Final Strategic Recommendation for Woolworths

The report evaluates the market size and trends of the Australian grocery retail market and also the corporate and financial performance of grocery retailer Woolworths. It highlights the strategic options Woolworths can undertake and the manner the same would be implemented and also the fashion in which the performances would be monitored in such respect.

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Final Strategic Recommendation for
Woolworths

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Executive Summary
The report ideally reflects that Woolworths can effectively focus on the development of a new
product category like the healthy and quality product category for rightly meeting the needs of
Australian customers that are interested in gaining access to such products at lower prices.
Further, Woolworths is also observed to focus on developing fixed price structures for targeting
American customers for its quality products. Implementation and monitoring strategies are also
put in place for the two different strategic options undertaken by Woolworths for developing its
position along both the regional and the foreign markets.

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Table of Contents
Introduction......................................................................................................................................4
About Woolworths.......................................................................................................................4
Overview of the paper.................................................................................................................4
Market Size and Trends...................................................................................................................4
Financial and Corporate Performance.............................................................................................8
Strategic Options...........................................................................................................................12
Strategic options based on use of the Ansoff Matrix.................................................................13
Strategic options based on use of Porter’s Generic Strategies..................................................14
Final Recommended Strategy........................................................................................................15
Focus on development of healthy and quality products............................................................15
Generation of Fixed Prices........................................................................................................16
Implementation of the Final Strategy............................................................................................16
Implementation for marketing of health and quality product ranges........................................16
Implementation for marketing of the fixed prices policy..........................................................17
Monitoring and Control of Future Performance............................................................................17
References......................................................................................................................................19

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Introduction
About Woolworths
Woolworths operates as a large scale grocery retailer in the Australian market that focuses on
delivering high quality grocery and food products to customers at an effective value. It also
focuses on enhancing the level of consumer convenience through continually innovating on its
service and product offerings. Presently, the company works based on the employment of
201,000 team members that potentially serve around 29 million customers on an average weekly
basis. It also looks forward in developing an effective relationship with its farmers and supplier
communities (Woolworths Group Limited 2019).
Overview of the paper
The paper initially would focus on evaluating the market size and trends of the Australian
grocery retail market and also the corporate and financial performance of grocery retailer
Woolworths. It would also aim at highlighting the strategic options Woolworths can undertake
and the manner the same would be implemented and also the fashion in which the performances
would be monitored in such respect. The same is required to be undertaken for helping the firm
in developing an effective presence both along the regional and global retail markets.
Market Size and Trends
A survey report rendered by the IBISWorld reflects the market size of the grocery retail industry
based in Australia as $102 billion. The growing demands of Australian consumers of high priced
food products like that of organic fruits and also vegetables are taken to generate growth to the

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grocery retail industry in the region. The major players operating in the grocery retail market of
Australia are identified to be Woolworths, Coles, Aldi and also Metcash (IBIS World 2018). A
comparison carried out for the individual market shares of the grocery retailers highlight that
Woolworths acts as the market leader in the market.
(Retail World 2018)
The comparison of the shares of the grocery retail companies in Australia with that of the market
for Fresh Foods in the region based on market data of 2017 period is reflected as under.

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(Roy Morgan 2018)
The grocery retail market of Australia is also characterised by intense price wars between the
above identified players. The prices marked by Woolworths accounted for a decline by around
2.4 percent during 2017-18 in terms of competing with other grocery retailers like Coles and
Aldi. The resurgence of the supermarket business in Australia accounted for growth in market
share for Woolworths while Coles’ operation faced potential pressures from the buoyancy
position of Woolworths and expansion of Aldi. The above pressures faced by Coles accounted

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for a receding sales growth of around 0.3 only during the first quarter of 2017-18. The store
expansion policy of Aldi is taken to account in increasing the number of retail stores from the
present figure of 500 stores in the region (Retail World 2018). Metcash operating as an
individual player suffered heavily owing to the price-cutting competition which in turn
accounted for its declining market shares. The intensity of the competition faced by the grocery
retail players in Australia is further augmented owing to the entry of the online retailer, Amazon
in the Australian market. The opening up of AmazonFresh accounted to be a growing threat to
already existent supermarkets and other grocery retailers operating in the region. The report of
IBISWorld however reflected that there is nothing much to fear in that the online grocery market
only accounted for a meagre 3 percent market share in the Australian grocery market during
2017-18 (IBIS World 2018). The entry of Amazon in the Australian retail market has however
fuelled innovation in the existing grocery retailing operations with Woolworths and Coles
incorporating and thereby developing on the click-and-collect activities. The incorporation of
click-and-collect retail process accounts to increase the level of customer satisfaction and
consumer convenience in that the customers can easily purchase based on the use of
Smartphones and Tablets and thereby collect the merchandise from nearby stores based on their
convenience (Crothers 2018). Similarly, the partnership made by Coles with Airtasker App based
in Sydney is taken to help consumers in earning the benefit of easy deliveries. Moreover, the
players in the grocery retail market of Australia face a potential threat from the entry of David
Jones in the region with the planning of opening of a standalone food store in the South Yarra
region of Melbourne during 2019. David Jones is noted to invest in around $100 million till 2024
for developing on its retail potential in the food retail market of Australia (Retail World 2018).

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Financial and Corporate Performance
The financial performance of Woolworths Group during 2018 is reflected in the following
illustration.
(Woolworths Group 2018)
The total return made to the shareholders by Woolworths Group during the financial year 2018
accounted to around 22.4 percent of the revenues. The same is observed to have outperformed

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the grocery retail market in the region. The revenue for the firm during 2018 accounted a growth
of around 3.4 percent with also a rise in the level of EBIT (Earnings before Interest and Taxes)
by around 9.5 percent and NPAT (Non-Performing Assets and Taxes) by around 12.9 percent.
The return gained based on the employment of funds accounted to grow by around 24.1 percent
for Woolworths during 2018 (Woolworths Group 2018). Further, the growth of the grocery retail
business and also the effectiveness in management of working capital in turn contributed in
reduction of the amount of debt of net repayable nature by around $677 million. The company
management commemorated the strong financial performance of the company through the
generation of annual dividends of around 93 cents on a per-share basis which was observed to
have gained a growth by around 11 percent compared to the 2017 period (Woolworths Group
2018).
Apart from financial performance, the company management of Woolworths reflected that the
increased focus on developing and sustaining its Customer and Team First Culture ideally helped
in enhancing the scores for voices of customers, suppliers and the internal team (Woolworths
Group 2018).

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(Woolworths Group 2018)

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(Woolworths Group 2018)
Moreover, the number of pick-up stores for Woolworths was also increased to 2,900 owing to
the encompassing of different regions over Australia and the New Zealand regions. Further, large
numbers of store renewals in around 80 stores were also promoted during 2018 (Woolworths
Group 2018).

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The sales results of Woolworths compared to the total group for FY 2018 is reflected in the
following illustration.
(Pash 2018)
Strategic Options
The strategic options for Woolworths can be effectively analysed based on the application of the
Ansoff Matrix and model of Porter’s Generic Strategies.

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Strategic options based on use of the Ansoff Matrix
Ansoff Matrix reflects on the market choices that a business institution can carry out associated
to the marketing of its product and services in the target market. The Ansoff Matrix developed
by Igor Ansoff reflects four different types of product-market based combinations like market
penetration, product development, market development and finally diversification. The Ansoff
Matrix is reflected as under.
(Khan 2018)
In terms of Market Penetration, the business institutions tend to gain larger market penetration in
the existing market for its existing products/services based on lowering down the price structure
compared to the market average for the same. The lowering down the price structure for
products/serves in the existing market would tend to enhance the level of market share for the
same compared to its competitors. In terms of Product Development, the business managers

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focus on developing the existing product/service potential for building up the level of utilisation
of its products/services and also in endeavouring to protect the overall market share for the firm
in the targeted market (Nestorović 2016). Again, in terms of Market Development the firms
focus on gaining effective entry into newer markets for the existing set of products/services
through the generation of marketing and promotional activities aimed at targeting new consumer
groups in the potential new markets. Herein, newer market segments for the products/services
are targeted by the firms for ideally marketing the same in the newly identified or untapped
market. It thereby helps the firm for both effectively expanding into the newer territory and also
in gaining of needed revenues. Finally, the Diversification strategy is employed by the business
firms for totally diversifying into a new product or service sector and thereby in identifying
newer and potential markets for the new products or services portfolio. The same requires an
understanding of the market expectations of the consumer segments in new markets and thereby
strategising on new product and service offerings for meeting the consumer expectations (Khan
2018).
Strategic options based on use of Porter’s Generic Strategies
Michael E. Porter reflected on three different kinds of strategic options that can be undertaken by
a firm for overpowering the performances of competitive firms in the like industry. The three
different strategies outlined as Generic Strategies by Porter are generating differentiated product
or service offerings, enabling low prices for the existing set of products and services and finally
the focus strategy. The focus strategy is exercised by the business institution for essentially
focusing on marketing the products or services to a focused consumer segment. Likewise, the
focus strategy undertaken by business institutions are further outlined as focused differentiation
where differentiated products and services are prepared for meeting the expectations and needs

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of the focused customer groups and also focused low-cost leadership approach where low prices
are sets for products and services for marketing in a focused fashion to segmented consumer
groups (Borneck 2016). The differentiation strategy gains focus in markets that tend out to be
filled with loyal customers to the product/service brand or to the company and thus are ready to
pay higher prices for the good and services marketed by the firm. In differentiation strategy the
firm thus focuses on promoting and advertising for unique, new and differentiated features for
products and services thereby aiming to charge a higher price for such. The low-cost leadership
model can be exercised by the firm based on focusing of effective facilities that can help in
accessing of key resources for production of products at low costs, tends to work on cost
reduction models and also exercises tighter cost controls compared to its competitors
(Vallabhaneni 2015).
Final Recommended Strategy
Focus on development of healthy and quality products
Australian consumers are observed to have become increasingly health conscious such that they
potentially focus on the consumption of healthy foods. However, the expensive nature of the
healthy food products with also need for greater time in preparing such make to quality food
products in turn reduces the level of consumers’ interests in procuring them. Woolworths’
management thereby focuses on targeting the Australian Kids based on the development of the
program termed Fresh Foods Kids. The Australian Children thereby can be encouraged to visit
the different stores for gaining direct tastes to fresh fruits and quality vegetables. Similarly, the
management can rightly focus on development of effective catalogues and recipe books for
attracting children. Further, Woolworths’ management can also rightly focus on the development

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of new type of store formats that would essentially focus on the development of quality fruits and
vegetables to the targeted customers (Woolworths Group Limited 2019).
Generation of Fixed Prices
Woolworths’ management in its bid to gain an effective presence in an international market like
United States is focusing to operate based on the fixed prices model. The management observed
that consumers in developed economies like United States are interested in buying commodities
that are marketed based on setting of fixed prices that would rightly meet their tight budgets.
Woolworths focusing on targeting the US customers through the use the focus cost-leadership
approach is required to open special counters and even store formats that would rightly appeal to
the consumer needs of gaining quality food and grocery products at fixed price ranges (Gale
2017).
Implementation of the Final Strategy
Implementation for marketing of health and quality product ranges
The management of Woolworths aiming to market its healthy and quality product ranges to
customers’ needs to focus on aptly reducing the prices for such offerings. Lowering of the prices
for the product offerings in grocery and vegetables and other food products would help in
creating needed market hype in that it would increase consumer access to healthy food stuffs.
Further, the company can also focus on partnering with non-government organisations or NGOs
such that the same would help in circulation of the product brochures and also the leaflets for the
kids programs at different primary schools and other children learning centres. Again, the
healthy food offerings can also be advertised through the use of the company website based on

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the use of the star rating campaign. The use of social networking, print, broadcasting and outdoor
media can be effectively used for generating large scale consumer awareness for the quality
product offerings and new store formats marketing such quality products amongst the target
customers (Woolworths Group Limited 2019).
Implementation for marketing of the fixed prices policy
The marketing of fixed prices policy for the food and grocery products in foreign markets like
that of United States can be rightly carried out through the use of development of different types
of media campaigns essentially meant for the digital platform like social media platforms,
website, multichannel platforms like apps for Smartphones and Tablets and also based on usage
of conventional media like print, broadcasting and outdoor media. The multichannel platforms
can rightly be developed wherein the customers can directly tap and book the fixed prices
products associated to different grocery, food and vegetable categories based on their diverse
demands. Again, the incorporation of the click-and-collect model with the fixed prices policy
would help in enhancing the level of consumer convenience such that they can collect the fixed
prices products from fixed prices counters and stores of Woolworths located in their vicinity
after having purchased or booked them through use of web or multichannel interfaces (Gale
2017).
Monitoring and Control of Future Performance
The monitoring and control of future performances of Woolworths to evaluate the success of the
implementation of the healthy and quality product marketing and fixed prices marketing can be
rightly carried out based on the generation of set standards of customer satisfaction, supplier
performances and internal team performances. Further, continual review is required to be carried

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out based on carrying out of consumer surveys while also reviewing the supplier potential in
adhering to quality standards at low prices on a quarterly fashion. The performances of the
internal team can also be monitored on a daily and weekly basis based on set targets for
promoting of the healthy and quality food offerings and also the fixed prices based grocery, food
and vegetable products to the customers. A feedback mechanism is rightly to be put in place for
generation of needed feedback to concerned stakeholders for enhancing the performance and
productivity potentials in the long run.

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References
Borneck, T 2016, Generic vs. hybrid competitive strategies: A comparison, GRIN Verlag,
Germany.
Crothers, L 2018, 'Retail Food Sector Report 2018', USDA Foreign Agricultural Service,
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Khan, A 2018, How to Formulate an Operations and Supply Chain Strategy to Enter into New
and Emerging Markets, Anssar Khan, United States.
Nestorović, Č 2016, Islamic Marketing: Understanding the Socio-Economic, Cultural, and
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<https://www.woolworthsgroup.com.au/page/about-us/>.
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<https://www.woolworthsgroup.com.au/page/community-and-responsibility/group-
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