MGT501 - Woolworths' Business Environment: External Analysis

This report examines the external environment of Woolworths Limited and its strategic marketing plans. It identifies Woolworths' corporate strategy, analyzes Porter’s five forces, and evaluates its market positioning in the retail and grocery sector. The report also discusses strategies applied b...Read More

Running head: BUSINESS ENVIRONMENT
BUSINESS ENVIRONMENT
Name of the Student:
Name of the University:
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BUSINESS ENVIRONMENT
Executive Summary
The organization’s primary role is to understand its environment in which it operates as to
identify the marketing environment and thus take management and marketing strategies in
accordance to the organization’s environment. These decisions need to properly implement the
company’s potentials and capacities in order to maximise its ability and successfully satisfy the
customer base to the fullest. The report has attempted to recognize the external environment of
Woolworths Limited and the way it strategizes its marketing plans and initiatives to cater to
these environmental forces.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Woolworths’ Corporate Strategy.................................................................................................3
Porter’s five forces of Woolworths..............................................................................................4
Woolworths’ Market Positioning in Retail and Grocery Sector..................................................5
Strategies applied by Woolworths to improve its business operations........................................6
Woolworths sales amplifies with digital strategy........................................................................7
Woolworths Offer Competitive Strategy.....................................................................................8
Conclusion.......................................................................................................................................8
References......................................................................................................................................10

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Introduction
Woolworths since its opening of first single basement store in Sydney has attained
substantial recognition with a dominant presence in about every metropolitan and regional store
in Australia. Woolworths initiated its business operations with fresh food stores when
development in refrigeration technology significantly revolutionalised transport and storage. The
company has exhibited consciousness of the potential enduring impacts of change in climatic
conditions on the planet and food delivery. Woolworths understand such concerns are shared by
consumers and communities (Woolworths.com.au, 2018). The company in the year 2007 issued
its sustainability strategy 2008-2016 entitled as “Doing the right thing”. In this approach, a series
of goals and commitments have been established in order to condense the effects of carbon
releases from facilities such as distribution centres, transport and waste and sourcing products
(Woolworths.com.au, 2018). The following paper aims to examine the environmental factors of
Woolworths which tend to influence the company’s business operations. In addition to this, it
will further evaluate Woolworths’ business strategies that is relevant its business processes.
Discussion
Woolworths’ Corporate Strategy
Chanticleer, (2018) report that the major tactical priority for Woolworths is to establish
multi-option selling operations in terms of low price and in-store practice in order to attain
consumer demands and requirement. The company has attained a position as the major e-
commerce retailer in Australia and has a purpose to reach over A$ 1.7 million sales in digital
channel by 2020 (Sullivan & Gouldson, 2017). In order to achieve mission, Woolworths has
been pursuing its four strategic priorities which involves an expansion of leadership techniques
in food and liquor by reinstituting marketing promotions of adding values and standards for

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stakeholders and further intensifying growth to extend the dimension of Australian market share
(Chanticleer, 2018). The company further according to Sullivan and Gouldson, (2017) has been
efficiently maintaining track record of building growth to develop as Australia’s one of the most
trusted retail enterprise with multi-option retailing.
Analysis of External Factors influencing Woolworths’ Business Processes
At this juncture, it is essential for Woolworths to significantly evaluate the impact of
external environment on its productivity and success of business strategies (Woolworths.com.au,
2018). Mialon et al., (2016) is of the perspective that not only external factors tend to
significantly influence the business performance of Woolworths but corporate strategic
management is also influenced by the company’s internal factors. Thus understanding its market
position in the Australian retail sector will facilitate the company to enhance its current
strategies.
Porter’s five forces of Woolworths
 Bargaining power of buyers-(High)-Reports reveal that major proportion of
Woolworths’ consumers are individual purchasers who possess immense bargaining
power. Chanticleer, (2018) stated that strong power buyers tend to reinforce the company
reducing the prices as the credit of purchasing in-store products.
 Bargaining power of suppliers-(Low)-Porters’ five forces analysis indicates that
stakeholders playing crucial role tend to be in the stronger position. Thus the company’s
business particularly Safeway supermarkets tend to have relatively low reliance in
suppliers and distribution signifying the weak bargaining ability of suppliers. Sullivan
and Gouldson, (2017) claim that primary reason of low level power of Woolworths’
suppliers is due to its substantial amount of market share in the Australian retail industry.

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 Threat of substitute services-(High) - Woolworths’ business practices typically
encounter critical challenges and high competition specifically in operating Woolworths’
Supermarket (Mialon et al., 2016). As some of the major competitors of Woolworths
such as Coles offer similar products, the company must efficiently introduce wide range
of innovative as well as competitive marketing strategies to magnetize increasing number
of consumers and set up their brand repute.
 Threat of new retailers- (Low) - This force of external factor is considered to be
significantly low as marketing theorists claim that establishing a business with wide
ranging outlets and further offering exceptional quality products and services with
competitors like Coles requires considerable amount of financial resources. Chanticleer,
(2018) note that that Woolworths and its current rivals are regarded as leading player
with inconsistent accesses to allocation channels and dependant brands in retailing sector.
 Rivalry among competitors-(High)- The occurrence of immense competition in the
Australian retail sector such as Coles Group or Target Corporation have the propensity to
constrain market dimension and value of Woolworths. Furthermore, the power of these
rivals has been reinforcing (Sullivan & Gouldson, 2017). Woolworths to continually
create competitive as well as effectual strategies to successfully distinguish themselves as
competitors.
Woolworths’ Market Positioning in Retail and Grocery Sector
Recent reports by Trevena et al., (2015) reveal that Woolworths has acquired an
approximate of over 32.5% of the total grocery market which involves fresh food along with a
rise of around 0.8% over the 2017 result. Pollard et al., (2014) state that the two consistent
performers in 2017 for acquiring substantial share in the overall retail sector were Aldi with

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around 0.8% points with a rise of around 12.3% while Woolworths on the other hand with an
increase of approximately 33.3% points from 0.8% (Carey et al., 2016). Such a statistical data
reveals that the cumulative market value of Woolworths, Coles and Aldi has been estimated to be
around 75% with a 1.7% increase since 2016. Whereas, another competitor of Woolworths that
is IGA has been facing critical challenges from these competitors and has been positioned at the
fourth place on 7.3% with a decline of around 1.1% (Mortimer & Grimmer, 2018).
Market Position of Woolworths and its competitors in the Australian Retail Sector
Source: (Carey et al., 2016)
Strategies applied by Woolworths to improve its business operations
Woolworths recently has outlined its strategic business operations in order to acquire
substantial level of prominence and trust from its customer base (Woolworths.com.au, 2018).
However, the company reveals that it has already been in progress of applying the core
approaches of business strategies with significant investment program that involves $130 million

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of price decrease for customers since 2015 deriving its market value and position to the most
competitive level. Chanticleer, (2018) claim that this new marketing pricing and value strategy
has been applied in order to neutralize Coles and further constitute Aldi’s influence on the sales
rate of Woolworths. Measures will incorporate a lower pricing strategy with improved ranging
that targeted consumer offers utilizing a refurbished and advanced loyalty program (Mialon et
al., 2016).
Cost Leadership Strategy- Cost leadership strategy by Woolworths primarily incorporate
offering wide ranging services and products at a lower cost than its competitors. To acquire the
maximum services and profits at the lowest expenses, the company must efficiently engage the
‘sales up costs down policy’ for several years which have been designed in order to reduce the
expenses related to supply and production (Pollard et al., 2014). Woolworths have been in high
success for implementing the policies and strategies along with a lowered level of prices
(Woolworths.com.au, 2018). Furthermore, Mialon et al., (2016) have revealed that Woolworths
must take into utmost consideration other cost leadership schemes in order to reduce their
operating expenses. These expenses primarily involve ‘just-in-time’ strategy. However the
strategies have been efficiently utilized in managing goods and services in proper supply chain to
decrease the expenses of wastage and storages by making as well as arriving goods at retailers at
the time they are required. Therefore Sullivan & Gouldson, (2017) state that in order to
efficiently attain the strategies, it is highly essential for Woolworths to have a stock replacement
or refill program to forecast the amount of goods which are demanded. However the long
distance between the stores and suppliers is regarded as a critical challenge as Woolworths’
suppliers are located around Australia (Mialon et al., 2016).
Woolworths sales amplifies with digital strategy

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Woolworths in recent times has been investing in its digital strategy as the global trends
and developments reveal a consistent growth in e-commerce shopping and tech-savvy instate
consumer experiences (Patroni, von Briel & Recker, 2016). Woolworths.com.au, (2018) has
reported a significant growth of around 9.5% rise in group revenues along with a 3.5% rise in
sales off the back of its enduring customer-driven turnaround endeavours and consistent
supermarket performance. Woolworths’ supermarket segment has been a consistent player with
around 4.5% increase in sales over the 8 months to $38.40 billion and a 9.7% increase in EBIT
(Earnings Before Interest & Tax) to over $1.80 billion (Pollard et al., 2014). Through the digital
strategy, the Woolworths Group has shed light on strong customer satisfaction across
Woolworths’ supermarkets as a significant success with a range of VoC that is voice of customer
scores. These VoC has been reportedly improving over the last one year (Carey et al., 2016).
Woolworths Offer Competitive Strategy
Woolworths refers to the fundamental aim of attaining sustainable competitive gains and
further increasing the sales growth of the company (Chanticleer, 2018). Woolworths has
continually faced critical competition from one of its strongest competitors Coles as these two
enterprises have dominantly comprised 80% of the Australian retail market
(Woolworths.com.au, 2018). Woolworths in order to attain its position on the Australian retail
market has been focusing on endorsing brands which has been creating tensions for Australian
retail producers who anticipate Coles’ private label strategy and planned reduction in its
aggregated number of product range could affect its sales in future (Sullivan & Gouldson, 2017).
Conclusion
Therefore, from the above discussion it has been stated that Woolworths has been
recognized as one of the most trusted brands because of its innovative branding strategy and

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wide ranging offerings of products. As the company’s total retail experience has been more vital
to its customers, Woolworths has been offering a wide range of quality shopping experiences to
successfully cater their needs and requirements be online or through offline store services.
Woolworths should maintain and develop its intentional association and coalition among the core
businesses with diverse business processes. However in order to attain complete benefit of the
strategy, Woolworths is suggested to unite the association with the efficient reward program
which will build long term consumer loyalty by offering buyers to collect reward points.

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References
Carey, R., Caraher, M., Lawrence, M., & Friel, S. (2016). Opportunities and challenges in
developing a whole-of-government national food and nutrition policy: lessons from
Australia’s National Food Plan. Public health nutrition, 19(1), 3-14.
Carey, R., Krumholz, F., Duignan, K., McConell, K., Browne, J. L., Burns, C., & Lawrence, M.
(2016). Integrating agriculture and food policy to achieve sustainable peri-urban fruit and
vegetable production in Victoria, Australia. Journal of Agriculture, Food Systems, and
Community Development, 1(3), 181-195.
Chanticleer. (2018). Woolworths is winning a very different grocery game. Retrieved from
https://www.afr.com/brand/chanticleer/woolworths-is-winning-a-very-different-grocery-
game-20180222-h0wj72
Evans, P., & Forth, P. (2015). Navigating a world of digital disruption. IEEE Engineering
Management Review, 43(3), 89-97.
Mialon, M., Swinburn, B., Allender, S., & Sacks, G. (2016). Systematic examination of publicly-
available information reveals the diverse and extensive corporate political activity of the
food industry in Australia. BMC public health, 16(1), 283.
Mortimer, G., & Grimmer, L. (2018). Love them or loathe them, private label products are taking
over supermarket shelves. The Conversation, (19).
Patroni, J., von Briel, F., & Recker, J. (2016). How enterprise social media can facilitate
innovation. IT Professional, 18(6), 34-41.
Pollard, C. M., Landrigan, T., Ellies, P., Kerr, D. A., Lester, M., & Goodchild, S. (2014).

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Geographic factors as determinants of food security: a Western Australian food pricing
and quality study. Asia Pacific journal of clinical nutrition.
Riemer, K., Gal, U., Brunk, J., Gilchriest, B., Ord, R., & Tong, J. A. (2014). Australian Digital
Commerce: Now is the time for Australian Retailers to Address the Customer
Engagement Gap. University of Sydney, Business School and Capgemini.
Sullivan, R., & Gouldson, A. (2017). The governance of corporate responses to climate change:
An international comparison. Business Strategy and the Environment, 26(4), 413-425.
Trevena, H., Neal, B., Dunford, E., Haskelberg, H., & Wu, J. H. (2015). A comparison of the
sodium content of supermarket private-label and branded foods in
Australia. Nutrients, 7(8), 7027-7041.
Woolworths.com.au. (2018). {{metaController.metaData.title}}. Retrieved from
https://www.woolworths.com.au/