Strategic Management of Woolworths: Internal and External Factors

This report discusses the internal and external factors faced by Woolworths in their business operation. It uses marketing models such as PESTLE, SWOT, VRIO, Porter five forces and Strategic group map to identify the current position of Woolworths. The report also includes a value chain analysis and VIRO analysis of Woolworths, along with recommendations for enhancing their strategic business management.

Running head: STRATEGIC MANAGEMENT
Strategic management
Name of the student
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Author note

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Executive summary
The aim of this report is to discuss about the internal and external factors faced by Woolworths
in their business operation. This report used marketing models such as PESTLE, SWOT, VRIO,
Porter five forces and Strategic group map in order to identify the current position of
Woolworths. This report also used value chain analysis to identify the strategic capabilities of
Woolworths along with identifying the sources of gaining competitive advantages in the market.
This report concludes with a few recommendations for Woolworths, which will help them in
enhancing their strategic business management.

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Table of Contents
Introduction......................................................................................................................................3
Ownership status..........................................................................................................................3
Determination of the external market mechanisms.........................................................................4
Determination of the industry competitiveness...............................................................................6
Determination of the internal market mechanism...........................................................................7
Porter generic strategies...................................................................................................................9
Cost leadership.............................................................................................................................9
Differentiation strategy................................................................................................................9
Market focus strategy................................................................................................................10
Strategic group of Woolworths......................................................................................................10
Value chain analysis of Woolworths.............................................................................................11
VIRO analysis................................................................................................................................14
Valuable.....................................................................................................................................14
Inimitability...............................................................................................................................15
Rarity.........................................................................................................................................15
Organizational capability...........................................................................................................16
Recommendations..........................................................................................................................16
Conclusion.....................................................................................................................................17
Reference.......................................................................................................................................18

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Introduction
Strategic management is one of the major considerations for the contemporary business
organizations due to the reason that they face diverse complexities in their daily operations. In
addition, with time, the rate and intensity of the completion in the market is rapidly increasing.
Initiation of the strategic management also helps the business organizations in having effective
business strategies in order to survive in the intensely competitive business scenario (Wheelen et
al. 2017). In the present time, one of the major business sectors, which are witnessing the growth
of competition, is the retail business of the consumer goods. Especially in the Australian market,
the competition in the retail business is much higher with the presence of large number of global
brands (Zakaria et al. 2014). Among all the available brands in the Australian retail market, one
of the major brands is the Woolworths.
Woolworths is chain of supermarkets operating mainly in the New Zealand and
Australian market. They are founded in 1924 and having a major portion of the market share
with them in the Australian market. According to the reports, they are only second to
Wesfarmers in the Australian market in terms of market share (Woolworths.com.au 2018). They
are having diversified product portfolio ranging from groceries to household products. Currently,
they are having more than 1000 stores across Australia. Their prime objective is to be the market
leader in its sector overtaking Wesfarmers by attracting more number of customers.
Ownership status
As per the reports, currently Woolworth group is having more than 75 percent of share
holdings followed by ALE Property Group with having 8.72 percent share holdings. Another
prominent shareholder in the company is Perpetual Investment Management Ltd.

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Determination of the external market mechanisms
Political  Political environment of the operating country determines the
business environment of the organization (Amore and
Bennedsen 2013).
 Australia is having fairly stable political scenario in the market.
This helps Woolworths in having favorable business
environment in the market.
 However, stable political scenario of the country is also
attracting number of global competitors.
Economical  Australia is having favorable economic environment in the
country, which helps Woolworths in having more market
potentiality.
 Rate of unemployment also increasing, which is creating more
opportunities.
 However, emergence of the economic recession is having
negative impact on the business potential of Woolworths
(Rollins, Nickell and Ennis 2014).
 Huge intensity of the competition in the retail market is limiting
the profitability of Woolworths.
Social  Woolworths cater to the end customers. Thus, they are having
huge diversity in their product category to meet the diversified
requirements.
 However, it is challenging for Woolworths to provide added

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services due to the fact that presently customers expects more
than just shopping.
 However, the rapid change in the social trend is difficult for
Woolworths to cope up with.
Technological  Retail sector is witnessing huge development in terms of
technology.
 Woolworths initiated technologies such as online shopping
portal and self service check out (Prashar, Vijay and Parsad
2015).
 However, it is important for them to determine the customer
requirement and preference before initiating technological
development.
Legal  Woolworths also offers food items. Thus, they need to adhere to
the food standard legislations in Australia.
 In addition, they also need to comply with the business
legislations in operating their business in Australia and New
Zealand.
 However, emergence of more stringent rules and regulations are
creating issues in the business operation of Woolworths.
Environmental  Current business scenario is heavily determined by the
environmental factors.
 Woolworths follows different sustainability activities such as
reducing the carbon footprint from their operation and waste

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management (Benjaafar, Li and Daskin 2013).
 With the increase in the environmental concerns, it is important
for Woolworths to update their strategies.
Determination of the industry competitiveness
The previous section discussed about the external factors faced by Woolworths in their
business operation. However, it is also important to determine the competitiveness of the
industry Woolworths operates.
Threat of new entrants  Threat of entry in the retail sector is moderate.
 This is due to the reason that retail business can get started
with low capital (E.Dobbs 2014).
 However it is not easy for the new entrants to match the brand
value of Woolworths and achieve their economies of scale.
 The area of business for Woolworths is huge and it is not
possible for new entrants to match.
Threat of substitutes  Threat of substitutes in the market is huge due to the presence
of good number of similar players.
 Coles and Aldi is offering same products as Woolworths.
 Switching cost is also low for the customers.
Bargaining power of
buyers
 Bargaining power of the customers is also high due to having
more options (Haucap et al., 2013).
 Buyers will opt for the brand, which is more value creating.

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 Customer loyalty is less in this sector due to the wide
availability of similar products.
Bargaining power of
suppliers
 Bargaining power of the suppliers is also high.
 Woolworths sells only the end products and not
manufacturers any item.
 Thus, they are largely dependent on their suppliers for their
sourcing of the materials.
 However, the brand value of Woolworths and their large
number of suppliers ensures the low intensity of the
bargaining power of the suppliers.
Competitive rivalry  Competitive rivalry is high due to the presence of huge
number of competitors.
 Aggressive marketing campaigns are being initiated in order
to stay ahead in the competition (Kurt and Hulland 2013).
 It is the brand value and distinctiveness of the Woolworths,
which helps them to cut off the competitive rivalry.
Determination of the internal market mechanism
The earlier sections discussed about the external market factors being faced by
Woolworths. However, there are some internal factors also being present for them, which
determine the effectiveness of their business operation.
Strengths  Woolworths is one of the oldest retailers in Australia. Thus,

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they are having huge brand value with them.
 Business process of Woolworths is favorable enough to deal
with the marker challenges.
 Having huge diversity of products that helps in catering to
more number of customers (Park and Han 2013).
 Huge market reach and penetration in their operating areas
ensures higher market share.
Weaknesses  Not having the status of market leader is making them trail
behind the competitors.
 They are mainly having their presence in Australia and New
Zealand. Thus, global presence is lower for them.
 Coles are taking away the major businesses of them.
Opportunities  Retail sector is growing at a rapid pace. Thus, the
opportunities are increasing for Woolworths.
 Leveraging the online marketplace more will help due to the
reason that online customers are rapidly increasing (Wang et
al. 2013).
 Sales of private level brands of Woolworths are also
increasing.
Threats  Offering more discounts in competition with others will
reduce the business growth for Woolworths.
 Threat of having new entrants will further reduce the
profitability.

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 Frequent change in the market trend and requirements may
change the business approach of Woolworths.
Porter generic strategies
In terms of the marketing strategies being initiated by Woolworths in order to gain
competitive advantages, Porter generic strategies will be used. According to this theory, there are
mainly three elements or aspects to be followed by the organizations in gaining competitive
advantages (Tanwar 2013). The following sections will discuss about the generic strategies
initiated by Woolworths.
Cost leadership
Cost leadership is being initiated by Woolworths in order to offer their products at
minimal price in the market. The less will be the price, the more will be the attraction of the
customers. In the case of Woolworths, they initiate the cist leadership strategy by locally
sourcing their raw materials. For instance, grocery items of them are being sourced from the
local farmers directly (Kaliappen and Hilman 2013). Thus, it helps Woolworths to reduce the
cost of intermediaries and transportation. Another strategy they practice is having large number
of suppliers. Having large number of suppliers helps Woolworths to increase their bargaining
power in the market. This also helps them to source their materials from the suppliers with less
quoted price. All these strategies are reducing the cost of operation for Woolworths and helping
them to gain cost leadership in the market.

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Differentiation strategy
Initiation of the differentiation strategy helps the organizations to have distinctive image
in the market. This is beneficial in attracting more customers in the intensely competitive market.
Woolworths initiates differentiation strategy by having distinctive approach in their service
delivery. Initiation of the practices such as carbon neutral stores and self service check out
process is helping to have distinctive image in the market. Another differentiation strategy being
practiced by them is by offering private level products. With the help of the private level
products, Woolworths is being able to offer the products according to the current trend of the
market (Zehir, Can and Karaboga 2015). These private level brands are only available in the
stores of Woolworths and thus, customers will have different and distinctive experience in using
these products.
Market focus strategy
Woolworths do not initiate market focus strategy due to the reason that they do not have
niche marketing approach. They are having mass market approach and cater to maximum
number of customers possible. Thus, they do not possess market focus strategies.

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Price HighLow
High
Product diversity
Low
Woolworths
Coles
ALDI
Strategic group of Woolworths

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According to the above strategic group diagram, Woolworths is mainly having Coles as
their main competitor. This is due to the reason that in the above diagram, the level of product
diversity for Woolworths and Coles is in similar level. However, on the other hand, the price
level of Coles is relatively higher than that of the Woolworths. Aldi is also competing in the
Australian retail sector but their product diversity is much less than that of Woolworths. Thus, it
can be concluded that the point of differences for Woolworths are the product diversity and price
level.
In doing the strategic group map for Woolworths, there are some assumptions being
made. It is assumed that all the three competitors are similar in terms of product offerings and
they do not have any differences. Another assumption being made is that all the three
organizations are having their vast presence across Australia.
Value chain analysis of Woolworths
Primary activities
Inbound logistics Inbound logistics of Woolworths are effective and efficient in
nature. They are having distribution centers across Australia
where the products are being stored. They also maintain
efficient procurement strategies that enable them to have no
intermediaries in between. They directly deal with the producers
(Chuang, Liao and Lin 2013).
Operation Updated and latest technologies are being initiated by them in
their operational activities. This helps them to enhance the
effectiveness of their entire process. In addition, their

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mechanism in operation ensures that the flow of the inventory is
seamless and accurate. This also helps Woolworths to have
fewer products in transaction.
Outbound logistics Outbound activities of Woolworths are also effective due to the
fact that they are having distribution centers across Australia
and all the distribution centers are well connected with their
stores (Hiremath, Sahu and Tiwari 2013). It helps in having the
flow of the inventory across every store. Their outbound
facilities also ensure that seasonal products are properly stored
and are being offered around the year.
Marketing and sales Woolworths initiates Omni channel marketing process to cater
to larger section of the customers. Social media marketing and
television commercials are the most effective and efficient
forms of marketing for Woolworths. Promotional activities
include the branding and discounts for their customers. Their
entire marketing and sales activities are targeted at retain the
existing customer base and also attracting the new customers.
Service Woolworths is having dedicated customer care service for the
round the clock service to their customers. This also includes
the replacement offers for their products. Having the effective
customer service ensures that Woolworths is having high
retention ratio of the existing customers. It also generates
positive word of mouth for Woolworths in the market.

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Support activities
Firm infrastructure As the reports, Woolworths is having more than 1000 stores in
Australia and more in the New Zealand. They are also having
more than 20000 employees in place to serve the customers.
Apart from all these stores, they are also having huge number of
distribution centers. All their stores are strategically located in
the main city to provide ease to their customers in
transportation.
Human resource management Woolworths is having right and skilled employees in right
place. They practice effective process of human resource
management in their organization. Their human resource
management approach starts from the recruitment process. All
the new employees are being selected based on the particular
criterion of the organization (Alfes et al. 2013). In addition,
training programs are being conducted periodically in order to
equip and train the employees according to the present market
trend and requirement. The policies of human resource
management of Woolworths ensure that they are having
motivated and engaged employees in place, which will reflect in
having positive customer service.
Procurement Procurements are being done directly from the producers rather
having any intermediaries in between. This ensures that the
producers are getting right value and cost of materials for

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Woolworths is low. Sustainability is also being followed in
procuring the materials in order to have a sustainability
approach in the entire process.
Technology Woolworths initiates latest technologies in place in order to
offer their customers enhanced experience and value. They are
having their own mobile apps for their customers to shop from
their conveniences. In addition, initiation of the latest
technologies also helps in having automated logistics and
supply chain process.
VIRO analysis
Thus, from the above value chain analysis, there are various sources of competitive
advantages for Woolworths identified. However, these sources will be effective only when they
will be sustainable. Hence, determination of the sustainability of the identified sources is
important (Knott 2015). In this case, VIRO analysis will be used to determine the sustainability
of the sources of competitive advantages.
Valuable
Valuable resources are the resources, which enhance the value for the company and also
for the customers. In the case of Woolworths, human resources are one of the major valuable
resources for them. This is due to the reason that having skilled and trained employees in place
will ensure the organizational productivity (Bondarenko et al. 2017). On the other hand, having
skilled and trained employees will enhance the level of customer service quality. This will act as

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added value for the customers. Another valuable source of gaining competitive advantages for
them is the technology. This is due to the reason that in the above value chain analysis, it is
determined that technological development is helping Woolworths to create more value for the
customers. This is also creating value for Woolworths by enhancing the effectiveness of their
logistic and supply chain process. Outbound logistics is another valuable source for Woolworths
due to the reason that this is helping in having smooth flow of the inventories. This is ensuring
that customers will be able to have products available at very point of time.
Inimitability
Inimitability is also an important criterion to determine the sustainability of the sources of
competitive advantages. This refers to the extent to which the resources can be imitated. In the
case of Woolworths, the brand value of them is one of the resources that cannot be imitated. The
brand value gained by Woolworths involves huge investments and promotional activities. This
cannot be imitated by others (Lin and Wu 2014). The skills of the employees are also inimitable
due to the reason that the skills of the employees along with the training being given to them are
unique and limited to Woolworths only. This will help in effective determination of the social
environment and offering products accordingly.
Rarity
Rarity refers to the extent to which the resources for the business organizations are rare in
nature. Rare resources for Woolworths are financial resources. This is due to the reason that the
financial resources accessible to Woolworths are huge and cannot get accessed by their
competitors. Moreover, financial resources are not abundant and freely available. Other
competitors may not able to get the access to the financial resources even by performing as per to

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Woolworths. Having financial resources will ensure that they will be able to rapidly develop
newer technologies in the market.
Organizational capability
It is already being discussed that Woolworths is having huge number of stores,
distribution centers and employees in place to operate in the market. In addition, they are having
effective policies of training activities and development program in place to further enhance the
effectiveness of their organization. Effective management of the internal organization also
contributes in having competitive advantages in the market. This will help them to effectively
adhere to the legal challenges in the market.
Recommendations
 It is recommended that diversity in the workforce should be increased. This is due to the
reason that the more diversity will be there in the workforce, the more effective will be
the determination of the diverse requirements of the customers. Currently, Australia is
having population from different social and cultural groups. Thus, proper representation
of them in the organization will ensure that all the needs will get fulfilled.
 The online marketplace should get aligned with the distribution center so that the time in
transporting the goods to the customers will be less. The less will be the transportation
time in delivering the goods to the customers, the more will be their competitive
advantages in the market.
 Woolworths can enter in the foreign countries mainly in the Asian developing countries.
These countries are having huge market potentiality. Moreover, this will also ensure that

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the brand value of Woolworths will get enhanced and it will help them to tap the new and
existing markets effectively.
Conclusion
Thus, from the above discussion, it can be concluded that Woolworths is having different
and complex business factors in their operation. These factors are having direct impact on their
business performance. In view to these factors, the sources of gaining competitive advantages are
being identified in this report. In addition, the sustainability of these sources of gaining
competitive advantages is also being determined. This report concluded a few recommended
steps, which will further enhance their market position compared to what is identified in this
report. Woolworths will gain more competitive advantages in the market with the
implementation of these steps.

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