Strategic Management of Woolworths Supermarkets: A Detailed Report

This report provides a strategic management analysis of Woolworths Supermarkets, a leading Australian retail organization. It begins with an executive summary and table of contents, followed by a company description outlining Woolworths' market position and business operations. The report then delves into an external analysis using PESTLE and Porter's Five Forces, examining political, economic, social, technological, legal, and environmental factors, as well as industry rivalry, the threat of new entrants, supplier and buyer power, and the threat of substitutes. An internal analysis assesses Woolworths' resources, capabilities, and core competencies, including its supply chain, brand reputation, top management, innovation, human resources, and in-store services. The report identifies key issues related to environmental concerns, competition, and staff morale, concluding with recommendations for improvement. The analysis aims to provide insights into Woolworths' competitive environment and strategic positioning within the Australian retail industry.

Running Head: STRATEGIC MANAGEMENT 1
Strategic Management of Woolworth Supermarkets

STRATEGIC MANAGEMENT 2
Executive Summary
Strategic management is a significant aspect for each and every organization. The people
at organization should make efforts to manage its operations and processes strategically. It plays
an important role in the retail industry. The Australian retail industry comprises several
businesses and organizations. This industry is one of the most powerful industries in the world.
Major players in the industry are Coles, Wesfarmers Limited etc. This report includes the
strategic management of Woolworths Supermarket. The strategic management of the company is
analyzed by conducting the external and internal environmental analysis. Different tools of
strategic analysis are used identifying the factors of environment. These factors are impacting the
growth and performance of Woolworth Supermarkets.
Furthermore, it discusses internal environment analysis of the organization by identifying
its resources and capabilities. In the retail industry, the growth of Woolworth is affected by the
threat of competition and threat of substitutes. PESTLE analysis of the organization indicates
that most of the external factors in the country are favorable for the organization. At the end, this
report will identify the issues of external and internal environment, which it is facing in this
competitive business environment. The organization can deal with these issues by considering
these recommendations. It will be beneficial for the organization’s performance and profitability.

STRATEGIC MANAGEMENT 3
Table of Contents
Introduction....................................................................................................................................................4
Company Description....................................................................................................................................4
External Analysis...........................................................................................................................................4
PESTLE Analysis......................................................................................................................................5
Political Factors.....................................................................................................................................5
Economic Factors...................................................................................................................................5
Social Factors.........................................................................................................................................5
Technological Factors............................................................................................................................6
Legal Factors..........................................................................................................................................6
Environmental Factors...........................................................................................................................6
Porter’s Five Forces Analysis....................................................................................................................7
Industry Rivalry.....................................................................................................................................7
Threat of new entrants...........................................................................................................................7
Bargaining Power of Suppliers..............................................................................................................7
Bargaining Power of Buyers..................................................................................................................8
Threat of Substitutes..............................................................................................................................8
Internal Analysis............................................................................................................................................8
Resources, capabilities and core competencies.........................................................................................9
Effective Supply Chain Process.............................................................................................................9
Brand Reputation...................................................................................................................................9
Effective Top Management....................................................................................................................9
Innovation and Integration.....................................................................................................................9
Human Resources................................................................................................................................10
In-store services...................................................................................................................................10
Issues............................................................................................................................................................10
Environmental and community issues.....................................................................................................10
Threat from competitors..........................................................................................................................11
Weak Staff morale...................................................................................................................................11
Recommendations........................................................................................................................................11
Conclusion...................................................................................................................................................12
References....................................................................................................................................................13

STRATEGIC MANAGEMENT 4
Introduction
Strategic management is the process for analyzing the current strategy and finding out the
efficiency and position of organization in industry. It is helpful for developing more beliefs and
value systems for a company. This report includes strategic management of a well-established
retail organization in Australia, i.e. Woolworths Supermarket. The discussion analyzes the
internal and external environment of the organization by using different tools, like; Porter’s five
forces and PESTLE analysis. Furthermore, it describes capabilities and resources of the
organization and related issues in both external and internal environment.
Company Description
Woolworths Supermarkets is one of the Australian leading players with broad retail
business throughout New Zealand and Australia. It is the second largest retail organization in
Australia in terms of revenues after Wesfarmers Limited. The organization has started its
business operations in the year 1924 by launching its first store in Sydney. In the year 2012, the
organization has become one of the largest retail stores in Australia and New Zealand. This is the
subsidiary of a well-known brand, i.e. Woolworth Limited. It operates different brands, such as;
Dick Smith Electronics, Safeway Supermarkets, Big W, BMS, Tandy etc. Currently, Woolworth
has 1000 retail stores across Australia, from which 968 are supermarkets and 19 are convenience
stores, which carry similar logo of Woolworths. Mostly, the company sells the groceries, like;
fruits, vegetables, meat, packaged food products etc. with this, it also sells magazines, stationary
goods and DVDs. With Coles, this organization makes a duopoly of supermarkets in Australia,
accounting approximately 80% of the Australian industry (Woolworths, 2017). Here is the
discussion about the internal and external environment of the Woolworths Supermarkets and the
factors, which impact the growth and performance of the organization in Australian retail
industry.
External Analysis
It is very important for each and every organization to understand the impact of external
environment on the growth and profitability of the strategies of organization. There are some

STRATEGIC MANAGEMENT 5
external factors, which affect the performance of organization. For analyzing external
environment, here are two strategic tools, i.e. PESTLE Analysis and Porter’s five forces analysis.
PESTLE Analysis
PESTLE analysis includes many factors, like; Political, economic, social, technological, legal
and environmental factors. This analysis includes how these factors affect Woolworths
Supermarkets and all over retail industry in Australia (Arli, Dylke, Burgess, Campus & Soldo,
2013).
Political Factors
Woolworths is a well-known brand name in the retail sectors, which is taking advantages of
close Economic Relation Trade Agreement between New Zealand and Australia. This
organization carries two countries where Woolworth is running its business operations in a sole
economy. This organization and its shareholders, whether domestic and foreign, are very safe in
political strength of both the nations. On the other side, there are some political conflicts, which
discourage the investors and businesses from investing in the supermarkets because there is a
risk of having low return on investment and more risk of business letdown (Barney, 2014).
Economic Factors
There are some economic factors, which are favorable for Woolworths Supermarkets, because
both the countries, New Zealand and Australia have environment with the economic stability.
Both the countries have maintained a higher living standard in comparison to other nations.
Apart from this, the position of company has been affected adversely due to global financial
crisis. Due to this global crisis, the organization had closed its business operations in United
Kingdom and it faced a considerable loss. Still, the organization is able to perform in an effective
manner regardless of this financial trouble (Chung, 2016). The economy of Australia is
supporting Woolworths Supermarkets in continuing its business operations after closing in UK.
Social Factors
In modern environment, people prefer to purchase the products from the organizations, which
focus on being environmental friendly and commit to offer organic and products with green-tag.

STRATEGIC MANAGEMENT 6
So, Woolworth is one of the organizations, which has engaged in setting the trends for healthier
and greener life style. It has used various eco-friendly tools and techniques in its sustainability
strategy. It is engaging in the corporate social responsibility. It is considering the needs of
consumers with a short period for shopping (Cole, 2013).
Technological Factors
Technological factors play an important role for the organizations in retail industry. Woolworths
is engaged innovation and developing the better technologies that can assist in increasing the
effectiveness and efficiency of its products and services ad fulfill the needs and expectations of
customers. The organization has installed self-checkout machines in the retail stores. The
machines of its retail stores enabled the customers to scan and make payment for the products
and groceries via credit and debit cards or cash (Cheng, Green & Ko, 2014). As the people are
actively engaged in using new technologies, so they are positively influenced with the
technology innovations of Woolworths.
Legal Factors
The trading policies of government and other policies impact the retail sector in Australia. The
consumer commission, competition and Trade Practicing Act and other trading policies in
Australia have positive impact on the supermarket business in the country. So, it can be stated
that regulatory and legal factors are favorable for the growth and development of business of
Woolworth’s retail business.
Environmental Factors
The environmental aspects of retail sector is indicated in the form of using the eco-friendly
practices in the business and engaging in the processes that decrease the harmful impact on
people and environment (Dwivedi, Merrilees, Miller & Herington, 2012). This organization is
engaging its resources in minimization of the carbon footprint of the organization and with this,
it is reducing the wastage of resources like; water. In external environment, there are some
environmental factors, which mainly impact the sustainability of the retail business.
Thus, most of the external factors are favorable for the growth of Woolworths in the country.

STRATEGIC MANAGEMENT 7
Porter’s Five Forces Analysis
Porter Five Forces analysis is a model, which can assist in analyzing the situation and trends in
the perspective industry. This model evaluates the current situation of the industry and the ways
in which various factors impact the company’s performance (Dos Santos, Svensson & Padin,
2013).
Industry Rivalry
In Australian retail industry, the rivalry among competitors is intense. There are so many
competitors in the industry, like; Wesfarmers, Coles, Asda etc. that are competing against each
other for gaining large market share. In the industry, the competition is majorly based on price
factor, but other factors of competition are such as; location of stores and product choice. The
industry is increasing due to some driving factors; one is the entry of American supermarket, i.e.
Costco and turn-around of Coles (E. Dobbs, 2014).
Threat of new entrants
Threat of new entrants is low in the retail industry in Australia, because already established
larger companies have made the entry very difficult. It is not easy for new players to enter the
industry. There are some reasons, like; establishing a retail business with a number of retail
stores and higher quality to compare with its competitor, like; Coles requires a high amount of
capital (Eden & Ackermann, 2013). Moreover, Woolworths and its large competitors are
governing players, having access to different channels of distribution and well-known brands in
the retail sector.
Bargaining Power of Suppliers
For Woolworths, the bargaining power of supplier is moderate. There are two major leading
players, i.e. Woolworths and Coles, which are controlling over 80% of the retail industry. This
bargaining power of suppliers changes in the supermarkets depending on the brand name of
suppliers and size of retailer. There are some large suppliers, like; Coca Cola, British American
Tobacco, which have strong power in the area of supermarket (Fernie & Sparks, 2014).
Therefore, the bargaining power of suppliers in Australian retail industry is higher to moderate.

STRATEGIC MANAGEMENT 8
Bargaining Power of Buyers
In the retail industry, retail and supermarkets provide mostly similar products that have low
switching costs among stores and offered purchasers with very high bargaining power.
Customers have several options to buy the grocery and packaged food products. To meet the
needs and demands of the customers, the companies are making effective strategies and
becoming highly competitive in the industry.
Threat of Substitutes
In the retail or supermarket industry, there are so many substitutes for customers, like; grocery
stores, online stores, convenience stores, pharmacies and fresh food markets (Flax, Bick &
Abratt, 2016). In the country, the customers are ready to pay comparatively higher prices for
their convenience, for instance; close to their homes, easy parking, no waiting time or queues etc.
So, the threat of substitutes in retail industry is medium to high.
Thus, the major threats for the company are threats from competitors and substitutes in the retail
industry.
Internal Analysis
Analyzing internal environment is very important for recognizing the strengths and weaknesses.
Evaluating the strengths and relationships among processes, which create a value chain of the
firm can be the resources of revealing the possible resources of competitive advantage for the
organization. For instance, the weak performance in the year 2011 caused several supermarkets
to look back at business model and to evaluate the opportunities in the online business, in an
atmosphere, where the confidence of customers is weak (Ho, 2014). So, from internal analysis,
an organization can shifted in the market with new products and services by adjoining its
weaknesses. Here is the discussion about the different components of internal environment at
Woolworths Supermarkets.

STRATEGIC MANAGEMENT 9
Resources, capabilities and core competencies
Effective Supply Chain Process
Distribution network and supply chain of Woolworths work as both the resources and capability
as well. It works in both the out-bound logistics and in-bound logistics. The relationship with
suppliers is highly valuable because it is a major cost-savings, which are attained during its entire
supply chain network and logistics process. This resource and capability enabled the Woolworths
to attain comparatively higher EBIT than Coles (Keith, 2012).
Brand Reputation
Woolworths has made a great brand reputation over past years. It was done by providing
consumer experience with its products and services that can be recognized to its inflexible
quality evaluation processes in its supply chain network. The brand reputation of the
organization is valuable, because it offers significance differentiation to the competitors, like;
Coles and Wesfarmers (Landrum, Gardner, & Boje, 2014). This resource of the organization is
contributing to the higher customer satisfaction. This resource is neither rare, nor difficult to
imitate.
Effective Top Management
Even there were increasing rates of inflation and recessionary pressures, but still Woolworth is
able to attain the growth rates at higher levels (Ho, 2014). It is contributed to the top
management of Woolworths. Its top management is significant resource that is enabling the
organization to effectively compete with Costco in the coming future.
Innovation and Integration
Woolworths Supermarkets have implemented different projects and innovations, inclusive of
“new idea program” and “re –fresh”. There are so many processes at Woolworth’s retail stores,
which reflect its innovative capability in the competitive business environment. Moreover, the
organization is vertically integrated its supplies by generating its inputs to enhance its market
coverage and to react to the trends at private level (The Guardian, 2017).

STRATEGIC MANAGEMENT 10
Human Resources
Woolworths Supermarket possesses more efficient and effective employees and workers in
comparison to its competitors, like; Coles. The organization prefers to hire the people of middle
aged and who have experience in the field. In addition, it emphasizes on conducting training and
development program for employees. In the year 2011, the company invested $60 million in
education and learning program across its branches.
In-store services
In-store services of Woolworths Supermarkets are mainly focused in the strategy priority of
Woolworths. The organization has offered a number of in-store services to its consumers, for
instance, delivery service for some specific products and purchases in a day with reasonable
prices. Fresh food initiatives of Woolworths helped the organization in expansion of new in-store
kitchen to serve the different tastes (The Guardian, 2017).
Thus, these resources and capabilities are effective for the organization. They are leading the
organization to gain higher competitive advantage against its major competitors, i.e. Coles,
Wesfarmers etc.
Issues
However, the internal and external environment factors are favorable for Woolworths
Supermarket, but still there are some issues, which are hampering the performance and
productivity of the organization.
Environmental and community issues
According to a research, Woolworths Supermarket is facing the issues related to environment
and community. People are demanding more information about the products, like; where the
goods and products are coming from and they are expecting products to possess environmental
and ethical characteristics without increasing the costs (Rothaermel, 2013). It means the
customers of Woolworths are demanding “Value with Values”. With this, organization is facing

STRATEGIC MANAGEMENT 11
some transformational and social issues in the country and the people wish to see the job
opportunities, which are created and retained by the organization, which they assist.
Threat from competitors
There are so many players in the industry, which are posing threats to the growth of Woolworths
in Australia and South Africa. The biggest threat to this organization is the growth of cut-cost
supermarket competitors, like; Aldi and entry of other global rivals, i.e. German supermarket,
Lidi. These new entrants in the market are dangerous is not only for their capacity to gain their
market share, but Aldi has over 10% but the major pressure is on the margins, which these low
costs and home focused retailers produce (Morschett, Schramm-Klein & Zentes, 2015).
Weak Staff morale
Although, Woolworths is conducting training and development programs for motivating its
employees, but still they are facing the issues related to weak staff morale. The morale of staff
and suppliers is comparatively low at Woolworths because of disengagement and lost sales
opportunities. There is high staff turnover, which is making it very difficult to adopt new
strategies and focused on the requirement to shake up the culture at Woolworths Supermarkets
(Chung, 2016).
Thus, the organization is facing these issues in external and internal environment. Now, it is
using some effective ways and strategies to deal with these issues.
Recommendations
To deal with these issues, Woolworth supermarket should implement effective strategies in its
business operations. The organization should invest in the advertising and promotional
campaigns, which promote environmental concerns. Hereby, it is recommended that Woolworths
should focus on an enjoyable shopping experience and convenience of customers. It should have
enthusiastic, cheerful and helpful staff members, so that the customers may have the good
shopping experience. Moreover, it should engage the employees in the processes of organization.
Along with the customers, the organization should focus on employees and enhance their morale
by conducting motivational programs.

STRATEGIC MANAGEMENT 12
Conclusion
From the above analysis, it can be concluded that Woolworth Supermarket is a leading player in
the retail sector in Australia and New Zealand. From the PESTLE analysis, it can be said that the
external factors are favorable for the growth of organization in the country. From the Porter’s
analysis, it can be concluded that Woolworth is facing high competition in the retail industry
with the high threat of substitutes. Moreover, the organization has many resources and
capabilities, which are enhancing its growth in the market. Despite of this, the organization is
facing some issues related to staff, competitors and community.

STRATEGIC MANAGEMENT 13
References
Arli, V., Dylke, S., Burgess, R., Campus, R., & Soldo, E. (2013). Woolworths Australia and
Walmart US: Best practices in supply chain collaboration. Journal of Economics,
Business & Accountancy Ventura, 16(1).
Barney, J. B. (2014). Gaining and sustaining competitive advantage. Pearson Higher Ed.
Chung, F. (2016). Woolworths Morale “at all-time low”. Retrieved from
http://www.news.com.au/finance/business/retail/woolworths-morale-at-alltime-low/
news-story/db37428e5b16097771c74af2e9328357.
Cole, G.A. (2013). Strategic Management, Cengage Learning.
Cheng, M. M., Green, W. J., & Ko, J. C. W. (2014). The impact of strategic relevance and
assurance of sustainability indicators on investors' decisions. Auditing: A Journal of
Practice & Theory, 34(1), 131-162.
Dwivedi, A., Merrilees, B., Miller, D., & Herington, C. (2012). Brand, value and relationship
equities and loyalty-intentions in the Australian supermarket industry. Journal of
Retailing and Consumer Services, 19(5), 526-536.
Dos Santos, M. A., Svensson, G., & Padin, C. (2013). Indicators of sustainable business
practices: Woolworths in South Africa. Supply Chain Management: An International
Journal, 18(1), 104-108.
E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
Eden, C., & Ackermann, F. (2013). Making strategy: The journey of strategic management.
Sage.
Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new
challenges in the retail supply chain. Kogan page publishers.

STRATEGIC MANAGEMENT 14
Flax, J., Bick, G., & Abratt, R. (2016). The perceptions of supplier-buyer relations and its affect
on the corporate brand. Journal of Brand Management, 23(1), 22-37.
Ho, J. K. K. (2014). Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), 6478-6492.
Keith, S. (2012). Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal
of Regional Food Studies, 2, 47-81.
Landrum, N. E., Gardner, C., & Boje, D. M. (2014). An integral foundation for international
strategic management. Humanistic Perspectives on International Business and
Management, 120-133.
Morschett, D., Schramm-Klein, H., & Zentes, J. (2015). Strategic international management.
Springer.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
The Guardian. (2017). Woolworths: the rise and fall of the department store empire. Retrieved
https://www.theguardian.com/business/2008/nov/19/woolworths-retail-department-
stores.
Woolworths. (2017). Woolworths Limited. Retrieved from http://www.woolworths.co.za/.

STRATEGIC MANAGEMENT 15