Woolworths Strategic Management: Analysis and Recommendations

This report analyses the strategies being put in place by Woolworths to counter competition and remain the leading chain store in Australia. It includes a macro-environmental analysis, industry analysis, company analysis, competitor analysis and strategy analysis. The report also provides recommendations on how Woolworths can counter the competition brought by other critical players in the market.

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WOOLWORTHS STRATEGIC MANAGEMENT
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Executive Summary
With the entrance of new critical players like IGA and Aldi in the Australian retail
industry, the duopoly formed by Woolworths and Coles seems to be broken. The breakdown of
this duopoly has brought in the issue of competition at hand since the new supermarkets like IGA
and Aldi are growing very fast thus posing a lot of threat to bigger supermarkets like
Woolworths. The case study report seeks to explore the Australian retail industry and look at
various supermarkets and how their strategies are developed with the aim of competing for the
highest market share. It is important to note that with Woolworth supermarket being the leading
chain store, the case study report will explore its strategies, resources and capabilities in
comparison to others competitors like Coles, Aldi and IGA. It is noted that Woolworths control
more than 35% of the retail industry market share in Australia. It has various stores and outlets
across Australia. Therefore, the report seeks to understand how the chain store is reshaping its
strategic plans for it to remain the leading supermarket in Australia. The report will also include
some recommendations on where to improve for it to counter the competition brought other
critical players in the market.

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Table of Contents
Executive Summary.....................................................................................................................................2
Table of Contents........................................................................................................................................3
Introduction.................................................................................................................................................4
Macro-Environmental Analysis...................................................................................................................4
Industry Analysis.........................................................................................................................................5
Company Analysis......................................................................................................................................6
Competitor Analysis....................................................................................................................................7
Strategy Analysis.........................................................................................................................................7
Recommendations.......................................................................................................................................8
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9

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Introduction
Woolworth’s supermarket is an Australia supermarket store chain ran and owned by
Woolworths Limited. Founded in 1924, Woolworths is the leading supermarket in the
supermarket retail industry in Australia commanding 39% of the market share with Coles as its
main competitor who is ranked second regarding the market share. Woolworths operates about
1000 stores in Australia.
Till lately, the Australian supermarket and retail industry were dominated by only two
giant companies Woolworths and Coles with a joint market share of 72.5% (Knox 2015, pp.
109). However, over the recent past years, there has been an emergence of other supermarkets
such as IGA and Aldi who command market shares of 10.3% and 9.5% respectively.
It is important to note that the entrance of the new supermarket and retail outlets is posing
a significant challenge to Woolworth with the main problem being the stiff competition being
witnessed in the market (Madsen and Walker 2015, pp. 115). Therefore, the primary aim of this
report is to analyse the strategies being put in place by Woolworths to counter competition and
remain the leading chain store in Australia. Moreover, the report will also put in place the
recommendations and what is to be done for Woolworths to stay at its current position in
Australian supermarket industry.
Macro-Environmental Analysis
The analysis of macro-environmental factors impacting on Woolworths and the whole
Australian retail industry can be best analysed by majorly looking at PEST analyses of the
Australian business environment (Ho 2014, pp. 6480). These factors may include economic
factors, legal, political, technological, social and demographic changes.
The political conditions in Australia affect the retail industry to a more prominent level.
For example, Australia's Federal Government has launched a competition policy which limits the
companies' chances of eliminating their competitors (Starkie 2016, pp. 110). Companies such as
Woolworths and Coles have been put into stiff competition from other small retailers struggling
to thrive in the retail industry in Australia. Therefore, Woolworths faces a challenge from the
competing small retailers like IGA and Aldi to maintain their leading market share.
Woolworths’ performance will be profoundly affected by the drop in the economic
market conditions with Australia. In the recent past, Australia has witnessed a fall in the
economic activities which will profoundly affect the operations of Woolworths (Perera and
Reddy 2017, pp. 92). Also, variations in the rate of currency exchange and the fall in the value of
the Australian dollar have also affected the Woolworths operations to a greater extent.
The growth in technology is also affecting Woolworth’s daily operation. The global
technological advancement and use of technology its daily process, there has been a significant
improvement in the way Woolworths operates and conducts its activities. For instance, the
introduction of green refrigeration technology has helped the supermarket to store that perishable
good for a long time. Therefore, technology is impacted positively by Woolworth's operations.

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It is crucial to note that Woolworth's operations are profoundly affected by the society
where it operates in. The companies like Woolworths need to attain high societal development
which includes being socially responsible by undertaking societal initiatives (Perera and Reddy
2017, pp. 92). A company like Woolworths needs to win the hearts of the people living around it
by being socially responsible to them. By doing so, the company will increase its brand
awareness as well as customer loyalty (Payne and Frow 2013, pp. 308). Thus, Woolworths need
to look at their strategies and establish whether they are favouring the society and what is meant
to be spent in such activities.
Some of the legal regulations put across by the government to help in the provision of the
way companies operate in Australia have profoundly affected Woolworths (Starkie 2016, pp.
110). For example, the introduction of a carbon tax and regulation by Australian Competition
and Consumer Competition has changed the way the organisations operate across the economy.
Moreover, the need to run within the stipulation of a fair policy has highly affected Woolworths
since their main competitors have a chance of ousting them in the market if they do not remain
keen.
Industry Analysis
The Porter Five Forces strategic is an analytical tool can be used to assess the current
position of the total retail and supermarket industry in Australia (Grant 2016, pp. 250). It entails
all the factors that affect the performance conditions of the production as a whole (Dawson 2014,
pp. 160). The use of Porter Five Forces analytical tool can be applied in the analysis of
Australian retail industry is discussed in the subsequent sections.
The bargaining power of consumers in Australian retail industry is one of the forces
discussed under the Porter Five Forces analytical tool. The availability of a vast number of
supermarkets such as Woolworths, Coles, IGA and Aldi has led to the growth in the level of
consumer bargaining power since they have a variety of options to choose from regarding
essential items they want.
The threat of new entry is another force under the Porter Five Forces. The entry of new
players in the retail industry has not highly affected the existing since larger firms have made it
exceedingly difficult for new players to enter the industry (Porter and Heppelmann 2014 pp. 78).
It, therefore, concluded that the overall threat of new entry had been reduced to minimal.
Bargaining power of suppliers is another crucial force in the Porter Five Forces. The
bargaining power of suppliers in the Australian retail industry is moderate. Since the industry is
concentrated, some of the big players like Woolworths and Coles have a majority of the market
share (Knox 2015, pp. 109).
Rivalry among existing firms is another force within the Australian retail industry (Porter
and Heppelmann 2014 pp. 78). In Australia, there are significantly high levels of rivalry due to
the existence of few significant competitors. Such competitors in the Australian retail industry
include supermarkets like Woolworth, Wesfarmers, ASDA, and Coles.

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The threat of Substitute is last, but a strong force of the Porters Five Forces used to
analyse the situation of the Australian retail industry. The consumption of the daily retail
products among consumers in Australia is highly essential. The consumers seem to have a
limited range of option to select from making it difficult for them to get alternatives (Hubbard et
al. 2014, pp. 265). It is understood that the threat of substitute is significantly lower due to lack
of alternative retail products. Therefore, consumers lack the choice and thus stick to the available
retail products for consumption.
From the analysis of Porter five forces above, the Australian Industry has offered a high
attractiveness for key players such as Woolworths. The most important reasons for the high
attractiveness were due to lack of alternative substitutes for consumable retail products as well as
higher barriers to entry for the new players in the industry (Bishop et al. 2013, pp. 45).
Company Analysis
To keep up with the competition, Woolworths has adopted an integrated competitive
strategy. It is argued that their integrated competitive approach has been achieved through its
efficient supply chain to minimise operational costs, a well-differentiated brand image and
awareness to keep it different from others regarding quality and also combining cost leadership
with various elements to compete (Wells 2013, pp. 70). Considering the above mentioned macro-
environmental factors, Woolworths has the following resources and capabilities to help it
achieve its objectives and strategies.
Woolworth has got a highly efficient and effective network of distribution which is both a
capability and a resource. The company adoption of technology in its logistics helped to
company improves its supply network saving many costs associated with manual distribution
operations. The benefits derived from the cost-saving aspect are the best resource for the
company. The chain of distribution is also highly complicated to copy by other rivals. Therefore,
the supply chain covered here has helped Woolworths to maintain its position as the leading
company in the Australian retail industry (Cavusgil et al. 2014, pp. 150).
Woolworths has maintained its brand reputation as the best supplier of quality consumer
products among the people in Australia. The company engaged in positive consumer experiences
through its quality assessment strategy and substantial investment in advertising. As mentioned
earlier, the company has been involved in product and service differentiation to the customer
satisfaction. Thus, Woolworths has maintained it a strong brand reputation which is hard to a
copy-the aspect which made it the leading retail supermarket in Australia.
The company also has an effective and efficient top management. Despite the fact that
the fluctuation in the currency exchange rate and the fall in the value of their currency has not
hindered the growth of Woolworth's initiatives (Perera and Reddy 2017, pp. 92). The increase
can be attributed to the efficient top management which was a factor that has enabled the
supermarket to compete with other to achieve a considerable market share in the Australian retail
industry. Therefore, the company has an outstanding human resource with experienced managers
who are committed to delivering.

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Competitor Analysis
The competitor analysis seeks to look at the environment in which the company is
operating in and who are main competitors in the market share (Madsen and Walker 2015, pp.
116). Being a leading retail outlet among the supermarkets in Australia, Woolworths has some
competitors ad discussed in the next paragraph.
In the supermarket and retail industry offering consumer products, there are four key
players namely Woolworths, IGA, Aldi and Coles. It is noted that some of the new players like
IGA and Aldi have been opening their stores across the country posing more threat to the
Woolworths. However, Woolworth has been able to maintain its position as the leading
supermarket in Australia beating all it rival initiatives (Perera and Reddy 2017, pp. 92).
Nevertheless, with the introduction of legislation such as fair policy in Australia, the upcoming
player like Aldi and IGA are producing a stiff competition for Woolworths. Hence, the company
has decided to counter the competition using its resources and capabilities as discussed in our
previous section of company analysis.
As the porter five forces maintain, Woolworth has kept it various strategies like use of
effective supply chain to support its position ahead of the four main competitors in the Australian
retail industry (Williamson et al. 2013, pp. 185). Moreover, the entrance of new threats in the
market makes it difficult for new players to enter the market.
Strategy Analysis
Woolworths has achieved a significant position the leading retail outlet in the Australian
retail industry due to its well-structured strategies. Some of the plans have been integrated into
the company's operations to give it a competitive advantage (Grant 2016, pp. 257). For instance,
in its growth plans, the company has its operations growth strategies in place.
Some of the strategies developed by Woolworths include the extension of leadership in
all the company’s market segments, employee relations and customer satisfaction, tacking the
growth of the company through evaluation, maintenance of brand reputation, and corporate
social responsibility among others (Payne and Frow 2013, pp. 305).
Most of the strategies have worked due to the availability of enough resources and
capabilities within the company as discussed in the company analysis. For instance, the company
has competent top management which has contributed to better operations within the
organisation due to better employee relations (Eden and Ackermann 2013, pp. 197). The strong
brand reputation has been maintained through massive investment on advertising, and this has
worked very well for the company. As discussed earlier, corporate social responsibility has
helped in the growth of the company, and therefore the company has taken this strategy very
seriously by participating in societal initiatives and development to win the consumer loyalty
(Porter and Heppelmann 2014, pp.80). Policies such as effective supply are not enough in
assuring enough competition and should be supported by robust competitive strategies. Brand
reputation might not necessarily mean the company has a competitive advantage through sales
and thus they should make sure they deal with actual sales leading to increasing revenues.

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Recommendations
Due to the changing environment in the Australian retail industry, Woolworths is
required to follow a particular proposal for growth and maintain its dominant position and
market share. As noted that the profitability and attractiveness of the Australian market will fall
soon, Woolworths is recommended to diversify their business to more profitable industries. The
supermarket is also encouraged to invest more in advertising to create an everlasting Woolworths
brand in the consumer minds. Woolworths should also reframe their strategies to be in line with
political conditions in the country especially the fair price policy. Due to changes in the
consumer preferences and trends, the Woolworths should also engage in continuous innovation
for it to address these changes effectively. The chain store should also participate in enhancing
and supporting their skilled employees through training to sharpen their skills and improve their
levels of productivity.
Conclusion
A strategic analysis of the Australian retail industry was done paying more critical
attention to Woolworth's chain store. The investigation focused on the strategies to be put in
place by the company to counter competition and falling nature of the falling attractiveness and
profitability of the Australian retail industry. However, we have noted that the company has to be
the best due to its commitment to aligning itself to the environmental factors impacting on its
operations and performance. Moreover, the paper has covered the recommendations and the
adjustments to be made by Woolworths to counter future challenges, maintain its market share
and keep up with the dynamic consumer demands and social trends.

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