Strategic Management Analysis of Woolworths in Australian Supermarkets Industry

This report provides a strategic management analysis of Woolworths in the Australian supermarkets industry. It includes macro environmental analysis, industry analysis, life cycle stage of the industry, Porter’s five forces analysis, company analysis, competitor’s analysis, and strategic analysis. The report recommends strategies to overcome the challenges faced by Woolworths.

Strategic Management
Woolworths
8 / 1 6 / 2 0 1 8

Strategic Management 1
Executive summary
Strategic management involves the formulation and implementation of the major initiatives and
goals that are taken by the company on the behalf of the owner of the firm, based on the
consideration of the resources. This report is based on the case study of the Australian
Supermarkets: who will win and when. The company that has been selected for the assessment is
Woolworths who dominate the Australian supermarkets. The findings of the analysis include the
major challenge which is faced by the company. This analysis is done with the help of the macro
environmental analysis, industry analysis, life cycle stage of the industry with the resources and
capabilities. In addition, the competitor’s analysis reflects the intense competition present within
the market. Considering the issues, the strategies are recommended which will help in reducing
the challenges faced by the company.

Strategic Management 2
Contents
Introduction......................................................................................................................................3
Macro environmental analysis- PEST.............................................................................................4
Industry analysis..............................................................................................................................5
Life cycle stage of the industry....................................................................................................5
Porter’s five forces analysis.........................................................................................................6
Company analysis............................................................................................................................8
Resources and capabilities...........................................................................................................8
Core Competencies......................................................................................................................9
VRIO analysis..............................................................................................................................9
Competitor’s analysis....................................................................................................................10
Strategic analysis...........................................................................................................................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

Strategic Management 3
Introduction
The aim of the report is to analyse the strategic issues faced by the company in the supermarket
industry of Australia. The company that has been selected for the analysis from the case study:
“Australian Supermarkets: who will win and when” is Woolworths. In the case study, this has
been found that Coles and Woolworths dominate the market of Australia with approx. 80%
market share of this vital industry. Though, both the companies are facing the challenge when
Aldi entered the market as the low-cost service provider. Woolworths operates 873 supermarkets
as well as Grocer with the name of Thomas Dux. Along with this, they also operate 527 liquor
outlets and 327 other outlets with the license. These big players give tough competition to each
other which is one of the major factors that affect the working and provide the benefit to the
customers of Australia. Woolworths is facing the challenge due to the emergence of the mobile
technology as the buying pattern of the customers is changing. In the end, some of the challenges
are discussed with the help of the frameworks.

Strategic Management 4
Macro environmental analysis- PEST
The major external factors that can influence the working of the organisation while making the
decision are discussed below: -
Political factors: - Political factors that can affect include legislation and taxation policy (Hill,
Jones and Schilling, 2014). The stores and outlets are opened after taking the license and
approval of the government. The changes in the regulation of the government for the
supermarket will affect the working as they have to pay the high taxes for the same.
Economic factors: - GDP in Australia was worth 1323.42 billion US dollars in the year 2017.
The value of the GDP of the country reflects 2.13% of the world economy. The rise in the GDP
of the country is increasing due to which there is a rise in the purchasing power (Trading
Economics, 2018). This will help in bringing the rise in the sales which will contribute to
improve the revenue. This is evident from the revenue of the country which increased in the year
2015 by 5.4%. Along with this, the economic factors are contributing to receive the high returns
on capital.
Social factors: - The social factors include the change in the patterns and preference of the
customers towards the supermarkets. The rise in the number of supermarkets is increasing the
competition for the company due to which most of the people shift one market from other due to
the price sensitivity. The customers are focused towards the price of the product so they make
the purchase from the store where they are supposed to pay fewer prices. This is one of the
leading challenges which are faced by the company.

Strategic Management 5
Technological factors: - The technological factors include the upgrade and change in the
technology (Kotler, 2015). The technology has affected the industry and Woolworths is able to
understand the wider situation that is faced by other supermarkets. The customer can make the
purchase from anywhere and anytime because of the mobile technology. According to the case
study, the ubiquitous app is changing the way through which the world can be viewed. This is
major challenges which are faced by the companies due to which they need to recognise that they
need to keep up and understand the needs of the customers to move seamlessly and effortlessly
between the virtual and physical stores.
Industry analysis
Life cycle stage of the industry
The life cycle stage of the industry includes four major stages which include introduction,
growth, maturity and decline. The introduction stage reflect that sales of the product begin then
at growth stage there is an increase in sales and after levelling sales at the maturity stage, the
sales decrease with the time (Hsueh, 2011).

Strategic Management 6
(Source: Hsueh, 2011)
Introduction: - The supermarket industry is a vast industry that begins with the opening of the
stores in the country. Woolworths Company began in the year 1924 with the emergence of the
sales of the company initiated and the customers started purchasing the products from the
company.
Growth: - The growth of the supermarket industries started with the rise in the customer needs
and demand for the products (Rothaermel, 2015). Woolworths strive to establish the stores in all
the areas where they found the rise in the population. The stores of the company seem to be
inevitable parts of the growth area.
Maturity: -Maturity stage of the life cycle reflects the point after which the company might face
the downfall in the sales. Woolworths is currently at the maturity stage because the emergences
of the competitors in the industry are increasing. These competitors include Coles, Aldi, Metcash
and many others. The competitors came into the market with different types of innovation and
technology which affect the working of the other companies present within the market.

Strategic Management 7
Decline: - This stage reflects the decline in the sales of the products and services that are offered
by the companies in the industry. The rise in the competition is bringing the decrease in the sales
of the company. Along with this, the Woolworths Company is not able to understand the
customers better due to which they are unable to make their sales.
Porter’s five forces analysis
The Porter's five forces analysis is a framework that helps the companies in analysing the
industry competitiveness that can affect their working and operations (Hollensen, 2015).
Woolworth’s company analysed the market which is given below: -
Bargaining power of suppliers: - The suppliers play a vital role in the company as there is a
huge number of suppliers are present in the market. The supply chains of the supermarkets are
established effective as they have the tight contacts with the fruit and vegetable suppliers
(Christopher, 2016). In this dealing, the company specify the size and quality of the individual
products. Accordingly, the suppliers deliver the products to the company. Along with this, this
has been found that there is very tight time specific delivery contracts for the trucking companies
who make the delivery of the products. This might make the suppliers shift to other company or
they can bargain to get the best. This shows that there is the moderate threat of the bargaining
power of suppliers.
Bargaining power of customers: - The bargaining powers of customers are high in the market
because Australian are price sensitive (Wilson and Gilligan, 2012). The customer makes the
purchase from the store where they are getting the products at the low price which shows that the
bargaining power is high. Along with this, the up-gradation in technology and location of the
stores is one of the factors due to which they are easily performing the negotiation.

Strategic Management 8
Threats of new entrants: - The threat of the new entrants is moderate in Australia because this
has been found that the market is growing fast due to which most of the stores who are operating
the operations in different states are willing to spend their business in the Australian market.
Though, the expansion of the stores in Australia requires huge capital because the company need
to expand the business on the wide range so that they can face the big supermarkets like
Woolworths. This shows that the company face the moderate threat of new entrants.
The threat of substitutes: - The threat of the substitute is high in the market because the
technology is allowing the customers to compare the prices in an easy way. Along with this, the
presence of the different supermarkets is allowing the customers to find the substitute of one
product very easily. Therefore, the Woolworths face the high threat of substitutes in the market
in Australia.
Rivalry competitiveness: - The case study analysis reflects that the competitiveness rivalry is
very intense in the market due to the presence of companies like Coles, Aldi, Metcash and many
others. Coles is giving the tough competition to Woolworths, the company is a part of
Wesfarmers which is a part of the Western Australian cooperative that is growing faster to
become a highly successful company.
Company analysis
Resources and capabilities
Resources include the different types of resources that are used by the Woolworths for effective
working of the operations. Woolworths operates 873 supermarkets as well as Grocer with the
name of Thomas Dux. Along with this, they hire numerous numbers of employees to maintain

Strategic Management 9
the operations within the organisation. This reflects that the company has the strong tangible and
intangible resources (Grant, 2016). Further, they have an effective team who manage the wide
operations of the company, the range of products, innovative, design, logistics and many others.
The capabilities refer to as the skills of the organisation in coordinating its resources and putting
them to the productive use (Bamberger, Biron and Meshoulam, 2014). This is the fact that
Woolworths is running the business from the year 1924 which shows that the business is in the
hand of a right person with the right position. Furthermore, the brand value of the company is
effective which shows that the company is able to make full use of resources.
Core competencies
The core competencies of the company include: -
 World-class supply chain: - The supply chain of the company is effective due to which
they are able to manage the effective relationship with the suppliers of the company
(Madsen and Walker, 2015).
 Branding and market: - The branding of the company is unique as it has kept the name
of the stores as “The Fresh Food” that contributes in creating a differentiated image of
healthy product range at the reasonable prices.
 Innovation: - Woolworths Company is an innovation which is one of the reason due to
which the company is able to survive in the market.
VRIO analysis
Valuable Rare Inimitable Organisation Competitive

Strategic Management 10
Implications
World-class
supply
chain
Yes Yes No No
Competitive
Parity
Branding
and market
Yes Yes No No
Competitive
Parity
Innovation
Yes Yes Yes No
Temporary
Competitive
Advantage
Competitor’s analysis
The competitors of the company include Coles who is achieving growth by increasing the
number of the stores in Australia market. The company has approx. 223 warehouses which help
them in maintaining the regular flow of the goods. Coles Company operates 750 full-service
supermarket which is only slightly less than Woolworths. The marketing budget of both the
companies is increasing with the increase in the competition in the market. Along with this, the
Woolworths has opened its new store near the tourism place (Keegan and Green, 2015).
Strategic analysis
This is the fact that the corporate strategy is associated with the strategic decision that can impact
the organisation as it includes financial performance, mergers and acquisitions. The company

Strategic Management 11
follow the low pricing strategy in which they consider the price of products offered by the
competitors and accordingly they offer the products at that price. The company is following the
low price strategy effectively.
This has been found that the Woolworths seek to understand the willingness of customer better.
Considering the same, the company will expand the convenience style stores because the
research reflects that people shop in the smaller lots as they need the convenience while
shopping. This will contribute to improve the customer relationship with the customers. Though,
the company need to follow some essential steps to complete this strategy. These steps are: -
These are the steps which are required to be implemented by the company to deal with the
challenges which are generally faced by the company. Along with this, the company will be able
to deal with the competitors because they can easily offer the products to the customers at the
doorstep.
Reserach for the customer
needs and demand for small
stores
Analysis of the location for the
small stores
Selection of the location
considering the motive of profit
and customer convenience
Opening of the new stores

Strategic Management 12

Strategic Management 13
Conclusion
In the end, it can be concluded that the Woolworths Company is also facing the challenges in the
supermarket industry due to which they need to take the required steps so that they can overcome
from the same. The analysis related to the environment and industry reflects the issues which are
majorly faced by the company. Along with this, the company analysis reflects the working of the
company and the major issues which are faced by them. In addition, it is recommended to the
company to upgrade themselves on an online platform which will enhance the reach to the
customers. In addition, they should think for some differentiation in the field in which they are
performing their obligation.

Strategic Management 14
References
Bamberger, P.A., Biron, M. and Meshoulam, I. (2014) Human resource strategy: Formulation,
implementation, and impact. Routledge.
Christopher, M. (2016) Logistics & supply chain management. Pearson UK.
Coles (2018) About Coles. [Online]. Available from: https://www.coles.com.au/about-coles
[Accessed on 16th August 2018].
Grant, R.M. (2016) Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hill, C.W., Jones, G.R. and Schilling, M.A. (2014) Strategic management: theory: an integrated
approach. Cengage Learning.
Hollensen, S. (2015) Marketing management: A relationship approach. Pearson Education.
Hsueh, C.F. (2011) An inventory control model with consideration of remanufacturing and
product lifecycle. International Journal of Production Economics, 133(2), pp.645-652.
Keegan, W.J. and Green, M.C. (2015) Global marketing. Upper Saddle River, NJ: Pearson.
Kotler, P. (2015) Framework for marketing management. India: Pearson Education.
Madsen, T.L. and Walker, G. (2015) Modern competitive strategy. McGraw Hill.
Rothaermel, F.T. (2015) Strategic management. UK: McGraw-Hill Education.
Trading Economics (2018) Australia GDP [Online]. Available from:
https://tradingeconomics.com/australia/gdp [Accessed on 16th August 2018]

Strategic Management 15
Wilson, R.M. and Gilligan, C. (2012) Strategic marketing management. New York: Routledge.