Strategic Management Report: Woolworths' Business Environment Analysis

This report provides a strategic management analysis of Woolworths, a leading Australian supermarket chain. It begins with an executive summary and table of contents, followed by an introduction that highlights the importance of strategic marketing in a competitive environment. The report then delves into the external environment using a PEST analysis, examining political, economic, socio-cultural, and technological factors. It assesses industry competitiveness, including the bargaining power of buyers and suppliers, the threat of substitutes and new entrants, and competitive rivalry. A competitor analysis, including a strategic group map, identifies key competitors like Coles. The report also identifies opportunities and threats for Woolworths. An internal analysis, based on a resource-based view, identifies tangible and intangible resources, capabilities, and core competencies. The report proposes a customer relationship management system and provides recommendations. The conclusion summarizes the key findings and references are provided.

Running head: STRATEGIC MANAGEMENT
Strategic management
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the external and internal business factors for
Woolworths. PEST analysis is being done for identifying the external factors and resource based
view is used to identify the internal capabilities. It is identified that Woolworths is facing the
challenge in coping up with the change in the taste and preference pattern of the customers. In
addition, this report concluded that initiation of customer relationship management system will
further help Woolworths in enhancing their business operation in the long term.

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Table of Contents
Introduction......................................................................................................................................3
Determination of the external environment.....................................................................................4
Analysis.......................................................................................................................................6
Determination of industry competitiveness.....................................................................................6
Competitor analysis.........................................................................................................................9
Determination of the opportunities and threats.............................................................................11
Internal analysis.............................................................................................................................12
Identification of the resources...................................................................................................12
Identification of the capabilities................................................................................................13
Core competency analysis.........................................................................................................13
Proposed information system........................................................................................................15
Recommendations..........................................................................................................................15
Conclusion.....................................................................................................................................15
Reference.......................................................................................................................................17

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Introduction
Strategic marketing is an inevitable part of the contemporary business organizations. This
is due to the reason that strategic marketing approaches help the business organizations in
dealing with the competitive factors and stay relevant among the competitors. However, the
strategic marketing approach of different organizations is different and diverse due to the reason
that external and internal situations of the organizations are different (Payne and Frow 2014).
Therefore, it is important for the business organizations to identify their respective business
environmental factors to initiate their respective approaches of strategic management. These
environments include the general environment, competitive factors and the internal capabilities
of the organizations (McDonald 2016).
Woolworths is one of the leading supermarket chains in Australia with having more than
1000 stores across the Australia. They are having huge diversity of products ranging from
household products to stationery items (Woolworths.com.au 2018). Thus, they are operating in
the highly competitive retail market in Australia. This sector is having some of the major
companies such as Coles, Aldi and Costco, which are posing huge challenges for Woolworths. It
is also creating the importance for them to have an effective approach of strategic management
in place.
This report will discuss about the general environmental factors and competitive forces
being faced by Woolworths in their business operation. In addition, this report will also discuss
about the competitive scenario for Woolworths along with determining their competencies. This
report will also discuss about the internal resources and capabilities of Woolworths. In

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accordance to the major factors identified, a suitable and effective information system solution
will be proposed along with its recommended steps.
Determination of the external environment
Political and legal
factors
 Australia is having stable political and legal framework in the
country that is helping in having favorable operating
environment for Woolworths (Ekici and Onsel 2013).
 However, in the recent time, foreign entities are given legal
permission to have retail unit in Australia. This is increasing
the inflow of global players in the market.
 Legal formalities especially for the food products are
becoming more stringent. Thus, it is important for
Woolworths to adhere to the changes in the legal factors
periodically (Price 2016).
 Reduction in the government regulation in the retail industry
is increasing the threat of new entrants for Woolworths.
Economic factors  Australian economy is growing and showing positive trend.
This denotes the increasing opportunity for Woolworths.
 However, increasing in competition is causing reduction in
profitability for Woolworths (Teeratansirikool et al. 2013).
 Majority of retail business in Australia is based on cost
leadership (Kaliappen and Hilman 2013). Thus, the revenue
generation is limited for Woolworths even as their operating
cost is increasing.

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 Points of difference are less for Woolworths with their
competitors. This is creating further challenge for Woolworths
in initiating differentiation strategy (Lam et al. 2013).
Socio-cultural factors  Australian population is highly globalized with increasing
preferences for latest and updated products (Stark 2015).
 Thus, it is important for Woolworths to upgrade their product
portfolio periodically in order to stay relevant.
 Change in taste and preference pattern of the customers is also
posing challenge for Woolworths in offering products.
 Australia is having diverse social and cultural environment
with the huge inflow of Asian immigrants (Collins 2013).
This is forcing Woolworths to offer more diverse products in
the market.
Technological factors  Number of newer technologies such as online payment
system, self checkouts and virtual shopping are being
introduced in the retail market (Piotrowicz and Cuthbertson
2014).
 Woolworths is having the requirement of continuous
improvement of their existing technologies to stay
competitive.
 This will cause added cost and investment for Woolworths in
their operation.
 Inflow of the global players in the country is further

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enhancing the technological advancements in the retail sector
(Lee and Yang 2013).
Analysis
From the above discussion, it is concluded that there are number of factors such as rapid
change in the taste and preference pattern of the customers and technological advancements are
posing challenges for Woolworths. This is due to the reason that Woolworths should have to be
upgrading their business strategy in accordance to the market scenario. Moreover, with the
inflow of the global companies in the Australian market, it is becoming more challenging for
Woolworths to cope up with the change. They are having the need of an integrated mechanism,
which will help them to effectively coordinate among all the factors.
Determination of industry competitiveness
Bargaining power of the buyers  Bargaining power of the buyers is high due to the
reason that number of firms is present in the market.
 Switching cost for the buyers is low.
 Pricing is influenced by the economy of the buyers and
products are offered accordingly.
 Customers will switch to other supermarket of
Woolworths increase their price.
 Taste and preference pattern of the customers also
influence the product strategy of Woolworths due to
their marketing orientation.

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Bargaining power of the
suppliers
 Bargaining power of the suppliers is low due to the
reason that larger number of suppliers is present in the
industry (Sutton-Brady, Kamvounias and Taylor 2015).
 Woolworths is not dependent on a single supplier and
Woolworths is also having own backward integration.
This further reducing the bargaining power of the
suppliers (Rezaei, Fahim and Tavasszy 2014).
 Brand value and identity of Woolworths is more
compared to that of the suppliers. Thus, influence of the
suppliers is less on Woolworths.
Threat of substitutes  Threat of substitute is high due to the fact that point of
differences is low between the competitors (Schwenger,
Straub and Borzillo 2014).
 Almost all the players in the Australian retail industry
are offering products of same brands.
 Customers can have their same products from any one
of the retail brands (Suwardy and Ratnatunga 2014).
 Thus, the pricing strategy of the competitors affect the
pricing strategy of Woolworths
Threats of new entrants  Threat of new entrants is moderate. This is due to the
reason that new entrants can start their business in
small scale.
 However, new entrants will have difficulty in matching

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up with the brand value and market share of
Woolworths (Seamans 2013).
 They will also not be able to gain the economies of
scale similar to Woolworths.
 Furthermore, reduction in the regulations of the
government is enhancing the threat of new entrants.
Competitive rivalry  Competitive rivalry is high in the retail sector of
Australia.
 This is due to the reason that all the competitors are
fighting for same customer segments with same
products (E. Dobbs 2014).
 Price discounts and other offers are being initiated to
attract customers.
 Loyalty level of the customers is less in this sector and
thus competitors are initiating newer strategies to poach
customers.

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Price LowHigh
Product
Low diversity
High diversity
Woolworths
Coles
Costco
Competitor analysis

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Figure: 1
Strategic group mapping
Source: As done by author
From the above strategic group map, it is identified that strategic group for Woolworths
is based on cost leadership and product diversity. Customers will opt for the retain brand that
will provide more product assortments in less cost. This is also increasing the rivalry in the group
due to the reason that majority of the competitors including Woolworths are concentrating more
on gaining cost leadership to attract customers. In addition, they are also adding new product
categories to offer more holistic experience to the customers (Zakaria et al. 2014). It is also
identified that Coles is the closest competitor for Woolworths due to the fact that Coles is the
market leader in the Australian retail industry. The major capability for Coles is the resource
based support of their parent company Wesfarmers. Thus, Coles possesses more financial and
infrastructural capabilities than Woolworths.
It is also identified that strategic intent of Coles is different to that of Woolworths and it
is evident in the above strategic group mapping. Woolworths caters to lower customer segments
while target customers of Coles are majorly the upper level compared to Woolworths. Though
the price differences between Coles and Woolworths are less but Coles have the upper hand in
targeting the premium customers with their product strategy and pricing strategy. Coles mainly
follows the market focus and differentiation strategy compared to the cost leadership strategy of
Woolworths. The major competitor threat for Woolworths is pricing (Knox 2015). This is due to
the reason that competitive pricing including the market segmentation pricing strategies of

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Costco and Aldi are forcing Woolworths to regulate their product price also. Another major
threat is the diversification of the competitors. Entry of the competitors of Woolworths in other
product categories will cause them more market limitation in the long run.
Determination of the opportunities and threats
Opportunities Threats
 Diversifying in different product
categories will help Woolworths to
enhance their target customer segments.
 Market development strategies will also
help Woolworths to extent their brand
value in new markets.
 Offering more sustainable products
such as organic products will help to
maintain the business sustainability in
future.
 Emergence of new competitors in the
market will lead to further reduction of
the profitability.
 Emergence of economic recession will
cause reduction in purchasing power of
the customers and will affect the
business of Woolworths.
 Initiation of the newer government
regulations will pose challenge for
Woolworths in maintaining their
competitiveness in the market.