Analyzing the Strategic Management of Woolworths Group

This report analyzes the internal and external environmental analysis of Woolworths Group in Australia. It discusses the threats and opportunities through PESTEL, Porter's Five Forces Model, and Value Chain Analysis. It also examines the competitive advantage and provides recommendations for the company's strategy.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
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Executive Summary
The report has thrown light on analyzing the internal and external environmental analysis of
Woolworths Group which is situated in Australia. Strategic Management is defined as one of the
essential parts of the business which will be beneficial in succeeding in the business
environment. Through PESTEL, Porter’s Five Forces Model along with Value Chain Analysis,
the different threats along with opportunities have been identified which plays a significant role
in successfully improving the various business operations. With the help of the competitor
analysis, it can be identified that Coles and Costco are the two main competitors which affect the
growth of Woolworths.

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Table of Contents
Strategic Management.....................................................................................................................0
1. Introduction..................................................................................................................................3
2. Evaluating the Environment of Woolworths...............................................................................3
a. External Analysis.....................................................................................................................3
b. Internal Analysis......................................................................................................................5
3. Analysis of competitive advantage..............................................................................................6
a. Discuss competitive rivalry......................................................................................................6
4. Strategy formulation and choice..................................................................................................7
a. Vision.......................................................................................................................................7
b. Goals........................................................................................................................................7
c. Initiatives – cost leadership versus differentiation...................................................................8
5. Recommendations and conclusions.............................................................................................9
a. With the rationale for support of strategy................................................................................9
b. With the rationale for the critique of strategy........................................................................11
References......................................................................................................................................12

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1. Introduction
Woolworths Supermarkets is an Australian supermarket chain which is owned by
Woolworths Limited. The company was founded in the year 1924, and it is headquartered at
New South Wales, Australia (Woolworthsgroup.com.au, 2019). The number of employees
working at Woolworths includes 115000 until the year 2017, and there has been an enormous
increase of A$56.726 billion in the revenue units until the year 2018. The mission of the
company is to satisfy the different partners along with the customers with unique shopping
experience by providing quality as well as the price which is based on attainment along with the
commitment of employees. The vision is to become an innovative and independent cooperative
suitable for meeting different needs of customers (Woolworthsgroup.com.au, 2019).
2. Evaluating the Environment of Woolworths
a. External Analysis
Porter’s Five Forces Analysis
The threat of Substitutes- It is high as Woolworth’s faces indirect competition from the
convenience stores and specialist grocery stores. The different evidence suggests that indirect
competitors are substitutes and pose a huge threat to Woolworths. Moreover, the convenience
stores have experienced huge expansion in offerings of products, and they are introducing
healthy alternatives that affect the growth of Woolworths (West, Ford & Ibrahim, 2015).
Rivalry among Existing Competitors- There is a high degree of rivalry from existing
competitors as there are different small players present in the market. There is no differentiation

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in pricing technique adopted by Woolworths, and it is a dangerous threat for Woolworths
(Rosenbaum-Elliott, Percy & Pervan, 2015).
Bargaining Power of Suppliers- The aspect is low as Woolworths and Coles are
controlling 80% of the market share, and therefore, they are considered to be the significant
purchasers which are one of the positive aspects (Renz, 2016). However, with the entry of
Costco supermarket along with the expansion of Aldi which can create moderate threat for
Woolworths in the future.
Bargaining Power of Buyers- It is low as the buying power of customers is set to
increase shortly as there is the introduction of new competitors which will increase the choice of
the customers (Renz, 2015). On the contrary, the purchasing power of customers is low which
creates enormous pressure for Woolworths to make the products available at lower prices to their
customers.
The threat of New Entrants- It is low and is set to remain unchanged in nature as well as
there are very less substitutes available in the market. The different few substitutes which are
available in the market provide the various products and services at low cost, and it is not
possible to match with the preferences of Woolworths (Morschett, Schramm-Klein & Zentes,
2015).
PESTEL Analysis
Economic Factors- The different economic climate has resulted in a low level of
spending on discretionary goods. Therefore, the customers are switching to the various private
label brands for a cost savings approach (McDONALD, 2016). In such a scenario, the different

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supermarkets are trying to increase the offerings of private labels. It enables them to compete
based on pricing aspects while gaining high margins.
Socio-Cultural Factors- It is the other factor which is increasing the overall
consciousness of the different customers towards health, and they prefer more healthy food items
consumption. The respective trend provides proper opportunity to Woolworths as there are only
a few players present in the market which are offering organic food items which are considered
an opportunity and threat (Hollebeek, Conduit & Brodie, 2016). Moreover, the social aspect is
that the high demand for the convenience related to time wherein the different individuals can
purchase various products and there are no such restricted trading hours.
b. Internal Analysis
Core Competencies
The motto of the company is to lower the costs of the different products along with
improved services provided to customers has been of enormous success for them. The approach
of customer-centric through offering fresh products has been assisting Woolworths in gaining
competitive advantage in the market (Hill, 2017). Moreover, the positive brand image along with
other segments of business such as home décor and grocery items are being sold which has
created a wide market base for the customers.
Value Chain Analysis
Inbound Logistics- Woolworths controls the distribution network of the products, and
there are two main functions which contribute towards firm (Felix, Rauschnabel & Hinsch,
2017).

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Operations- It includes assessment of quality wherein the standardized procedures are
used to detect defective products.
Marketing and Sales- There is the inclusion of in-store promotions and dynamism in
organizational activities which proves to be beneficial in adapting to changes to compete
effectively in the market (David, David & David, 2017).
3. Analysis of competitive advantage
a. Discuss competitive rivalry
The competitive rivalry is highly present in the Australian market, and it is affecting the
brand image of Woolworths. The different other retail companies such as Coles and Costco are
strongly involved in the business, and it is affecting the market share of Woolworths as well.
Besides, Woolworths has recently suffered from the penetration of DIY retail business which has
affected the business of Woolworths in a negative manner (Chernev, 2018). Furthermore, Coles
There is nationalization of
buying related activities to
achieve cost savingsProcurement
Proper technology installation
which will be beneficial in cost
cutting and efficiency of
distirbution
Logistics

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has been able to increase their investment which helped them in becoming more competitive in
comparison to Woolworths and gaining popularity in the respective business domain effectively.
The different new players in the market such as Costco and Aldi are the different retail
companies which are gaining huge competitiveness in the market as they are offering the similar
kinds of products to the customers and at low prices in comparison to Woolworths (Banerjee,
2017). These are the various companies which are providing huge competition to Woolworths,
and it is affecting the market share negatively. However, Woolworths is gaining competitive
advantage in the market in comparison to the other competitors through the adoption of the self-
check-out concept which helps them in being more competitive.
4. Strategy formulation and choice
a. Vision
The primary vision of the company Woolworths is to provide the different customers in the
market with the different kinds of products at less price which will be beneficial for Woolworths
in focusing on analyzing the various efficient means to turnaround the entire business.
Woolworth's strategy related to food will be focusing on the three major strategies which help
offer and improve the core values which will be beneficial in ensuring that the customers are the
first preference for Woolworths and the company needs to satisfy the different needs of the
company effectively (Baker & Saren, 2016).
b. Goals
The primary strategic goal and objective of Woolworths are to put the customers in the
first position across the different brands. As to identify the various purposes, Woolworths
Company mainly focuses on building a customer-centric company wherein the culture of the

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company focuses on prioritizing the diverse needs of the company accurately. In the future,
Woolworths want to concentrate mainly on drinks business which will be providing them with a
chance to expand their business activities and offer the different customers with more variants
under one roof (Baker, 2016). It will help increase the value for the different customers through
differentiating the food customer propositions. Besides, the company wants to become a lean
retailer in the competitive business environment by generating excellence in the systems.
On the other hand, as Woolworths is facing huge pressure in the market in comparison to
other retailers such as Coles which is affecting the overall profitability of the company. In order
to improve the respective position in the market, Woolworths need to look forward towards
introducing innovative products and services with the best quality and at lower prices. It will be
one of the major goals of the company as it will help enhance the scenario and gain a competitive
advantage in the market (Baker, 2015). There should be the inclusion of efficiency and
transparency in dealing with customers as they are the significant assets of the company and they
should be provided be the best quality as it is the foremost approach to generate excellence in the
system.
c. Initiatives – cost leadership versus differentiation
From the various researches, it can be identified that Woolworths Company has been able
to successfully integrate the different supplies of the products and services through vertical
approach and it is the differentiation aspect which will help gain a competitive advantage in the
market (Aghazadeh, 2015). Differentiation is the primary aspect that is followed by Woolworths
as the products which are sold and increasing competitive advantage in the market without
decreasing the price of the products. With the implementation of differentiation aspect, it will be

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helpful for Woolworths to stand out in terms of quality which will be set apart from the other
competitors.
On the other hand, cost leadership strategy is dominant in the respective company
Woolworths as the respective organization is dedicated to providing the diverse customers with
the most exceptional superiority of products at a lesser price in comparison to the other
competitors. Moreover, Woolworths can include the cost-leadership aspects which will be
beneficial for them in gaining competitive advantage in the strongly competitive environment
(Baker & Saren, 2016). These are the two approaches which can be helpful for Woolworths and
it will be useful for them in competing and attract more customers through managing
transparency in selling the different kinds of products and services to the customers.
5. Recommendations and conclusions
From the overall strategic analysis of Woolworths Company, it can be analyzed that there
are different recommendations which can be provided to the respective company which will be
both for support and critique of the strategy which will be implemented by Woolworths in the
future.
a. With the rationale for support of the strategy
In the respective aspect, it can be recommended that Woolworths Australia needs to offer
the different products and services to the various customers at the lowest prices as it will be
beneficial for them to gain a competitive advantage in the market. Besides, I feel that the
management of Woolworths needs to employ the different strategies which will reduce the
operations costs. Moreover, Woolworths needs to frame the various strategic related initiatives
which will be consistent in comparison to the political circumstances of Australia, and it will be

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beneficial for the organization in avoiding the missteps. The other recommendation which can be
made by me is that Woolworths require to develop strategic alliance between the different range
of operations through implementing the same with the reward program as it will be beneficial in
generating huge revenues and more profitability in the market and it will be helpful in creating
more profitability in the market as well.
The other aspect which can be adopted by Woolworths is that the management requires to
communicate transparently along with clear expectations as well as objectives to the different
associated employees as they are the significant assets of the company and it is one of the
essential parts of the compelling business future of Woolworths. I feel that the higher officials of
the company need to encourage open communication between the different suppliers, employees
as well as customers which will be beneficial in properly understanding the various business
activities.
In addition, Woolworths Company can include the cost leadership approach to be ahead
of the different competitors present in the market, and it will be beneficial in cutting down the
costs as well. In the respective regard, strategy related to a ‘just-in-time' approach can be useful
for the improvement of the supply chain related activities of Woolworths. From the different
recommendations, I can conclude that Woolworths needs to implement the various strategies in
performing the various activities as it will be helpful for them in enhancing the different
activities and improve their overall performance accurately.
b. With the rationale for the critique of the strategy
On the other hand, the critique of the strategy which can be recommended to Woolworths
are as follows:

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Firstly, Woolworths is facing various challenges wherein the pricing strategy is required
to be changed by the company as in the competitive market scenario; the different customers are
ready to pay a high amount for the high-quality products. Woolworths need to increase the
strategy related to pricing for achieving the different objectives as the customers are considered
to be the assets of the company. Moreover, Woolworths need to focus more on the cost-
leadership aspect wherein it will be improving the profitability of the company that has
downsized.
Lastly, it can be concluded that Woolworths needs to implement the strategic initiatives
which will be beneficial for the overall growth of the company. As customers are the assets of
the company, they need to improve the cost leadership strategy which will help cater to the
different needs of the customers, and it will be beneficial for the growth of the company.

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References
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Woolworthsgroup.com.au (2019) Annual Reports of Woolworths (online) Retrieved from
https://www.woolworthsgroup.com.au/page/investors/ourperformance/reports/Reports
[Accessed on 23rd April 2019]
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https://www.woolworthsgroup.com.au/page/about-us/ [Accessed on 23rd April 2019]