Strategic Analysis Report of Woolworths: Australian Retail Market

This report provides a strategic analysis of Woolworths Group Ltd, a prominent Australian retail company with interests in supermarkets, drinks, and hotels across Australia, New Zealand, and South Africa. The analysis covers the external environment using PESTEL and Porter's Five Forces, highlighting the impact of political, economic, social, technological, environmental, and legal factors, as well as buyer power, supplier power, new entry threats, rivalry, and substitute threats. The competitive environment is assessed, focusing on competitors like Myers and Coles, and Woolworths' strategic responses. An internal analysis uses the VRIO framework to evaluate Woolworths' resources and capabilities. The report concludes by proposing information system solutions and recommendations for Woolworths to enhance its competitive position. Desklib provides a platform to access similar solved assignments.

Running head: STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
Strategic Analysis Report of Woolworths
Name of the University:
Name of the Student:
Authors Note:

1STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
Executive Summary
The major focus of Woolworths Company’s business is the retail and financial services provision
to the upper as well as middle income groups in South Africa, New Zealand and Australia. The
report reveals that Australian retail industry needs agility along with multiplicity of delivery
platforms which might leave behind the non-responsive retailers. The existence of certain strong
competitors within Australian retail industry such as Myers and Coles are likely to decrease
Woolworth Company’s market share and also contribute to increased concentration level. To
deal with such fierce competition from Myers and Coles, Woolworths Company is greatly
focused on developing its strategic priority. The latter half of the report scans the internal
environment of the organization using the strategic tools of Resources, Capabilities and
competency analysis using the tool of VRIO Analysis. This has been followed by the
Information solutions system being proposed related to the Point of sales and certain
recommendations have also been provided.

2STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
Table of Contents
Part 1: (External Analysis)...................................................................................................3
Business Background.......................................................................................................3
Industry Description........................................................................................................3
General Environment Analysis........................................................................................4
The Industry Environment Analysis................................................................................5
Competitive Environment Analysis.................................................................................7
Opportunities and Threat Analysis..................................................................................8
Part 2: Internal Analysis and Proposal.................................................................................9
Resources of Woolworths................................................................................................9
Capabilities identification..............................................................................................11
Core competency analysis using VRIO.........................................................................11
Proposing a suitable information system solution that meets the needs of Woolworths
...................................................................................................................................................13
Evaluating the proposed system and recommendations................................................13
Conclusion.........................................................................................................................14
References..........................................................................................................................16

3STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
Part 1: (External Analysis)
Business Background
Woolworths Group Ltd is positioned as a renowned Australian retail company. The
business segments of the company encompass New Zealand supermarkets, Australian food and
petrol, Endeavour drinks group and group of hotels. The major focus of Woolworths Company’s
business is the retail and financial services provision to the upper as well as middle income
groups in South Africa, New Zealand and Australia. The retail company is also positioned as an
investment holding business and among the top 100 organizations listed within “Johannesburg
Securities Exchange” (Woolworthsgroup.com.au. 2018). The business of Woolworths is focused
on offering quality services and products to all its target consumers by its competitive price,
human resource and fresh food strategies.
Industry Description
The retail industry of Australia in which Woolworths Company has its business operation
is affected by disruptive forces like changing spending pattern of the Australian consumers along
with arrival of international companies (Naidoo and Gasparatos 2018). These companies are
intended to bring in a whole new approach of retailing. Consumers in the Australian retail
industry have turned out to be more tech-savvy, affluent as well as busier. Moreover, their
expectations are also changing and the technology is evolving their buying behavior. In the
upcoming years, Australian retail industry needs agility along with multiplicity of delivery
platforms which might leave behind the non-responsive retailers.

4STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
General Environment Analysis
PESTEL Analysis is carried out in realizing the conditions in external business
environment that can impact the retail industry performance and that of Woolworths Company.
 Political- The political situation impacts Australian retail industry and Woolworth’s
performance to a great extent. For example, Australian Federal Government introduced a
competition policy that prevents established independent players such as Woolworths and
Coles in reducing competition (Methner, Hamann and Nilsson 2015). Moreover,
increasing market dominance of such established retailers has caused small retailers to
deal with struggle in industry performance.
 Economic- A drop in Australian economic situations has affected Woolworths
performance drastically for there is observed a decline in Australian and New Zealand
market economic conducts and that of Woolworths (Rogers, Brown, de Haan and Deletic
2015). Rather than such decline, certain economic indicators like currency exchange rate
fluctuations and Australian dollar weakening has drastically impacted the global retail
operations of Woolworths.
 Social- Certain social factors also impact Australian retail industry considering that the
companies operating within the nation needs to attain increased societal and community
development. This is for the reason that current social trends among consumers indicates
that they prefer increased socially reliable company. So, through implementing societal
initiatives retailers like Woolworths can generate considerable impact on consumers.
 Technological- The function of technological aspect impacting retail industry and
Woolworths is significant as this can be recognized from the fact that Woolworths

5STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
considered implementation of green refrigeration technology (Woolworthsgroup.com.au.
2018). This is in a way that perishable goods can be stored from longer time duration.
 Environmental- The environmental factor is also impacting Woolworths Company’s
performance along with overall Australian retail industry. An evaluation indicates that
Woolworths is impacted by environmental factors in a way that the company’s petrol as
well as winemaking businesses are posing increased threats on environment conditions
performance. This has further impacted the profitability performance in the companies’
business areas.
 Legal- An evaluation of Woolworths indicated that regulation by Australian Competition
along with Consumer Commission has impacted the business operation of the
organization all through the economy (Woolworthsgroup.com.au. 2018). Moreover,
carbon tax in Australia is also deemed to impact retail industry and Woolworth’s business
performance because of which it needs to adapt fait business policies.
The Industry Environment Analysis
For analysing the retail industry environment of Australia, Porters Five Forces Analysis
is used in analysing the recent position of Woolworths within the overall industry along with
ways in which distinct factors impact the company’s performance situations.
 Buyers Bargaining Power- The bargaining power of buyers within the Australian retail
industry and for Woolworths is considerably high for the reason that there is rage number
of retail stores and supermarkets that offers basic necessity terms to the consumers
(Bailey, Price, Pyman and Parker 2015). For the reason that Woolworth’s consumers
have broader options to select from, the bargaining power is deemed to be increased.

6STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
 Suppliers Bargaining Power- An evaluation of the Australian retail industry signifies
that it is greatly focused and there are several huge players which have concentrated a
major part of the market share. This increases the suppliers bargaining power to a
considerable extent and for this reason it can also be regarded as this power is moderate
for Woolworths in Australian retail industry (Phillipov 2016).
 New Entry Threats- In consideration to the new threats of entry within the Australian
retail market, the new entry threat is observed to be lower. This is for the reason that the
leader organizations have made it highly complex for the new players in Australian retail
industry to enter. This therefore decreases the overall new entry threat within the
Australian retail industry conditions.
 Rivalry in Existing Companies- The rivalry threats as evaluated to be present in
Australian retail industry signifies that it is considerably higher. This is major because of
the reason that there exist a few established competitors namely Woolworths, Coles
supermarket, Wesfarmers and Asda those are competing against one another. Such
competition exists in order to attain a large market share within the retail industry
(Woolworthsgroup.com.au. 2018).
 Substitute Threats- The retail dairy consumable goods are increasing vital along with
that their consumption on a regular basis is increasingly important. There are very less
number of alternatives those are available to them and considering the same it can be said
that threat of substitutes for Woolworths is observed to be lower. Consumers of
Woolworths Limited is bound to consume the retail goods for they have no other choice.

7STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
Competitive Environment Analysis
The existence of certain strong competitors within Australian retail industry such as
Myers and Coles are likely to decrease Woolworth Company’s market share and also contribute
to increased concentration level. The intensity of such competitor strategic group is persuading
Woolworths to generate competitive as well as efficient strategies for differentiating its business
from its major rivals (Pederzoli and Kuppelwieser 2015). The capabilities possessed by Myers
and Coles are observed to represent sustainability threat for Woolworths over the long run in
case the company does not develop effective strategies to deal with them. Moreover, the
competitor companies also follow highly competitive strategies that are affecting market shares
of Woolworths in the industry. Myers and Coles are imposing competitive pricing strategies to
grab huge consume base with offering its high-quality products. Moreover, the capabilities of
these competitor companies are observed to include locating stores in the high traffic places that
offers them increased opportunity to attain high consumer base (Soosay et al. 2016). Moreover,
Myers and Coles have strategic capabilities with its string and established brand name with
increased access to highly skilled employees that facilitates them to maintain effective corporate
social responsibility by developing goodwill. Strategic capability of Coles to maintain aesthetic
appeal of its departmental stores facilitates in attaining competitive edge through offering
consumers with better consumer experience.
To deal with such fierce competition from Myers and Coles, Woolworths Company is
greatly focused on developing its strategic priority. A number of in-store services are considered
by the company to be offered to its target consumers. Moreover, fresh food strategy of
Woolworths is also focused on expanding its new in-store sushi kitchens that can cater highly
diverse tastes of consumers (Grimmer 2018). Moreover, to deal with increased competition from

8STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
Myers and Coles, Woolworths is focusing on attaining international brand equity through
licensing and merchandising all its products.
Opportunities and Threat Analysis
Opportunities and threat analysis for Woolworths is carried out for critical strategy
analysis which can further facilitate in attaining increased growth level along with operations
development (Wiedemann, McGahan and Murphy 2017). This can also facilitate in conducting
internal analysis with an intention to evaluate the efficiency of strategies implemented by the
retail organization.
Opportunities
 The retail industry all through
Australia indicates an increased
growth potential. Such growth can
also be observed in the factors namely
computerization, technical
advancement in supply chains and
changes in consumer lifestyle (Graves
and Shan 2014). These opportunities
are observed to impact the capabilities
of the retailers along with offering
them profitable opportunities to
develop their business.
 Considering the same, Woolworths
Company is observed to positively
Threat
 The threats those can be faced by
Australian retail companies including
Woolworths are majorly from the
increased competition level within the
industry. In such scenario,
Woolworths is primarily under
competition with Cole’s supermarket
(Ahsan and Rahman 2016).
 Rather than this, increased
government intervention is one more
considerable factor that impacts
business growth of Woolworths
specifically within Australian retail

9STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
view towards embracing such option
through implementing the strategy of
multi-option retailing. This strategy is
developed by this retail company in
order to deal with the changing
consumer needs.
sector.
Part 2: Internal Analysis and Proposal
The internal environmental analysis goes a long way in helping any business to
understand the strengths as well as the weaknesses of the organization and understanding those
areas where the firm needs to improve (Frynas and Mellahi 2015). Hence, for this purpose, the
organization will be required to continuously assess its resources, capabilities as well as core
competencies in order to propose a better system for future application (Woolworths.com.au.
2018). Therefore, from the analysis of the internal analysis, an organization can reposition itself
and look out for its vulnerabilities.
Resources of Woolworths
Tangible Resources
The tangible resources can be rightfully identified as those resources which can be
measured successfully and compared against the resources of another company. The different
Tangible resources of Woolworths are as follows:

10STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
Large number of stores: There are more than 990 stores of the Woolworths organization
in Australia which is quite large in number. With this aspect, the organization is successfully
able to cover all the prime regions of the country.
Human resources: There are more than 115000 team members in all the operational
departments of Australia (Gereffi and Fernandez-Stark 2016). These include employees in the
stores, at the distribution centres and the support offices so that premium services can be
provided to the different customers.
Technology: Woolworths has made use of advanced technology in all its operations.
Moreover, its presence in the online domain has made it quite popular in the eyes of the different
consumers.
Intangible resources
The intangible resources of an organization can be defined as those resources which can
be measured effectively in monetary terms but they hold the utmost importance (Ginter, Duncan,
and Swayne 2018). The different intangible resources of the organization have been given as
follows:
Intellectual property rights: The organization has an access to a large number of
Intellectual rights which help the firm to conduct its operations successfully. Intellectual rights
are difficult to obtain and thus having them as a resource is essential
Brand name: Woolworths has a respectable brand name in Australia as it is able to
provide excellent services and products to the different customers (Hahn 2013). The brand
reputation of Woolworths brings about effective footfall to the stores as well

11STRATEGIC ANALYSIS REPORT OF WOOLWORTHS
Management efficiency: The management of the Woolworths is also very efficient in
nature and they continuously assess the external environment so that they are able to successfully
combat against the competition and are able to gain a sustainable competitive advantage.
Strong relationship with the different suppliers: The organization has a strong
relationship base with its different suppliers which enables the organization to ensure success in
providing the right products at the right price and at the right time (Rothaermel 2015).
Capabilities identification
Capabilities can be rightfully defined as the skills of the organization and the manner in
which it is successfully able to align these resources for the success of the firm and to increase its
productivity.
The different capabilities of Woolworths have been given as follows:
 Ability to provide efficient customer service: Due to its efficient human resources,
Woolworths is able to successfully provide efficient customer services and assist them to
purchase the right kind of products based on their needs (Woolworths.com.au 2018).
 Ability to ensure that the stores are always stocked: As the relationship off the company
with its suppliers are very good, the organization will be successfully able to ensure that
the stores are always stalked up to its capacity.
 Good financial returns: The firm has been performing well and has been providing good
financial results for a long time (Wheelan et al. 2017).
 Specialized in private labels: The organization specializes in private labels.
 Marketing capabilities: Woolworths has a good marketing strategy which thereby assists
it to ensure that it is able to perform considerably well.