Competitive Strategy: SWOT, PESTEL, and Five Forces Analysis of Woolworths

This essay explains how Woolworths uses SWOT, PESTEL, and Five Forces analysis to gain a competitive edge in the retail industry against rivals like Wal-Mart, ALDI, TESCO, and Macro Wholefoods Limited. The essay discusses the internal and external market factors affecting Woolworths' performance and sustainability in the market.

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Competitive Strategy
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Introduction
Gaining a competitive advantage against a company’s rivals involves the creation and sustaining
of superior performance by the company. Woolworths, an Australian based company operates in
the retail industry. The retail industry is highly competitive and this forces Woolworths to
formulate competitive strategies by differentiating its operations from the competitors in order to
gain a competitive edge (Madsen and Walker, 2015, p. 88). Woolworths faces stiff competition
from Wal-Mart, ALDI, TESCO, and Macro Wholefoods Limited companies. The main goal of
Woolworths is becoming competitive in the retail industry by giving customer high-quality retail
services and products. To achieve this dream, the company applies strategy development tools
such as the SWOT analysis, PROFIT, PESTEL, Porter's five forces in designing competitive
advantage strategies against its main rivals as mentioned above. The aim of this essay is
explaining SWOT, PESTEL, and Five Forces as the main strategy development tools used by
Woolworths in gaining a competitive edge against its competitors.
Porter’s Five Forces
The Porter five forces strategy analytical tool assesses the current position of the whole sector in
which a company operates (Porter, 2011, p. 66). The analysis of Woolworth's operations in
Australian retail industry is done through the application of the five forces as follows:
Bargaining power of buyers
There are numerous companies that operate in the retail industry in Australia. As a result, the
bargaining power of customers is significantly higher as far as the purchasing of basic
commodities from the supermarkets by customers is concerned (Porter, 2011, p. 68). Since

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buyers have broad options of companies to buy from, Woolworths offer after sales services such
as discounts, transport, and e-business more effectively hence winning more buyers. As a result,
the competitive edge is gained.
Bargaining power of suppliers
The Australian retail industry is highly concentrated with big companies and among them is
Woolworths. Other players also dominate the market such as Wal-Mart hence divides the market
share for Woolworth’s retail products (Porter, 2011, p. 69). Woolworths, therefore, should
advance its supplies roles to boost its performance in the market hence obtain a wider market
share that leads to a competitive advantage.
Threats of new entrants
In the Australian retail industry, the threat of new players is low since the big companies have
dominated the market (Porter, 2011, p. 70). Woolworths being a big player in the market needs
to acquire more businesses and market its products in the country to compete out the already
established rival firms such as Wesfarmers.
Rivalry among existing companies
Woolworths is rivaled by Wesfarmers and Wal-Mart in the Australian market. Woolworth
competes with these companies for the market share (West, Ford, and Ibrahim, 2015, p. 40). The
management should properly assess the strategies used by these rivals to design counter-
strategies of improving market share.
Threat of substitute

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Woolworths sells basic commodities for human survival. The market has no other alternative
consumable product hence must buy from Woolworths. Therefore, the threat of substitute is
lower and consumers have to utilize the retail commodities for there is no other choice.
PESTEL Analysis
PESTEL is another crucial tool that Woolworths can use in assessing its external industry
environment that impacts on its performance.
Political
The political factors in Australia significantly affect Woolworth’s performance in the retail
industry adversely. For example, the Federal government launched a competition policy to deny
Woolworths and other big players the right to eliminating competition (Ashton and Morton,
2005, p. 30). These political conditions make Woolworths lose completion edge to small retailers
hence should be addressed.
Economic
Market recessions in Australia have adversely affected Woolworths performance and
profitability in the retail industry. There have been declines in economic activities in Australian
markets and this affects Woolworths (Babu, 2012, p. 55). Also, currency fluctuations and
exchange rates disparities affect Woolworths international businesses.
Social
The norms, beliefs, religions, customs, and behavior of consumers in Australian market also
affect Woolworths performance in the retail industry. For example, some cultures prohibit

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consumption of certain foods sold by Woolworths (Yüksel, 2012, p. 52). The company is highly
socially responsible to the society and gives back to the society.
Technological
Woolworths operates in a technologically competitive industry in which investing in technology
is necessitated. Other big players such as Wal-Mart use e-commerce in selling its products.
Woolworths applies the green refrigeration technology in storing perishable products (Babu,
2012, p. 56). Further, the company is adopting the e-business model to increase its sales hence
enhance its competitiveness in the industry.
Environmental
Environmental factors also impact on Woolworths performance and competitiveness in the
industry. Petrol and winemaking businesses around Woolworths location poses adverse threats to
the company in that the environment is at risk of unclean air to breath and water to drink. As a
result, the healthy conditions of workers are endangered (Ghemawat, 2016, p. 732).
Legal
Legal factors affect Woolworths in form of carbon tax that was implemented by Australia’s
Federal government and affected the retail sector in particular. Regulation of retail operations by
Australian Competition and Consumer Commission adversely affects Woolworths performance
in the industry (Wagner and Hollenbeck, 2014, p. 90).
SWOT Analysis

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Woolworths applies SWOT (strengths, weaknesses, opportunities, and threats) analysis tool in
understanding both internal and external demands in the market hence gaining a competitive
advantage.
Strengths
i. Strong retail brand name and efficient
operations
ii. Popular and successful brands such as
Chad Valley
iii. Use of modern retail trade model
iv. A wide variety of retail products
Weaknesses
i. Global presence is negligible as
compared to that of rivals
ii. Failure to sustain a competitive edge of
its brand in the market
iii. Late entry to e-commerce hence stiff
competition
iv. Lower experience in online marketing
Opportunities
i. Promote its retail brands through
adverts, sales promotions, and
sponsorship
ii. Wide unexploited retail market in the
world
iii. Availability of strategic acquisitions
and mergers in the market
iv. Numerous franchise models in
emerging economies
Threats
i. Stiff competition both locally and
internationally
ii. Recessions in the economy that hinder
its growth strategies
iii. Increase in material costs from both
food to non-food products
iv. Falling profit margins due to rising of
material costs

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As highlighted in the introduction, the main competitors of Woolworths are TESCO, Wal-Mart,
and ALDI. A proper understanding of the internal and external market forces would help the
management of Woolworths design effective competitive advantage strategies (Arli et al., 2013,
p. 16). These strategies include the exploitation of the potential markets in the world market to
boost performance, the formation of mergers and acquisitions with other companies to diversify
its brand recognition and enhance its financial position (Gunjal, 2017, p. 40). Further,
Woolworths marketing team needs to employ franchise models in its acquisition policies so as to
thrive in the market. Also, the company should enhance creativity and innovation by getting up
to date with the new business technologies such as online marketing and e-commerce in order to
gain a competitive advantage over its key rivals (Gunjal, 2017, p. 20). Finally, Woolworths
needs to invest in building its brand to enhance that its value is maintained in the market hence
maintaining its competitive edge.
Conclusion
A critical strategic analysis of Woolworths has been undertaken with an aim of assessing the
critical strategies that the company uses to gain a competitive edge against its big rivals. The
performance of Woolworths is affected by both internal and external market factors ranging from
SWOT factors, PESTEL Factors, and Porter Five Forces. From the analysis, Woolworths is
strongly committed to establishing a brand acceptable in the entire Australian and international
markets. Woolworths is faced with stiff competition from other big players in the retail industry
and this threatens its performance and sustainability in the market. Also, Woolworths operates in
adverse economic, political, and legal market environment that affects its performance. While
the company cannot take control over the adverse PESTEL factors, the company can come up
with strategies for advancing an efficient SWOT model in which all opportunities are exploited

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and all weaknesses addressed appropriately. Therefore, Woolworths should frame a consistent
competitive strategy in which all adverse factors are properly addressed in a manner that will
establish a fair price policy to the consumers.

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Bibliography
Arli, V., Dylke, S., Burgess, R., Campus, R. and Soldo, E., 2013. Woolworths Australia and
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Babu, H.S., 2012. SWOT analysis for opening of FDI in Indian Retailing. European Journal of
Business and Management, 4(3), pp.55-65.
Ghemawat, P., 2016. Evolving ideas about business strategy. Business History Review, 90(4),
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Gunjal, T.D., 2017. A SWOT ANALYSIS AND RECENT FDI CONTROVERSY OF RETAIL
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Porter, M.E., 2011. Competitive advantage of nations: creating and sustaining superior
performance (Vol. 2). Simon and Schuster.
Wagner III, J.A. and Hollenbeck, J.R., 2014. Organizational behavior: Securing competitive
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West, D.C., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating competitive advantage.
Oxford University Press, USA.

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Yüksel, İ., 2012. Developing a multi-criteria decision making model for PESTEL
analysis. International Journal of Business and Management, 7(24), p.52.