Strategic Analysis – Woolworths Supermarkets

This report engages in a strategic management analysis of Woolworths Supermarkets, a leading food corporation in Australia that is headquartered in Sydney. The report carries out an external and internal analysis of the operations of this supermarket chain which is followed by a value chain analysis, the identification of different sources of competitive advantage and a vrio analysis of these sources of competitive advantage. In conclusion the report recommends a number of developments that need to be initiated for the development of strategic resources, that can enable Woolworths Supermarkets to compete more effectively with its rivals, including changes that it needs to bring about in the area of corporate governance to do so.

Running Head: STRATEGIC ANALYSIS - WOOLWORTHS SUPERMARKETS
Strategic Analysis – Woolworths Supermarkets
Name of the Student
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1STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
Executive Summary
The Australian Supermarket Industry is a thriving one, with new competitors emerging in the
scene every now and then. It is therefore a huge challenge for existing supermarket power
houses to stay ahead in the game and meet the requirements needed to root out all
competition. This report engages in a strategic management analysis of Woolworths
Supermarkets, a leading food corporation in Australia that is headquartered in Sydney. Set up
in as early as 1924, Woolworths Supermarkets is one of the best known names in the fresh
food business in the country. The report carries out an external and internal analysis of the
operations of this supermarket chain which is followed by a value chain analysis, the
identification of different sources of competitive advantage and a vrio analysis of these
sources of competitive advantage. In conclusion the report recommends a number of
developments that need to be initiated for the development of strategic resources, that can
enable Woolworths Supermarkets to compete more effectively with its rivals, including
changes that it needs to bring about in the area of corporate governance to do so.

2STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
Table of Contents
1. Introduction.........................................................................................................................3
1.1. Woolworths Supermarkets: Company Structure, Aims and Objectives.....................4
1. External Environment Analysis for Woolworths Supermarkets.........................................4
1.1 Macro Environment Analysis......................................................................................4
2.2 External Analysis of Woolworths Supermarkets using Porter’s Five Forces..................6
3. Internal Analysis of Woolworths Supermarkets....................................................................7
3.1. SWOT Analysis of Woolworths Supermarkets..............................................................7
3.2. Value Chain Analysis for Woolworths Supermarkets....................................................8
3.3. Sources of Competitive Advantage and VRIO Analysis..............................................10
4. Recommendations for Developing Strategic Resources......................................................11

3STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
1. Introduction
Woolworths Supermarkets is a renowned Australian grocery retailer that is based in
the city of Sydney and which holds a prominent position in the supermarket industry of
Australia. It was established in the year 1924 by Coles and Woolworths and occupies more
than eighty percent of the shares in the Australian stock market. Woolworths specialty lies in
the sale of packaged foods, frozen meat and fish and both fresh and processed fruits and
vegetables. It also deals in products like stationery items, baby supplies, pet supplies,
household products, beauty products, DVD’s, magazines and health related products. It has
nineteen convenient stores and nine hundred and seventy six supermarkets all across the
country, with every store and supermarket carrying the exact same logo. Woolworth’s
products are available for sale online and are delivered to customers via an efficient and cost
effective home delivery service. Customers can order Woolworth’s products from the
comfort of the home or office and have these delivered to them within a few hours to a few
days. This report shall examine Woolworth’s external and internal operations to gain a
thorough understanding of its strategy and its success in the Australian market. It will
specifically identify sources of sources of cost and differentiation advantage for Woolworths
in the industry and position the company and its competitors in the market
(Woolworthsgroup.com.au, 2018). The report will then proceed to engage in value chain
analysis to identify sources of competitive advantage for Woolworths and a VIRO analysis to
determine the sustainability of such competitive advantages. Finally, the report shall make
recommendations for the development of strategic resources like corporate government
processes for example, that can help it to increase its competitiveness by a considerable
extent.

4STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
1.1. Woolworths Supermarkets: Company Structure, Aims and Objectives
Woolworths Supermarkets is a company that is governed by a Board of Directors, a
group executive committee and board committees. As far as its aims and objectives are
concerned, Woolworths Supermarkets aims at creating a customer as well as store led
team and culture. A major objective of the company is to generate a highly sustainable
sales momentum in the area of food (Woolworthsgroup.com.au, 2018). The company
wishes to evolve a drinks business which provides great convenience and value to its
consumers. Another objective of the company is to empower its portfolio businesses for
the purpose of pursuing strategies that are capable of delivering stakeholder value. It also
aims to become a lean retailer via systems excellence and a full-fledged end to end
procedure.
1. External Environment Analysis for Woolworths Supermarkets
1.1 Macro Environment Analysis
1.1.1 Political and Legal Factors – The Australian government is one that is seen to
have a fairly direct and powerful influence on the functioning of the Australian
supermarket industry. Trade hours are legislated in Australian parliament on a
regular basis, the consumer forums and the competition forums of Australia are
monitored as well as regulated very frequently as are the foreign investment board
and trade practices act among others ("Fair trading laws", 2018). Such a well-
regulated political and legal environment makes it convenient for Woolworths
Supermarkets to run its operations with efficiency and productivity.
1.1.2 Economic Factors – The Australian economy is one that has been growing at an
uncertain and slow pace of late ("Low wages, high debts and housing bubble
threaten the Australian economy in 2018", 2018). This in turn has turned out to be

5STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
a problem for many retail players including Woolworths Supermarkets. The
company’s future growth may just get stunted and the rise in fuel prices as well as
the increasing rate of unemployment is a cause of great worry for many retail
participants in the Australian supermarket industry including Woolworths
Supermarkets.
1.1.3 Social Factors – Major changes in attitudes, lifestyles and concerns in society has
resulted in several transformations taking place in the way that the Australian
supermarket industry functions. People tend to be image conscious a lot and don’t
want to eat foods that are likely to make them obese and injure their health in the
long run. Customers now want food that is organic and low fat in nature and also
gluten free in certain instances ("About the Australian Dietary Guidelines | Eat For
Health", 2018). Woolworths Supermarkets takes such new food preferences into
consideration in order to survive in the industry. Women have also started
participating in the Australian supermarket workforce in large numbers and this is
something that Woolworths Supermarkets always takes into account when
recruiting manpower.
1.1.4 Technological Factors – Australia is a country that is technologically well
advanced ("Technology and Innovation - Australian Bureau of Statistics", 2018).
Australian supermarket chains and outlets are seen to be increasingly making use
of sophisticated computer technology in order to run their operations. Woolworths
Supermarkets incorporated new technology in order to carry out its functions, by
subscribing to Global Electronic Marketing and Merchandising Network in as
early as the year 1994, becoming one of the pioneers in the Australian
supermarket industry as far as technology use is concerned. It makes online

6STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
shopping facilities available to its customers and invests a considerable sum of
money every now and then for the development of its website.
2.2 External Analysis of Woolworths Supermarkets using Porter’s Five Forces
2.2.1. Threat of Substitutes – As far as the threat of substitutes is concerned, Woolworths
does face a good deal of competition. There are many farmers markets, specialist grocery
stores and convenience stores in operation in several Australian cities and towns that are
likely to attract customers because of their low priced yet fresh produce. Convenience stores
in particular have been expanding quite a bit of late and due to the latest fad among the
Australian population, the farmers markets are doing quite well too. The farmers markets sell
highly organic and nutritious fresh farm food that people are not likely to come across even
when they visit a top-notch supermarket.
2.2.2 Rivalry among Competitors – The rivalry among Woolworths Supermarkets
competitors is fairly intense. Competition usually arises over factors like price, store location
and product choice. Costco and Coles are both major competitors for Woolworths
Supermarkets, with the latter bringing about a major change in its senior level management
that makes it perceived by its competitors as quite a big threat (Heffernan, 2018).
2.2.3. Bargaining Power of Suppliers – The bargaining power of suppliers was for
Woolworths Supermarkets quite low at one point of time, when the company itself was a
major buyer and bought way more from its suppliers than its competitors ever could. Now
however, due to the entry of rivals like Aldi and Costco into the Australian supermarket, the
bargaining power of suppliers has become rather high ("Meet the suppliers to the major
supermarkets - ABC Rural - Australian Broadcasting Corporation)", 2018).
2.2.4. Bargaining Power of Buyers – The arrival of new competitors into the Australian
supermarket industry and the emergence of price comparison websites have certainly

7STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
contributed to the bargaining power of buyers becoming quite high in recent years
(Loertscher & Marx, 2017). Woolworths Supermarkets has to keep its product prices highly
competitive in order to draw the type of clientele necessary to ensure a profit for its ongoing
business.
2.2.5. Threat of New Entrants – The threat of new entrants is one that is usually very high
in the corporate world (Fresard & Valta, 2016). Already the arrival of competitors like Costco
and Aldi is making Woolworths Supermarkets rethink and innovate with its marketing
strategies like never before, and things may get even more competitive down with line with
the Australian Federal government insisting on the lowering of trade barriers to facilitate the
entry of new competitors.
3. Internal Analysis of Woolworths Supermarkets
3.1. SWOT Analysis of Woolworths Supermarkets
3.1.1 Strengths – Woolworths Supermarkets holds a relatively strong financial position in
the Australian supermarket industry (Knox, 2015). It engages in the manufacture of a wide
range of products and is therefore able to easily meet the varied requirements and preferences
of customers. It has a good brand image as well as reputation in the market and occupies a
significant portion of market shares, making it a leading stakeholder in the Australian
supermarket industry.
3.1.2. Weaknesses – Operating costs tend to be very high leading to a rise in debt for the
company (Blundell, 2013). The overall running costs are quite high and a reduced petrol
margin puts Woolworths Supermarkets in a weak position in the market.
3.1.3. Opportunities – There is plenty of scope for Woolworths Supermarkets to increase its
client base, given the huge preference among people in Australia now for healthy, nutritious

8STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
and fresh food, the sale of which the company specializes in (Lewis & Huber 2015). The
company also has the opportunity to grow and develop in sectors like the health food sector,
increase its shares in the market and use information technology to avail new sales
opportunities and bring down expenses.
3.1.4. Threats – The increasing rise in unemployment, the continued threat of new
competitors and the gradual increase in the power of suppliers all constitute major threats to
the growth and expansion of Woolworths Supermarkets (Merrett & Smith, 2013). Certain
competitors have several technological advantages over the company, since they use
sophisticated new software, the use of which the company is not familiar with until now.
3.2. Value Chain Analysis for Woolworths Supermarkets
There are three primary value creating functions that may be noticed in the operations
of Woolworths Supermarkets.
3.2.1. Inbound Logistics – Since Woolworths Supermarkets is in essence a retail business, it
does not engage in the manufacture of the different products that it sells in the market. What
Woolworths Supermarkets is instead in control of is control over the entire distribution
network for its various products (Lawley & Birch, 2014). In this respect there are two
important activities that are seen to contribute quite a bit to the company’s business, namely,
logistics and procurement. The products that are sold by Woolworths Supermarkets are seen
to be transported from the manufacturing centre directly to a regional or national distribution
centre from where these products make their way to the stores, after being thoroughly
assessed for quality. Such an efficient system of functioning as made it possible for
Woolworths Supermarkets to control heavy expenditures. Since Woolworths Supermarkets
has sole ownership of all its distributions and locomotives or trucks, it is in a suitable position

9STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
to combat hurdles like workers strikes. It is also able to ensure that shipment is delivered at
distribution centers and from there to the stores or outlets in a punctual manner.
3.2.2. Operations – Two of the main functions that make sure that customers feel both
convenience and valued when they buy from Woolworths Supermarkets are inventory
management and quality assessment (Arli et.al, 2013). Woolworths Supermarkets officials
make every effort to detect as well as remove all defective products before putting these on
display for customer purchase. Minimum presentation level technology is made use of in
order to ensure that products meet the right standards or quality before being sold to
customers. If certain products are seen to fall behind in terms of minimum presentational
level, then the stock is removed and an order for a fresh stock is dispatched to the company’s
distribution centre. Additionally, advanced forecasting programs are made use of by
Woolworths Supermarkets to detect and understand any prospective change in demand owing
to external factors like economic trends or changes in the season.
3.2.3. Sales and Marketing – The primary activities that are carried out in order to increase
sales and to enable the company Woolworths Supermarkets to compete in as effective a
manner as possible are organizational dynamism and in store promotions (Phillipov, 2016).
Weekly sales are held by Woolworths Supermarkets in order to enhance the sale of specific
products for a limited period of time. The prices of these products are reduced by a
considerable degree in this limited time-period. Customers are made to know about these
short-term weekly sales via the timely and efficient distribution of sales catalogues. Where
inventory turnover is concerned, Woolworths Supermarkets has also introduced a variety of
meals that are easy to prepare, thus catering to the lifestyles and preferences of present day
consumers.

10STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
3.3. Sources of Competitive Advantage and VRIO Analysis
The sources of competitive advantage that can seem evident after carrying out the
above value chain analysis for Woolworths Supermarket are as follows:
3.3.1. Excellent Top Level Management – In spite of high rates of inflation and economic
recession, Woolworths Supermarkets has been able to grow and expand at a rate that is way
higher than what was projected for this company (Kor & Mesko, 2013). This has happened
largely due to the fact that Woolworths Supermarkets has capable and efficient people
working at the senior levels of management. The CEO’s of the company till date have been
excellent managers and have seldom given employees and customers any reason to complain
about the way the company does its work and the quality of the products that it releases into
the market. However, while having capable and efficient top-level management is a valuable
thing indeed, it is not something that is rare. As a result, this effective and efficient top
management cannot be regarded as a very distinct competitive advantage. Instead, it may be
considered as a parity point that is used along with a number of other important factors like
smooth and efficient supply chain management that makes it possible of the company to be
well ahead of its competitors in the industry.
3.3.2. Brand Image and Reputation – Customer experiences have been largely positive as
far as Woolworths Supermarkets products are concerned, since the company resorts to strict
quality assessment measures to make sure that what it releases into the market is never
substandard (Lewis & Phillipov, 2016). The good image and reputation that this brand enjoys
as a consequence of such satisfied customer experiences is something that can definitely be
regarded as valuable but it is not rare, it is not hard to imitate and many of the company’s
competitors are also claiming to sell fresh and nutritious produce that are guaranteed to
ensure customer satisfaction. In fact, all Woolworth’s customers now expect its products to

11STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
always be fresh, to have high health value and to be satisfactory in every other way. The
positive brand image cannot therefore be regarded as distinct competitive advantage but
instead as an essential point of parity, which the company needs in order to be able to
compete well enough with its rivals.
3.3.3. Effective and Efficient Supply Chain Management – The efficient distribution
network that Woolworths Supermarkets has maybe regarded as an excellent capability as well
as resource in terms of both its outbound and inbound logistics (Burch, Dixon & Lawrence,
2013). Cost savings are what the company has been able to achieve by a considerable degree
because of its good relationship with suppliers and its technological competence. The
efficiency in distribution is certainly tough to imitate because a few of the technologies used
in the process are indeed very sophisticated, and it is not something that can be easily
substituted either. However, if Woolworths Supermarkets ever manufactures products that are
inferior in terms of quality and are not up to customer satisfaction then even having such a
wonderfully efficient distribution system in place will not help the company to survive in the
market. The effective and efficient supply chain management system is something that can be
regarded as a highly distinct competency for sure but it needs to be complemented and
supplemented by a wide range of other competitive advantages.
4. Recommendations for Developing Strategic Resources
 All the existing Woolworths Supermarkets stores and outlets should be refurbished in
order to give these a new look and feel. Playing cheerful and relaxing music can
definitely improve the shopping experience for customers and by encouraging the
staff to be polite and well behaved, the company will succeed in getting its customers
to keep coming back time and again.

12STRATEGIC ANALYSIS – WOOLWORTH’S SUPERMARKETS
 Woolworths Supermarkets should make an effort to employ people from diverse
religious and ethnic backgrounds. By doing so, it will be giving all members of the
Australian population the equal opportunity to showcase their skills and potential
when working for the company.
 Woolworths Supermarkets must ensure that its employees and customers don’t face
any risk to their health or safety when they are present at the company’s stores and
outlets (Sage & Goodman, 2016). There should be a sufficient number of fire
extinguishers and adequate fire escape route in every store or outlet that will allow
those in these stores to protect themselves or escape in the event that a fire breaks out.
 Woolworths Supermarkets must invest in advertising campaigns to ensure that its
products are always attractive to customers. These advertising campaigns should
focus on the importance of eating healthy and point to the benefits of a healthy diet so
that those who view such advertisements feel encouraged to try out the healthy fresh
and organic food that Woolworths makes available in the market (Cameron et.al.,
2015).
 Woolworths Supermarkets should consider investing in other types of businesses that
are likely to have long-term sales growth like businesses that deal in up-market
organic produce or hardware business, as the supermarket industry in Australia may
just end up witnessing a downfall in the near future.

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