, it could be concluded that the presence of Low cost retailer
in the market that is Aldi has impacted majorly the profitability of Woolworths due to which
company is being enforced to reduce the prices of its products.
Conclusion
The above report has provided the detailed analysis of the retail industry of Australia.
From the analysis it has been identified that the increasing government pressure and intensity
of competition has majorly influenced the profitability of Woolworths. Hence, in order to
survive the company is recommended to increase its private labelled products for the
customers.

STRATEGIC ANALYSIS 8
References
Australian Competition and Consumer Commission. (2013). Cooperation arrangement
between the New Zealand Commerce Commission and the Australian Commission.
Retrieved from https://www.accc.gov.au/system/files/Cooperation%20arrangement
%20between%20the%20New%20Zealand%20Commerce%20Commission%20and
%20the%20Australian%20Competition%20and%20Consumer%20Commission.pdf
Farfan, B. (2018). The Largest Australian Retailers. Retrieved from
https://www.thebalancesmb.com/largest-australian-retailers-2892105
Fin 24. (2017). Why SA consumers are most satisfied with Woolworths. Retrieved from
https://www.fin24.com/Companies/Retail/why-sa-consumers-are-most-satisfied-with-
woolworths-20170421
Friedlos, D. (2008). Australia's Woolworths Supermarket Chain Studies RFID. Retrieved
from https://www.rfidjournal.com/articles/view?4409
Hall, J. (2009). Woolworths: the failed struggle to save a retail giant. Retrieved from
https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/6570626/
Woolworths-the-failed-struggle-to-save-a-retail-giant.html
Pash, C. (2018). Sales growth has returned to Woolworths. Retrieved from
https://www.businessinsider.com.au/woolworths-results-profit-full-year-2018-8
Rothaermel, F. T. (2013). Strategic management: concepts 2nd ed. New York: McGraw-Hill
Irwin.

STRATEGIC ANALYSIS 9
Ryan, P. (2019). ALDI's attack on the supermarket duopoly has 'helped strangle inflation'.
Retrieved from https://www.abc.net.au/news/2019-05-02/aldi-breaks-supermarket-
duopoly-kills-inflation/11073342
Smith, R.L. (2006). The Australian Grocery Industry: A Competition Perspective. The
Australian Journal of Agricultural and Resource Economics, 50(2006), 33-50.
Woolworths Group Limited. (2019). Woolworths Supermarkets. Retrieved from
https://www.woolworthsgroup.com.au/page/about-us/our-brands/supermarkets/
Woolworths
Woolworths Group. (2019). Strategy and objectives. Retrieved from
https://www.woolworthsgroup.com.au/page/about-us/our-approach/strategy-and-
objectives
Woolworths. (2019). News. Retrieved from
https://www.woolworths.com.au/shop/discover/sustainability