Strategic Analysis of Woolworths' New SBU: Import/Export Business Plan

This report provides a strategic analysis of a new Strategic Business Unit (SBU) proposed by Woolworths, a major Australian retailer, focusing on its import and export business. The analysis includes an examination of the external environment using PESTEL and Porter's Five Forces, assessing political, economic, social, technological, environmental, and legal factors, as well as the competitive landscape. The internal environment is evaluated using a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The report concludes with recommendations based on these analyses, considering the challenges and opportunities within the Australian retail market and the global import/export industry. The report emphasizes the importance of adapting to the evolving market conditions, considering factors like competition, buyer power, and compliance with environmental and legal regulations.

Running head: STRATEGIC ANALYSIS
Strategic Analysis
Name of the Student
Name of the University
Author’s Note

1STRATEGIC ANALYSIS
Executive Summary
The main objective of this report is to analyze and evaluate various external and internal
environmental factors for the new strategic business unit (SBU) of Woolworths. Woolworths is
considering the development of new business that includes in the import and export of different
kinds of goods that is related with the retail business of Woolworths. For this reason, external
and internal business environment analysis is done. As a part of external analysis, PESTEL
analysis and Porter’s Five Force analysis is done. As a part of internal analysis, SWOT analysis
is done.

2STRATEGIC ANALYSIS
Table of Contents
Executive Summary.........................................................................................................................1
Background......................................................................................................................................3
External Analysis.............................................................................................................................4
PESTEL Analysis........................................................................................................................4
Porter’s Five Forces Analysis......................................................................................................7
Internal Environment Analysis......................................................................................................10
Conclusion.....................................................................................................................................12
Recommendations..........................................................................................................................13
References......................................................................................................................................14

3STRATEGIC ANALYSIS
Background
Strategic Business Unit (SBU) refers to fully autonomous unit of the existing businesses.
SBUs are generally small so that they can be flexible; and they are large enough so that effective
control can be exercised on them. SBUs help the parent companies in responding various
economic changes and market situations on a quick basis. Thus, it can be said that SBUs are the
important part of the business organizations (Resumption, 2016). The main objective of this
report is to develop a new strategic business unit for one of the major Australian conglomerate,
Woolworths. As per the provided situation, Woolworths is considering developing a new SBU
that will involve in the import and export of different kinds of goods that is related with the retail
business of Woolworths. For this reason, the SBU will provide the facility of storage and
transportation of those goods.
Woolworths Limited is one of the major retailer conglomerates of Australian market and
it is the second largest retailers in terms of revenues. The company was founded in the year of
1924 and the founders of the company were Percy Christmas, Stanley Chatterton, Cecil Scott
Waine, George Creed and Ernest Williams (Woolworths.com.au, 2017). The major business
divisions and products of the company are supermarket, petrol, liquor, general merchandise,
home improvements, hotels and others. From the below figure, it can be seen that Woolworth is
the market leader in terms of market share as the company posses 36.3% of market share worth
AUS$ 32.6 billion. In the year 2016, the revenue and operating income of the company were
AUS$ 59 billion and AUS$ 1.6 billion respectively. Woolworths has an employee base of
202,000 around. Hence, from the above discussion, it can be seen that Woolworths is a major

4STRATEGIC ANALYSIS
market leader of Australian retail market; and the business growth of the company ensures the
future business scope of the c company (Woolworths.com.au, 2017).
Figure 1: Market Share of Woolworths
(Source: Roymorgan.com, 2017)
External Analysis
As the new SBU of Woolworths is about the import and export that includes both storage
and transportation, the external business environmental factors of Australia will have large
impact on the new SBU. Two of the major tools for measuring this impact are PESTEL analysis
and Porter’s Five Forces analysis. Both the analysis is shown below:

5STRATEGIC ANALYSIS
PESTEL Analysis
There are six major factors in PESTEL analysis; they are as below:
Figure 2: Factors in PESTEL Analysis
(Source: Yüksel, 2012)
Political Factors: Political situation of Australia is a major factor for the new SBU as import and
export involve with it. It needs to be mentioned that Australia has a stable political situation that
benefits the imports and exports business of the country. The political environment of Australia
consists of stable business environment; skilled, well-educated and multi-lingual workforce,
PESTEL
Political
Economical
Social
Technological
Environmental
Legal

6STRATEGIC ANALYSIS
strategic time zone and others. All these aspects will support the business operations of the SBU
(Joshi et al., 2012).
Economic Factors: Some major economic factors will have large effects on the business
operations of the SBU. At present, Australian dollar is the fifth most traded currency all over the
world. Foreign investors attracts towards Australia for its high interest rate. In the year 2016, the
GDP of Australia was $1204.62 billion that is 1.94% of the world economy. At present, the GDP
of Australia is higher than countries like United Kingdom, France and Germany. Thus, it can be
seen that Australia has a strong economic condition that is a positive signal for the SBU
(atlas.media.mit.edu, 2017).
Social Factors: The population of Australia consists of aborigines and other people like British
and Irish descent. At present, as a part of the immigration policy of the country, Australian has
brought liberalization in their immigration policy. As a result, the people of Australia has
become a multi-cultural and multi-faith society where people have different choice and
preferences. The SBU needs to consider these factors (Nix et al., 2013).
Technological Factors: New technologies will help to create new business processes for the
SBU. Massive technological advancement of Australia has ensured the reduction in costs,
improvements in product quality and innovation for the Australian businesses. Thus, the SBU
also needs to take full advantage of the technological advancement of the country. Two of the
major Australian organization that support technological innovation in the Australian businesses
are the Commonwealth Scientific and Industrial Research Organization (CSIRO) and Defense
Science and Technology Organization (DSTO) (Hakansson, 2015).

7STRATEGIC ANALYSIS
Environmental Factors: The major environmental issue in Australia is weather and climate
change. Extreme weather change can affect the business operations of the SBU. For this reason,
the Government of Australia has implemented certain acts and regulations to protect the
environment like The Environment Protection Act of 1974 and others. It is needed for the SBU
to take into consideration these acts and regulations at the time of commencing the business
operations (Jahn et al., 2012).
Legal Factors: Australia has a strict legal and legislative environment. Some of the major
legislatives that can affect the business operations of the SBU are the introduction of age
discrimination, disability discrimination, increase in the level of minimum wages, requirement
for recycling and many others. Thus, it is required for the SBU to consider all these aspects at the
time of business operations (Hill et al. 2013).
Based on the above discussion, it can be said that the political and economical factors are
two of the major success driver of the SBU. The stable political condition of Australia will
ensure the hassle free business operations of SBU where the company will be beneficial from the
growing economic condition of the country. At the same time, the SBU needs to design their
product in such a way so that they can be able to match the taste and preferences of Australian
people. The adoption of advanced technologies of Australia will ensure the effective business
operations of the SBU. Most importantly, the SBU needs to well complied with the
environmental and legislative regulations of Australia. Overall, it can be said that the SBU has a
prosperous future, as most of the external factors of Australia will provide advantage to it.
Porter’s Five Forces Analysis
The five forces of Porter’s model are as below:

8STRATEGIC ANALYSIS
Figure 3: Factors in Porter’s Five-Force Analysis
(Source: E. Dobbs, 2014)
Existing Rivalry (HIGH): It can be seen that the import and export industry of Australia consists
of some major players; they are Australian Export Consortia, Australian Institute of Export,
Australian Lamb Company, Haltec, Nungar Trading Company, Sanwa Australia, Wellard Group
and others (az.ezilon.com, 2017). All these companies import and export various goods like
retail products, foods and others. From the above, it can be seen that the new SBU will has to
face immense competitions from these players. Thus, this risk is high for the SBU.
Threat of New Entrants (LOW): The establishment of an import and export business with
storage and transportation facility demands high investment. The companies need to establish
various national and delivery networks and they have entered into high-competitive market.
Companies need to incur large costs for the establishment of business units and transportation. In
Existing Rivalry
Threat of New Entrants
Bargaining Power of Buyers
Bargainig Power of Suppliers
Threat of Substitute

9STRATEGIC ANALYSIS
addition, they need to comply with different kinds of regulations and legislatives at the tie of
business operation. Thus, this risk is low for the SBU (Porter & Heppelman, 2014).
Bargaining Power of Buyers (HIGH): In the import and export industry of Australia, it can be
seen that most of the companies offers almost similar kinds of products to the customers. For this
reason, a particular customer can get the same kinds of products from different companies. Apart
from this, the customers do not have to bear huge costs at the time of switching the companies.
For this reason, the customers have a particular power to control the demand and supply of the
industry. Thus, this risk is high (Hui, Klasa, & Yeung, 2012).
Bargaining Power of Suppliers (MEDIUM): The major inputs of import and export industry are
labors, equipments, transportations, information system and others. In this particular industry,
there is not much requirements for highly skilled labors. However, for the section of
transportation, there is a need for skilled drivers. On the other hand, technologically sound
employees are needed for different business operations of this industry. Overall, it can be said
that this risk is medium for the SBU (Lee, Kim & Park, 2012).
Threat of Substitutes (LOW): In this particular business industry, there is not any space for
substitute products. Companies in this particular industry use to import and export different kinds
of products and for reason, there is not any restriction about products. Thus, in this regard, this
risk is low (Lee, Kim & Park, 2012).
According to the above discussion, it can be seen that there is a presence of excessive
rivalry in the import and export industry of Australia and most of the companies use to deal with
almost same types of products. On the other hand, due to the huge establishment costs and need
to comply with different legislative regulations, it is difficult for the new companies to enter into

10STRATEGIC ANALYSIS
this market. The buyers in this particular industry have high control over the demand and supply
as they can get similar kinds of products from different customers. Thus, it is suggested for the
SBU to take into consideration all the above discussed factors.
Internal Environment Analysis
For the establishment of the new SBU, it is necessary to analyze the internal business
environment of Woolworths in order to gain insight about various aspects like resources and
competencies of the company. In this situation, SWOT analysis is considered as one of the major
tool for internal business environment analysis. SWOT stands for Strengths, Weaknesses,
Opportunities and Threats. The SWOT analysis of Woolworths is done below:
Strengths Weaknesses
 Woolworths is one of the oldest retail
companies in Australia and currently
holding second place in terms of
revenue. This is a major strength of the
company.
 The large supermarket chain and the
highest market share are other major
strengths of the company
(theaustralian.com.au, 2017).
 Large variety and numbers of products
help Woolworths to register high
amount of revenues and profits.
 It can be seen that Woolworths does not
have much presence outside Australia
as most of the business operations of
this company is Australia based. This is
a major weakness for Woolworths for
the development of export and import
business as this particular business
industry wants massive international
presence.
 As per earlier discussion, excessive
competition can be seen in the
Australian export and import industry.

11STRATEGIC ANALYSIS
 Woolworths has strong commitment
towards the environmental and
sustainability issues that helps to
increase its market reputation
(woolworthsgroup.com.au, 2017).
 Effective corporate social responsibility
programs can be considered as the
strength of Woolworths
(woolworthsgroup.com.au, 2017).
 Amalgamation with online-based sales
channel helps Woolworths in growing.
For this reason, Woolworths is losing
competitive edge to its competitors
(bigcompetitions.com.au, 2017).
 Woolworths has made its entry in the
online market lately. For this reason,
the company already lost some market
share to its competitors.
Opportunities Threats
 In June 2017, 0.4% growth can be seen
in the Australian retail market. This
will be creating business opportunities
for the SBU (abs.gov.au, 2017).
 It can be seen that Woolworths use
effective promotional strategy in order
to retain their customers. This will
create business opportunities for
Woolworths.
 The emerging economy of Australia is
creating large business opportunities
 Massive discounting competition can
be seen between Woolworth and Coles.
This process is creating future threats
for Woolworths.
 The aggressive expansion of some of
the retail companies like Aldi is
creating future threats for Woolworths.
 Slow growth of the online retail market
of Australia is posing future threats for
Woolworths.