A Strategic Management Report on Woolworths' Market Position

This report presents a strategic analysis of Woolworths, a prominent retailer in the Australian supermarket industry. It begins with background information on Woolworths, including its market share, product range, and number of employees. The report then delves into a macro-environmental analysis using the PESTEL framework, examining political, economic, social, technological, legal, and environmental factors influencing Woolworths' growth and sustainability. Following this, an industry competitiveness analysis is conducted using Porter's Five Forces, assessing the threats of new entrants, the bargaining power of buyers and suppliers, the threat of substitutes, and the competition among existing businesses. The analysis highlights the impact of Aldi and Costco's entry, economic downturns, and ACCC regulations. The report concludes by emphasizing the importance of Woolworths expanding in the Asia-Pacific region and investing in technology, while addressing legal issues to maintain its competitive edge. References to supporting documents and online resources are also included, providing context and validating the analysis.

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Strategic Management

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Table of Contents
Background Information............................................................................................................2
Macro environment Analysis.....................................................................................................3
Industry competitiveness Analysis.............................................................................................4
Conclusion..................................................................................................................................6
References..................................................................................................................................7

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Background Information
In Australia, Woolworths is one of the prominent retailer influencing the supermarket
industry from a long period of time. The company is having total of 995 stores across
Australia where their first store was opened in 1924. In terms of product range, Woolworths
offers several range of products in extent with health and beauty products, groceries,
magazines and other home based products. In 2018, the company revenue stands out with
$56, 726 M with market share of 34% (woolworthsgroup.com.au, 2018). In relation with their
team members, it includes total number of 201,522 employees comprising all of their stores
and distribution centres. Woolworths also have their several grocery store chains in New
Zealand i.e. countdown, super value and fresh choice.
The Australian supermarket and grocery stores will also face fierce competition due to entry
of Aldi and Costco with their private label products negatively influencing Woolworth’s
growth and sustainability. This also leads to offers consumer and suppliers more power in
terms of selection of these retailers. In relation with current Australia supermarket and
grocery stores, the annual growth in the industry signifies as 2.1% from the year 2014-19. It
has also generated revenue of $ 103bn (ibisworld.com.au, 2019).
In the next sections of the report, Woolworth external and macro environment has been
analysed including the threats and opportunities in relation with its revenue growth. In
addition, the industry environment also has been explored in relation with Porter 5 Forces
framework that helps in identifying Woolworth’s competitive position in the market place.
Afterwards, a recommended conclusion also has been drawn.

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Macro environment Analysis
The macro environment analysis of Woolworths helps in exploring Woolworth external
opportunities and threats that are having significant impact over the company strategic
decision. PESTEL analysis is the tool that has been adopted for macro-environmental
analysis in relation with Woolworth growth and sustainability. This analysis help the
management to see holistic view of the market share in order to attain competitive advantage.
Hence, It is elaborated below –
1. Political factors – This includes the necessary political action taken by the Australian
government and Australian Competition and Consumer Commission (ACCC) to
control and regulate the competition in the retail grocery industry. For instance,
Woolworth and Coles gain the highest market share domestically and thus creates
various entry barriers for new players and other business firms. Therefore, ACCC
targets Woolworths to lower down the prices of the product to bring stability in this
industry.
2. Economic Factors – In Australia, the economy has slackened to the weakest level as
of the world-wide economic crisis a decade ago, flashing fears of a downturn.
Australia’s economy grew by 1.8 per cent over the past year and by just 0.4 per cent
in the three months to March, marking the weakest activity since September 2009
(Dunn, 2019). This downturn leading to make population more price sensitive. This
also influences shopping trend of people in relation with their expenditure. Though,
Woolworth initiated to widen their product portfolio for both new and old customers
while decreasing their margins to deliver products to customer at low price.
3. Social Factors – Woolworth Corporation has undertaken several significant by
recognising the arisen deviations in the community background and started trading
dissimilar items at the least prices (Keith, 2012). Furthermore, it has engaged to
consider the societal drifts with bringing the loyalty programs that have helped the
organisation to earn (Cameron, 2016). This drive benefiting the organisation to earn
900,000 members. The company is also promoting gender equality with an aim to at
least 40 per cent of senior management and executives positions to be held by women
as per their sustainability report.
4. Technological Factors – It was found that Woolworths adopt RFID technology for
the efficient management of retail stores. For instance, it helps the company to refill

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the stock as soon as it got empty. The company also deployed integrated SOA for the
support of their technology. In their stores, the company also facilitated self-service
checkout to ease the process of customers. In addition, Woolworth also recently
execute SAP based merchandising system in replacement of its old proprietary system
with connection to the cloud assets (Pearce, 2017). This implementation of the
company help in bringing positive change with rise of sales.
5. Legal Factors – One of the biggest issues Woolworth faced is the legal clashes with
ACCC. It has negatively influence Woolworth brand image and sustainability. For
instance, ACCC has stated that Woolworth seeks to steadily attain payments from
various suppliers so that to reduce the shortfall of profits.
6. Environmental factors – According to Woolworth annual report 2018, the company
commitments to social responsibility includes minimising their impact on the
environment and for that, the company has taken various carbon and energy
initiatives. For instance, reduced carbon refrigerator system is used in all their stores
and grocery chains resulting in 75% less global warming potential
(woolworthsgroup.com.au, 2018b).
Industry competitiveness Analysis
For the industry analysis of Woolworths, Porter 5 Forces framework has been used with
assessing industry based competitive forces. It helps the company to identify its competitive
stand in the market place.
 Threat of New Entrants – The economies of scale is fairly tough to attain in the
industry in which Woolworths Limited functions as the company already attained a
larger market share with positive brand image. In addition, the company also
established vast distribution network including farmers. This will brings various
challenges for the new players in the industry until and unless they do not go for
mergers or acquisitions.
 Bargaining Power of Buyers – Due to presence of Coles and other small
supermarkets and retailers, the customers gets large varieties of choices and
selections. They also enjoy low switching cost to purchase products according to their

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needs. In addition, their bargaining power is increased with entry of Aldi and Costco
in the Australian grocery retail chain.
 Bargaining Power of Suppliers – Supplier power in this industry is low as both
Woolworths and Coles control the major per cent of market share reflecting
duopolistic nature of market (Sutton-Brady, Kamvounias and Taylor, 2015). This
requires suppliers to follow their strict guidelines. However, ACCC is implementing
various practices to increase the bargaining power of suppliers.
 Threat of Substitutes – Considering Woolworth, there are only a few substitutes
available and they also produced by low profit earning sector. As company also offers
products at low prices and this states that customers are less likely to switch to
substitute offerings. Even though threat of substitute is moderate as Coles and other
new entrants i.e. Aldi, are using same pricing strategies for the various primary
products.
 Competition among Existing Businesses – As the industry is continuously growing,
this leads to fierce competition in the Australian industry as already established
retailer (Coles) and new entrants (Aldi and Costco) are fighting to grab highest market
share in Australian and New Zealand market. This negatively impacts Woolworth’s
profitability and growth.
The industry competitive forces of Woolworths is directly linked to the macro-
environmental factors. For instance, ACCC practices under political factors leading to
increased bargaining power of suppliers. In this way, it is important for the management
to comprehend all interconnected factors for gaining competitive edge in the industry.

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Conclusion
In the limelight of above discussion, a critical strategic study of Woolworth has been
emphasized to assess fiercely competitive macro environment aspects. Woolworth external
environment is complex and dynamic as it keeps changes with the new trends, entry of
international players and economic downturn and responsiveness. It is very important for
Woolworth to expand in Asia-Pacific region to achieve competitive edge in the grocery
supermarket chain. Other than this, the company also needs to invest in information
technology such as augmented reality and cloud computing to enhance operational efficiency.
In addition, it also helps the company to gain more number of potential customers while
retaining old customers.
To ensure sustainability for longer period of time, Woolworths needs to give answers to all
ACCC allegation and also needs to comply with its various standard policies and procedures.
Including all in their strategic vision will help Woolworths to improve its brand presence
globally and earn greater market share that Coles, Aldi and Costco.

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References
Cameron, N. (2016) Woolworths brings back points to customer loyalty program [ONLINE]
Available from: https://www.cmo.com.au/article/605469/woolworths-brings-back-points-
customer-loyalty-program/ [Accessed 18/09/2019].
Dunn, M. (2019) Recession fears as economy hits lowest level since 2009 global financial
crisis [ONLINE] Available from: https://finance.nine.com.au/personal-finance/australian-
recession-2019-economy-slowed-to-weakest-level-since-2009-global-financial-crisis/
9282fe6c-b394-40d2-ab83-39add2e099d5 [Accessed 18/09/2019].
ibisworld.com.au. (2019) Supermarkets and Grocery Stores - Australia Market Research
Report [ONLINE] Available from: https://www.ibisworld.com.au/industry-trends/market-
research-reports/retail-trade/food-retailing/supermarkets-grocery-stores.html [Accessed
18/09/2019].
Keith, S. (2012) Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal
of Regional Food Studies, 2(1), pp.47-81.
Pearce, R. (2017) Woolworths looks for pay-off from new IT systems [ONLINE] Available
from: https://www.computerworld.com.au/article/614635/woolworths-looks-pay-off-from-
new-it-systems/ [Accessed 18/09/2019].
Sutton-Brady, C., Kamvounias, P. and Taylor, T. (2015) A model of supplier–retailer power
asymmetry in the Australian retail industry. Industrial marketing management, 51(1), pp.122-
130.
woolworthsgroup.com.au. (2018) Together. 2018 ANNUAL REPORT [ONLINE] Available
from: https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf
[Accessed 18/09/2019].
woolworthsgroup.com.au. (2018b) 2018 SUSTAINABILITY REPORT [ONLINE] Available
from: https://www.woolworthsgroup.com.au/icms_docs/195398_2018-sustainability-
report.pdf [Accessed 18/09/2019].

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