Woolworths Business Strategy: Cost Leadership, Differentiation, and Focus

This article discusses the business strategy of Woolworths, an Australian supermarket chain. It explores the company's adoption of Porter's generic strategies, including cost leadership, differentiation, and focus. The article also covers Woolworths' organizational culture and structure.

Organization Strategy and
Leadership
Student’s Name

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Introduction
Designing of the business strategy includes the decisions and the actions taken by
the company to accomplish the goals of the organization and to secure a competitive
position in the market. It is considered as a roadmap based on which the actions are
undertaken by the company. It is the strategy that gives the way to the business plan
and helps in analyzing the strength and the weaknesses of the organization which
are further used to analyze the competitive advantage of the company. It controls the
activities of the company to assess whether the activities are in line with the
business goals of the organization. The designing of the business strategy can be in
three forms which include corporate level, business unit level and the functional level
strategy (Hubbard et al, 2019).
Woolworths is an Australian supermarket chain that currently operates 1008 stores
across Australia and focuses on attaining long term profits and creates sustainable
value for the stakeholders. It ensures to provide connected retail experience and
deliver value to the customers. The company employs 2, 01,522 team members and
serves 29 million customers (Woolworths Group, 2019). It focuses on delivering the
best to the customers in terms of quality, convenience, and value. The company has
developed a retail team which understands the changing needs of the customers
and based upon the research the business strategies of the company are designed.
It provides differentiation in the product or service and takes continuous feedback
from the customers to provide improved products and services (Woolworths Group,
2019).The further paragraphs will reflect upon the generic business strategy adopted
by Woolworths and will also cover the culture and the structure of the organization.
Generic business strategy of Woolworth
The company applies Porter’s generic business strategy to sustain its competitive
advantage over its competitors. It consists of three strategies cost leadership,
differentiation and focus. The cost leadership strategy focuses on designing the
products at a lower cost by removing the frills and another cost. The price of the
product is the same as the parity but the company is able to sustain the competitive
advantage at the lean times. In this strategy, the company efficiently applies logistics

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and cuts the cost in comparison to its competitors. Another generic strategy includes
the differentiation strategy under which the company creates differentiated products
and services (Salavou, 2015).
Woolworth focuses on the differentiation strategy by taking continuous feedback
from its customers and creates innovative product and services. Through the
adoption of the differentiation strategy the company charges premium prices from its
customers and are able to generate higher profits. It focuses on making continuous
innovation and satisfies the diverging needs of the customers. The last generic
strategy is the focus strategy under this strategy the company focuses on delivering
the products and the services to the niche market. The company focuses on
understanding the needs of customers of the niche market and deliver unique
products at the low-cost pricing. It focuses on developing loyal customers from the
niche market (Plouffe et al, 2016).
It is analyzed that Woolworths applies integrated competitive strategy under which it
focuses on adopting the cost leadership and the differentiation strategy. In the
competition to the Coles, the company focuses on lowering its prices to gain the
market share and controls the large chain of supermarkets which in turn lower the
prices from the suppliers (Mitchell, 2017).
The main objective of the company is to deliver value to the customers by providing
the core products to the customers and makes innovation in accordance with the
changing needs of the target market. It applies new pricing and value strategy to
neutralize the impact of Coles on the performance of the company and provides a
high-quality better-priced product to gain the trust of the customers. It fosters to
develop new products and provides fresh quality products to the customers. It cost
leadership strategy allows the company to earn above-average returns and faces
vigorous competition with Coles. To implement the cost leadership strategy the
company efficiently manages the logistics and reduces the expenditure upon the
technologies and the supplier’s relationship. It reduces the unnecessary expenses
and reduces the production cost to provide the products at similar prices to its
competitors and gain the market share (Van der Voet, 2014).
Considering the differentiation strategy of the company it has developed a three-year
strategy under which the customers are placed at the first and aims to neutralize the

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competition by enhancing the customer experience. Its three-year strategy mainly
focuses on improving the core offer, development of new products and services and
initiating new efficiencies through the lean retail model. The current strategy will help
in lowering the prices of the products and provides more compelling offers and
greater innovation (Jie and Gengatharen, 2019)
(Source: Woolworths Group, 2019).
To improve the customers experience the company has designed a retail team that
takes continuous feedback from the customers and every day focuses on improving
the customer experience. It has six priorities under which the customers are placed
at number one. It focuses on providing a connected, convenient and personalized
experience to customers and differentiates food customer propositions. It fosters to
bring innovation in the drinking business and unlocks the value of the portfolio. It
emphasizes on E2E processes to simplify for the stores and better for the customers
(Nastasoiu and Vandenbosch, 2019).
To deliver the differentiated products it focuses on a deeper understanding of the
customers. It leverages a single view of the customers by efficiently using the
customer database and analyzing the customers need in the real-time to deliver
personalized services. It efficiently uses digital channels to increase the market
share and develop loyal customers for the brand (Phillipov, 2019)

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Adoption of the combination of cost leadership and differentiation strategy allows
gaining the trust of the customers and maximizing the profits of the company. The
company provides the product at relatively lower prices by reducing the inventory
and the operating cost through its saving process under which it provides the product
directly to the stores and through the use of global sourcing. It combines its existing
distribution system with the online network to promote the sales of the company and
engages in product expansion with the different industries (Australian Food News,
2015).
It focuses on connecting the customers and providing a seamless experience and
has added rewards through the Apple and Google Wallet. It has also focused on
making improvements in online home delivery through the development of customer
fulfilment centres and provides popular choices to the customers. The company has
made 80 renewals and 40 upgrades to satisfy the local customers of Australia and
New Zealand. It has updated 5000 products across all the categories and the range
includes organic fresh produce, wholesome ingredients, snacks, on-the-go meals,
and drinks to adopt the focus strategy and targets the niche market (Woolworths
Group, 2019).The company is also developing the drink business to satisfy the
diverging needs of the customer and make improvements in the online and the pick-
up experience (Woolworths Group, 2019).
The adoption of the competitive pricing strategy allows the company to expand its
target market and helped the company to increase its financial performance. The
company focused on the differentiation strategy and deliver the best experience to
the customers. The sales of the company have increased to 4.3% from the year
2017. This strategy helps the company in sustaining its competitive advantage and
maintains loyal customers (Woolworths Group, 2019).
Organizational culture
The company adopts the down-to-earth culture and considers team members as the
main asset if the company. They are considered as the key to the success of the
business. The company focuses on retaining the best employees with diverse skills,
capabilities and continuous motivates the workforce to make them more committed
towards the organization. The company creates workforce plans, talent planning

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sessions and the career development of the workforce. It provides the opportunity for
growth and takes continuous feedback from the employees to increase employee
motivation (Desai, 2019).
The voice of the customers was given the highest priority to improve the customer’s
feedback and every aspect of the business focuses on making the lives of the
customer easier and better. The customers are the main priority and the company
ensures that all the transparent information and dealings are shared with the
customers. The company adopts the culture where it focuses to develop a strong
relationship with the customers, team members, suppliers and producers to the
inbuilt positive working environment. In consideration to the above, the company is
able to serve 28 million loyal customers and welcomes diverse culture team
members (Khor, 2017).
The company accepts the open culture when all the members have the freedom to
speak and the company has also developed a third-party managed complaints line
which specially deals with the issues raised by the vendors. Every member has
given the opportunity to speak shared the issues faced by them. It has developed
team member speak up to provide the independent avenue to the members to speak
up the issues faced by them internally and externally (O'Neill et al, 2016).
Every member has the opportunity to thrive and all the members are given equal
value and respect. The company focus on fostering a workplace that welcomes
diversity and ensures that there is no gender inequality in the workplace. It embraces
diversity in all the forms (Gowland, 2018).

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(Source: Woolworths Group, 2019).
The company focuses on improving its relationship with the suppliers and establish
long –term relationships with them. It empowers the suppliers for better negotiations
and replaces the power with trust. It has also developed supplier speak up a policy
which provides the opportunity to the supplier to use the individual and the
confidential avenue for raising the issue. The company works with the partners
based upon three governing ideas which include collaboration, fairness, and source
locally. The company is able to develop mutual trust and has partnered with 80% of
the suppliers which in turn helps to be highly responsive to the changing needs of
the customers and designs the innovative products for the customers. It develops
long term relation with the small suppliers by adopting fairness and equitable dealing
with the suppliers (Woolworths Group, 2019).
Despite adopting the result oriented culture, it is analyzed that in the latter part of the
year 2014 the company was not able to satisfy the customers because of non-
availability of the products in the shelves and the stocks were incorrectly measured
by the company. The company continuously ignored the negative feedback of the
customers which in turn decreased the loyal customers and company faced the loss.
The company also turned out the labor and suppliers due to a shortage of demand
for the products (Paul, 2018).

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In response to the above issues faced by the company, is focused on making the
customers the highest priority and ensures that there is the right availability of goods
at the right time. It focused on transforming the culture and provides the products at
the cheapest prices. The degree of power distance index is high in the company
because the company follows the hierarchical structure and the powers are
distributed on the basis of the position held by the member in the company (Paul,
2018).
The company adopts the culture of collectivism over individualism because it adopts
the culture where the company focuses on developing strong interpersonal
connections and respects the privacy of the individuals. It provides the freedom to
take the individual decisions and values the decision of all the members. The
company provides equal opportunities to all the males and females to participate in
higher positions and focuses on eradicating gender inequality (Nakandala and Lau,
2019).
The company also observes a low uncertainty avoidance index and derive the
creative solution to handle the fluctuations and efficiently responds to the changing
environmental conditions. The company drives innovation through its digital business
named as WooliesX and has become the market leader through $1 billion sales and
has seen 30% growth in the business. The company focus on effectively contributing
to the community and the environment. The company employs 1875 indigenous
members and effectively contributes to the community (Woolworths Group, 2019).
The company adopts the listening culture and puts the customers at the first to
provide the personalized experience and effectively contributes towards the
sustainable growth of the shareholders (Woolworths Group, 2019).
Woolworths focus on listening to the customers and learn from the mistakes. They
foster continuous innovations and encourage freedom within the framework. The
company adopts the collaborative culture where it ensures that all the members work
together and always look ahead to lead the market. The company is customer
obsessed and always ensures to provide quality products and services. Quality is
considered as the heart of the business. It ensures that the company takes the right
action and be responsible for the community (Mitchell, 2017).

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The company leaves a positive impact on society and ensures that all the actions of
the employees are in line with the goals of the company. It welcomes diversity and
provides equal opportunities to all the members for personal growth and
advancement. It adopts the end-to-end process and provides complete solutions to
improve the experience of the customers. The company’s core value is to deliver the
best quality products at the fair prices and sustains the competitive advantage by
creating the best customer experience (Das Nair and Dube, 2017)
Organizational Structure
The organizational structure determines the roles and the responsibilities and the
power of members at various stages in the hierarchy and the flow of information in
the organization hierarchy. It is analyzed that Woolworths adopt the team-based
organization structure and forms a group under which the employees are assigned
with the task and cannot perform the tasks of the other departments. This type of
structure initiates the organization to combine low-overhead, minimal management
structure of lateral structure with the efforts of the team just like a hybrid structure.
Through the adoption of the team based structure, the company recruits the
employees in accordance with the requirement of the teams and innate
specialization to deliver the best customer experience. This structure helps in
eliminating confusion and delivering efficiency to the target market. The team-based
structure allows easy flow of work and cooperates with the business functions to
increase the market share of the company (Clegg et al, 2015).
(Source: Woolworths Group, 2019)

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The top of the hierarchy structure includes the managing directors that manage the
overall performance of the organization and are highly committed to maintaining the
relationship with its stakeholders. The managing director is accountable to the
shareholders of the company and controls the day to day business operations of the
company. It establishes the vision and develops the strategy to control the actions of
the company. It controls the actions of the non-executive directors (Von Bonsdorff et
al, 2015).
Looking at the above mentioned organizational chart it is observed that Woolworths
adopts the team-based organization structure and has formed the different
department’s heads. Ever department is subdivided into different teams to control
the different functions of the company (Weebly, 2018).
(Source: Woolworths Group, 2019)
Under the supermarket's store, there are different teams formed which allows easy
flow of information and clarity of roles and the responsibilities of each member in the
organization. The company also consist of the support team to provide assistance to
all the departments and achieve the objectives of the company. Under this structure,
each employee is responsible for its actions and develops trust among the members.
Adoption of this structure allows easy flow of communication among the members
and helps in resolving the problems at a faster rate due to the speedy response of
the teams. This structure provides the advantage of motivating the employees by
providing the flexibility to learn and work for the different departments. It empowers

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the workforce and provides the opportunity for personal growth and advancement.
This structure directs the company in attaining the competitive advantage and
manages the activities efficiently (Evans and Eys, 2015).
This structure is centralized yet decentralized because under this all the employees
take their decisions and undertake their activities towards the achievement of the
common goals. The achievement of the goals of the team helps in increasing the
productivity of the company because the goals of the team are united towards the
achievement of the common goals of the organization. This structure allows the
Woolworths to reduce the multiplication of work and reduces the barriers faced by
the company. The major advantage of adopting this structure is that the problems
faced by one team does not affect the functioning of the other teams and does not
hamper the productivity of the company (Rajabian Tabesh et al, 2016).
Considering the advantages of using the team-based structure the company also
faces the major disadvantages which include employee dissatisfaction. This method
does not provide recognition to the individual employee which is considered as the
main employee motivator. The lack of motivation creates difficulty for the employee
to sustain in the business and be more committed towards the goal of the
organization. Under this structure, the team is recognized not the individual
employees (Ashkenas et al, 2015).
Considering the organizational structure of Woolworths, the role of the board is
complex and critical. The board decides the vision and the strategies to be adopted
for the growth of the organization. The board attains the highest position and is
directly accountable to the shareholders of the company. It includes the non-
executive directors and executive directors. It handles the financial performance of
the company and decides the leadership and also control the corporate governance
if the company (Hambrick et al, 2015).
The non-executive directors of the Woolworths are appointed through a letter of
appointment and are expected to conduct all the activities in compliance with the
laws. The directors ensure that no department prioritize personal goals over the
goals of the organization and are expected to conduct the business ethically and with
full honesty. The CEO is considered at the third level of the hierarchy and is
accountable to the board regarding the issues faced by the company. The CEO of

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Woolworths handles the day to day operations of the business. It develops and
implements the corporate strategies and ensures that all the actions all in
accordance with ethical and environmental standards. The CEO hires the senior
managers and under them, the employees are sub-divided to control the activities of
the business and maintain the efficiency in the operations of the business (Eva et al,
2018).
The company also forms the committees to discharge the responsibilities and
supports the board for getting a more intense review. The four standing committees
include people performance committee, nomination committee, sustainability
committee, audit committee, risk committee, and compliance committee. Under
Woolworths, each non-executive director is assigned with a particular committee to
support the team and solve the complexities faced by the teams (Holbeche, 2018).
By adopting the team-based organization structure the company is able to manage
its diversifying business and is able to handle the complexities in a better way. The
organization focuses that all the employees are committed towards the goals of the
company and each team is inclined towards the goals of the organization. The
company ensures that all the activities of the business are in compliance with the
laws and each member performs the task with all the honesty and integrity
(Parkinson, 2018).
Conclusion
From the above discussion, it is critical to note the adoption of the low pricing and
the differentiation strategy allows the company to sustain the competitive advantage
and improves the productivity of the company. The company has changed the
business strategy that keeps the customer at first. This change in the strategy allows
the company to focus on the customers changing needs and wants and enhance the
experience of the customers. The company is getting highly responsive towards the
changing needs and has made 80 renewals to serve the local customers. The
company has improved its online delivery channel and has provided more ease and
convenient services to its customers.
From the above paragraphs, it is analyzed that Woolworth adopts the inclusive
culture and embraces diversity in all the forms. It provides equal opportunities to all

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the employees and reduces the biases of gender inequality. The strategies of the
company are implemented with full honesty and integrity considering the benefits of
the customers. The company focuses on establishing long term relations with the
customers and the suppliers of the company. It provides wide choices to the
customers and makes the constant efforts to deliver improved services to its
customers.
The company adopts the team-based organizational structure that allows the
company to achieve the objectives if the company and sustain the competitive
advantage by providing satisfaction to the target market. Adoption of this structure
allows the company to quickly respond to the complexities of the business and does
not affect the functioning of the other teams. It also provides flexibility to the team
members to implement the actions accordingly and achieve the goals of the
organization.

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