Woolworths Strategic Management: Market Analysis & Recommendations

This report provides a comprehensive analysis of Woolworths' strategic management, examining both internal and external factors that influence its business operations. Utilizing marketing models such as PESTLE, SWOT, VRIO, Porter's Five Forces, and strategic group mapping, the report identifies Woolworths' current market position and competitive landscape. A value chain analysis is conducted to pinpoint the company's strategic capabilities and sources of competitive advantage. The report also explores Porter's generic strategies, including cost leadership and differentiation, as applied by Woolworths. Concluding with actionable recommendations, the report aims to assist Woolworths in enhancing its strategic business management and overall market performance.

Running head: STRATEGIC MANAGEMENT
Strategic management
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Executive summary
The aim of this report is to discuss about the internal and external factors faced by Woolworths
in their business operation. This report used marketing models such as PESTLE, SWOT, VRIO,
Porter five forces and Strategic group map in order to identify the current position of
Woolworths. This report also used value chain analysis to identify the strategic capabilities of
Woolworths along with identifying the sources of gaining competitive advantages in the market.
This report concludes with a few recommendations for Woolworths, which will help them in
enhancing their strategic business management.

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Table of Contents
Introduction......................................................................................................................................3
Ownership status..........................................................................................................................3
Determination of the external market mechanisms.........................................................................4
Determination of the industry competitiveness...............................................................................6
Determination of the internal market mechanism...........................................................................7
Porter generic strategies...................................................................................................................9
Cost leadership.............................................................................................................................9
Differentiation strategy................................................................................................................9
Market focus strategy................................................................................................................10
Strategic group of Woolworths......................................................................................................10
Value chain analysis of Woolworths.............................................................................................11
VIRO analysis................................................................................................................................14
Valuable.....................................................................................................................................14
Inimitability...............................................................................................................................15
Rarity.........................................................................................................................................15
Organizational capability...........................................................................................................16
Recommendations..........................................................................................................................16
Conclusion.....................................................................................................................................17
Reference.......................................................................................................................................18

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Introduction
Strategic management is one of the major considerations for the contemporary business
organizations due to the reason that they face diverse complexities in their daily operations. In
addition, with time, the rate and intensity of the completion in the market is rapidly increasing.
Initiation of the strategic management also helps the business organizations in having effective
business strategies in order to survive in the intensely competitive business scenario (Wheelen et
al. 2017). In the present time, one of the major business sectors, which are witnessing the growth
of competition, is the retail business of the consumer goods. Especially in the Australian market,
the competition in the retail business is much higher with the presence of large number of global
brands (Zakaria et al. 2014). Among all the available brands in the Australian retail market, one
of the major brands is the Woolworths.
Woolworths is chain of supermarkets operating mainly in the New Zealand and
Australian market. They are founded in 1924 and having a major portion of the market share
with them in the Australian market. According to the reports, they are only second to
Wesfarmers in the Australian market in terms of market share (Woolworths.com.au 2018). They
are having diversified product portfolio ranging from groceries to household products. Currently,
they are having more than 1000 stores across Australia. Their prime objective is to be the market
leader in its sector overtaking Wesfarmers by attracting more number of customers.
Ownership status
As per the reports, currently Woolworth group is having more than 75 percent of share
holdings followed by ALE Property Group with having 8.72 percent share holdings. Another
prominent shareholder in the company is Perpetual Investment Management Ltd.

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Determination of the external market mechanisms
Political  Political environment of the operating country determines the
business environment of the organization (Amore and
Bennedsen 2013).
 Australia is having fairly stable political scenario in the market.
This helps Woolworths in having favorable business
environment in the market.
 However, stable political scenario of the country is also
attracting number of global competitors.
Economical  Australia is having favorable economic environment in the
country, which helps Woolworths in having more market
potentiality.
 Rate of unemployment also increasing, which is creating more
opportunities.
 However, emergence of the economic recession is having
negative impact on the business potential of Woolworths
(Rollins, Nickell and Ennis 2014).
 Huge intensity of the competition in the retail market is limiting
the profitability of Woolworths.
Social  Woolworths cater to the end customers. Thus, they are having
huge diversity in their product category to meet the diversified
requirements.
 However, it is challenging for Woolworths to provide added

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services due to the fact that presently customers expects more
than just shopping.
 However, the rapid change in the social trend is difficult for
Woolworths to cope up with.
Technological  Retail sector is witnessing huge development in terms of
technology.
 Woolworths initiated technologies such as online shopping
portal and self service check out (Prashar, Vijay and Parsad
2015).
 However, it is important for them to determine the customer
requirement and preference before initiating technological
development.
Legal  Woolworths also offers food items. Thus, they need to adhere to
the food standard legislations in Australia.
 In addition, they also need to comply with the business
legislations in operating their business in Australia and New
Zealand.
 However, emergence of more stringent rules and regulations are
creating issues in the business operation of Woolworths.
Environmental  Current business scenario is heavily determined by the
environmental factors.
 Woolworths follows different sustainability activities such as
reducing the carbon footprint from their operation and waste

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management (Benjaafar, Li and Daskin 2013).
 With the increase in the environmental concerns, it is important
for Woolworths to update their strategies.
Determination of the industry competitiveness
The previous section discussed about the external factors faced by Woolworths in their
business operation. However, it is also important to determine the competitiveness of the
industry Woolworths operates.
Threat of new entrants  Threat of entry in the retail sector is moderate.
 This is due to the reason that retail business can get started
with low capital (E.Dobbs 2014).
 However it is not easy for the new entrants to match the brand
value of Woolworths and achieve their economies of scale.
 The area of business for Woolworths is huge and it is not
possible for new entrants to match.
Threat of substitutes  Threat of substitutes in the market is huge due to the presence
of good number of similar players.
 Coles and Aldi is offering same products as Woolworths.
 Switching cost is also low for the customers.
Bargaining power of
buyers
 Bargaining power of the customers is also high due to having
more options (Haucap et al., 2013).
 Buyers will opt for the brand, which is more value creating.

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 Customer loyalty is less in this sector due to the wide
availability of similar products.
Bargaining power of
suppliers
 Bargaining power of the suppliers is also high.
 Woolworths sells only the end products and not
manufacturers any item.
 Thus, they are largely dependent on their suppliers for their
sourcing of the materials.
 However, the brand value of Woolworths and their large
number of suppliers ensures the low intensity of the
bargaining power of the suppliers.
Competitive rivalry  Competitive rivalry is high due to the presence of huge
number of competitors.
 Aggressive marketing campaigns are being initiated in order
to stay ahead in the competition (Kurt and Hulland 2013).
 It is the brand value and distinctiveness of the Woolworths,
which helps them to cut off the competitive rivalry.
Determination of the internal market mechanism
The earlier sections discussed about the external market factors being faced by
Woolworths. However, there are some internal factors also being present for them, which
determine the effectiveness of their business operation.
Strengths  Woolworths is one of the oldest retailers in Australia. Thus,

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they are having huge brand value with them.
 Business process of Woolworths is favorable enough to deal
with the marker challenges.
 Having huge diversity of products that helps in catering to
more number of customers (Park and Han 2013).
 Huge market reach and penetration in their operating areas
ensures higher market share.
Weaknesses  Not having the status of market leader is making them trail
behind the competitors.
 They are mainly having their presence in Australia and New
Zealand. Thus, global presence is lower for them.
 Coles are taking away the major businesses of them.
Opportunities  Retail sector is growing at a rapid pace. Thus, the
opportunities are increasing for Woolworths.
 Leveraging the online marketplace more will help due to the
reason that online customers are rapidly increasing (Wang et
al. 2013).
 Sales of private level brands of Woolworths are also
increasing.
Threats  Offering more discounts in competition with others will
reduce the business growth for Woolworths.
 Threat of having new entrants will further reduce the
profitability.

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 Frequent change in the market trend and requirements may
change the business approach of Woolworths.
Porter generic strategies
In terms of the marketing strategies being initiated by Woolworths in order to gain
competitive advantages, Porter generic strategies will be used. According to this theory, there are
mainly three elements or aspects to be followed by the organizations in gaining competitive
advantages (Tanwar 2013). The following sections will discuss about the generic strategies
initiated by Woolworths.
Cost leadership
Cost leadership is being initiated by Woolworths in order to offer their products at
minimal price in the market. The less will be the price, the more will be the attraction of the
customers. In the case of Woolworths, they initiate the cist leadership strategy by locally
sourcing their raw materials. For instance, grocery items of them are being sourced from the
local farmers directly (Kaliappen and Hilman 2013). Thus, it helps Woolworths to reduce the
cost of intermediaries and transportation. Another strategy they practice is having large number
of suppliers. Having large number of suppliers helps Woolworths to increase their bargaining
power in the market. This also helps them to source their materials from the suppliers with less
quoted price. All these strategies are reducing the cost of operation for Woolworths and helping
them to gain cost leadership in the market.

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Differentiation strategy
Initiation of the differentiation strategy helps the organizations to have distinctive image
in the market. This is beneficial in attracting more customers in the intensely competitive market.
Woolworths initiates differentiation strategy by having distinctive approach in their service
delivery. Initiation of the practices such as carbon neutral stores and self service check out
process is helping to have distinctive image in the market. Another differentiation strategy being
practiced by them is by offering private level products. With the help of the private level
products, Woolworths is being able to offer the products according to the current trend of the
market (Zehir, Can and Karaboga 2015). These private level brands are only available in the
stores of Woolworths and thus, customers will have different and distinctive experience in using
these products.
Market focus strategy
Woolworths do not initiate market focus strategy due to the reason that they do not have
niche marketing approach. They are having mass market approach and cater to maximum
number of customers possible. Thus, they do not possess market focus strategies.