MGT501 Business Environment: Woolworths' Failure Analysis Report

This report provides a comprehensive analysis of Woolworths' business failure, a prominent supermarket in the Australian retail industry. The report begins with an introduction to Woolworths, its market position, and the challenges it faced from competitors like Coles and Aldi. It then delves into the factors driving the failure, including an environmental analysis using PESTEL and Porter's Five Forces, and the competitive environment. The report highlights the company's unsuccessful strategies, such as the 'cheap-cheap' and 'down-down' campaigns, and explains why these strategies failed to improve price perception and keep pace with market changes. The analysis also covers the loss of loyal customers and the impact of external factors like political and economic forces. Finally, the report concludes with recommendations for more successful strategies, drawing from strategic management literature and the models used in the analysis, offering insights for future business success.

RUNNING HEAD: Marketing Strategy and Plan 0
Woolworths
Marketing Strategy and Plan

Marketing Strategy and Plan 1
Contents
Introduction...........................................................................................................................................2
Business failure.....................................................................................................................................3
Unsuccessful strategies..........................................................................................................................8
Conclusion and recommendations.......................................................................................................14
References...........................................................................................................................................17

Marketing Strategy and Plan 2
Introduction
Woolworth is a leading supermarket in the retail industry of Australia. Woolworth is having a
78% market share and faces strong level of completion from Coles, Aldi, and Wesfarmers.
The company is having more than 900 outlets in Australia and it’s specialization includes
vegetables, fruits, meat, stationeries, magazines, and DVDs. It’s headquarter is situated at
New South Wales. The slogan of the company is ‘The fresh food people’. The sales revenue
of the company was more than $40.123 at the end of 2015. The company aims to provide
fresh products to it’s customers from the cultivators and farmers.
The company constantly faces threat to lead in the market. Woolworth went wrong in some
of it’s campaigns such as cheap-cheap and down-down. The shoppers are price conscious
nowadays. In order to fight this issue, the company adopted a cheap-cheap campaign. The
company reduced prices of products to attain huge market share. As a result, the sales of the
food and liquor increased by .2% but in the fourth quarter, it went down by .7%. This
campaign was not as successful as expected by the company. It could not bring improvement
in the price perception of the consumers. The down-down campaign has been one of the
successful campaigns but the adulation did not last long. This campaign focused on the past
success rather than the keeping pace with the changing dynamics of the market place. The
company also made three-year strategy for the successful implementation of the activities.
But it could not accomplish the targeted decided. The company also reviewed it’s whole
business in 2002. It reviewed the further expansion and merger of it’s management structure.
It strengthened the infrastructure and the management to maintain at optimum levels. The
company also introduced new till system to ensure stock holding capacity and provision of
enhanced and efficient services to the customers. The management of the company also

Marketing Strategy and Plan 3
reduced the number of suppliers and boosted the use of own brand products. But these
improvements contributed very less in the sales as well as profits (Mumbrella, 2015). This
report includes the factors which drive the failure of the business. The strategies are also
discussed which are adopted by the company and the reason behind the failure of the
strategies. At last, the recommendations are made for the successful strategy.
Business failure
General Environmental Analysis
The general environmental analysis consists of PESTEL analysis with global supply chains.
Political factors: The political forces affect the supply chain operations of the retail industry
in Australia. The recently launched government campaign negatively impacted the industry
and it targeted to block the operations of the companies like Woolworths. It eliminates small
traders through the partial competition in the market. The fair business policy and consumer
commission considerably affected the performance of the Woolworths. The supply chain
management is focused in order to establish effective strategic measures. Due to these
processes, the company is able to succeed in the industry and grasp a substantial market share
(Neilson, Pritchard & Yeung, 2014). Woolworths receives support from the government for
importing raw materials from the overseas or domestic market. It comprises the use of rules,
regulations, norms, regulations, and advice. The international trade for obtaining resources
from other countries brings out the complex matters such as transportation, language barriers,
tariffs, exchange rates and more.
Economic factors: These factors deal with the country’s economic performance. These
factors relate to the preference of consumers, inflation, exchange rates, purchasing power and
the inflation rates. The weak purchasing power of the consumers leads to the negative
performance of the Woolworths. The inflation rate raises the price of raw materials in the
supply chain process. Hence, affects the buying behavior of the consumers. Woolworth
modifies it’s marketing and management strategies to deal with the economic factors. The
high employment rate influences she business operations (Arunraj & Ahrens, 2016). The
global financial crisis caused a financial crisis for the company in 2009. The recession also
had a great bearing on the supply chain operations of the company as well as sales turnover.
Even during the financial crisis, the Australian retail industry maintained a stable market
position with a fixed market share.

Marketing Strategy and Plan 4
Social factors: The social factors include the demographic factors, attributes, and the
individual beliefs. It mainly includes religion, age, gender, population size, sex, language and
more. The demographic aspects keep on changing. The consumers change their demands as
the technology changes and prefer the most updated products. The consumer prefers to
purchase products from the companies leading in supply chain and corporate social
responsibility practices. The company has implemented the process of self-service checkout
along with the modern technology. The online website of Woolworth delivers every detail of
the supply chain process and the relevant information about the products (Bailey, Price,
Pyman & Parker, 2015). It helps customers to choose the best product among the available
options.
Technological factors: The technological factors affect the way business conducts it’s supply
chain operations. The technological harnessing and innovations are the common trends which
are applied by the company to sharpen it’s competitive advantage. Woolworth has employed
technology in it’s supply chain operations. The company has used green supply chain
management to deliver products through material flow in the framework of the environment.
The green supply chain management can be set by selecting safe products, the process which
has less negative impacts on the environment, eco-friendly packaging material, and the
automatic process. Woolworths has also installed self-check-out machines to scan, weigh and
make payments considerably which help in reducing the costs (O’Kane, Richardson,
D’Almeida & Wei, 2018).
Legal factors: The taxation policy and the management rules are the part of the legal
framework of a retail industry. The food licensing requirement is also an important aspect of
the retail sector as the companies are required to comply with the regulations. The food
quality is focused on the supply chain operations as per the regulations of the country. The
new outlets are required to follow the legal requirements and obtain approval from the
concerned government.
Environmental factors: The environmental factors affect the supply chain of Woolworths and
the entire retail industry. The company makes use of environment-friendly practices to reduce
the harmful effect on the environment. The company has been investing in the resources in
minimizing the carbon footprint and wastage of natural resources. The businesses of
Woolworth such as petrol and winemaking are posing an adverse impact on the environment;
hence it affected the profitability of the business (Paillé, Chen, Boiral & Jin, 2014).

Marketing Strategy and Plan 5
However, the company supports the recycling practices for a improved environment. The
company makes use of the practices which are ethically sound.
The Industry Environment
The industry environment can be analyzed by Porter’s five forces framework. It evaluates the
present position of the retail industry and the means in which the factors affect the
performance. The analysis of the retail industry can be done through the following tools:
Bargaining power of buyers: The bargaining power of buyers is considerably higher in
relation to the retail industry of Australia. There are various supermarkets and retail stores in
the Australia which provides a different kind of items to the customers. There is a low
switching cost between stores as the supermarkets offer homogenous products. The
bargaining power of the customers is comparatively high due to the availability of wider
options of supermarkets (Pantano, Priporas, Sorace, & Iazzolino, 2017).
Bargaining power of suppliers: The bargaining power of suppliers in the retail industry is
moderate. It depends on the brand name of the suppliers and the extent of the supermarket.
There are certain players in the retail industry of Australia that have a major market share.
This factor upturns the bargaining power of suppliers up to a definite level (The New Daily,
2018). The suppliers have more power when the supply reduces due to climate changes.
Woolworth has opted a significant supply chain management to satisfy customers.
The threat of new entry: The threat of entry in the retail industry of Australia is low. The
established firms have made it problematic for the new players to move into the industry. The
retail industry offers low-profit margin so it is not successful in attracting industries to take
the entry (Mortimer & Ingersoll, 2015). The huge capital investment, government
regulations, high price of land creates barriers to entry in the retail industry. The larger retail
companies have dominated the Australian market. For instance, Aldi has affected the
profitability of Woolworths and has made the rivalry higher.
Rivalry among existing firms: The rivalry among the existing firms is higher as there are few
major competitors such as Wesfarmers, Coles supermarket, Asda, IGA and more. These
competitors compete against each other to attain the largest market share. Such competition
has reduced the profitability of Woolworths. There are chances of increasing sales in the
future (Sutton-Brady, Kamvounias & Taylor, 2015).

Marketing Strategy and Plan 6
(Roy Morgan, 2016)
The threat of substitute: There is always the availability of the substitute products in the
market. Woolworth makes available ample of products and the opportunity to choose from
them. The company is making use of a differentiation strategy to influence customers. These
strategies are surely going to help in increasing sales and the profit maximization (Mol,
2015).
Competitive environment
The contemporary growth of the Woolworth is based on the understanding of the
management concerning the demands and the norms of the consumers in Australia. The
concept of retailing has been rapidly changing due to it’s large scope and the probability of
dynamic business future. Woolworths is being successful in it’s business day by day even
when the behavior and attitude of the customers are constantly changing. The company has
effective strategies to define a complete phase of opportunity and growth. It provides a
perfect shopping facility to the customers when they want to shop online (Methner, Hamann,
& Nilsson, 2015). The innovation in the technology takes place on the regular basis and the
trends of online shopping keep on changing. So, the management of the company engages
software developer for updating online shopping website to provide more products to the
customers. The company also provides the option of virtual stores with the help of mobile

Marketing Strategy and Plan 7
applications and the door to door delivery provision. The strategies discussed above are the
efforts made by the management of Woolworth to enhance it’s customer base and loyalty
(Shin & Eksioglu, 2015). The factors driving failure of Woolworths are given below:
Losing loyal customers: Woolworths faced the problem of losing existing customers to the
competitor companies. It influences the annual sales revenue and viability. The reward
strategy of Woolworths is additional significant strategy employed by the management
(Spillan & Ling, 2015). It is an important loyalty program for the existing customers. After
implementation of this s strategy, the company enjoys at least 18 million customer base every
week and this number is rapidly growing. The online strategy includes the easy practice of
online shopping. The marketers and the experts of the Woolworth provide the significant and
adequate information about the products which is sold by the company. The company
provides the great facility of selecting products online and pick them from the supermarkets.
The company also makes use of a social media platform such as Twitter, Instagram,
Facebook and blogs to advertise and launch new products. It helps in attracting new and
younger generation of Australia (Leibold & Hugo, 2015). Woolworths also offers gift cards
in order to offer different items. The company has regarded some customers as corporate
customers who regularly purchase products from them. The mobile money app of the
company is successful in tracking the balance of gift cards and purchase products online to
avail doorstep delivery (Thompson & McLarney, 2017).
Technology challenge: Woolworths faces various strategic challenges within the modest
retail market of Australia. The company has announced an online shopping website in order
to fight with such challenges. The management evaluates the current trends and initiates to
offer products online. The innovation strategy of the company includes fresh Sushi bars in
order to offer a proper choice of healthy meal (Jiao, et. al. 2017). The company also have
outlet growth strategy which comprises the in-store facilities of amassing seafood from the
specific counter and choose a sauce as per taste and the experts put in a ready to cook bag. It
offers seafood of restaurant excellence at home. The business strategy adopted by the
organization helps to attain goal and intentions within the certain period of time. The strategy
helps to hold the best position within the marketplace and hold anticipated market share at the
end of the annual year. The stock strategy of lamb and beef is outstanding as it stores easily
rotten products along with following the Meat Standards Australia in an authoritarian
manner. The CEO of the company, Ian Moir focuses on the productivity and cost-cutting
strategy with the inference of wining strategies. The credit card strategy comprises an

Marketing Strategy and Plan 8
automatic tracking of the purchases in the outlets. The shopping card provides payback points
which makes possible to avail discount to the customers on their next purchase.
Competition issue: The company faces huge competition from the existing companies like
Coles, Aldi and IGA supermarkets. There is the possibility of new entrants in the Australia
market. These new entrants make use of innovative strategies and can destroy the leading
position. Woolworth needs to change it’s current strategies in order to avert the potentials of
new strategic issues which can obstruct the business of the company. The company also
follows the seasonal strategy which offers customers flash sales and discounted coupons for
purchasing particular products. Woolworth enjoys the position of the unique retailer in
Australia by offering the above-mentioned strategies. The strategies help in increasing sales
revenue and bring the success to the company (Woolworths, 2018). The brand strategy of the
company plays the part of winning strategy (Indartono & Wibowo, 2017). The company
provides fresh products to the customers by making use of this strategy and it helps in
retaining the loyalty of customers. The company creates a strong customer base in various
countries by making use of the business strategy.
Issues regarding promotion and campaign of products: Woolworth faces issues in
campaigning and promotions due to increasing number of population constantly. It makes
difficult to appeal a large number of customers. In the promotion strategy, the company
incorporates creativity and innovation in order to appeal new customers and retain it’s
existing and loyal customers. The marketers make use of social media platform to endorse
and launch new products, special offers, seasonal sales and online shopping website. The
campaign strategy of the company is as successful at the time of launching any kind of
product. The company also makes use of street and outlet campaigns in order to determine
the success of the business (Paras, Pal & Ekwall, 2018). The strategies mentioned above
helps the company to retain a strong position in the retail industry and give hard completion
to the Coles. The company updates it’s strategies from time to time but no strategies are fixed
in this competitive world.
Unsuccessful strategies
There are some factors which help to analyze the specific factors. The profit model is used to
assess the profitability of the firm. Woolworth has two types of resources such as tangible
and intangible. The tangible resources can be calculated as dividing net income by it’s total

Marketing Strategy and Plan 9
tangible assets. The intangible resources do not have any physical form but has great value to
the company and can be unveiled in the financial reports. The intangible resources are
recognizable, non –monetary in nature and have lack of physical substance. The resources of
the Woolworths are:
Financial resources: Woolworth earned $60.68 billion at the end of the financial year of 2015
which indicates the current performance of the company compared to it’s competitors. The
sales of the company have been consistent from $51,918 to $60868 in the financial year
2015. The company makes use of credit rating to raise the funds to enter in the international
markets. It can help the company to enter in the new market with ease.
Technological resources: The technology which was used by the Woolworths in the
Australian market can be used in other countries as well. It can enhance efficiency in the new
markets where it is not established earlier. The practices, processes and the trademarks of the
company are the technological resources which can be used by the company in the
international markets (Phillipov, 2017).
Organisational structure: Woolworth has enormous experience in the international market and
can utilize it’s strategic frameworks to gain competitive advantage. The presence of the
company worldwide has accumulated years of learning and intellectual capital which is
irreplaceable in the market (Woolworths, 2018).
Human resources: Woolworths has experienced staff from all over the world they operate in.
The staff is known to the processes and procedures which are useful in maintaining standards
in any location of the world (Rajabian Tabesh, Batt & Butler, 2016). The human resources
are the biggest asset for the company.
Woolworth has enabled strategies to keep update itself with the consumer trends and
environmental changes. For example, the company has introduced a collection of easy to
prepare meals under the fresh brand to update with the consumer trends and environmental
changes. The company makes of value proposition model to generate profits. It keeps the
value proposition united with shifts in the market. Woolworth makes substantial
improvements in it’s operating model, as value proposition and operating model have a great
role behind the generating revenue and success of the business. The value proposition
includes the following elements:

Marketing Strategy and Plan 10
 The product includes the range of collection, private label options and the quality of
the product.
 The shopping experience of the customers includes the physical layout of store and
prearrangement of stock.
The pricing and revenue model comprises the pricing strategy such as high- low and value
added services such as free delivery. The profit model helps the value proposition by
assisting the retailers to fulfill a pledge to the customers. It comprises the cost model as the
company supports low-cost policy in order to attain more profits and the value chain structure
such as organizational process. Recently, the company has adopted a new business model for
the expansion in Africa (Hwang & Kandampully, 2015). The company will replace it’s
franchise business model with joint venture partnerships in order to make an expansion in
Africa. The company is going to be better involved in the retail operations by moving into the
partnership model. It also represents that the company will be working more closer with the
partners in the range of products. The company also signed joint venture for Tanzania and
Uganda with the former franchisee Ali Mufuruki.
The capabilities of Woolworth can be judged by it’s ability to serve a wide range of
customers at low cost with high-quality assurance and improved efficiency. The capabilities
of Woolworth include:
 Organizational: The organizational capabilities include a variety of policies and
procedures to improve efficiency along with the supply chain and the quality control.
 Physical: The customers can approach physical stores as well as online shopping,
mobile site, and the virtual stores.
 Human: The directors working in Woolworths have already worked as leaders in the
retail industry for decades in the domestic market or overseas (Chen, Wang & Jiang,
2016).
 Reputation: The qualities that add to the reputation of Woolworths are high
bargaining power over suppliers for the quality products and low input costs.
 Valuable: The assurance of the quality of the products and well-trained employees
improve the base of the customers.
The VRIO analysis includes the dimensions such as value, rareness, imitability, and
organization.

Marketing Strategy and Plan 11
 Value: The financial resources enables Woolworth to pursue it’s expansion strategies
more aggressively so that competitive advantage can be attained. The company takes
advantage of the human and technological resources in order to establish
technologically advanced supermarkets in the new place. The staff of the company is
technically skilled and helps in training local people who are hired to work for the
organization. It helps in standardizing the whole operations of the company (BCG,
2010).
 Rareness: Woolworth has some technological resources which help to lead in the
innovation. The company made a partnership with eBay to facilitate eBay orders to be
delivered to the selected stores of Woolworths. The stores have become picking up
points for the eBay customers (Chen & Kodono, 2014). The company should also
focus on it’s existing technological resources effectively.
 Imitability: Woolworths should make use of advanced processes in it’s supermarkets
which is hard for the competitor companies to copy. Such technology should be ahead
in terms of advancement and more updated for the local players. It is also an
advantage for the company to have outlets in the international markets.
 Organized: The resources of the company whether it’s financial or human cannot
deliberate any advantage for the company until these are organized to capture value.
Woolworth can organize it’s management, structure, and policies to realize the
potential of it’s resources and capabilities. It is helpful in sustaining competitive
advantage.
The value chain analysis is an important tool which analyses the performance of Woolworths.
The value chain represents the primary and support activities which help the organization in
supporting it’s operations. The primary activities entail the inbound logistics, operations, sale,
outbound logistics, and service to the customers (Balaji & Roy, 2017). The sourcing strategy
implemented by the Woolworths aims at attaining sustainable performance. Woolworth
implements local food sourcing strategy to make sure development and growth of the
domestic chains. The local food sourcing strategy aims at cooperating local producers and the
purchasing process supports sustainable development. The products as bases are being
managed and sold under the company’s brand across the shelves of the Woolworth in it’s
supermarkets.
The primary activities are sustained by the huge range of activities in terms of highly skilled
human resources worldwide. The strong information technology and the supporting supply