External Factors Influencing Woolworths' Business Operations
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This report analyzes the external factors influencing Woolworths' business operations and evaluates its business strategies relevant to its processes. It also analyzes Woolworths' market positioning in the retail and grocery sector.
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Running head: BUSINESS ENVIRONMENT BUSINESS ENVIRONMENT Name of the Student: Name of the University: Author note:
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1 BUSINESS ENVIRONMENT Executive Summary The organization’s primary role is to understand its environment in which it operates as to identify the marketing environment and thus take management and marketing strategies in accordance to the organization’s environment. These decisions need to properly implement the company’s potentials and capacities in order to maximise its ability and successfully satisfy the customer base to the fullest. The report has attempted to recognize the external environment of Woolworths Limited and the way it strategizes its marketing plans and initiatives to cater to these environmental forces.
2 BUSINESS ENVIRONMENT Table of Contents Introduction......................................................................................................................................3 Discussion........................................................................................................................................3 Woolworths’ Corporate Strategy.................................................................................................3 Porter’s five forces of Woolworths..............................................................................................4 Woolworths’ Market Positioning in Retail and Grocery Sector..................................................5 Strategies applied by Woolworths to improve its business operations........................................6 Woolworths sales amplifies with digital strategy........................................................................7 Woolworths Offer Competitive Strategy.....................................................................................8 Conclusion.......................................................................................................................................8 References......................................................................................................................................10
3 BUSINESS ENVIRONMENT Introduction Woolworths since its opening of first single basement store in Sydney has attained substantial recognition with a dominant presence in about every metropolitan and regional store inAustralia.Woolworthsinitiateditsbusinessoperationswithfreshfoodstoreswhen development in refrigeration technology significantly revolutionalised transport and storage. The company has exhibited consciousness of the potential enduring impacts of change in climatic conditions on the planet and food delivery. Woolworths understand such concerns are shared by consumers and communities (Woolworths.com.au, 2018). The company in the year 2007 issued its sustainability strategy 2008-2016 entitled as “Doing the right thing”. In this approach, a series of goals and commitments have been established in order to condense the effects of carbon releases from facilities such as distribution centres, transport and waste and sourcing products (Woolworths.com.au, 2018). The following paper aims to examine the environmental factors of Woolworths which tend to influence the company’s business operations. In addition to this, it will further evaluate Woolworths’ business strategies that is relevant its business processes. Discussion Woolworths’ Corporate Strategy Chanticleer, (2018) report that the major tactical priority for Woolworths is to establish multi-option selling operations in terms of low price and in-store practice in order to attain consumer demands and requirement. The company has attained a position as the major e- commerce retailer in Australia and has a purpose to reach over A$ 1.7 million sales in digital channel by 2020 (Sullivan & Gouldson, 2017). In order to achieve mission, Woolworths has been pursuing its four strategic priorities which involves an expansion of leadership techniques in food and liquor by reinstituting marketing promotions of adding values and standards for
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4 BUSINESS ENVIRONMENT stakeholders and further intensifying growth to extend the dimension of Australian market share (Chanticleer, 2018). The company further according to Sullivan and Gouldson, (2017) has been efficiently maintaining track record of building growth to develop as Australia’s one of the most trusted retail enterprise with multi-option retailing. Analysis of External Factors influencing Woolworths’ Business Processes At this juncture, it is essential for Woolworths to significantly evaluate the impact of external environment on its productivity and success of business strategies (Woolworths.com.au, 2018). Mialon et al., (2016) is of the perspective that not only external factors tend to significantlyinfluencethebusinessperformanceofWoolworthsbutcorporatestrategic management is also influenced by the company’s internal factors. Thus understanding its market position in the Australian retail sector will facilitate the company to enhance its current strategies. Porter’s five forces of Woolworths Bargainingpowerofbuyers-(High)-Reportsrevealthatmajorproportionof Woolworths’ consumers are individual purchasers who possess immense bargaining power. Chanticleer, (2018) stated that strong power buyers tend to reinforce the company reducing the prices as the credit of purchasing in-store products. Bargainingpowerofsuppliers-(Low)-Porters’fiveforcesanalysisindicatesthat stakeholders playing crucial role tend to be in the stronger position. Thus the company’s business particularly Safeway supermarkets tend to have relatively low reliance in suppliers and distribution signifying the weak bargaining ability of suppliers. Sullivan and Gouldson, (2017) claim that primary reason of low level power of Woolworths’ suppliers is due to its substantial amount of market share in the Australian retail industry.
5 BUSINESS ENVIRONMENT Threatofsubstituteservices-(High)-Woolworths’businesspracticestypically encounter critical challenges and high competition specifically in operating Woolworths’ Supermarket (Mialon et al., 2016). As some of the major competitors of Woolworths such as Coles offer similar products, the company must efficiently introduce wide range of innovative as well as competitive marketing strategies to magnetize increasing number of consumers and set up their brand repute. Threat of new retailers- (Low)- This force of external factor is considered to be significantly low as marketing theorists claim that establishing a business with wide ranging outlets and further offering exceptional quality products and services with competitors like Coles requires considerable amount of financial resources. Chanticleer, (2018) note that that Woolworths and its current rivals are regarded as leading player with inconsistent accesses to allocation channels and dependant brands in retailing sector. Rivalry among competitors-(High)-The occurrence of immense competition in the Australian retail sector such as Coles Group or Target Corporation have the propensity to constrain market dimension and value of Woolworths. Furthermore, the power of these rivals has been reinforcing (Sullivan & Gouldson, 2017). Woolworths to continually create competitive as well as effectual strategies to successfully distinguish themselves as competitors. Woolworths’ Market Positioning in Retail and Grocery Sector Recent reports by Trevena et al., (2015) reveal that Woolworths has acquired an approximate of over 32.5% of the total grocery market which involves fresh food along with a rise of around 0.8% over the 2017 result. Pollard et al., (2014) state that the two consistent performers in 2017 for acquiring substantial share in the overall retail sector were Aldi with
6 BUSINESS ENVIRONMENT around 0.8% points with a rise of around 12.3% while Woolworths on the other hand with an increase of approximately 33.3% points from 0.8% (Carey et al., 2016). Such a statistical data reveals that the cumulative market value of Woolworths, Coles and Aldi has been estimated to be around 75% with a 1.7% increase since 2016. Whereas, another competitor of Woolworths that is IGA has been facing critical challenges from these competitors and has been positioned at the fourth place on 7.3% with a decline of around 1.1% (Mortimer & Grimmer, 2018). Market Position of Woolworths and its competitors in the Australian Retail Sector Source: (Carey et al., 2016) Strategies applied by Woolworths to improve its business operations Woolworths recently has outlined its strategic business operations in order to acquire substantial level of prominence and trust from its customer base (Woolworths.com.au, 2018). However, the company reveals that it has already been in progress of applying the core approaches of business strategies with significant investment program that involves $130 million
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7 BUSINESS ENVIRONMENT of price decrease for customers since 2015 deriving its market value and position to the most competitive level. Chanticleer, (2018) claim that this new marketing pricing and value strategy has been applied in order to neutralize Coles and further constitute Aldi’s influence on the sales rate of Woolworths. Measures will incorporate a lower pricing strategy with improved ranging that targeted consumer offers utilizing a refurbished and advanced loyalty program (Mialon et al., 2016). Cost Leadership Strategy-Cost leadership strategy by Woolworths primarily incorporate offering wide ranging services and products at a lower cost than its competitors. To acquire the maximum services and profits at the lowest expenses, the company must efficiently engage the ‘sales up costs down policy’ for several years which have been designed in order to reduce the expenses related to supply and production (Pollard et al., 2014). Woolworths have been in high success for implementing the policies and strategies along with a lowered level of prices (Woolworths.com.au, 2018). Furthermore, Mialon et al., (2016) have revealed that Woolworths must take into utmost consideration other cost leadership schemes in order to reduce their operating expenses. These expenses primarily involve ‘just-in-time’ strategy. However the strategies have been efficiently utilized in managing goods and services in proper supply chain to decrease the expenses of wastage and storages by making as well as arriving goods at retailers at the time they are required. Therefore Sullivan & Gouldson, (2017) state that in order to efficiently attain the strategies, it is highly essential for Woolworths to have a stock replacement or refill program to forecast the amount of goods which are demanded. However the long distance between the stores and suppliers is regarded as a critical challenge as Woolworths’ suppliers are located around Australia (Mialon et al., 2016). Woolworths sales amplifies with digital strategy
8 BUSINESS ENVIRONMENT Woolworths in recent times has been investing in its digital strategy as the global trends and developments reveal a consistent growth in e-commerce shopping and tech-savvy instate consumer experiences (Patroni, von Briel & Recker, 2016). Woolworths.com.au, (2018) has reported a significant growth of around 9.5% rise in group revenues along with a 3.5% rise in sales off the back of its enduring customer-driven turnaround endeavours and consistent supermarket performance. Woolworths’ supermarket segment has been a consistent player with around 4.5% increase in sales over the 8 months to $38.40 billion and a 9.7% increase in EBIT (Earnings Before Interest & Tax) to over $1.80 billion (Pollard et al., 2014). Through the digital strategy,theWoolworthsGrouphasshedlightonstrongcustomersatisfactionacross Woolworths’ supermarkets as a significant success with a range of VoC that is voice of customer scores. These VoC has been reportedly improving over the last one year (Carey et al., 2016). Woolworths Offer Competitive Strategy Woolworths refers to the fundamental aim of attaining sustainable competitive gains and further increasing the sales growth of the company (Chanticleer, 2018). Woolworths has continually faced critical competition from one of its strongest competitors Coles as these two enterpriseshavedominantlycomprised80%oftheAustralianretailmarket (Woolworths.com.au, 2018). Woolworths in order to attain its position on the Australian retail market has been focusing on endorsing brands which has been creating tensions for Australian retail producers who anticipate Coles’ private label strategy and planned reduction in its aggregated number of product range could affect its sales in future (Sullivan & Gouldson, 2017). Conclusion Therefore, from the above discussion it has been stated that Woolworths has been recognized as one of the most trusted brands because of its innovative branding strategy and
9 BUSINESS ENVIRONMENT wide ranging offerings of products. As the company’s total retail experience has been more vital to its customers, Woolworths has been offering a wide range of quality shopping experiences to successfully cater their needs and requirements be online or through offline store services. Woolworths should maintain and develop its intentional association and coalition among the core businesses with diverse business processes. However in order to attain complete benefit of the strategy, Woolworths is suggested to unite the association with the efficient reward program which will build long term consumer loyalty by offering buyers to collect reward points.
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10 BUSINESS ENVIRONMENT References Carey, R., Caraher, M., Lawrence, M., & Friel, S. (2016). Opportunities and challenges in developing a whole-of-government national food and nutrition policy: lessons from Australia’s National Food Plan.Public health nutrition,19(1), 3-14. Carey, R., Krumholz, F., Duignan, K., McConell, K., Browne, J. L., Burns, C., & Lawrence, M. (2016). Integrating agriculture and food policy to achieve sustainable peri-urban fruit and vegetable production in Victoria, Australia.Journal of Agriculture, Food Systems, and Community Development,1(3), 181-195. Chanticleer. (2018). Woolworths is winning a very different grocery game. Retrieved from https://www.afr.com/brand/chanticleer/woolworths-is-winning-a-very-different-grocery- game-20180222-h0wj72 Evans, P., & Forth, P. (2015). Navigating a world of digital disruption.IEEE Engineering Management Review,43(3), 89-97. Mialon, M., Swinburn, B., Allender, S., & Sacks, G. (2016). Systematic examination of publicly- available information reveals the diverse and extensive corporate political activity of the food industry in Australia.BMC public health,16(1), 283. Mortimer, G., & Grimmer, L. (2018). Love them or loathe them, private label products are taking over supermarket shelves.The Conversation, (19). Patroni, J., von Briel, F., & Recker, J. (2016). How enterprise social media can facilitate innovation.IT Professional,18(6), 34-41. Pollard, C. M., Landrigan, T., Ellies, P., Kerr, D. A., Lester, M., & Goodchild, S. (2014).
11 BUSINESS ENVIRONMENT Geographic factors as determinants of food security: a Western Australian food pricing and quality study.Asia Pacific journal of clinical nutrition. Riemer, K., Gal, U., Brunk, J., Gilchriest, B., Ord, R., & Tong, J. A. (2014).Australian Digital Commerce:NowisthetimeforAustralianRetailerstoAddresstheCustomer Engagement Gap. University of Sydney, Business School and Capgemini. Sullivan, R., & Gouldson, A. (2017). The governance of corporate responses to climate change: An international comparison.Business Strategy and the Environment,26(4), 413-425. Trevena, H., Neal, B., Dunford, E., Haskelberg, H., & Wu, J. H. (2015). A comparison of the sodiumcontentofsupermarketprivate-labelandbrandedfoodsin Australia.Nutrients,7(8), 7027-7041. Woolworths.com.au.(2018).{{metaController.metaData.title}}.Retrievedfrom https://www.woolworths.com.au/