Woolworths: Market Analysis, Strategic Options & Recommendation

This report provides a strategic analysis of Woolworths, a major grocery retailer in Australia, focusing on its market size, trends, and financial performance. It explores strategic options using the Ansoff Matrix and Porter's Generic Strategies, recommending a focus on developing healthy, quality products and implementing fixed price structures. The report details implementation strategies for marketing these initiatives and monitoring future performance to enhance Woolworths' presence in both regional and foreign markets. It highlights the competitive landscape, including price wars and the entry of online retailers like Amazon, and emphasizes the importance of innovation and customer satisfaction. Desklib provides access to this and other solved assignments for students.

1
Final Strategic Recommendation for
Woolworths

2
Executive Summary
The report ideally reflects that Woolworths can effectively focus on the development of a new
product category like the healthy and quality product category for rightly meeting the needs of
Australian customers that are interested in gaining access to such products at lower prices.
Further, Woolworths is also observed to focus on developing fixed price structures for targeting
American customers for its quality products. Implementation and monitoring strategies are also
put in place for the two different strategic options undertaken by Woolworths for developing its
position along both the regional and the foreign markets.

3
Table of Contents
Introduction......................................................................................................................................4
About Woolworths.......................................................................................................................4
Overview of the paper.................................................................................................................4
Market Size and Trends...................................................................................................................4
Financial and Corporate Performance.............................................................................................8
Strategic Options...........................................................................................................................12
Strategic options based on use of the Ansoff Matrix.................................................................13
Strategic options based on use of Porter’s Generic Strategies..................................................14
Final Recommended Strategy........................................................................................................15
Focus on development of healthy and quality products............................................................15
Generation of Fixed Prices........................................................................................................16
Implementation of the Final Strategy............................................................................................16
Implementation for marketing of health and quality product ranges........................................16
Implementation for marketing of the fixed prices policy..........................................................17
Monitoring and Control of Future Performance............................................................................17
References......................................................................................................................................19

4
Introduction
About Woolworths
Woolworths operates as a large scale grocery retailer in the Australian market that focuses on
delivering high quality grocery and food products to customers at an effective value. It also
focuses on enhancing the level of consumer convenience through continually innovating on its
service and product offerings. Presently, the company works based on the employment of
201,000 team members that potentially serve around 29 million customers on an average weekly
basis. It also looks forward in developing an effective relationship with its farmers and supplier
communities (Woolworths Group Limited 2019).
Overview of the paper
The paper initially would focus on evaluating the market size and trends of the Australian
grocery retail market and also the corporate and financial performance of grocery retailer
Woolworths. It would also aim at highlighting the strategic options Woolworths can undertake
and the manner the same would be implemented and also the fashion in which the performances
would be monitored in such respect. The same is required to be undertaken for helping the firm
in developing an effective presence both along the regional and global retail markets.
Market Size and Trends
A survey report rendered by the IBISWorld reflects the market size of the grocery retail industry
based in Australia as $102 billion. The growing demands of Australian consumers of high priced
food products like that of organic fruits and also vegetables are taken to generate growth to the

5
grocery retail industry in the region. The major players operating in the grocery retail market of
Australia are identified to be Woolworths, Coles, Aldi and also Metcash (IBIS World 2018). A
comparison carried out for the individual market shares of the grocery retailers highlight that
Woolworths acts as the market leader in the market.
(Retail World 2018)
The comparison of the shares of the grocery retail companies in Australia with that of the market
for Fresh Foods in the region based on market data of 2017 period is reflected as under.

6
(Roy Morgan 2018)
The grocery retail market of Australia is also characterised by intense price wars between the
above identified players. The prices marked by Woolworths accounted for a decline by around
2.4 percent during 2017-18 in terms of competing with other grocery retailers like Coles and
Aldi. The resurgence of the supermarket business in Australia accounted for growth in market
share for Woolworths while Coles’ operation faced potential pressures from the buoyancy
position of Woolworths and expansion of Aldi. The above pressures faced by Coles accounted

7
for a receding sales growth of around 0.3 only during the first quarter of 2017-18. The store
expansion policy of Aldi is taken to account in increasing the number of retail stores from the
present figure of 500 stores in the region (Retail World 2018). Metcash operating as an
individual player suffered heavily owing to the price-cutting competition which in turn
accounted for its declining market shares. The intensity of the competition faced by the grocery
retail players in Australia is further augmented owing to the entry of the online retailer, Amazon
in the Australian market. The opening up of AmazonFresh accounted to be a growing threat to
already existent supermarkets and other grocery retailers operating in the region. The report of
IBISWorld however reflected that there is nothing much to fear in that the online grocery market
only accounted for a meagre 3 percent market share in the Australian grocery market during
2017-18 (IBIS World 2018). The entry of Amazon in the Australian retail market has however
fuelled innovation in the existing grocery retailing operations with Woolworths and Coles
incorporating and thereby developing on the click-and-collect activities. The incorporation of
click-and-collect retail process accounts to increase the level of customer satisfaction and
consumer convenience in that the customers can easily purchase based on the use of
Smartphones and Tablets and thereby collect the merchandise from nearby stores based on their
convenience (Crothers 2018). Similarly, the partnership made by Coles with Airtasker App based
in Sydney is taken to help consumers in earning the benefit of easy deliveries. Moreover, the
players in the grocery retail market of Australia face a potential threat from the entry of David
Jones in the region with the planning of opening of a standalone food store in the South Yarra
region of Melbourne during 2019. David Jones is noted to invest in around $100 million till 2024
for developing on its retail potential in the food retail market of Australia (Retail World 2018).

8
Financial and Corporate Performance
The financial performance of Woolworths Group during 2018 is reflected in the following
illustration.
(Woolworths Group 2018)
The total return made to the shareholders by Woolworths Group during the financial year 2018
accounted to around 22.4 percent of the revenues. The same is observed to have outperformed

9
the grocery retail market in the region. The revenue for the firm during 2018 accounted a growth
of around 3.4 percent with also a rise in the level of EBIT (Earnings before Interest and Taxes)
by around 9.5 percent and NPAT (Non-Performing Assets and Taxes) by around 12.9 percent.
The return gained based on the employment of funds accounted to grow by around 24.1 percent
for Woolworths during 2018 (Woolworths Group 2018). Further, the growth of the grocery retail
business and also the effectiveness in management of working capital in turn contributed in
reduction of the amount of debt of net repayable nature by around $677 million. The company
management commemorated the strong financial performance of the company through the
generation of annual dividends of around 93 cents on a per-share basis which was observed to
have gained a growth by around 11 percent compared to the 2017 period (Woolworths Group
2018).
Apart from financial performance, the company management of Woolworths reflected that the
increased focus on developing and sustaining its Customer and Team First Culture ideally helped
in enhancing the scores for voices of customers, suppliers and the internal team (Woolworths
Group 2018).

10
(Woolworths Group 2018)

11
(Woolworths Group 2018)
Moreover, the number of pick-up stores for Woolworths was also increased to 2,900 owing to
the encompassing of different regions over Australia and the New Zealand regions. Further, large
numbers of store renewals in around 80 stores were also promoted during 2018 (Woolworths
Group 2018).

12
The sales results of Woolworths compared to the total group for FY 2018 is reflected in the
following illustration.
(Pash 2018)
Strategic Options
The strategic options for Woolworths can be effectively analysed based on the application of the
Ansoff Matrix and model of Porter’s Generic Strategies.