Woolworths: Analysis of Sourcing Strategies and Sustainability

This report provides a comprehensive analysis of Woolworths' sourcing strategy, focusing on its sustainability and competitive advantages. It begins with a brief overview of Woolworths, an Australian retail giant, highlighting its business model and key strategies such as cost leadership and product differentiation. The report delves into Woolworths' current sourcing strategy, emphasizing its support for local suppliers and its commitment to sustainable practices. It critically evaluates the extent to which the current sourcing strategy is sustainable, considering factors such as economic growth, client satisfaction, and market competition. Furthermore, the report offers recommendations to enhance the sustainability of Woolworths' sourcing strategy, addressing potential challenges and suggesting improvements for long-term success in the dynamic retail environment. The analysis incorporates relevant supply chain management theories and concepts to provide a well-rounded and insightful assessment of Woolworths' sourcing practices.

Organization analysis
Business Logistic

Executive summary
Every organization needs to develop core competitive advantage in market to compete
with the rivals. This report emphasises upon how well company has been competition with
the rivals in market by following the current competitive strategy. The supply chain
management allow company to focus on unique set of skills and competitive advantage
which could keep its business ahead from those of others in market. This report focuses on
how Woolworths Company has used its sourcing strategies to keep its business more
sustainable and strengthening the overall market share in long run. The main sourcing
strategy of company is to support its retail local suppliers who provide goods to its retail
stores.

Table of Contents
Executive summary...............................................................................................................................2
Introduction...........................................................................................................................................4
Brief description of Woolworths Company...........................................................................................4
Detailed description of the current sourcing strategy of Woolworths..................................................6
To what extent do you think is the current sourcing strategy sustainable?..........................................8
Recommendations to further improve the sustainability of the organization’s sourcing strategy......10
Conclusion...........................................................................................................................................12
References...........................................................................................................................................13

Introduction
. The competitive advantage is described as advantage which keep company distinct
with those of others in market. In this report, Australian company has been selected. The
name of the company is Woolworths which has been offering its retail business services
around the globe with competitive advantage of providing cost effective services. The main
objective of company is to keep its clients highly satisfied by following two main leadership
strategy that is cost leadership and product differentiation strategy. Moreover, this report
analyses the internal and external environment of Woolworths and how company has been
competing with the competitors with its current sourcing strategies. In the starting of this
report, description of Woolworths Company has been given. After that detail description of
the current sourcing strategy of Woolworths have been divulged to understand how company
has been paving with the tough competition in market. Afterward the analysis has been made
to evaluate sustainability of the current sourcing strategy and how well company has been
copping up with the ramified economic factors. In the end of this report, recommendation to
make the business more sustainable in this changing business environment have been given
which could be adopted by Woolworths to make effective changes in its business. . The
Australian retail gain Woolworths has created core competency in market by following two
main strategy named cost leadership and product differentiation strategy. However, Local
support strategy is also one of the imperative one for the sustainable business of company.
These core competency allowed company to compete with its rivals and offering the best
quality services with a view to compete with those of rivals in market.
Brief description of Woolworths Company
Woolworths is an Australian retail business which is indulged in providing retail
services through its different retail stores. This company has been providing retail services
with a view to provide satisfy its clients through cost leadership and product differentiation
strategy. Company has increased its overall turnover by average 12% of the last three year net
profit which divulges that company has increased its business outcomes and profitability
throughout the time. Nonetheless, the share price of Woolworths company has been traded at
WOW (ASX) A$ 28.56 +0.26 (+0.92%) which is 92% higher as compared to last year share
price. The headquarter of the company is in Bella Vista, Australia. This company has several
business units around the globe which has been offering the same retail services to its clients.

All the employees and staff members of the Company are accustomed to act as per the
directions and instruction of its present CEO named Bradford Banduccci. He has been
assisting company to diversifying the business with a view to increase the overall turnover
and profitability at large. The financial structure of company is also reflecting that company
has kept high financial leverage and if it wants to keep its business more sustainable in the
sluggish market condition then it will have to lower down its debt funding as well. In addition
to this, company, with the increase in its profitability, company has focused on lower down
its overall costing by strengthening the efficiency in deploying the cash and increasing the
overall financial leverage. This has shown that company has easily managed its business with
a view to increase the overall outcomes.
Woolworths has diverse business operations such as supermarkets, liquor, hotels and
convenience stores and offering retail services through the different retail stores. Woolworths
has largest team numbered around 220000 employees and has a shareholder base of 530000
(Woolworths, 2018).
Vision
Woolworths Company has vision to become most recognized and trusted brands in
retailing business by serving more than millions of customers.
Mission
It has mission to increase its overall retail business market share to 40% in Australia
and offering clients retail services at the least cost without compromising with its quality of
the services.
Aim
The main aim of the organisation is to satisfy its stakeholders and stretching the
overall outcomes to society (Beeri, Bernstein, and Goodman, 2008).

Detailed description of the current sourcing strategy of
Woolworths
The current sourcing strategy of Woolworth’s local food sourcing strategy which
support local producers for their sustainable development. Company has focused on
promoting the local suppliers to strengthen their business process and align the interest of the
organization with the supplier’s development at large. This current sourcing strategy of the
Woolworths is based on the economic growth and consistent supply of the best quality
products from its retail stores (Kumar, and Azad, 2017). However, Company has invested
more than AUD $ 223 million amount of capital to support the local food and product
suppliers so that they could strengthen their business process and production process. This
type of current sourcing strategy of Woolworths will allow it to expand its business and
customized its products and services as per the client’s need and demand in market (Singh,
Shukla, and Mishra, 2018). This collaborative logistic planning will assist in setting up the
linkage with the organization development and supporting its suppliers in best effective way
for their sustainable long term supply of goods (Mathu, and Phetla, 2018). Nonetheless, due
to the increased business costing and high cost of capital it failed to undertake its own
production chain (Rajabian Tabesh, Batt, and Butler, 2016). There is another sub current
sourcing strategy of company which focuses on setting standards and Six sigma quality check
which assess the quality of the goods and services offered to clients. Only those goods and
services will be passed which will meet the standards set under the six sigma quality check
program ( Jurevicius, 2013).
Another current sourcing strategy of Woolworths is to focus on the clients. This
strategy focuses on gathering the required amount of information such as their values, belief,
culture, expectation, social needs and their particular demand associated with the products
and services offered by Woolworths in market (Zhu, Sarkis, and Geng, 2005).This sourcing
strategy has allowed company to make its business process more customized and satisfy its
clients to their best level. It is analysed that the loyalty card method has been introduced by
Woolworths for the consistent connectivity with the clients. By using the loyalty card
approach, company has gathered required amount of information and possible changes which
company should undertake to make it retail business stores more client’s oriented in long run
(Papenbrock, and Naumann, 2017). These all are the changes which are undertaken by
Woolworths after implementing the supply chain management theories such as logistic

management, efficiency and efficient value chain activities and quality check program in
logistic work channels (Hervani, Helms, and Sarkis, 2015).
Woolworths has also created core competency in providing cost leadership services to
its clients. The main rivals such as Tesco, Wesfarmers, Morrison and ALDI are giving the
tough competition to company. Wesfarmers has set up automation in its value chain activities
by installing the cyber computing enterprises resources planning process which not only
increase the efficiency of its offered services but also lower down the cost associated with the
process. It has allowed company to beat the competition in market through its cost leadership
program and also resulted to increased brand image and sustainable business process in long
run (Devin, and Richards, 2018).The latest system in its stores which rolled out was
new Retail point of sale systems running on IBM POS hardware with LCD touchscreens
which assists clients to understand the updated price and system process of organization (Ye,
Cao, Zhang, and Zhang, 2017).
Therefore, it could be inferred that Woolworths has followed several sourcing
strategies to keep its business more sustainable and challenging to the ramified business
growth. However, the main area which company need to focus is based on strengthening the
client relation program and supporting the local suppliers to maintain the quality of the goods
supply in system process of the company.

To what extent do you think is the current sourcing
strategy sustainable?
The company put its customer first as per the current sourcing strategy. It works with cost
leadership strategy and product differentiation strategy. It offers its product at a lower cost as
compared to its competitors. The cost leadership strategy performs a significant role in
establishing a competitive edge. Lowering the price of product is a common technique to
decrease the cost, so a significant advantage of following the cost leadership strategy is the
development of employees oriented culture program. It is a competitive strategy. Being the
market leader in Australia, Woolworths performs as a chain of supermarkets that enhances its
purchasing power also. If we discuss about the sustainability of such strategy, the strategy is
very helpful in creating a company culture that continually pursues an efficiency, which
provides an important competitive advantage to the company. In contrast, it cannot be
sustainable for long time as there are various other sources which influence the strategies i.e.
inflation costs, higher cost labour and un-trained personnel.
This local food suppliers supporting strategy is fruitful for the business success of the
Woolworths in long run. It has established nexus with the organization growth and food
supplier’s development. It is analyzed that company has focused on allowing the food
suppliers to provide the best quality products so that it could strengthen the client’s
satisfaction at large (Elmasri, and Navathe, 2010). The research and development department
of the Woolworths also suggest local food suppliers to identify the ways and process to
increase the quality of their goods produced by them. Woolworths was formulating plan for
downside integration process where it will start up its own production process and own brand
goods to meet the standards of the client’s need. It is analyzed that company could support
local goods suppliers by giving them capital funding and arranging new technologies for their
strengthening supply chain process.
The company also works with a differentiation and focus strategy. In this strategy, the
company provides some special and unique offers to its customer through its products and
services that makes the company different from its competitors. To continue with such
strategy is more than beneficial for the company as the differentiation makes the company’s
goodwill higher. Apart from that it also manages to attract the customers for long run.

However the company cannot really manage to pursue that diffentiation strategy for so long.
For that the differentiation and uniqueness in the product of company is necessary.
On the same time company also follows the focus strategy. It involves the selection of
specific market segment, in which the company can offer its products on a lower price. This
is the following strategy of prior two strategies. After ascertaining the lower price and
product uniqueness, the company decides the suitable market to sale the product. For better
execution of such strategy, the company builds a team that listens to its customers and
suppliers and receives daily feedbacks from them. By using that strategy the company can
focus on improving its offers and shopping experiences of its customers. These strategies
ensure the companies to use their resources in most effective way to enhance their
performance.
In the conclusion we could state that company has used following sourcing strategies such as
product differentiation, suppliers support program and cost leadership business strategies to
compete with the rivals. Woolworths needs to adapt its business process system with the
installation of the advance technologies in its value chain activities. This process will not
only increase the client’s satisfaction but also assist in creating value on its investment. It is
analyzed that company should hire more expert employees, changing the supply chain
activities and adopting the new measures and standards to strengthen the overall outcomes for
its clients. Hence, the currently opted sourcing strategy of the company is sustainable. It
manages to carry the performance of the company higher. Nonetheless, the main rivals such
as Tesco, Wesfarmers, Morrison and ALDI are also facing the tough competition from the
Woolworths after when it developed these souring strategies in its business process system.

Recommendations to further improve the sustainability
of the organization’s sourcing strategy.
However, sustainability of the company is also very much required for the long run
business success (Svensson, et al. 2018).
Woolworths firstly should focus on re-engineering of its value chain activities.
Traditionally, value chain has focused on eliminating waste. A firm`s ability to identify and
manage linkage and interrelationships is a critical element in responding to competitive
forces. Value chain analysis can be a powerful tool in identifying linkages and developing
strategy. Woolworths needs to identify the linkages within the value chain activities and
eliminate the unnecessary costing which is associated with the process. This changes in the
value chain activities will result to creating competitive advantage. Nonetheless, chain
activities cannot remain isolated, one set of program and activity of company should be
linked to other one so that it could strengthen the overall outcomes and efficiency of its
functioning for the better satisfaction of clients in long run. Wesfarmers could make the
changes in its value chain activities but it should focus on using the cyber computing
enterprises resources planning in its every process so that automation could be established to
eliminate the unnecessary costing (Team FME., 2013).
Woolworths should also focus on hiring the experts sales employees who could
establish the positive nexus with the client‘s satisfaction with the organization development.
If company could strengthen its HRM department and training and development department
then it could train its employee to the extent which could meet client’s demand and need from
company. Highly expert employees will assist company to gather required data and make
business more customized with a view to satisfy client’s needs and demand in long run
(Youssef, and Asfour, 2015).
The current sourcing strategies focus on keeping the cost of its offered services low
and providing best quality services and products to its clients. However, the process
functioning of the Woolworths needs to be customized to satisfy clients more. The
customized business process system and set business process which is more inclined towards
the satisfying clients with their needs will assist Woolworths to strengthen its market share
and sustain business in long run. It has showcased that if company could re-engineer its
business process and strengthen its value chain activities as per the client’s needs and demand

then it will result to increased business outcomes and more sustainable business perceptive
(Büyüközkan, and Göçer, 2018).
Woolworths needs to focus on keeping its business more sustainable and effective in
terms of the economic perceptive as well. It is analysed that Australia is a country which
usually suffers from the scarcity of the resources so Woolworths should focus on using the
resources effectively to increase the overall outcomes and return on capital employed in
effective manner. However, the main issue is related to managing the human resources and
employees stability with the process system of company. It will allow company to establish
the linkage with the social and economic development with the organizational growth (Unicef
2015).
The board of Directors of Woolworths accepts partnership and strategic alliance to promote
the sustainability of the business growth by focusing on mainly four areas- Targeting
education and employment outcomes, medical research and health, community and education
initiatives, and the Woolworths arts program. Woolworths agreed four-year partnership with
Teach for Australia which focused on building the best leadership talent so that educational
disadvantages can be eliminated which can help in assisting the organisation in expanding its
operations into Western Australia. Woolworths became the best inaugural partner which
works on the building, promoting, protecting, and enriching the West Australian parks. It
should also strengthen its social and economic development program to keep its business
more sustainable in long run (Lawley, Birch, and Craig, 2016).
Woolworths should also focus on lower down the employee turnover and proper training and
development program for its employees. Efficiency in serving customers ensures continued
competitiveness. It should focus on delivering the best possible outcomes and proper client
based program which is provides proper support to system and make business more aware
with the existing the challenger propositions in the marketplace. This type of value chain
program and client based network will allow Woolworths to increase its overall market share
and keep its business more sustainable in long run (Sing, Shukla, and Mishra, 2018).
Company also focus on diversifying its business in other market segments. It should focus on
expanding its business more sustainable which will help to increase revenue and profitability
and as a widely recognized organisation, it will be easier to expand beyond Australia with the
cooperative business program.