Business Strategy Report: Woolworths Supermarkets in Australia

This research report provides a strategic analysis of Woolworths Supermarkets in Australia, focusing on its business-level strategy. It begins with an overview of Woolworths, including its history, operations, and financial performance. The report then delves into an external environment analysis using the PEST framework, examining political, economic, social, and technological factors impacting the Australian supermarket industry. Key findings include Australia's stable political environment, its high per capita income benefiting Woolworths' sales, the influence of multiculturalism and health concerns on product offerings, and the opportunities presented by advanced technology. The internal environment analysis employs Porter's Five Forces model to assess industry rivalry, bargaining power of customers and suppliers, the threat of new entrants, and the threat of substitute products. The report concludes that Woolworths benefits from a favorable external environment and holds a strong position within the Australian supermarket industry, while also identifying key challenges and opportunities for the company.

RUNNING HEAD: BUSINESS LEVEL STRATEGY
BUSINESS MANAGEMENT

BUSINESS LEVEL STRATEGY 1
Contents
Introduction......................................................................................................................................2
Overview..........................................................................................................................................2
External environment analysis.........................................................................................................2
Internal environment analysis..........................................................................................................4
Conclusion.......................................................................................................................................5
Bibliography....................................................................................................................................6
Appendix..........................................................................................................................................8

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Introduction
The research report is prepared on the title ‘Business management’. It comprises of a brief
overview of the Woolworths. The next section focuses on the Macro environment analysis of the
company with respect to Australia. Moreover, it also includes the microenvironment analysis.
The key purpose of the report is to pour light on the strategic analysis tools. Additionally, it
provides an opportunity to practically apply the gained knowledge of a real-life company.
Overview
Woolworth’s is an Australian company established in the year 1924 and currently owned by the
Woolworths Group. It operates in the form of grocery and supermarket chain stores. It offers a
wide variety of products including groceries, pet supplies, health and cosmetics. It has 995 stores
in its home country (Woolworths Group, 2019). Additionally, it also has its stores in
international countries including New Zealand, Asia, Europe and Africa. It is analyzed that
Woolworths is named among the top organizations in Australia (Woolworths Group , 2019). On
a weekly average, it serves around 29 million customers and 2.1 million customers through
physical and online channels. It has a strength of 201522 team members. The annual profit of the
company is ‘1.2B’ (Owler , 2019). Lastly, the key purpose of the Woolworths is continuous
improvement and to prioritizes its customers.
External environment analysis
PEST Analysis is a strategic tool used to analyze the external environment of a company. It helps
in identifying the possible threats and opportunities prevailing in the macro-environment (Perera,
2017).
Political factors
Political factors deal with activities related to government rules and regulations that can affect
the business practice of a company (Wallis , 2017). It is analyzed that the crime level and
corruption within the country is very low. The corporate tax rate is marked at 30%. It safeguards
the property rights of the company by 79.1%. It also provides high freedom in trade activity by

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87.6%. Thus, it suggests that the Australian government follows the strict rule of law (Heritage,
2019).
It means that Woolworths does not face any issue with respect to its patent rights. It will also
benefit from freedom in trade activity, as it will provide ease in establishing more supermarket
stores. Thus, it suggests that Australia offers a fine political environment to the Woolworths to
conduct its operations.
Economic factors
An economic factor determines the level of economic development prevailing in the country. It
focuses on the monetary factors such as inflation rate, unemployment rate, GDP rate that have a
direct effect on the economy of the country (Wallis , 2017). The unemployment percentage in
Australia is ‘5.6%’. The yearly Per Capita Income is marked at ‘$50,334’. Additionally, the
Gross domestic product is 1.2 trillion. It is assessed that GDP has a growth rate of ‘2.3%’. The
inflation rate and the interest rate in Australia is ‘2.0%’ and ‘4.39%’. It also provides a high
degree of trade freedom to the companies. Additionally, it has achieved the fourth rank in respect
of economic freedom. Thus, it suggests that Australia attains a fine economy (Heritage, 2019).
It is analyzed that Woolworths will face difficulty in acquiring more workforces because of the
low unemployment level. It is assessed that high Per Capita Income and Gross Domestic Product
will benefit the company. These factors suggest that Australian are earning high income that
ultimately enhances their disposable income and purchasing power. High disposable income will
directly enhance the Woolworth’s sale and overall profit. Hence, the economic environment
offers multiple opportunities for the company.
Social factors
Social factors focus on elements such as culture, social norms, behavior, rituals, health status and
eating habits (Berry, 2017). Australia is considered as a hub of a large number of cultures. It is
stated as a multicultural country. It is examined that individualistic culture is followed in
Australia. Additionally, it is assessed that Australians are liberal by their nature (Noordin, 2010).
It is analyzed that a large section of Australian is suffering from poor health status. This is

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because of the high consumption of junk and processed food. This resulted in an emerging health
issue of obesity among them (Backholer, 2012).
As mentioned above, Australia is a follower of multi-cultures and its population is tolerant by
nature. Thus, it develops an opportunity for the Woolworth’s to experiment with its
merchandises. The rising health concern of obesity among the Australian’s generates a chance
for the Woolworth’s to enhance the production of healthy grocery items as it will directly benefit
the company in enhancing its sale. Individualistic culture approach suggests that Woolworth’s
should focus in producing items in smaller quantities rather than in family packs to match with
the culture.
Technological factors
Technological factor determines the level of technological development within the country. It
deals with factors such as internet efficiency and automation (Robertson, 2015). It is examined
that Australia has upgraded technology. It also provides the facility of high internet speed. As per
the Global Innovation Index, it has achieved the 17th position in the list of highly innovative
countries. Moreover, it is analyzed that the Australian government is also encouraging technical
growth and advancement within the country (Liddy, 2015).
It is analyzed that Australia offers a fine technological environment to the Woolworths. It builds
an opportunity for the business to avail the benefits of upgraded technology. Utilizing upgrade
technology will directly help in lowering the production cost by reducing the manual
requirement. It will also benefit from the high internet speed. It will help the Woolworth’s in
providing early and better service to its customers through the digital channels.
Internal environment analysis
In order to examine the Woolworths microenvironment, Porters Five Force model is best
suitable. It is a strategic tool assist in identifying potential threats and opportunities prevailing in
the internal environment. Additionally, it helps in developing competitive advantage (E. Dobbs,
2014).
1. Industry rivalry: This force determines the level of competition prevailing in the
industry between the existing companies. It is analyzed that Woolworths attains

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intermediate threat from this factor. This is because there are not high numbers of
competitors. Additionally, its competitors like ‘Coles’, ‘ALDI’ and ‘Target’ are not
similar in size (Owler , 2019). Its established goodwill has helped the company in
retaining a high number of customers. However, Woolworths attains some degree of
threat from ‘Coles’ (Pash , 2017).
2. Bargaining power of customers: It suggests the power of the customer to drive down
the price. It is assessed that Woolworths has a low threat from the customers. This is
because there are large numbers of customers in the Australian market. Additionally,
Australian customers do not have access to a large number of substitute products. As
mentioned above, Australians are the followers of individualistic culture thus buy
products in smaller quantities (Noordin, 2010).
3. Bargaining power of Suppliers: It is analyzed that Woolworths has a high threat from
the suppliers because the cost of switching from raw material is not high (FMCG, 2016).
Additionally, there are large numbers of buyers in Australia. Moreover, it attains poor
relation from its suppliers that can affect its business practices (Halliday, 2017).
4. Threat of new entrant: Woolworths face a low threat from the new entry in the
supermarket industry. This is because existing companies like ALDI, Target and Coles
have a high number of loyal customers because of their established goodwill and
marketing techniques (Morwood, 2018). Additionally, these existing companies possess
copyrights and trademarks in the Australian market (Woolworths , 2019). It is evaluated
that a high amount of capital is required to attain a position in the market because the
existing supermarket operates on a large scale in Australia (Matsa, 2011).
5. Threat of substitute product: Woolworths has a high threat from identical products.
This is because existing companies like Coles and ALDI are offering similar products to
the customers. Thus, it allows the buyer to switch easily from one product to another
(Knox, 2015).
Conclusion
The research report summarizes on the title ‘Business management’. From the above discussion,
it is concluded that the external environment offers multiple benefits to the Woolworths. It
attains a crucial role in Woolworth's success in the Australian market. Additionally, it is analyzed

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that Woolworths attain a strong position in the internal environment of the supermarket industry
in Australia.
Bibliography
Backholer, K..M.H.R..M.D.J..W.H.L..S.C..B.A..S.J.E.a.P.A., 2012. Projected socioeconomic
disparities in the prevalence of obesity among Australian adults. Australian and New Zealand
journal of public health, 36(6), pp.557-63.
Berry, , 2017. Pestle Analysis Essntials. CreateSpace Independent Publishing Platform.
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
FMCG, 2016. Woolworths names top suppliers. [Online] Available at:
https://insidefmcg.com.au/2016/12/14/woolworths-names-top-suppliers/.
Halliday, , 2017. Woolworths To Sooth Troubled Supplier Relationships. [Online] Available at:
https://www.channelnews.com.au/woolworths-to-sooth-troubled-supplier-relationships/.
Heritage, 2019. 2019 INDEX OF ECONOMIC FREEDOM. [Online] Available at:
https://www.heritage.org/index/country/australia.
Knox, M., 2015. Supermarket monsters: The price of Coles and Woolworths' dominance. Black
Inc.
Liddy, M., 2015. How Australia ranks on innovation, in one chart. [Online] Available at:
https://www.abc.net.au/news/2015-12-07/how-australia-ranks-on-innovation/7007740.
Matsa, D.A., 2011. Competition and product quality in the supermarket industry. The Quarterly
Journal of Economics, 126(3), pp.1539-91.
Morwood, M., 2018. Coles shoppers the most loyal (why Little Shop worked). [Online] Available
at: https://www.canstarblue.com.au/groceries/coles-shoppers-loyal-little-shop-worked/.
Noordin, F.a.J.K., 2010. Individualism-collectivism and job satisfaction between Malaysia and
Australia. International Journal of Educational Management, 24(2), pp.159-74.

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Owler , 2019. Woolworths's Competitors, Revenue, Number of Employees, Funding and
Acquisitions. [Online] Available at: https://www.owler.com/company/woolworthslimited.
Pash , C., 2017. Hot competition is back in Australian supermarkets. [Online] Available at:
https://www.businessinsider.com.au/hot-competition-is-back-in-australian-supermarkets-2017-
10.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Robertson, , 2015. Pestle Analysis for Business. CreateSpace Independent Publishing Platform.
Wallis , G., 2017. Pestle Analysis Jump Start. CreateSpace Independent Publishing Platform.
Woolworths , 2019. Terms & Conditions. [Online] Available at:
https://www.woolworths.com.au/shop/discover/about-us/terms-and-conditions.
Woolworths Group , 2019. Woolworths Group. [Online] Available at:
https://www.woolworthsgroup.com.au/page/community-and-responsibility/corporate-
responsibility-news-updates/people/woolworths-group-named-top-australian-company-in-2018-
thomson-reuters-diversity-and-inclusion-di-index [Accessed 22 August 2019].
Woolworths Group, 2019. Woolworths Group. [Online] Available at:
https://www.woolworthsgroup.com.au/page/about-us/our-brands/supermarkets/Woolworths
[Accessed 22 August 2019].

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Appendix
Figure 1: Australia ranking in Economic Freedom
Source: (Heritage, 2019)
Figure 2: Tabular representation
S/N Porter’s Five Forces Level of force Level of threat
1 Industry rivalry Intermediate
threat
2 Bargaining power of customers Low threat
3 Bargaining power of Suppliers High threat
4 Threat of new entrant Low threat
5 Threat of substitute product High threat

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The table summarizes the discussion based on internal environment analysis of Woolworth’s.