Analysis of Woolworths: Business and Strategic Management

This article provides an analysis of Woolworths, one of Australia's leading supermarket chains, using macro-environment and industry analysis, internal analysis, and business level strategy. It also discusses the company's strengths, weaknesses, opportunities, and threats.

8/17/2019
Running Head: MANAGEMENT 0
Business Management and strategic management

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Table of Contents
Introduction................................................................................................................................2
Macro-environment analysis..................................................................................................2
Industry analysis.........................................................................................................................4
Internal analysis.........................................................................................................................5
Resources...............................................................................................................................5
Capabilities.............................................................................................................................6
Core competencies.................................................................................................................7
Strengths and Weakness.........................................................................................................7
Business level strategy...............................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
Woolworths is one of the Australia leading superchain with having 900 plus stores
situated across the country. The company is known to be providing best quality products in
synchronization to high integrity and with collaborations with various farmers. The first
Woolworths store was incorporated in 1924 in Sydney and in 2007, the organisation opened
its first “Green” supermarket that strategizes for minimising the use of materials causing
environmental harm. Woolworth revenue was increased by 12.5 percent in the year 2018
(Blake, 2018). In addition, it is also forecasted that Australian grocery stores and supermarket
will experience yearly revenue growth of 1.8% by 2022.
In terms of size, Woolworth includes 31 per cent of market share in retail. The
company is also known to be as one of the major contributors into the Australian economy
creating $53 billion or 4.1 percent of GDP of the nation (Knox, 2014). The company is
serving in the markets of both Australia and New Zealand. Woolworths mostly specialize in
selling groceries health and beauty products and various household products. This makes the
company as one of the Australia largest supermarket chains with ensuring the best products
available to the customers.
Macro-environment analysis
In Australia, the Supermarket and Grocery sector is one of the most fiercely
competitive sector that can influence Woolworth competitive strength. The external
environment factors in Australia Supermarket and Grocery sector are identified using the
Pestle model –
Political factors – It includes various political control and government regulations imposed
on the trade of business. An entry barrier is created in the business due to duopolistic nature
in the industry as of Coles and Woolworth. Hence, to offer equal chance to new players,
many regulations are being laid down by the Australian Competition and Consumer
Commission strengthening various rules on Woolworths in relation with price and products.
Economic Factors – Many consumers are now becoming price sensitive in Australia and
thus prefer to spend their revenue less on shopping due to economic downturn. To counter

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this issue, Woolworth focuses on keeping lower margin in align with bringing high range of
product in their grocery segment and supermarket stores.
Social Factors – From a long period of time, Woolworth is undertaking various steps to gain
the trust of the consumer. However the company got some issues with the suppliers and from
future perspectives, Woolworth set a goal to sign up most of its 3000 odd suppliers with the
support of Supplier Connect platform that gives various advantage to the supplier in terms of
free monthly scorecards and commercial reports showcase their performance beside the
competitors (Mitchell, 2017). Woolworth also tries to understand various needs of customers
from different perspectives by developing ‘listening culture’.
Technological Factors – SAP linked merchandising system has been implemented by
Woolworths with replacement of the proprietary system (CASS). This SAP system of
Woolworths also connected to their cloud assets to synchronise with payroll model in
Australia (Mbhele, 2012). These technological changes help Woolworth to bring more
efficiency in the operations of Woolworths and thus provides competitive edge in the
industry.
Environmental Factors – To ensure future sustainability, it is important for the company to
undertake various measures towards environmental sustainability. It was found that all the
stores of Woolworth are using carbon refrigerator system as a replacement of the convention
structures. The benefit of this system is that they have 75% less global warming potential.
Woolworth also has installed motion sensors and advanced light that help Woolworth to
lessens the energy emission and saving of electricity.
Legal Factors – It was identified that Woolworth is continuously facing challenges due to
Australian Competition and Consumer Commission (ACCC) and this commission
continuously pulling the company name in the media as well as alleging Woolworth in
relation with some payment from the suppliers (Sutton-Brady, Kamvounias & Taylor, 2015).
Such allegation may have negative image in relation with goodwill.

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Industry analysis
Woolworth industry environment will be analysed with the help of Porter 5 Forces
framework. The industry competitiveness is associated with the external environment and
impact not only the industry but also the firm. To gain competitive edge in the marketplace,
Woolworth needs to comply with various industry forces while matching up with the eternal
business environment.
Bargaining Power of Suppliers
Being a leading organisation in the Retail sector, Woolworth has significant control
over its suppliers and have the power to control them due to absence of other big players in
the market. Coles and Woolworth both have this advantage, however, it was forecasted that
supplier power may be increased because of Aldi and Costco who wish to expand fully in the
Australian market. In addition, ACCC also coming up with new policies in favour of new
players in the industry.
Bargaining Power of Buyers
As consumers have larger selection of choices to purchase of food products from
other superstores in Australia, they enjoy greater bargaining power (Aschemann-Witzel et al,
2015). In addition, the switching cost is also low in case of Woolworths as the company is
not providing something new or unique to the customers other than quality products at
affordable prices. This leads customers to buy necessary goods or product as per their needs.
Threat of New Retailers
This threat is relatively low in case of Woolworth as any organisation who wishes to
expand into retail sector in Australia whether on a larger or small scale required to seek for
huge capital base, extensive distribution channel and other infrastructure and facilities.

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Woolworth also has a long term and positive brand image all over the country and thus it will
be difficult for newcomer to enter into such market.
Competition among Existing Businesses
The retail sector of Australia consists of intense competition as many big companies
seeking to hold and retain the market share in the particular segment. With regards to this,
company from the other countries are also exploring to expand in the market in Australia
with focusing on one major wining element i.e. price. Woolworth profitability is hampered as
large number of consumers are getting attract towards competitor brand Aldi and Coles due
to various other factors.
Threat of Substitutes
Woolworth profitability and sustainability also has a threat from various substitute
products offered by other convenience stores together with 7-eleven and Coles (Munir &
Terry, 2018). Most of the rivals of Woolworth are using same pricing strategy in link with its
primary products. Farmers in Australia providing organic food in the market also considered
as one of the major threat for Woolworths.
Internal analysis
With exploration of internal environment, Woolworth strength and weakness can be
identified in relation with its resources, capabilities and core competencies. The internal
analysis of an organisation, company can also reposition in the market with new offerings
and with flanking its weaknesses.
Resources
At present, the company is having 995 stores in Australia and employed more than
115,000 workforces in their stores, distribution centres and support offices to offer the

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consumers with superior range of service and convenience (woolworthsgroup.com.au, 2018).
In relation with its operations, Woolworths has made use of advanced technology and also set
up its presence in online domain to attract the new consumers. In terms of intangible
resources, Woolworths has a reputable brand value in Australia and their brand reputation
brings about effective football to the stores also. The company has efficient HR resources and
management bringing wide range of products, partnership and alliance management to
vertically integrated business.
Capabilities
Capabilities can be defined as the organisation skill and the way in which it is
effectively able to synchronise the assets for the development of the organisation and to raise
its efficiency. Various distinct capability of Woolworth includes its efficient customer service
as the company always assists customers in their purchase and match up the products depend
on their needs. The company also ensures that their stores never get stock out and sustain
good relationship with the suppliers with the help of suppliers developer programme. From a
long time, the company was gaining good returns in financial terms and last year also,
Woolworth revenue was increased by 12.5 per cent (Blake, 2018). Woolworths is also
specialised in private label section and plans continuously to rebrand its private label ranges
in an attempt to meet changing demands of the customers. At last, the company undertakes a
significant marketing strategy which thereby contributes it to confirm that it is able to grow
substantially well.

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Core competencies
The core competencies of Woolworth is elaborated below through VRIO analysis -
Resources/
Proficiency
Valuable Rare Imitable Organised
to Exploit
Competitive
Suggestion
Brand name Yes Yes No Yes Sustained competitive
advantage
Economic
success
Yes Yes No No Temporary competitive
advantage
Consumer
service
Yes No No Yes Temporary competitive
advantage
Private
labels
Yes Yes Yes No Parity
Stocking
capabilities
Yes No Yes No Parity
Promotion Yes Yes No Yes Sustained competitive
advantage
Strengths and Weakness
Strengths
 Strong financial position as last year
also the company revenue increased
by 12.5 percent (Blake, 2018)..
 Trustworthy brand name and status
as at the close of 2012, Woolworths
was chosen as the sustainable
retailer of the year by BRM AMP
Australian retailer.
 High market share includes 31
percent in retail.
 Broad range of products and services
in extent with food products to
liquor, petrol and insurance sector.
Woolworth also owned Big W
Weakness
 One of the main weakness of
Woolworths is their low
international presence. The company
is having its major stores in New
Zealand and Australia only unlike its
competitors like Walmart which
operates in US, Canada, Asia,
Europe and UK.
 Increase in debt is their another
weakness as Woolworth debt rate
has gone up greatly at the end of
2012.

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another division of chain discount
stores.
Business level strategy
Woolworths business level strategy includes “Everyday Low Price (EDLP)” and
“Project Fresh” strategy that brings out economic benefits to the corporation in form of
higher revenue and increase in return to stakeholders (Wahyuni, 2010). The cost leadership
strategy of Woolworth helps the business to make above average returns on investment
considering the existence of the competitors in the sector.
Below, the business level strategy of Woolworths is examined by value chain
undertakings of the company –
Primary Activities
 Inbound logistics – Fundamentally, Woolworths is a retailer and under its distribution
network, there are two major activities including logistics and procurement.
Woolworths has selected “Trandestone’s Merchandise Lifecycle Management”
platform for their procurement process that connects all its supplier and provides a
platform for corporates to administer orders and suppliers, financing and B2B sales
(centricsoftware.com, 2019).
 Operations – In terms of operations, Woolworths has conserved uniform procedures
to monitor and eliminate the goods from the delivery lots which are attained from
suppliers.
 Outbound logistics – Woolworth prefers those suppliers who are using clean and less
polluted technology. It helps the business in green procurement process.
 Marketing and Sales – To accelerate sales, the company involve in organizational
dynamism and in-store promotion.
 Service – It includes company refund polices and decrease in waiting times with the
use of trolley –mounted scanner.
All these include the primary value activity undertaken by Woolworths and based on
these activities, Woolworths focus on all its secondary activities with execution of

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effective HR programs, involve in environment friendly development of infrastructure,
adopting latest technology to reduce carbon emission and improve customer experience
within the corporation.
Considering all, a critical strategic study of Woolworth has been conceded out to
evaluate highly competitive business environment factors. The company external
environment is quite competitive and with entry of new players including Aldi and
Costco, it is important for company to adopt new strategies or expand their operations to
developing countries in order to achieve economy of scale. In addition, Woolworth
internal strength helps the company to grab various opportunities in the marketplace such
as company can invest and diversify into new product line in relation with veg food due
to the trend of healthy living.
The company industry environment is quite competitive and Woolworths needs to
achieve competitive advantage in the retail sector by focusing in latest and advanced
technologies such as big data analytics. It helps the company to meet customer expectation in
a better way. At last, the conflict the Woolworths and ACCC considerably aided on the
business long-term strategy and helped them to deal with the political influence.

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References
Aschemann-Witzel, J., De Hooge, I., Amani, P., Bech-Larsen, T., & Oostindjer, M. (2015).
Consumer-related food waste: Causes and potential for action. Sustainability, 7(6),
6457-6477.
Blake, D. (2018). Woolworths increases profit by 12.5 per cent. Retrieved from
https://www.insideretail.com.au/news/woolworths-increases-profit-by-12-5-per-cent-
201808
centricsoftware.com. (2019). Woolworths Successfully Implements Centric PLM. Retrieved
from https://www.centricsoftware.com/in-the-press/woolworths-successfully-
implements-centric-plm/
Knox, M. (2014). Supermarket monsters. Retrieved from
https://www.themonthly.com.au/issue/2014/august/1406815200/malcolm-knox/
supermarket-monsters
Mbhele, T. P. (2012). Central supply chain distribution system diffusion in the selected retail
grocery industry. International Journal of Information Technology and Business
Management, 14(1), 139-159.
Mitchell, S. (2017). Woolworths connects with suppliers to win back customers. Retrieved
from https://www.afr.com/business/retail/woolworths-connects-with-suppliers-to-
win-back-customers-20170307-gusemv
Munir, R., & Terry, C. (2018). Accountants and the Ethics of Profit: The Case of the
Australian Retail Industry. Journal of business ethics education, 15, 327-348.
Sutton-Brady, C., Kamvounias, P., & Taylor, T. (2015). A model of supplier–retailer power
asymmetry in the Australian retail industry. Industrial marketing management, 51,
122-130.
Wahyuni, D. (2010). The importance of supply chain management in competitive business: A
case study on Woolworths. Manajemen Usahawan Indonesia, 1(1), 32-39.

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woolworthsgroup.com.au. (2018). Woolworths Supermarkets. Retrieved from
https://www.woolworthsgroup.com.au/page/about-us/our-brands/supermarkets/
Woolworths