PRJM6005 - Strategic Analysis of Woolworths Ltd: Business Strategy

This essay presents a comprehensive strategic analysis of Woolworths Limited, focusing on developing a business strategy for improved performance. It includes an organizational context with a strategic intent and positioning statement, followed by an industry value chain analysis. The external strategic analysis employs Porter's Five Forces and PESTLE analysis to assess the competitive landscape and macro-environmental factors. An internal strategic analysis uses the firm value chain to identify value-creating attributes. A SWOT analysis summarizes the strengths, weaknesses, opportunities, and threats facing Woolworths. The essay concludes with recommendations for Woolworths to enhance its market position and achieve sustainable growth, such as investing in healthy ready-to-eat meals and improving the in-store shopping experience. This strategic overview aims to provide actionable insights for Woolworths' top management.

[Strategic Analysis]
[Year]
Woolworths Limited
Student Name

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Table of Contents
Part A: Organizational context...........................................................................................................2
A.1 Strategic intent........................................................................................................................2
A.2 Positioning statement.............................................................................................................2
A.3 Industrial Value Chain..............................................................................................................3
Part B1: External Strategy Analysis....................................................................................................3
B1.1 Porters 5 Forces Analysis.......................................................................................................3
B1.2 PESTLE analysis.....................................................................................................................4
Part B2. Firm Value Chain Analysis...................................................................................................6
Part C: SWOT analysis........................................................................................................................7
Part D: Recommendation..................................................................................................................8
References.......................................................................................................................................10
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Part A: Organizational context
A.1 Strategic intent
Woolworths has a competent leadership team who are clear about their future
strategy. The company has focused on achieving higher profitability by deploying
technologies and ensuring a seamless experience for their consumers. The company intends
to use data analytics and study their customer’s preferences in order to have a dedicated user
base.The management believes in making quality products over quantity sales in order to
maintain their brand image. It also deploys the strategy of launching products at the right time
in order to garner maximum attention (UK. Essays 2013). This strategy is different from the
“always available” approach that many retailers deploy in order to maximize sales. The
company intends to be a Leading fashion retailer in the southern hemisphere and looks
forward to develop products most relevant to customers in these regions. This strategy also
complements its vision to become a leader in multiple segments like fashion retail and food
business (Woolworths Holdings Limited 2018).
A.2 Positioning statement
Woolworths has a greater preference among high-income earners who prefer their
farm products and have trust in the company to provide organic products. The company is a
leading chain in South Africa, where it has a 10% market share (Moorad 2012) . Moreover,
the fact that it attracts higher income group towards itself ensure that it is highly profitable
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and sustained customers. Consumers who prefer using digital modes of shopping are more
likely to buy from Woolworths as it an early adopter of connected retail.
A.3 Industrial Value Chain
Woolworths procures its farm products from exclusive producers, who sell their
produce to its local unit. Being a consistent buyer, it has a lot of influence among its suppliers
and thus it maintains strict standards and methods of production (Wade and Bradley 2002).
This ability ensures that the consumers get only high quality products from its stores.
Woolworths acts as an intermediary between its suppliers and consumers, and it derives value
from the way in which it supervises the distribution of products through its network of stores.
It procures farm produce directly from the producers and distributes them through a regional
center. This supply chain ensures cost savings as well as quality monitoring. Woolworths
owns all the vehicles and distribution centers, which help it in moving the goods quickly and
maintain less stock.
Part B1: External Strategy Analysis
B1.1 Porters 5 Forces Analysis
It is important for Woolworths to keep track of changes in its external environment in
order to stay relevant. The five forces analysis of the company analyses the external factors
affecting the company.
Threat of new entrants: Woolworths is less vulnerable to the impact of new entrants due to its
large and dominant position. Any new entrant would have to make considerable investment
and build a network in order to compete with Woolworths. Being a highly competitive
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market makes it tough to do so. In addition, the new entrant runs the risk of losing capital if it
does not gain traction quickly.
The bargaining power of customers: To maintain steady sales and customers, Woolworths
has to price its products competitively as customers have other choices in the market and easy
availability. Thus, they have a good bargaining power.
The bargaining power of suppliers: Woolworths is a bulk buyer and a consistent customer.
This factor helps it in dominating its suppliers. The suppliers have a weak bargaining position
because they cannot afford to lose a big customer like Woolworths (Smith 2006).
The threat of substitutes: Substitute products and alternatives to supermarkets are a major
threat to Woolworths. The availability of cheaper quality products in the markets can wean
away customers from the company. In order to safeguard itself against such threats, the
company has to monitor the pricing and quality constantly. Strong marketing strategy and
maintaining good brand image is necessary to ward off threats from substitute products
(Uddin, Hassan and Arafat 2012).
The rivalry among existing firms: Woolworths has to face stiff rivalry with its chief
competitor Coles, which has been aggressive in marketing and pricing strategies. In addition,
the presence of other strong player, Myer, poses threat to the company in terms of gaining
market share.
B1.2 PESTLE analysis
The political factors of a country affect every business in one way or the other.
Woolworths being a formidable player, it has to remain in the limelight of the public. If there
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is any change in the preferences of the government, especially related to farming policies or
procurement, the company has to adapt itself quickly (Umberger, Stringer and Scott 2008).
Economic situations like recessions and the resulting layoffs can have adverse effect on the
sales of the company. During the recession period, the company had to close its UK business,
which led to loss of capital and unemployment. However, better economic outlook in its main
markets presently and less uncertainty related to the economy has ensured that Woolworths is
not in any imminent threat for its business.
The Social profile of the local market is an important factor in order to attract the right kind
of customers. Woolworths has positioned itself as a seller of select quality food products.
Thus if the local customers are brand or quality conscious, they are more likely to visit the
store.
Technological factors are crucial for the company in order to achieve its vision of becoming a
store with a difference. The adoption of new technologies for billing and inventory has
helped it in maintaining efficient operations. However, the attempt to use self-checkout was
not so successful and the company had to face backlash among its customers. Thus, technical
factors are to be employed with caution and run the risk of failure.
The company has to be vigilant about any legal issues, which can hamper its image. The strict
employment laws for large organizations and standards for maintaining food licenses are an
important legal factor, which is to be taken care of (Adamkasi 2016).
Woolworths has to ensure that it has a minimal impact on the environment. It has to monitor
the amount of waste material and the possibility of recycling in order to reduce impact on the
environment. Use of systems such as water conservation methods and power saving
equipment’s can help in reducing its carbon footprint. The company claims to have reduced
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its water consumption significantly at its South African units and looks forward to achieving
conservation methods.
Part B2. Firm Value Chain Analysis
Value creating attributes: In order to maintain its leading position in the market,
Woolworths has to provide fresh produce to its customers every time. This requires an
efficient logistics management by the company, co-ordination among its various divisions in
order to ensure smooth operations, and a strong sales and marketing strategy. These three
factors help in creating the value of the product that Woolworths aims to sell.
Logistics: Woolworth’s primary concern is to keep its goods as fresh as possible and ensure
that they reach the market in the shortest time. It maintains a sizeable fleet of trucks and
warehouse all over the country in order to remove any supply and storage issues. This also
ensures that Woolworths is in a position to take advantage of any demand supply gap by
moving goods from less demand areas to areas of shortage (Wayhuni 2010).
Operations: Woolworths have an experienced team, which handles its daily operations in a
planned manner. The team ensures stringent quality checks before they are procured and co-
ordinate their pickup and storage at its facilities. They are also responsible for the timely
availability of products at its stores by maintaining inventory records and identifying products
that need to be delivered on time, which ensures that they maintain high margin of profits.
Marketing: Woolworths is quick to adapt to changing market scenarios and ran a successful
loyalty program in order to gain customers and achieve. The rewards program for its
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customers ensures they get some form of cash back and redeem them at a later purchase. This
strategy ensures that the customers are hooked to the store and make repeat purchases.
Part C: SWOT analysis
Strengths: Woolworths is a consistent performer with highest growth rates among
peers. It has managed to run its business in an efficient manner and has achieved cost savings,
which has helped it in maintain competitive prices. The innovative marketing strategies and
quality consistence has helped it achieve a strong brand value and loyal customers. This
brand value has also led to good relation among its suppliers, who are confident of selling
their produce to such a reputable company.
Weaknesses: Woolworths had made several acquisitions in the past in order to remain
competitive and expand business opportunities. As a result, it has raised significant debt from
the market, which makes it vulnerable to risk. The impact will be more severe if the sales
growth is not achieved consistently. Another factor for Woolworthsis it is focused mainly in
Australia and New Zealand. The company has to look beyond its core areas and increase
footprint in order to compete with the likes of Walmart.
Opportunities: Woolworths has a very attractive opportunity to expand its online presence.
Being present in this segment provides it the first mover advantage. Another segment where
the company can establish itself is health food and nutrition products. Being a strong brand
will enable to market its products with ease and the products will bring in high margin of
profit.
Threats: Woolworths is facing stiff competition from its rivals to gain market share. There is
a risk of slow growth in sales due to the threats from other retailers. The profitability of the
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company can also be affected if the government takes any action regarding the sale of
alcohol. Any such move can affect sales of the company and affect profitability (Vodanovich,
et al. 2010).
Figure: SWOT Analysis of Woolworths Ltd.
Part D: Recommendation
Woolworths has scope for improvement in various areas and needs to evolve in order
to stay competitive. Woolworths can invest in introducing healthy ready to eat meals, as they
are convenient for people who do not have time to prepare their own meals .These products
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will also synchronize with the company’s image of an urban supermarket. They also have to
invest considerably in promotional activities like in-store promotions and sales events etc.
Buyers tend to make impulse purchase on such discount offers and events. The company also
has to look for new verticals that it can enter, like dairy products or home improvement
products. These products can be easily integrated to its existing offerings and will require
fewer changes to its logistics model. Another key for the company is to focus on the shopping
experience by providing in-store convenience and training their staff to be more helpful and
informative. They can also provide small entertainment zones for the kids who come along
with their parents and facilities for the elderly or handicapped. Although these
recommendations can help in achieving growth, there is also risk involved with changing the
company’s strategies. The health conscious consumers can view ready to eat products with
doubt as there may be concerns regarding their nutritious value. In addition, any changes in
the store format and entertainment should be decided with care as it can cause the store to
lose its appeal among customers who like its look and feel. The discounts and promotional
offers also need to be deployed with caution as it can go against the stated goal of the
company to prioritize quality and profitability over volume growth.
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References
Adamkasi. Freepestel analysis.com. January 31,2016. http://freepestelanalysis.com/pestle-
pestel-analysis-of-woolworths/ (accessed May 25, 2018).
Moorad, Zeenat. Woolworths eyes full- line supermarkets. February 17, 2012. (accessed May
23, 2018).
Smith, Rhonda L. "The Australian grocery industry, a competitive perspective." The
Australian Journal of Agricultural and Resource Economics,, 2006: 39-43.
Uddin, Md. Mesbah, Kamrul Hassan, and Bahauddin Arafat. Scribd.com. July 3, 2012.
https://www.scribd.com/doc/99563233/Woolworths-Ltd-A-Case-Study-Report (accessed
May 25, 2018).
UK. Essays.UK Essays.com. November 2013. (accessed May 23, 2018).
Umberger, Wendy J., Randy Stringer, and Emily M. Scott."Australian Consumers' Concerns
and Preferences for Food Policy."American Agricultural Economics Association Annual
Meeting, 2008: 20-22.
Vodanovich, Ivan Matej, Evan Brownlee Blythe, KhaiHoong Leong, and Jia Yun Liang.
Slideshare.net. January 13, 2010. https://www.slideshare.net/KyleL1/strategic-management-
group-assignment-1 (accessed May 25, 2018).
Wade, Matt, and Michael Bradley.mh.com. June 9, 2002. (accessed May 23, 2018).
Wayhuni, Dina. "The Importance of Supply Chain Management in Competitive Business: A
Case Study on Woolworths." The Importance of Supply Chain Management in Competitive
Business, 2010: 12-16.
Woolworths Holdings Limited. Our Strategy.2018. (Accessed May 23, 2018).
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Strategic Analysis of Woolworths Limited