Woolworths Strategic Planning and Management Report - Analysis

This report provides a comprehensive strategic analysis of Woolworths, a major retail chain. It begins with an introduction outlining the company's background and current market position. The report then delves into the macro environment, utilizing PEST (Political, Economic, Social, Technological) analysis to assess external factors impacting the business. A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis evaluates Woolworths' internal capabilities and external challenges. The industry environment is examined using Porter's Five Forces model to understand competitive dynamics. The report concludes with strategic recommendations for Woolworths, suggesting potential actions to achieve its objectives and maintain a strong market position in the competitive retail landscape. The analysis provides insights into the company's strengths, weaknesses, and opportunities within the Australian retail market.

Running Head: WOOLWORTHS 0
STRATEGIC PLANNING
AND MANAGEMENT

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Table of Contents
Introduction................................................................................................................................2
Drivers and Factors in Macro Environment...............................................................................2
PEST Analysis.......................................................................................................................2
SWOT Analysis.....................................................................................................................4
Drivers and Factors in Industry Environment............................................................................5
The Industry Five Force of Woolworths................................................................................5
Recommendations......................................................................................................................7
References..................................................................................................................................9

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Introduction
Businesses in this retail industry comprise of varieties of selections such as dairy
foods, groceries, canned goods, toiletries, fruits and vegetables and cleaning merchandise. In
most of the countries, the retail industry is highly mature and competitive. In this industry,
Woolworths is one of the leading supermarket retail chain incorporated in 1924 when the first
store of the company was opened. With continuous innovation and development, Woolworths
is now operating with 900 plus relying on 115,000 team members in the stores. In 2017,
Woolworths earned net revenue of 5,566.9 crores AUD (wsj.com, 2019). The company
business is built on integrity.
This report outlines Woolworth’s macro and industry environment factors having
significant influence over the strategic direction of the firm as well as decision making. In
last, necessary recommendations were also suggested relating to the strategic options to the
firm leading Woolworths to achieve its objectives and mission.
Drivers and Factors in Macro Environment
The macro environment of Woolworths analysed with the help of PEST and SWOT
tools –
PEST Analysis
PEST stands for Political, Economic, Social, Technological factors. PEST analysis
defines a context of macro-environmental factors used as a constituent of strategic
management. It benefits the management in identifying company strategic position, rate of
market growth and significant directions for the operations (Gupta, 2013). The PEST
exploration of Woolworths is stated below -
 Political factors
Government regulations against duopolistic nature of market – Woolworth and Coles
controls a greater market share in Australia and thus creating duopolistic market in nature.

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However, as per latest reports, the Federal government have taken some serious steps to
regulate this duopoly and loosen the competition in the marketplaces. The Australian
Competition and Consumer Commission also interfere and laid down several regulations
and procedures in front of Woolworths so that new plays can freely enter into the market
(Richards et al, 2012). Indirectly, it also raises the consumer bargaining power and
benefits them to check and compare the prices prior taking purchasing decision.
 Economic Factors
Lackluster customer spending impacting retailers – In Australia, there is an economic
downturn and that makes large number of consumer price sensitive (McDonald & Morling,
2011). This results in spending less on their shopping habits. In its continuous effort to
become consumer friendly Woolworths has introduced an extensive range of products and
also make attempt to reduce prices of various products with the lowest margins possible.
Drastic reduction in bargaining power of suppliers – As Woolworth's control majority of
the retail chain in Australia, it makes difficult for supplier to gain any new intermediaries and
also duopolistic market nature also force them to reduce their bargaining power and this
results in high financial loss to these suppliers. However, due to necessary steps taken out by
The Australian Competition and Consumer Commission, it is anticipated that bargaining
power of suppliers will be restored in near future with the convenience of new intermediaries.
 Social Factors
Poor relationship with suppliers leading to change in corporate culture - Woolworths has
come a long way to recover relationships with suppliers and also recapture the trust of
consumers. Woolworths had aimed to sign up most of its 3000-odd suppliers to a new
Supplier Connect program which allows suppliers to receive commercial reports and free
monthly scorecards which evaluates their performance in contradiction of competitor brands
in relation to various groups (Wiles et al, 2012).. The building of this ‘listening culture’ also
develops new ways of understanding customer needs and work with rather than against
suppliers.
 Technological Factors
Implementation of SAP-based merchandising system to enhance efficiency – A SAP
based merchandising system has been rolled out by the Woolworths with replacing very

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much old brand CASS system as a subject of change advantage. Woolworths also was the
first that rolls promotion management applications in 2011 internationally. This operation of
SAP platform is forecasted to take positive drive to the progress of sales for the company
(Conforti et al, 2013). In addition, Woolworths also come with cloud built asset that is
connected with the complete payroll system in Australia. Therefore, all these initiatives will
benefit Woolworths to achieve its vision connected to become international retailer in multi-
channel retailing.
SWOT Analysis
SWOT analysis stands for Strengths, weakness, threats and opportunities aids in
recognising internal and external aspects of the organisation that can make huge impact on
the organisation success and achievement (Helms & Nixon, 2010). Many businesses use this
tool to gain a competitive advantage in their marketplace.
 Strengths – Woolworths is one of the prominent and renowned retail brands in
Australia and this is the company biggest strength, i.e. strong branding. In addition,
most of the young individuals in Australia have their first job at Woolworths. Due to
its wideness, the company has a strong reach with its 900 plus stores and greater
market share. The company also offer broad range of products and services including
other divisions such as Big W. Due to changing competitive landscape, the company
also enhance its online capabilities and it was seen that online purchase has displayed
a steady growth of over 40% as per the yearly report.
 Weakness – Woolworths have two biggest weakness i.e. persistent problems from
suppliers and low international presence. Woolworth has their major stores and
operations in Australia and New Zealand. In extent with other countries, the company
is still planning to expand. This limited global presence gives the company a
disadvantage as it is not able to achieve economy of scale in relation to its product
portfolio (Wahyuni, 2010). Moreover, the supplier’s issues beforehand also caused
huge loss to the company as they have to face critiques from various stakeholders
including customers and government.
 Opportunities – The Company have the opportunity to expand into emerging
markets, adopt private label strategy, and leverage big data analytics for enhanced

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experience and efficiency. For instance, Woolworths can plan to expand in India as
there is an abundance of resources helps the company in saving various costs related
to sustainable sourcing.
 Threats – The major threats for Woolworths includes discounting wars with Coles
and slow growth of online retail in Australia. After Woolworths, Coles also has a
bigger market share representing 30.3% (ibisworld.com, 2018)and thus gives tough
competition to Woolworths. Moreover, due to changing spending habits of consumers
as well as economic downturn in Australia, the company long term sustainability can
be hampered.
Drivers and Factors in Industry Environment
Industry Factor includes various market dynamics, competitive position and structure
that have a great impact on company future capabilities and activities (Zhou & Li, 2010). The
industry environment of Woolworths will be analysed by Five Force Model that allows
management to assess and evaluate the competitive position and strength of the business. It
will also help to recognise the nature of industry competitiveness and trends.
The Industry Five Force of Woolworths
Bargaining Power of Suppliers
As per Banerjee, Dasgupta & Kim (2008), the greater significant suppliers are, the
stronger they are. Hence, Woolworth’s business has low dependence on the suppliers
depicting weak suppliers bargaining power. The major reason for this is the duopolistic
nature of retail market in Australia where vast number of products are being sold to the
commerce. The retail trade being competitive, an important total of the market share is
occupied by the majority. However, the supplier bargaining power is restoring with entering
of Aldi and Costco and also due to execution of various regulation by ACCC. Hence,
bargaining power of suppliers is relatively low in case of Woolworths.

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Bargaining Power of Buyers
The consumers of Woolworth’s represents strong bargaining power and Flynn, Huo &
Zhao (2010) stated that strong bargaining power to the consumers enables to forces the
business to reduce the prices in relation with buying at the store. One of the major strategies
of Woolworths is to fulfil the needs of the consumers by delivering low priced products. The
consumer’s affordability of price of the product also allows consumers to adopt such
consumer focused strategy. In addition, customers have several choices and selections to
purchase grocery and packed food products. They also have a low switching costs across the
stores and thus offered buyers with very high bargaining power.
Threat of New Retailers
It is relatively low in situation of Woolworths as for an organisation to set up business
in Australia retail industry requires huge amount of capital and with major competitors such
as Coles and Woolworths, it is not flexible to stand in the market. Woolworths and its
competitors also have a long lasting and variable access to the distribution channel which
requires huge time and money while establishment. Many companies and business firms also
have fear to lose their investment due to such big players in Australia retail market having
huge customer base. In addition, the facilities and infrastructure also cost high to the new
entry and because of these factors, new entrance is low to Woolworth. Majority of industry
players including Woolworths and Coles also have strong brand awareness and this makes
challenging for the new entrants as building strong brand name requires much time in the
market.
Competition among Existing Businesses
In Australia retail industry, the rivalry among competitors is intense. Due to many big
companies such as Coles, Aldi and Wesfarmers, all are competition to another to gain high
market share. In addition, there are also some driving factors in the industry due to entry of

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American supermarket i.e, Costco trying to gain market based on price factor. In the grocery
industry, price war is a very usual aspect and the companies also broaden their variety of
products and web services to raise the competition among the industry. The profitability has
also been condensed as several consumers who used to buy goods from Woolworths have
now going towards competitors stores such as Aldi and Coles.
Threat of Substitutes
These include the products that can aid an alternate objective as the existing one.
Threats of substitutes are comparatively low to Woolworths. The company is offering daily
usage products fulfilling the daily requirements of individuals. Hence, it reduced the threat of
substitutes to the company. Reduction in threat help Woolworths to gain market opportunity
through either diversifying or offering an extensive range of products. In global markets,
Woolworths is adopting differentiation strategy to gain more and more consumers. The
company also embraced diversification in Australian market while offering varieties of
products in various segments. In addition, many offers substitute in the Australian
supermarket and for this cause, Woolworths is come up with innovative and competitive
strategies to form a good brand reputation and also to appeal to the consumers. In the retail
industry, feasible price strategy is a very significant factor to gain market share.
Recommendations
In the limelight of above discussion, Woolworth’s supermarket is required to
implement effective strategies in relation to the business operations. For instance,
Woolworths should expand its business outside Australia and mostly in emerging or
developing countries such as China and India. This will help the company to increase its
brand awareness and market share against top competitors (both a global and domestic level)
such as Coles, Aldi and Costco. The company also should frame its strategy consistent with
that of political conditions such as using fair pricing strategy, effective segmentation and so
forth. In relation with short term strategy, Woolworths should build advertisements showing
how their fresh range of healthy meals go fits with every routine of the consumer. This will
also help the brand to heighten brand recall in the minds of consumers. In addition, creating
advertisement of healthy meals would increase the chance of making Woolworths

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synonymous with healthy consumption and convenience that signifies a valuable aspects of
differentiation in the marketplace where fresh food and low prices are considered as points of
parity. The company needs to focus on disruptive technologies such as AI, RFID tags, data
mining and other automation in cloud computing. This help the company to take a
competitive edge on its competitors. Woolworths also constantly formulating operational
strategies that are in line with the industry requirement and match with organisation internal
capability and resources. In addition, for the effective implementation of these strategies,
there should be complete support from the management accordingly.
To ensure long term sustainability, Woolworths can also invest in research and
development to support innovation and creativity in the retail sector. Equipping stores with
advanced technology directly helps Woolworths to compete against the rivals. Woolworths
also needs to build suppliers training programme so that to tighten relationship with them
over a long period of time and thus gain competitive edge in the marketplace. At last, the
company should also conduct monthly or quarterly training programs for their employees to
keep them informed about organisation expectations. They can also conduct motivational
programs to enhance their morale and synchronise their individual goals with corporate goals.
Adopting all these will help Woolworths to gain high brand awareness in the community and
people with increased profitability.

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References
Banerjee, S., Dasgupta, S., & Kim, Y. (2008). Buyer–supplier relationships and the
stakeholder theory of capital structure. the Journal of finance, 63(5), 2507-2552.
Conforti, R., La Rosa, M., Fortino, G., Ter Hofstede, A. H., Recker, J., & Adams, M. (2013).
Real-time risk monitoring in business processes: A sensor-based approach. Journal of
Systems and Software, 86(11), 2939-2965.
Flynn, B. B., Huo, B., & Zhao, X. (2010). The impact of supply chain integration on
performance: A contingency and configuration approach. Journal of operations
management, 28(1), 58-71.
Gupta, A. (2013). Environment & PEST analysis: an approach to the external business
environment. International Journal of Modern Social Sciences, 2(1), 34-43.
Helms, M. M., & Nixon, J. (2010). Exploring SWOT analysis–where are we now? A review
of academic research from the last decade. Journal of strategy and management, 3(3),
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ibisworld.com. (2018). IBISWorld reveals state of the supermarkets and grocery industry.
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stores-industry/
McDonald, T., & Morling, S. (2011). The Australian economy and the global downturn Part
1: Reasons for resilience. Economic Round-up, 1(2), 1.
Richards, C., Lawrence, G., Loong, M., & Burch, D. (2012). A toothless chihuahua? The
Australian Competition and Consumer Commission, neoliberalism and supermarket
power in Australia. Rural Society, 21(3), 250-263.
Wahyuni, D. (2010). The importance of supply chain management in competitive business: A
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Wiles, J. L., Wild, K., Kerse, N., & Allen, R. E. (2012). Resilience from the point of view of
older people:‘There's still life beyond a funny knee’. Social Science &
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wsj.com. (2019). Woolworths Group Ltd. Retrieved from
https://quotes.wsj.com/AU/XASX/WOW/financials/annual/income-statement
Zhou, K. Z., & Li, C. B. (2010). How strategic orientations influence the building of dynamic
capability in emerging economies. Journal of Business Research, 63(3), 224-231.