Strategic Management Analysis of Woolworths Group

This report analyzes the Woolworths group by using the framework models of strategic management for analyzing its operation environment, goals and strategic choices. Furthermore, some recommendations have been provided that both critique and support the strategic direction chosen by the organization.

RUNNING HEAD: Strategic Management
Strategic Management

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Executive Summary
As a strategic analyst for ABC Consultancy Firm, the following report has been prepared for the
purpose of analyzing Woolworths group. Woolworths Group Limited is an Australian company
with wide retail interest throughout New Zealand and Australia. Woolworths group is on the
mission of delivering the best in value, convenience, and quality for their customers. The
business gives prime importance to its team members, customers, producers, and manufacturers.
A number of framework models of strategic management have been used for the purpose of
evaluating the environment in which Woolworths operates along with its strategic choices and
mission goals. Furthermore, some recommendations have been provided that both critique and
support the strategic direction chosen by the organization.

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Contents
Introduction......................................................................................................................................3
Evaluation of the Organization’s Environment...............................................................................3
Porter’s Five Forces Analysis......................................................................................................3
Political/Legal and Social Environment......................................................................................4
Internal Analysis..........................................................................................................................4
Core Competencies...................................................................................................................4
Value Chain Analysis...............................................................................................................5
Analysis of competitive advantage..................................................................................................5
Strategy formulation and choice......................................................................................................6
Recommendation and conclusion....................................................................................................7
References........................................................................................................................................9

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Introduction
Woolworths Group Limited is an Australian company with wide retail interest throughout New
Zealand and Australia. It considers itself as a business built on integrity. Woolworths group is on
the mission of delivering the best in value, convenience, and quality for their customers.
Approximately 205,000 team members have been employed by the group who are responsible
for serving more than 29 million customers of their brand every week. The business gives prime
importance to its team members, customers, producers, and manufacturers. The existence of each
and every aspect of the business is for making the lives of the customers better, easier and
simpler (Woolworths Group, 2018).
As a strategic analyst of ABC Consultancy Firm, the following report has been prepared that
analyses the Woolworths group by using the framework models of strategic management for
analyzing its operation environment, goals and strategic choices. Furthermore, some
recommendations have been provided that both critique and support the strategic direction
chosen by the organization.
Evaluation of the Organization’s Environment
Porter’s Five Forces Analysis
Bargaining Power of Buyers- homogenous products are offered by the supermarkets in Australia
therefore, there are low switching costs between stores and this has offered high bargaining
power to the buyers. However, the stores that offer customized products for specific market are
the exception. Woolworths often lose its competitors to its competitors as a result of high
bargaining power (Hill, Jones & Schilling, 2014).
Bargaining power of Suppliers- the size of the supermarket and the brand name of the suppliers
act as the basis on which the bargaining power of the suppliers depends. Strong power is enjoyed
by Coca Cola and British American Tobacco in the supermarket. Therefore, high to moderate
bargaining power is enjoyed by the suppliers in Australia. As a result, Woolworths face pressure
from the suppliers in terms of reduced availability of the products.

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Industry Substitutes- there are a number of substitutes in the supermarket industry such as
pharmacies, convenience stores, grocery stores, etc. Consumers are willing to pay higher for
convenience such as no queues, easy parking, etc. Therefore, there is moderate to high
availability of substitutes in the industry. Woolworths sometimes lose their customers to the
competitors as customers are more concerned for the convenience than any offers (Moreno-
Izquierdo, Ramon- Rodriguez & Perles- Ribes, 2016).
Threat of New Entrants- supermarket industry is not an attractive industry for the new entrants as
it has lower profit potential. Barriers to entry include restrictions and regulations of the
government, huge capital requirement, etc. Therefore, the barriers to entry in the industry are
moderate which is a plus point for Woolworths (Phillipov, 2017).
Rivalry among competitors- there is intense rivalry among the competitors in the industry which
has resulted in driving down the prices and decreasing the profitability of the industry.
Competitive offers from the competitors affects Woolworths by reducing its sales and overall
profitability (Wheelen, Hunger, Hoffman & Bamford, 2017).
Political/Legal and Social Environment
Political/ Legal Environment- the supermarket industry is directly impacted by the government
in respect of legislating trading hours and through regulation and monitoring functions of
Australian Competition and Consumer Commissions (ACCC), the trade practice act, the
commonwealth government and the Foreign Investment Review Board (Richards, Lawrence,
Loong & Burch, 2012).
Social Environment- changing attitudes, societal concerns and lifestyles have resulted in huge
changes in Australia’s supermarket industry. Health and obesity have become the matter of
concern for the Australians. Demand for easy to cook, low-fat foods are increasing (Carter,
2017).

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Internal Analysis
Core Competencies
World- Class supply chain- the competitive advantage and innovation by Woolworths have
developed through its strong supply chain. The focus of Woolworths is on cost cutting and
bringing efficiency in the management of needless expenses.
Branding and Market- the stores of Woolworths have been positioned with a slogan “the fresh
food people” which creates a differentiated image of the brand regarding its quality and healthy
product range which is available at reasonable prices (Hamilton & Webster, 2015).
Innovation- several innovative projects have been implemented by Woolworths “re-fresh” and
the “new idea program”.
Integration- some of the supplies of Woolworths were vertically integrated by the production of
own inputs for increasing market power and responding to other market trends.
Value Chain Analysis
Inbound Logistics- own distribution centres are used by Woolworths due to which it is capable
of obtaining the advantage of procuring bulk quantity and reduced cost price. It also allows
obtaining discount from the suppliers. Distribution network helps Woolworths in ensuring
quality and distribution efficiency.
Operation- Woolworths has its own farmers due to which it is capable of obtaining supplies from
the root level which helps it in providing fresh products and reduced costs. Strict quality
assessment procedures and inventory management assists Woolworths in value creation
(Mudambi & Puck, 2016).
Outbound Logistics- Woolworths make the use of in- store vendor quality management system
which, in turn, ensures freshness of products and product quality. Optimum distribution
efficiency and quality of products are also maintained by Woolworths.
Marketing and sales- a large amount is spent by Woolworths for marketing. It assists in the
creation of successful brand awareness. Its sales are also influenced due to promotions by
celebrities and advertisements of premium label products and grocery discounts.

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Customer Service- Woolworths has formulated certain refund policies and has aimed at reducing
the time for waiting with the help of mounted scanner. A new initiative known as Customer
talkback has been started for holding custom focus groups across the country (Lasserre, 2017).
Analysis of competitive advantage
The competitive rivalry in the supermarket industry is intense as there are some competitors
present in the grocery and retail industry of Australia such as Coles and Myer. These competitors
are also expected to limit the market share of Woolworths. The company is being continuously
forced by the competitors to create effective and competitive strategies and in order to
differentiate themselves from the competitors. However, Woolworths has a number of
competitive advantages. The slogan of Woolworths “the fresh food people” is itself capable of
making a point of difference between this business and its competitors which, in turn, delivers
the group a sustainable competitive advantage. When any of the competitors make any attempt
for replicating this strategy, it is simply dismissed as it lacks credence and proves to be a market
follower strategy (Trevena, Neal, Dunford & Wu, 2014).
With the passage of time, quality and fresh products have become the basic requirement and
expectation of people. Therefore, it constitutes the key competitive advantage for Woolworths
that is capable of distinguishing it from the competitors. The excellent supply chain management
by Woolworths also constitutes its distinctive competency. Also, it is the ability of Woolworths
to frame competent strategies that attempt at influencing the length and size of the competitive
advantage of the organization (Mahdi & Almsafir, 2014).
Strategy formulation and choice
Vision- The vision of Woolworths group is to assist each and every Australian in living big for
less and for the purpose of achieving this, a strategy is being pursued by this business in his
regard.
Goals-the main goal of Woolworths is to have the customers who put then first across all their
brands. For the purpose of achieving this goal, this business has set five priorities and the
strategy is also based in accordance with these priorities. The priorities include building a store
and customer- led team and culture, becoming a lean retailer with the help of system excellence

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and end- to- end process, generation of momentum for sustainable sales in food, empowerment
of the portfolio businesses for pursuing strategies in order to deliver shareholder value and
evolvement of their drinks business for providing more convenience and value to the customers
(Charlton, Kahkonen, Sacks & Cameron, 2015).
Initiatives- Cost Leadership vs Differentiation
Cost leadership has been selected as the business level strategy by Woolworths. The company
has also engaged in the price related war with Coles, which is also one of the largest players in
the supermarket industry in Australia. Once the prices of milk were lowered by Coles which, in
turn, also forced Woolworths to lower the prices in accordance with that of Coles for being
competitive in the market. A large chain of supermarkets is also controlled by Woolworths as it
is the market leader in Australia. This strategy has helped Woolworths in earning above average
returns irrespective of the existence of strong competitive forces. The products are always
offered at reasonable prices so that the vision of living big in less can be achieved (E. Dobbs,
2014).
Over a number of years, Woolworths has been able to build its reputation as the “fresh food
people”. This was made possible with the help of positive customer experiences throughout the
supply chain of the organization. Meaningful differentiation has been provided to the
competitors through this valuable brand reputation. It has further contributed towards high levels
of customer satisfaction. Woolworths has also been able to create differentiation in the market
with the help of offering convenience and healthy consumption (Singh- Peterson, Lieske,
Underhill & Keys, 2016). Differentiation has been created in terms of offering fresh food and
low prices. It is further differentiating itself from the competitors adapting the changing taking
place in the environment. Woolworths drives the business on the basis of the demands of the
customers, choice and technology. They respond to the new eras in a number of ways i.e. by way
of placing the customer as the most important aspect of the business, listening and understanding
their requirements and demands and creating innovative ways for them in which they can shop
with the business. The differentiation strategy puts the customers as the first preference. The
business is continuously working harder for the purpose of valuing each and every customer and
for providing them with endless choices (Rothaermel, 2015).

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Recommendation and conclusion
The present strategy of Woolworths group keeps the customer under focus and emphasizes on
cost leadership and differentiation of business. I will recommend that Woolworths should invest
more amounts on advertising in order to be competitive in the market. Social media strategies
can be adopted for taking the benefit of low- cost promotional activities. A fresh range of healthy
meals offered by Woolworths should be highlighted in those advertisements so that it can fit into
the daily routine of the customers. This will assist in amplifying the brand recall of Woolworths
in the minds of the customers which, in turn, is expected to increase the purchase likelihood.
Furthermore, it is recommended that Woolworths should focus on providing an enjoyable and
convenient shopping experience to the customers in the long run. The store atmosphere should
be improved by including enthusiastic, cheerful and helpful staff and inclusion of relaxing music
for the purpose of creating an enjoyable shopping experience. It should also aim at diversifying
into new businesses in which a rise is projected in sales over the long run.
Therefore, it can be concluded that the retail industry of Australia is competitive and mature but
suffer from low profit potential and is not an attractive industry for new entrants. Despite the low
profit potential and intense competition, Woolworths have been able to implement competitive
strategies with the help of which it was capable of ruling the Australian market. Its success
clearly indicates a superior business model and effective strategies. The strategy of cost
leadership, differentiation, and fresh food has expanded the boundaries of this business for the
purpose of including the suppliers and customers.
In my opinion, the strategies adopted can be criticized on the ground that the customers need
innovation in the way products are offered by the organizations. Nowadays, reasonable prices are
also losing their significance in the lives of the customers. Customers are willing to pay more for
the products that meet their needs and wants. Therefore, the cost leadership strategy may not
work for Woolworths in the long run. I recommend that Woolworths should explore new and
innovative strategies from time to time for offering greater comfort and convenience to the
customers in their overall shopping experience. In order to maintain dominance in the market,
Woolworths is required to adopt strategies that ensure the preservation of sustainability of its
competitive edge.

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References
Carter, I. (2017). Human behavior in the social environment: A social systems approach.
Routledge.
Charlton, E. L., Kahkonen, L. A., Sacks, G., & Cameron, A. J. (2015). Supermarkets and
unhealthy food marketing: An international comparison of the content of supermarket
catalogues/circulars. Preventive medicine, 81, 168-173.
E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
Hamilton, L., & Webster, P. (2015). The international business environment. Oxford University
Press, USA.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.
Mahdi, O. R., & Almsafir, M. K. (2014). The role of strategic leadership in building sustainable
competitive advantage in the academic environment. Procedia-Social and Behavioral
Sciences, 129, 289-296.
Moreno-Izquierdo, L., Ramon-Rodriguez, A. B., & Perles-Ribes, J. F. (2016). Pricing strategies
of the European low-cost carriers explained using Porter's Five Forces Model. Tourism
Economics, 22(2), 293-310.
Mudambi, R., & Puck, J. (2016). A global value chain analysis of the ‘regional
strategy’perspective. Journal of Management Studies, 53(6), 1076-1093.
Phillipov, M. (2017). Media, Supermarkets and the Strategic Manufacture of Consumer Trust.
In Media and Food Industries(pp. 155-192). Palgrave Macmillan, Cham.

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Richards, C., Lawrence, G., Loong, M., & Burch, D. (2012). A toothless chihuahua? The
Australian Competition and Consumer Commission, neoliberalism and supermarket
power in Australia. Rural Society, 21(3), 250-263.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Singh-Peterson, L., Lieske, S., Underhill, S. J., & Keys, N. (2016). Food security, remoteness
and consolidation of supermarket distribution centres: Factors contributing to food
pricing inequalities across Queensland, Australia. Australian Geographer, 47(1), 89-102.
Trevena, H., Neal, B., Dunford, E., & Wu, J. H. (2014). An evaluation of the effects of the
Australian Food and Health Dialogue targets on the sodium content of bread, breakfast
cereals and processed meats. Nutrients, 6(9), 3802-3817.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management
and business policy. pearson.
Woolworths Group. (2018). About Us. Retrieved July 28, 2018 from
https://www.woolworthsgroup.com.au/page/about-us/