Strategic Management Report: Woolworths Internal Analysis & Issues

This report provides a strategic analysis of Woolworths, a major retail chain in Australia, focusing on its internal environment. It assesses key performance indicators such as company culture, brand image, and profitability, highlighting a customer-centric approach and improvements in safety metrics. The analysis covers tangible and intangible resources, core competencies, and a VRIO analysis, revealing strengths in skilled staff and green technology adoption. The value chain analysis examines inbound logistics, operations, outbound logistics, marketing and sales, and customer service, emphasizing cost reduction and quality maintenance. The report also discusses the company's cultural transformation and strategic issues like declining sales, profit margins, and pricing challenges, suggesting improvements in product quality, promotion, and lean retail management. The report concludes that Woolworths is adapting its strategies to enhance competitiveness and customer satisfaction within the Australian retail market. Desklib provides access to similar past papers and solved assignments for students.

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Table of Contents
Introduction......................................................................................................................................2
Internal Environment Analysis....................................................................................................2
Resources and Capabilities..........................................................................................................2
Core Competencies of the firm....................................................................................................4
VRIO Analysis.............................................................................................................................4
Value Chain Analysis...................................................................................................................5
Discussion on the culture of the firm...........................................................................................6
Strategic Issues................................................................................................................................6
Explaining the major strategic issues of Woolworths..................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Introduction
This section is briefly introducing the details of the key performance indicators which are
useful in measuring the performance of any organization. The study is focused on one of the
most reputed retail chain Woolworths which is located in Australia. It should be discussing on
the analysis of the internal environment of Woolworths.
The three key performance indicators which are evident in Woolworths would be the
culture of Woolworths, brand image and profitability of the company. The company is
developing an embedded and store led culture within the team and develops goals which are
fulfilling the requirements of the customers. The customer claims reduced by 19 percent in the
year 2017 and the Lost Time Injury Frequency rate has reduced down to 6.76 and the Total
Injury Frequency Rate of 12.97 (woolworthsgroup.com.au, 2018). It is also seen that the
company has the dedicated and diverse team which has been bringing the culture into play and
the culture is aligned with the goals of the customers.
The brand image of the company provides an indication of how much the company is
liked by the customers which is the second KPI for Woolworths.
The next performance indicator for Woolworths should be the high profitability and sales
of the company. There has been the growth of around 3.7 percent from 2016. There is the growth
of say 4.5 percent and 4.3 percent in Australia Food and Endeavour Drinks. There has been the
gross profit margin of around 28.71 percent. It is seen that the sales for the year of $36.4 billion
has been incare4sed 4.5 percent on the previous year while the comparable sales has been
increased by 3.6 percent (woolworthsgroup.com.au, 2018). There has been the online sale grew
by 15.8 percent. It is also seen that the sales for the year has been enhanced in hotels.

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Internal Environment Analysis
Resources and Capabilities
Woolworths is considered as one of the largest and reputed retail chain operating in
Australia. The resources are very important in bringing sustainability to the business. There are
basically two types of resources which include the tangible and the intangible resources. A
tangible resource is the resource which can be felt or touched wand that indicates that the
resource is physically available (Evans, Stonehouse & Campbell, 2012). The intangible resource
is the one which is not felt but it is significant in developing the core competencies for any
organizations.
The tangible resource for Woolworths could be that they have around 3000 stores across
Australia and New Zealand and have the employees of around 185,000. Woolworths has the
effective management and the human resources. They also have the well designed and well
equipped machineries inside the stores so that they can be able to provide high quality services
and customer satisfaction (Keupp, Palmié & Gassmann, 2012).
One of the intangible resources could be that Woolworths should be developing and
delivering quality and value driven products and services to the customers. It is important that
there is the need of developing the high quality products and services to be given to the
customers with the enhanced employee engagement practices and right kind of motivation to be
given to them so that they can become customer centric and hopefully they will be achieving the
requirements of the customers on a daily basis as well (Lasserre, 2017). The next intangible
resource which they have is basically the high brand equity and reputation for their excellent

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quality fresh foods and their strong relationship with the alliance and partnering organizations
they have been collaborated with.
Capabilities are defined as the resources when come together in the achievement of the
organizational objectives. One such capability for Woolworths is to be delivering high quality
products and services to the customers. The next could be the development of the good
compensation packages and incentive systems for their employees working in the respective
stores helps them to improve their performance. The next could be the wide range of products
and services along with the huge volume of stores they have which helps in enhancing their
capabilities.
Core Competencies of the firm
A core competency is defined as the capability of any firm which helps in developing
competitive advantage for that firm. The wide variety of food products and services they deliver
it to the customers adds a competitive advantage. The effective culture as well the huge volume
of stores helps in reaching out millions of customers providing them immense satisfaction
(ausfoodnews.com.au, 2018). The innovation they make for example petrol retailing. They have
also vertically integrated some of their suppliers in reduce their competition in the market.
VRIO Analysis
The VRIO analysis is the analysis where there is the identification of the resources which
has been segmented into different categories. This explains that if the resources which are
identified can be integrated then only it creates competitive advantage.
Value- The Company has its dedicated and high skilled and talented staffs who can
deliver high quality services to the customers.

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Rarity- They basically relies on the capabilities which are valuable but they are common
in other retail stores like the quality and innovative products and the skilled employees (Stead &
Stead, 2014).
Imitation- Woolworths has been adopting the green refrigeration technology which has
taken several years to adopt and this is quite costly to imitate for the competitors.
Organization-The company has been exploited the resources quite successfully within the
retail market of Australia. This will help them to exploit the competitive advantage they are
enjoying it now.
Value Chain Analysis
The value chain analysis is the tool which is useful in creating value for the activities they
are doing for holding a high position within the retail industry of Australia (Rothaermel, 2015).
So the value chain analysis has been depicted below
Inbound Logistics- They have their own distribution centers and this results in added
advantage of procuring huge volumes and reduce the cost price (Hill, Jones & Schilling, 2014).
They should also be taking the advantage from the suppliers by providing the discounts.
Operations- Woolworths has owned local farmers who can be able to provide fresh raw
materials and this result in the development of fresh products with cost reduction to the
customers.
Outbound Logistics-There has been the application of the in store vendor quality
management system to be implemented so that the freshness of the products and its quality could
be maintained for a long period of time (Slack, 2015).

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Marketing and Sales- Woolworths has been using advertisements and the social media
marketing as the tool for promoting the new products (Evans, Stonehouse & Campbell, 2012).
They also provide discounts, customer loyalty cards in order to increase their sales.
Customer Service- The use of the trolley system inside the stores and the refund policies
has been useful in providing high quality customer service resulting in high customer loyalty.
Discussion on the culture of the firm
There is a transformation to be made in the culture of Woolworths. After the new CEO
has been appointed, the new CEO is sending the staffs to the boot camp before they start their
career in the respective stores of Woolworths (mumbrella.com.au, 2018). They are paying quite
heavy in order to make them motivated and they are also organizing meetings in head offices for
the staffs to identify themselves. They have also provided good working conditions to work on.
Strategic Issues
Explaining the major strategic issues of Woolworths
The major strategic issues for Woolworths could be the decline in the sales and profit
margins for the shareholders of the company. It should also be the prices of the products they
deliver it to the customers and fostering of growth within the retail market of Australia as there
was increase in competitors in the market taking place for Woolworths.
In the context of the sales decline and less profit margin for Woolworths, there is some of
the statistical evidence which justifies the issue for this company. The company has 190,000
employees working currently and it is needed to be increased. There is around net loss of $973
million achieved at Woolworths. The profitability for Woolworths is $925 million which is down

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by 33 percent in the year 2016 (ausfoodnews.com.au 2018). They have only made a profit of
$1.3 billion which is less than its competitors like Coles and Wesfarmers as well. This could be
improved with improved quality of products to the customers as well as innovation in the
promotion of the products as well.
In the context of the prices for Woolworths, the company is altering its pricing policies
and developing new pricing strategies in order to overcome the pricing issue. The pricing issue is
basically making it difficult for Woolworths to be able to compete with the new and small
retailers coming in this retail market (Killen et al., 2012). It is seen that there is the around $125
million or price reductions for the customers to be taken place from 2015 and this helps in
enhancing the value proposition for the business (the conversation, 2018). They are also trying to
match the in store prices of the products with the online stores.
In the context of enhancing growth and efficiency of the company, it is useful that they
have been trying to introduce lean retail management model where the waste is eliminated and
he wastes are recycled or make it consumed by the animals so that there is no wastage of food
products took place. There is reduction in the level of inventory to be taken place as well for
Woolworths.

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Conclusion
From the study it is evident that Woolworths has been reinventing and changing their
business strategies in order to become much more competitive within the retail market of
Australia. It is concluded that there is the development of the high quality products and its
delivery at the right time will help in enhancing the customer satisfaction. It is also concluded
that Woolworths has a sound working environment and fresh culture to be developed in order to
meet the customer expectations. It concludes that they have the quality and talented staffs who
can provide high quality services to the customers.

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References
ausfoodnews.com.au (2018). Ausfoodnews.com.au. Retrieved 9 April 2018, from
http://www.ausfoodnews.com.au/2015/05/06/woolworths-announces-new-strategies-to-
win-over-grocery-shoppers-afn-reveals-full-detail.html
Evans, N., Stonehouse, G., & Campbell, D. (2012). Strategic management for travel and
tourism. Taylor & Francis.
Harrison, J. S., & John, C. H. S. (2013). Foundations in strategic management. Cengage
Learning.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases:
competitiveness and globalization. Cengage Learning.
Keupp, M. M., Palmié, M., & Gassmann, O. (2012). The strategic management of innovation: A
systematic review and paths for future research. International Journal of Management
Reviews, 14(4), 367-390.
Killen, C. P., Jugdev, K., Drouin, N., & Petit, Y. (2012). Advancing project and portfolio
management research: Applying strategic management theories. International Journal of
Project Management, 30(5), 525-538.

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Lasserre, P. (2017). Global strategic management. Palgrave.
mumbrella.com.au (2018). Woolworths: Where did it go wrong? - Mumbrella. Mumbrella.
Retrieved 9 April 2018, from https://mumbrella.com.au/woolworths-where-did-it-go-
wrong-308694
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Slack, N. (2015). Operations strategy. John Wiley & Sons, Ltd.
Stead, J. G., & Stead, W. E. (2014). Sustainable strategic management. Routledge.
theconversation (2018). The Conversation. Retrieved 9 April 2018, from
http://theconversation.com/retail-outlook-big-retailers-feel-the-pressure-of-new-
challengers-54745
woolworthsgroup.com.au (2018). Woolworthsgroup.com.au. Retrieved 9 April 2018, from
https://www.woolworthsgroup.com.au/icms_docs/188795_annual-report-2017.pdf