Business Level Strategy of Woolworths in Australian Retail Sector

This report focuses on the business level strategy of Woolworths in the Australian retail sector. It includes a PESTLE analysis, competitive analysis, and key opportunities and threats. The report concludes with recommendations for Woolworths to establish a large consumer base and develop a cost benefit.

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STRATEGIC MANAGEMENT
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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Pestle Analysis.......................................................................................................................2
Key opportunities and threats.................................................................................................4
Competitive Analysis of Australian Retail Sector.................................................................5
Conclusion..................................................................................................................................7
References..................................................................................................................................8

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Introduction
Business entities have to make choices amongst diverse strategic options relying on
the market or industry in which they operate. On the contrary, corporate level strategy entails
the selection of strategic alternatives across all markets. It executes its operations, business
level strategy takes into account strategies, which determine the way the company will use its
resources in particular market or product area in relation to the strategies used by its market
rivalries (Bailey et al. 2015). Woolworths executes its operations with over 995 stores across
the country and relies on more than 115,000 team members in stores, distribution centres as
well as back office. Its official website mentions that Woolworths takes utmost pride on
working in an integrated way with Australian farmers and agriculturalists in order to ensure
availability of their products to clientele. Woolworths runs range of brands such as
Woolworths or Safeway supermarkets, Big W, Tandy, Dan Murphy’s, Dick Smith
Powerhouse, Dick Smith Electronics and BWS. Furthermore, it sources around 96% of all
fresh fruit and vegetables with 100% of fresh meat from Australian farmers, which has
developed the company as Woolworths Australia’s Fresh Food People (Woolworthsgroup.au
2019). The company’s Overall Business Woolworths initiated its business by launching the
first store in Sydney in 1924, which had been considered as chief supermarket chain in
Australia as well as New Zealand along with around 28 million clients per week accounted
for almost 31% market share. Reports of Paull and Hennig (2018) have revealed that
Woolworths has surpassed its last years’ big Masters-enthused defeat to post annual profit of
around $1.5 billion. It is seen as a relative reversal from its $1.2 billion loss estimated in 2018
as the supermarket giant extricated its financial condition from the wreckage of the Masters
Hardware experiment. The aim of the report is to focus on the business level strategy of
Woolworths’ strategy.
Discussion
Pestle Analysis
Political- Australian political scenario has been considerate for Woolworths in relation of its
business performance. Masih et al. (2019) have cited example of the Australian federal
government that has recently introduced competition policy, which prohibits major retailers
in eliminating competition. On the other hand, guarantee of increased rate of return and

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reduced level of risk of business failure, FDI tends to be profuse, thus letting retailers to
operate devoid of any political disruption.
Economic- Due to global fiscal crisis, many retailers have encountered massive loss when
the company had to disrupt its business operations in the U.K further resulting to job
redundancy of almost 30,000 employees engaged to the retail store. However, regardless of
recession phase and obstacle in the UK market, major retailers have been currently
performing in consistent manner (Onyushevaand Seenalasataporn2018).
Social- Australian retail industry is promoting sustainability corporate practices and
environmental friendly lifestyle. Retailers have progressed in disfiguring the occurred
changes in the social context and have initiated selling varied products at reasonable prices.
The subsequent step the company has taken is consideration of communal trends and
introducing loyalty program. This program has aided the company to attain over 900,000
members.
Technological- Most of the retail firms has harnessed the innovations of information
communication technology to advance the efficacy of their service and content their
customers.
In support of effective administration, the company is utilizing RFID (“radio-
frequency identification) as vital part of the retail stores. This use of technology is enabling
the company in maintaining the stock obtainable for the store visitors. Furthermore, number
of retailers has amalgamated integrated Service Oriented Architecture (SOA) in order to
support the technology successfully.
Legal- Implementation of Carbon taxation charges across the Australian retail sector have
posed impacts on the business operations of retailers. Need of selling products in
considerable prices has further affected the performance of the company (Xu, Gao and
Hammond 2017).
Environmental-Retailers, which produce significant amounts of waste, may be asked by law
to accomplish their environmental behaviours. This may incorporate pollution compensations
as well as quotas thus can pose monetary restrictions on majority of retailers.

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Macro-Environmental Analysis of Australian Retail Sector
Source: (Onyushevaand Seenalasataporn2018)
Key opportunities and threats
Drawing relevance from the above macro-environmental analysis there can be identified
three factors related to threats and opportunities for the Australian retail sector.
Strengths
 Significant growth- Australian retail sector exhibits good growth potential and
supply chain development and strategic planning will influence the capacities of
retailers for good avenues. It can be noted that Australian retail will experience
strategy of multi-option retailing to manage varying needs and demands of buyers
(Onyushevaand Seenalasataporn2018).
 Strategic acquisitions- Australian retail sector can seek growth via strategic
acquisition and franchise models in developing financial systems.

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 Implementation of Carbon taxation- This new policy can significantly influence
Woolworths and other retailers’ business operations to increase its revenue income.
Threats
 Varying buyer-purchasing behavior from digital channel can be seen as a hazard to
the recent physical infrastructure determined supply chain model of Australian retail
market.
 Rivalry among major retailers- The threats to the Australian retail are significantly
rising from the complex competition level in the trade with Woolworths chiefly
contending with the Coles Supermarket.
 Increasing raw material prices from food as well as non-food will affect revenue
margins generally (Zielke2018).
Thus, it is conclusive that Australian retail sector is flourishing and offering significant
prospects to major retailers operating in the sector.
Competitive Analysis of Australian Retail Sector
Bargaining power of suppliers:
 Bargaining influence of suppliers in Australian retail sector is highly variable
depending on the suppliers’ brand recognition and dimension of supermarket. With
highly concentrated retail industry there are number of major retailers, which have
concentrated in major proportion of retail market share. This elevates the bargaining
power of suppliers to restrained level (Zielke2018).
 Products offered by these traders are relatively consistent, less segregated and
comprises of reduced switching expenses. These factors have made it less challenging
for buyers of major retailers to switch suppliers. Thus, it has made the bargaining
power of suppliers in Australian retail advertise a weaker force (Paulland
Hennig2018).
 Furthermore, the suppliers do not offer reliable risk for forward integration into the
Australian retail sector where Woolworths operates.
Bargaining Power of Buyers-

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 The product differentiation within Australian retail sector is high. This exhibits that
the purchasers are incapable to seek other businesses manufacturing specific product.
Such a challenge of switching has made the bargaining power of purchasers a weaker
influence within the Australian retail sector (Zielke2018).
 Iyer et al. (2018) reveal that retail products in Australia are mostly homogenous, thus
comprising of low switching costs. This has enabled the buyers to elevate bargaining
power.
 Moreover, income status of buyers within Australia is low. There are several critical
demands of acquisition at reasonable prices, thus making the purchasers’ more price
to be highly sensitive.
 There can be seen no major risk to the clients to integrate backwards. This results to
low level of threat of bargaining threat of buyers within the Australian retail sector.
Threat of New Entrants
 The thrifts of scale are considerably challenging to attain in Australian retail sector.
Such difficulty makes it less complex for business entities making major capacities to
have price benefit.
 On the other hand, the product differentiation has utmost robustness within this sector,
in which companies sell differentiated products instead of standardized product.
 Consumers in Australia seek for differentiated products. There can also be witnessed
strong emphasis on marketing and customer services. These factors have lessened the
threat of new entrants in the Australian retail sector.
Threat of Substitute Products
 There is less substitutes obtainable for the merchandises, which are produced in the
sector where Woolworths Australia executes its operations. Few accessible substitutes
are also shaped by small profit earning industries. Drawing relevance to these factors,
Onyusheva and Seenalasataporn (2018) mentioned that there are fewer opportunities
on maximum profits, which firms can earn, in Australian retail. These factors make
threat of substitute products quite low.
 Furthermore, less number of available substitutes is of supreme quality and costly.On
the other hand, businesses producing at reasonable price in comparison to its
substitutes with sufficient quality. This implies to the fact that buyers in Australian
retail market have low potential to shift to substitute products, thus making the threat
level quite low.
Rivalry among Existing Firms

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 Woolworths Group recently has been encountering competition from new entrants
such as Aldi, Coles Supermarket, Asda and Costco owing to their low competitive
product prices and diverse range. This implies that rivalry among existing firms is
quite high and intense (Aithal2016).
Conclusion
Hence, from the above discussion it is conclusive cthat Woolworths must aim at
outlining its strategy aligned to Australia’s political scenario and further adapt the plan of fair
value policy to its clients. Woolworths should establish large consumer base by proficient
marketing efforts of building brand loyalty since the bargaining power of purchasers is quite
low. Woolworths can benefit from its thrifts of scale in order to develop a cost benefit and
retail at low prices to low-wage clientele of the Australian retail sector.

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