Strategic Analysis of Woolworths: Porter's Five Forces Report

This report offers a strategic management analysis of Woolworths, a major player in the Australian grocery and supermarket industry. It begins with an overview of the industry, highlighting the competitive landscape, the rise of ALDI, and the impact on profit margins. The core of the report applies Porter's Five Forces framework to assess the industry's dynamics. It examines buyer bargaining power, noting the influence of numerous retail options on customer choice. Supplier bargaining power is assessed as moderate due to the market share held by key players. The threat of new entrants is considered low because of the dominance of established companies. The report emphasizes the high level of competition among existing companies, specifically mentioning Coles, Wesfarmers, and Woolworths. Finally, the threat of substitutes is deemed low due to the necessity of daily consumable goods. The report concludes that Woolworths faces significant competition and has reduced prices to remain competitive.

Running head: STRATEGIC MANAGEMENT
Woolworths
Strategic Management
8/6/2018

STRATEGIC MANAGEMENT 1
Table of Contents
Industry Analysis.......................................................................................................................2
Porter 5 Force Analysis..........................................................................................................2
Buyer’s Bargaining Power.................................................................................................2
Supplier Bargaining Power................................................................................................2
Threats of New Entry.........................................................................................................3
Competition among Present Companies............................................................................3
Threat of Substitute............................................................................................................3
Conclusion..................................................................................................................................3
References..................................................................................................................................4

STRATEGIC MANAGEMENT 2
Industry Analysis
The grocery stores and supermarket industry of Australia are the most competitive industries.
The fast development and growth of ALDI from last some years has considerably changed
the whole industry. ALDI has evolved in terms of popularity, majorly because of its
discounted private-label products. The growth of ALDI has enforced the two recognized
giants of the industry, i.e. Coles and Woolworths, to reduce their prices and increase the
range of their private-label product (Retail World, 2018). Small chains of the supermarket,
like Food works, have struggled a lot to compete in the price-intense industry. Besides this,
the profit margins of the industry have dropped in the last five years as companies have
decreased the prices and adopted lower margins to remain competitive in the market (IBIS
World, 2018).
Porter 5 Force Analysis
The Porter five forces investigative tool evaluates the present position of the whole industry
and the conducts in which diverse factors influence its performance settings (Omsa, Abdullah
& Jamali, 2017). The examination of the retail industry of Australia by using this
investigative tool is performed below:
Buyer’s Bargaining Power
The power of bargaining of the buyer with respect to the retail industry of Australia is
considerably higher because there are various retail stores and supermarkets that offer general
products to the customers. As customers have various options to choose from, their power of
bargaining has been considerable higher (Mills, 2003).

STRATEGIC MANAGEMENT 3
Supplier Bargaining Power
The examination of the retail industry of Australia reflects that it is extremely intense.
Various key players have attained the huge market share in the industry. This results in
enhancing the supplier’s bargaining power at some level and as such, it can be said that the
supplier’s power of bargaining has been moderate ((Fern Fort University, 2018).
Threats of New Entry
The new entry threat in the industry is lower because big companies have made it very tough
for the new businesses to arrive into the industry situations and this consequently decreases
the new entry threat into the industry (Keith, 2012).
Competition among Present Companies
The threat of competition as measured in the retail industry of Australia specifies that it is
considerably higher majorly due to the fact that there are some key players like Coles,
Wesfarmers, and Woolworths, ASDA Supermarket, etc. that are competing with each other
for the higher share in the market.
Threat of Substitute
In a retailing business, day-to-day consumable goods are extremely necessary and their
consumption on regular basis is extremely significant. In the industry, there are no other
substitutes accessible for them and therefore the substitute threat is lower. Customers need to
take the retail goods because they do not have any other options.
Conclusion
In the conclusion, it can be said that Woolworths is dealing with high competition from the
key players in the market such as ALDI, Wesfarmers, etc. hence, it has reduced its prices in
the market to remain competitive. However, the company has some relief in terms of the

STRATEGIC MANAGEMENT 4
threat of new entry into the market because they are unable to compete with such big firms as
Woolworths.

STRATEGIC MANAGEMENT 5
References
Fern Fort University. (2018). Woolworths Limited Porter Five Forces Analysis. Retrieved
from http://fernfortuniversity.com/term-papers/porter5/asx/627-Woolworths-
limited.php
IBIS World. (2018). Supermarkets and Grocery Stores - Australia Market Research Report.
Retrieved from https://www.ibisworld.com.au/industry-trends/market-research-
reports/retail-trade/food-retailing/supermarkets-grocery-stores.html
Keith, S. (2012). 'Coles, Woolworths, and the local', Locale. The Australasian-Pacific
Journal of Regional Food Studies, no. 2, 47-81.
Mills, G. (2003). Buyer Power of Supermarkets. Journal of Policy Analysis and Reform,
10(2), 145-162.
Omsa, S., Abdullah, I.H., & Jamali, H. (2017). Five Competitive Forces Model and the
Implementation of Porter’s Generic Strategies to Gain Firm Performances. Science
Journal of Business and Management, 5(1), 9-16.
Retail World. (2018). Spotlight on Australia’s supermarkets and grocery industry. Retrieved
from https://www.retailworldmagazine.com.au/spotlight-australias-supermarkets-
grocery-industry/