Business Strategy: Woolworths Group and EG Group Alliance Report

This research report examines the strategic alliance between the Woolworths Group and EG Group, focusing on the sale of Woolworths' petrol business and the subsequent commercial agreement. The report analyzes the factors driving the agreement, including the new wholesale food supply arrangement and the competitive advantages gained by both companies. It also assesses the organization's response to the deal, its impact on rivals, and the initiatives taken to finalize the agreement, such as approvals from the Foreign Investment Review Board. The report highlights the benefits for consumers, the organization's team, and shareholders, while also discussing the long-term commercial relationship and loyalty programs. The analysis includes share price movements before and after the announcement, providing a comprehensive overview of the strategic implications and market dynamics of this significant business move. Finally, the report includes a comprehensive bibliography of sources used in the research.

Research Report
Woolworths Group

Woolworths Group to sell petrol business and enter into commercial alliance with EG Group
 Alliance with EG Group to expand into international market
 To enhance brand value in global market
 To step ahead the competitors Coles and ALDI

Company’s share price before and after the
announcement
 Firm has developed a binding agreement to sell its 540
Woolworths-owned fuel convenience sites to EG Group for
A$1.725 billion
 Share price of Woolworths before the announcement of entering
into commercial alliance EG was around 25.01 AUD
 after the announcement of the initiative, share price of the
company has increased to 29.96 AUD

Factors driving the agreement
 Organization commences a new wholesale food supply
agreement to the network by delivering extensive product range
as well as competitive price
 A positive growth in sales found due to extensive list of products
and service came along with the agreement
 EG group has also benefitted from the alliance because EG group
can also benefit from the competitive strategy such as
competitive product sourcing

Competitive advantages
 Firm has leveraged this reduced cost of operation to attract its
existing and new consumers
 Petroleum business was never a core business of Woolworths and
despite the same, the firm had to bear the additional cost of
petroleum operation for limited amount of profits
 Woolworths had a marginal growth which is further reflected on
share price of the company

Contd..
 Initiative has no negative influence on the external stakeholder of
the company, but the company remains profitable
 After the agreement with EG Group, the organization is not
supposed to bear the cost of its non-core products, while its
consumers still enjoy the accuracy of service with the benefits
coupled with the rewards programs

2. Organization’s response to the new article
 A long-term wholesale food supply arrangement could ensure
that EG Group can gain benefits from competitive producing and
sourcing with the inclusion of Woolworths’ own brand to deliver
a world class convenience offer which will further scale to
Woolworth FoodCo
 EG group has also added the fact that Woolworths’ service has an
understanding opportunity to enhance its international footprint

Response to Rivals in the sector
 Initiative has totally made the rivals anxious about their own
strategy in the supermarket sector because finalising scale of
Woolworths certainly follows a tortured attempt to threat other
petroleum giants like British Petroleum
 Transaction is a positive for the consumers, organization’s team
as well as shareholders.

Initiatives towards the approval of the
agreement
 Finalize the plan, board members of both the organizations have
mentioned that deal requires a clear approval from the Foreign
Investment Review Board and it is expected to be accomplished
early in the coming year
 EG group seems to be committed to invest in Woolworths’ site
network as they introduce leading brands by enhancing the
alliance with Woolworths as well as working with the exceptional
management team

Contd..
 To complete or implement the initiative, Woolworths is supposed
to transfer all existing Woolworths Petrol management as well as
operation teams to EG Group
 Woolworths is supposed to maintain some sort of skin in the
long-term commercial relationship with the inclusion of existing
4 cent a litre discount on fuel along with the loyalty point scheme

Bibliography
'Woolworths Group To Sell Petrol Business And Enter Into Commercial Alliance With EG Group - Woolworths Group' (Woolworthsgroup.com.au, 2019)
<https://www.woolworthsgroup.com.au/page/media/Latest_News/woolworths-group-to-sell-petrol-business-and-enter-into-commercial-alliance-with-eg-group/>
accessed 18 January 2019.
'Australia's Woolworths To Sell Petrol Business To EG Group For...' (U.S., 2019) <https://www.reuters.com/article/us-woolworths-grp-divestiture-eg-group/australias-
woolworths-to-sell-petrol-business-to-eg-group-for-1-25-billion-idUSKCN1NE0DA> accessed 20 January 2019.
'Woolworths Offloads Petrol Business To EG Group For $1.7B' (Australian Financial Review, 2019) <https://www.afr.com/business/retail/woolworths-offloads-petrol-
business-to-eg-group-for-17b-20181109-h17q51> accessed 18 January 2019.
'Australia's Woolworths To Sell Petrol Business To EG Group For...' (U.S., 2019) <https://www.reuters.com/article/us-woolworths-grp-divestiture-eg-group/australias-
woolworths-to-sell-petrol-business-to-eg-group-for-1-25-billion-idUSKCN1NE0DA> accessed 18 January 2019.
'EG Group Buys 540 Woolworths Sites In Australia For A$1.725Bn - Forecourt Trader' (Forecourttrader.co.uk, 2019)
<https://forecourttrader.co.uk/news/fullstory.php/aid/15881/EG_Group_buys_540_Woolworths_sites_in_Australia_for_A$1.725bn.html> accessed 20 January 2019.

Bibliography
Ferguson, R., 2011. The Brontes Went to Woolworths: The Bloomsbury Group. A&C Black.
Knox, M., 2015. Supermarket monsters: The price of Coles and Woolworths' dominance (Vol. 6). Black Inc..
Jie, F., Parton, K. and Chan, C., 2015. Australian beef supply chain integration: case studies of the two largest
Australian supermarkets. International Journal of Supply Chain and Operations Resilience, 1(2), pp.121-138.
Gama, M., 2018. Killer trade: Capitec, Woolworths. finweek, 2018(19 July), pp.13-13.
 Spillan, J.E. and Ling, H.G., 2015. Woolworths: An Adizes Corporate Lifecycle Perspective. In Business History
Conference. Business and Economic History On-line: Papers Presented at the BHC Annual Meeting (Vol. 13, p.
1). Business History Conference