Strategic Analysis of Woolworths: External and Internal Analysis

This report provides a critical strategic analysis of Woolworths, including external and internal analysis. It evaluates the impact of political, environmental, and competitive factors on the Australian retail market. It also identifies the firm's resources, capabilities, and core competencies, and recommends a suitable information system for the company.

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STRATEGIC ANALYSIS
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Executive summary
The report outlines a critical strategic analysis of the information system that is being
carried out by Woolworths for accomplishing the level of growth and establishment in its
functions. In this context, the analysis carried out here indicates that the strategy of
Woolworth is to obtain higher level of growth in all the level of growth. However, the
analysis has been elucidated through external environment influencing Australian retail
market in the form of political as well as environmental impact.
Apart from these, impacts, the report has also evaluated competitive situation of the
environment that is extremely intense forcing the company to impend on the level of change
and development in their system of information communication and strategy.

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Table of Contents
Part 1..........................................................................................................................................2
External analysis........................................................................................................................2
1. Business background..........................................................................................................2
2. Industry analysis.................................................................................................................2
3. PESTLE analysis................................................................................................................3
4. Porter’s Five forces.............................................................................................................4
5. Competition Analysis.........................................................................................................5
6. Opportunities and threats....................................................................................................6
Part 2..........................................................................................................................................6
Internal analysis.........................................................................................................................6
1. Firm’s resources.................................................................................................................6
2. Identification of capabilities...............................................................................................7
3. Core competency analysis..................................................................................................7
4. Suitable information system...............................................................................................9
5. Evaluation of the proposed system and recommendations...............................................10
Reference list............................................................................................................................11

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Part 1
External analysis
1. Business background
Woolworth opened its first store in Sydney in the year 1924 in the form of a bargain
base basement outlet in Australia. In the year 2012, the organisation turned in to the largest
supermarket chain in Australia with almost 28 million customers within a week that reported
almost 31% of the market share (NewsComAu 2018). However, Woolworth functions with a
number of brands that are known as Woolworth Safeway supermarket. Therefore, Woolworth
is one of the largest food and grocery retailers on the basis of sales, revenue, and a growing
number of supermarkets as well as stores.
The company has nearly 840 supermarket stores across the boundaries of Australia,
150 supermarkets in New Zealand and 22 retails stores across Indian boundary which are
joint venture agreement with the Indian Supermarket. However, the organisation’s EBIT at
the end of the year 2017 was almost 3.7% increase with AU $14.52 billion in which most of
the revenues come from Australian operations (Woolworthsgroup.com.au 2018). The
quarterly sales of food in Woolworth excluding alcohol, fuel and hotel was about AU $7.97
billion in the year 2017.

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Figure 1: Annual growth of Woolworth Australia
(Source: NewsComAu 2018)
2. Industry analysis
Australian retail industry contains almost 140,000 retail business with limited players
in the supermarket sector. In this, the major players are Woolworth Ltd, Cole's group ltd and
ALDI in Australia. However, amongst all these supermarket chains Woolworth is the largest
employers. There are almost 1.2 million people who are employees in the retail market
industry (Grimmer 2018). Business in this industry deals with the broadest choice of
groceries and non-expertise food lines that are inclusive of fresh foods and vegetables,
canned foods, daily goods and cleaning merchandise.
Therefore, the retail industry in Australia is the potential contributor to economy
providing almost $53billion or 4.1% of the GDP. In Australia, large businesses in the retail
field are comparatively more profitable than the smaller business organisation as they get
better returns on capital than their overseas counterparts (Ens et al. 2016). The supermarket
industry in Australia is presently ruled by the largest retail chains Coles and Woolworth.

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3. PESTLE analysis
Political and Legal
The government of Australia has a direct influence on the supermarket industry in
terms of regulatory terms, trading hours and due to the monitoring and regulatory functions
of Australian competition and consumer standards. It is the Commonwealth government that
sets out trade practising Act (TPA) and the foreign investment review Board on the
production of Goods (Azavedo and Walsh 2018).
Economical
The slow and uncertain growth of the Australian economy in the present period has a
high potential to pose a threat to the retail industry resulting in the stagnant growth of the
supermarket chain. Moreover, the growing rate of unemployment and a probable increase in
the price of fuel and salary may also impact upon the participants of the retail industry
(Pateman et al. 2016).
Social
Australia population was 22 million in the year 2015 and it is evident that there is a
mix of ethnic as well as religious groups of people present in the region due to the
immigration policy. In Australia, the population aged more than the age of 65 currently
accounts for 12% of the entire population that will increase by 25% by the year 2021
(Grimmer et al. 2016). However, changing social concerns and behaviour of people have
influenced the supermarket industry a lot in Australia. People nowadays are more concerned
about their health as a result people demand more for low carb diet that is easy to cook.
Technological

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Woolworth adopted a new technology which was first subscribing this in the year
1994. This system of technology has helped them to improve their supply chain and system
of distribution that has the potential influence on cost savings (Chimhundu 2018). This
system has also helped to increase the online system of shopping and has helped to develop
the company websites.
Environmental
The environmental aspects of the Australian region may also influence the
performance of Woolworth and the other retail industry. An analysis shows that Woolworth
in specific is affected by the environmental factors such as the rise in petrol price. Moreover,
winemaking business is also facing threats on the performance (Battilani et al. 2015).
4. Porter's Five Forces
Power of customers
In Australia, supermarkets provide almost homogenous goods that have the low cost
of switching in between different stores. Therefore, this provides the purchaser with a high
power of bargaining.
Power of suppliers
The bargaining power of suppliers in the supermarket retail sectors depends on the
brand name and size of the supermarket. Therefore, the bargaining power of the suppliers in
the supermarket in Australia is high to average (Collins and Junghans 2015).
Industry substitution
Within supermarket chain there a number of substitute options available for the
customers such as convenience stores, healthcare stores, non-affiliated stores, online

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platforms, grocery stores and fresh food local stores (Jie et al. 2016). Moreover, customers
are increasingly willing to pay a high cost for reasonable standards owing to easier parking,
online delivery. Therefore, the threat of substitute is moderate to high
The threat from the emerging market
Owing to low price offer for the products in Australian retail supermarket, it is not a
tractive sector to enter. The industries have a scarce availability and high price in the market
with high investment capital along with government obligation that can be challenging to
entry. Therefore, the barrier to entry of the emerging market is moderate (Shauki 2016).
Rivalry between competitors
The rivalry between different competitors within a supermarket in Australia is very
intense due to the presence of several supermarket stores.
5. Competition Analysis
The relationship of existing big players such as Coles, Aldi, and other supermarket
chains with the suppliers and requirement of developing their own centre for distribution may
be a barrier for the company. Apart from these, dominating online grocery stores may be high
competition for the company along with the presence of existing competitors in Australia
(Juan Ding et al. 2014).
As stated by Sullivan and Gouldson (2017), the rivalry is specifically destructive for
the profitability of the market solely due to the competition in prices that transfers the profit
directly from one industry to the consumers. Therefore, the retail industry in Australia is
extremely mature and intensely competitive with a low amount of potential profit. Despite the
competition, the company has almost 10.7% growth in the market that represents that it is the
dominating company in Australia (refer to appendix 1).

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6. Opportunities and threats
Opportunities
 The company has the potential to
expand the customer base
 They have the potential to increase
market revenue
 They have the opportunity of growth
in health and food retail sector
 Opportunity to use ICT operations
for reducing cost (Sullivan and
Gouldson 2017).
Threats
 Poor growth and uncertainty in the
Australian economy
 Economic recession and increasing
unemployment rate
 The growing power of the suppliers
 Technological growth (Suryawati
2018).
Part 2
Internal analysis
1. Firm’s resources
At the end of 2017, Woolworth operated with almost 3000 stores across Australian
boundary and New Zealand with an approximate number of employees of 180,000. This
shows that its tangible and intangible resources are comparatively stronger than other
supermarket chains. However, Woolworth has an effective system of management and
human resource with a broad range of product development skills and supply logistics
management along with strong reputation (Woolworthsgroup.com.au 2018). Moreover, the
company has a strong partnership and management of alliances that are vertically
incorporated in their business.

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2. Identification of capabilities
Capabilities represent the organisational skills in managing the resources while
putting them into effective use. Methner et al. (2015) stated that since the year 1924
Woolworth has been running their business in a successful way. This shows that they are
capable of using expertise employees in the appropriate position and they are well aware of
setting the resources.
3. Core competency analysis
First class supply chain
Woolworth innovation and competitive edge have been established through its supply
chain. In this context, Woolworth has significantly focused on the effectiveness and cost-
cutting strategies for handling their expenditure. It is a mixture of tangible and intangible
assets such as technological capacities and ways for developing relationships with the
suppliers (NewsComAu 2018). However, the level of cost-saving advantages provided by the
company through effective supply chain system is non-replaceable by any other resources.
These, the system is as well not possible to replicate at any of levels of technological
advancement.
Branding and industry
In terms of branding Woolworth has successfully positioned itself in the stores with a
slogan saying “fresh food for the people” slogan that created differentiated brand image
highlighting quality and healthy food products at affordable prices. Consumers have a
positive experience from the products that can be attributed to strict quality examined
processes throughout the process of the supply chain. In the existing period, 100% of the
fresh poultry and 95% of the fresh fruits are obtained from Australian retail market (Battilani

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et al. 2015). Therefore, these, brand reputation is a necessity for contributing towards higher
levels of customer satisfaction.
Innovation
In the case of innovation of project and product, Woolworth has adopted a number of
projects that are inclusive of "refresh", and the new idea program for petrol retail options.
Apart from these, the company also launches “everyday money” strategy with the credit card
partnership with HSBC bank (NewsComAu 2018). Moreover, Woolworth has launched
various system of reward for the customers and convenient programs along with the
innovation in products and service to increase competitive edge.
Incorporation
Woolworth has vertically developed integration with some suppliers by
manufacturing is own inputs for the expanding the power of the market and to respond to the
private tend in the existing market. Through this integration, the company has now produced
a broad range of products that are available under the Woolworth select brand. This brand
intends to offer consistently high quality to the customer.
4. Suitable information system
It can be said that weather is an application targeted towards a specific mission or a
web-capable business process or an entire enterprise system of resource deducing the
appropriate information system is often challenging. This is because; a single inappropriate
decision may result in troubling technology other than the business process. Therefore,
effective solution is necessary for setting the suitable system, that will help is generating
information (Sutton-Brady et al. 2015). The business organisational needs to drive the choice
of designing appropriate technology.

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Woolworth needs to have a web-based financial system for reporting and budgeting system
for enhancing strategic decision making, for linking budgets to the organisational strategy
and improve the system of ease and management reporting. In this context, data management
and planning commission reported that this system helps in integrating planning, budgeting
and management reporting within one single system of application (Sullivan and Gouldson
2017). Therefore, this will allow Woolworth Ltd an international strategy of reporting process
thereby enabling users to access reliable information through the internet from anywhere in
the country.
In order to efficiently execute a corporate strategy, managers of the organisation are
needed to set accurate, and on time business knowledge that they can utilise in any situation
from their web browsers. In this context, Comshare system of information system will
provide the managers through unified web-based interface modules to help them in planning,
financial consolidation and management reporting evaluation. Shauki (2017) stated that
Woolworth currently uses a Lotus spreadsheet for financial analysis and reporting and
cumbersome for the purpose of the home-grown system of budget evaluation. The major
issue with the existing system of reporting that is oriented to one single person in the
organisation. The organisation needs expanded accessibility of information for making
decisions,
5. Evaluation of the proposed system and recommendations
The new information system solution will help the company in making fast, informed
and smart decision making based on more original data. In addition to the reporting
information sets will be easier to deploy, in spite of its location. Moreover, the system will be
flexible enough to allow the usage at different levels of management. Another advantage of
the system will be the empowerment of the end users who will be able to receive relevant
information in a smooth way.

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Recommendations
 For a short-term period, Woolworth needs to implement an effective social media
strategy for taking advantage of low-cost advertisement activities.
 The company started providing organic and GM-free food items
 For long-term activities, the company needs to expand its R&D investment in
conducting research in food and wine-related disease for preventing itself from new
government regulatory standards.
 Woolworth needs to diversify in innovative business that will allow them to increase
their sales. This is because the attractiveness and profit margin in Australian
supermarket is dry for the future.

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Reference list
Azavedo, M. and Walsh, J., 2018. Artisanal Food Production And Marketing In The Perth
Area Of Western Australia: Some Preliminary Indications Of Difficulties With Classical
Economics And Supply Chain Theory. Management and Marketing Journal, 16(1), pp.47-57.
Battilani, P., Balnave, N. and Patmore, G., 2015. Consumer co-operatives in Australia and
Italy. Cooperative Enterprises in Australia and Italy, pp.57- 60.
Chimhundu, R., 2018. Key Research Issues in the Marketing of Private Label and
Manufacturer Brands. In Marketing Food Brands (pp. 107-123). Palgrave Macmillan, Cham.
Collins, D. and Junghans, A., 2015. Sustainable facilities management and green leasing: The
company strategic approach. Procedia Economics and Finance, 21, pp.128-136.
Ens, E.J., Daniels, C., Nelson, E., Roy, J. and Dixon, P., 2016. Creating multi-functional
landscapes: Using exclusion fences to frame feral ungulate management preferences in
remote Aboriginal-owned northern Australia. Biological Conservation, 197, pp.235-246.
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Behaviour, 17(1), pp.13-20.
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planning for small and social retail enterprises in an economically disadvantaged region.
European Journal of International Management, 10(4), pp.403-421.
Jie, F., Parton, K. and Chan, C., 2015. Australian beef supply chain integration: case studies
of the two largest Australian supermarkets. International Journal of Supply Chain and
Operations Resilience, 1(2), pp.121-138.

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Juan Ding, M., Jie, F., A. Parton, K. and J. Matanda, M., 2014. Relationships between the
quality of information sharing and supply chain food quality in the Australian beef processing
industry. The international journal of logistics management, 25(1), pp.85-108.
Methner, N., Hamann, R. and Nilsson, W., 2015. The Evolution of a Sustainability Leader:
The Development of Strategic and Boundary Spanning Organizational Innovation
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87-104). Springer, Cham.
NewsComAu. (2018). The retail area where Woolies snares 50c of every $1 in sales. [online]
Available at: https://www.news.com.au/finance/business/retail/woolworths-now-sells-more-
than-half-of-all-australias-packaged-liquor/news-story/fef892ed19bc7eb94c6f63aab4cba439
[Accessed 15 Sep. 2018].
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logistics industry: an empirical study in Australia. The Asian Journal of Shipping and
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Shauki, E., 2016. Is this a case of self-enlightened interest or genuine accountability: a study
of different reporting media in the Australian retail industry. Asia Pacific Journal of
Accounting and Finance, 2(1), pp.51-76.
Sullivan, R. and Gouldson, A., 2017. The governance of corporate responses to climate
change: An international comparison. Business Strategy and the Environment, 26(4), pp.413-
425.
Suryawati, B.N., 2018. A Scenario Study of Investment: Portfolio Modeling Through
Simulation on Virtual Management Funding Corporation. Journal of Economics and
Business, 3(1), pp.57-62.

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Sutton-Brady, C., Kamvounias, P. and Taylor, T., 2015. A model of supplier-retailer power
asymmetry in the Australian retail industry. Industrial marketing management, 51, pp.122-
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Woolworthsgroup.com.au. (2018). Woolworths Group: Quality Brands and Trusted
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2018].

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Appendix
Appendix 1: Growth rate of Australian Supermarkets