Name: Di Wu
ID No.:20167248 No.:201672 48
TMGT 601 Strategic Management Theory an !ractice Strategic Management in Woo"#orth$
%ecture Name: &e$$ica Santo$ Date o' Su(mit: )ugu$t 28* 2016
Wor +ount: ,0-8
Introuction Companies are increasingly using organisational project management in their work to achieve
company goals (Hyvari 2016). All organisations nee to aopt proactive strategic management. !o "stan still# is not an option. !his oesn#t mean that organisations always get it right $ut it#s important that they o. %trategic management eals with managing an organisation &rom an overall perspective. 't looks at ecision an processes when &ormulating strategy &or a company#s &uture. 't is o&ten a comple an am$iguous process that involves many aspects o& an organisation incluing multiple varia$les an issues. As a result an organisation must sometimes take con&licting interests an approaches into consieration. *eing "proactive# suggests creating an implementing strategic management ecisions to ensure the &uture success o& the company instea o& simply $eing reactive to current events. +oolworths has $een a market leaer in Australia since 1,2-. 't provies several eamples o& proactive strategic management in terms o& $oth success an &ailure. +hen analysing the strategic management o& a company there are several tools moels an &actors to take into account. any $elieve the &irst step in strategic management is to evelop strategy an set o$jectives $y setting the company#s strategic vision mission an core values. /ower&ul organisational vision is vital to the strategic management o& an organisation. 't has $een &oun to $e strongly relate to organisational growth (anta$utra Avery 2010). Aitional to strong vision the environmental &actors surrouning an organisation must $e analyse to ensure appropriate strategic management. !his can $e analyse through a management moel such as /orter#s &ive &orces. /orter#s &ive &orces looks into the &ive &actors surrouning an organisation o& Current competition3 threat o& new entrants3 threat o& su$stitutes3 $argaining power o& $uyers3 an the $argaining power o& suppliers. +oolworths is an Australian company that was &oune in 1,2- in %yney. +ith over ,0 years o& history in the Australian market +oolworths is goo eample o& strategic management with elements o& $oth success an &ailure in the company#s rich history. As the &irst step o& success&ul strategic management is eveloping strong vision this paper will &irst analyse the e&&ectiveness o& the +oolworths vision an missions statements. !he paper will then attempt to analyse the current market o& +oolworths. any moels are availa$le &or analysing the environmental &actors however /orters &ive &orces will $e the management moel o& choice when looking at the environment &or the purpose o& keeping the paper short. !he paper will then continue to analyse the cost strategy o& +oolworths with relation to its vision mission an current market environment. 't will then analyse recent news events o&
+oolworths limite as a case stuy. 't will conclue with an overall analysis o& the success an &ailures o& +oolworths limite with respect to all arguments presente.
+ontent !he &irst success&ul element o& strategic management o& +oolworths is its vision. 'n 1,2-
+oolworths opene its &irst store the 4ouning C5 /ercy Christmas state a key principle &or +oolworths 5very man woman an chil nees a hany place where goo things are cheap (+oolworths 2016). Currently +oolworths has more than 7000 stores across Australia an 8ew 9ealan that span &oo li:uor petrol general merchanise home improvement an hotels. +oolworths is a prou home;grown Australian $usiness employer o& more than 1,<000 people an committe $usiness partner o& many thousan local &armers proucers an manu&acturers (+oolworths 2016). any $elieve the &irst step in strategic management is to evelop strategy an set o$jectives. !his is usually one $y setting the company#s strategic vision mission an core values. !hen the company nees to cra&t a strategy to achieve the o$jectives an the company vision. 't is important $ecause it provies a irection &or the company. !he &irst step is making a vision &or the company. !he vision shoul provie a irection o& where the company is going &or its &uture. 't sets out the compelling rationale &or the &irm#s irection. 't uses istinctive an speci&ic language to set the &irm apart &rom its rivals. anta$utra Avery (2010) $elieves =although business strategy and leadership writers have proposed different characteristics that a vision should have, some commonly shared characteristics can be identified”. !hese inclue (anta$utra Avery 2010)
1. 2. 7. -. >. 6. ?.
Conciseness3 Clarity3 4uture rientation3 %ta$ility3 Challenge3 A$stractness3 an @esira$ility or a$ility to inspire
*y comparing the vision o& +oolworths limite against the commonly share characteristics a vision shoul have as propose $y anta$utra Avery (2010) we can attempt to analyse the e&&ectiveness or weaknesses o& the vision o& +oolworths. *ack in 1,2- +oolworths set a vision o& =5very man woman an chil nees a hany place where goo things are cheap. an this principal is just as important toay (+oolworths 2016). *ase on the ieology o& anta$utra Avery (2010) concerning share characteristics a vision shoul have it can $e seen many elements are lacking in the vision o& +oolworths
limite. !he elements lacking are &uture orientation3 sta$ility3 challenge3 a$stractness an little esira$ility or a$ility to inspire. !he only e&&ective element it possesses is its simplicity an clarity. 't is very &ocuse towars selling o& goos at a cheap price. 5ven though the &ailure elements o& the vision o& +oolworths seems to outweigh its success we must take into consieration the age o& the company. achaner et al. (2016) $elieves it is important to think a$out strategy at i&&erent time horiBons. !he vision o& +oolworths was set a long time ago in 1,2- when the importance o& setting a strong vision o& the company may not have $een realise $y the worl. 4rom the research o& anta$utra Avery (2010) they con&irme with prior &inings that power&ul $usiness visions possess all seven characteristics an were strongly relate to venture growth. However otter (1,,, as Cite in anta$utra Avery 2010) &oun in his research that success&ul visions o not have to $e $rilliantly innovative3 in &act some o& the $est ones are not. 5&&ective $usiness visions can even have an almost munane :uality o&ten consisting o& &unamental ieas that are alreay well know. !his is especially true to the vision o& +oolworths. Although it lacks many elements escri$e $y anta$utra Avery (2010) it possesses the :ualities o& a success&ul vision as propose $y otter (1,,, as Cite in anta$utra Avery 2010). 'ts munane however is very &ocuse on the &unamental iea o& proviing a place =goo things are cheap. !he success o& the vision lies in its a$ility to relate with the Australian people. As a &ormal ocument that articulates an organiBation#s istinct an enuring purpose mission statements have $ecome one o& the most popular an wiesprea management tools (@esmit et al. 2011). !he &irm#s mission is similar to the vision $ut escri$es its purpose an its current $usiness who the $usiness is an what they o an why they are here. Aitionally +illiams et al. (201-) ienti&ies the importance o& $eing a$le to operationaliBe these strategic intentions. !hrough a meta;analysis o& 20 years o& research @esmit et al. (2011) ienti&ies &our major &actors esira$le in mission statements 1. 2. 7. -.
Clear e&inition o& purpose Clear elineation o& strategic $ounaries Clari&ication o& the organisation#s value proposition Clear value statement
!hese &actors have the potential o& resulting in the &ollowing $ene&its
1. 2. 7. -.
/roviing a sense o& the organisation#s irection an purpose 4ocusing allocation o& organisational resources Communicating with internal an eternal stakeholers Highlighting organisational values that will guie an inspire organisational mem$ers
*y aopting this proposal we can attempt to analyse the elements o& the +oolworths mission statement. +oolworths# mission statement is “to live up to its vision by offering the best possible convenience, value, range and quality to the 28 million customers we serve each week”
(+oolworths 2016). *ase on the &our major &actors suggeste $y @esmit et al. (2011) the +oolworths mission statement possesses success elements in several o& the &actors consiere important. !he +oolworths mission statement clearly e&ines its purpose o& o&&ering the $est possi$le convenience value range an :uality. !he strategic $ounaries are $lurre however appears to $e consumer &ocuse. !he mission statement clearly aligns with the organisation#s value statement o& “Our businesses pride themselves on working closely with suppliers to bring the best products to consumers at the best price” (+oolworths 2016).
*y comparing the mission statement o& +oolworths against the &actors outline $y @esmint et al.(2011) it can $e see that the mission statement is :uite success&ul. !he statement per&orms success&ully in proviing a sense o& the organisation#s irection an purpose &ocusing allocation o& organisational resources communicates with internal an eternal stakeholers an highlights organisational values that will guie an inspire organisational mem$ers. +oolworths# current $usiness growth plan is $uilt on &our key strategic priorities (+oolworths 2016) 1. 2. 7. -.
5ten leaership in &oo an li:uor Act on our port&olio to maimise shareholer value aintain our track recor o& $uiling new growth $usinesses /ut in place the ena$lers &or a new era o& growth
!he priorities set $y +oolworths# &or its &uture orientation closely aligns with the previously iscusse organisation vision an mission. 't contains many elements that contain the potential to lea to the success&ul strategic management o& the company. *e&ore the setting o& strategic priorities it is important to &irst unerstan the environment in which the organisation is in. earning an unerstaning the organisational environment is very important in proactive strategic management. earning has $een acknowlege as a key
process that contri$utes to success&ul innovation which etermines an supports an organiBation#s success (ang et al. 200?3 Doronov 200<). !he processes o& organiBational learning involve key components that support knowlege prouctivity processes which inclue searching &or in&ormation assimilating eveloping an creating new knowlege on proucts processes an services(+ang 2011). An organisation must &irst unerstan its environmental &actors $e&ore attempting any kin o& strategic management. ne popular analytic tool to learn an unerstan an organisation#s environment is porter#s &ive &orces moel. 't looks into the analysis o& • • • • •
5isting competition in the market !hreat o& new entrants in coming into the market !hreat o& su$stitute proucts to the company#s pro&ita$ility !he $argaining power o& $uyers !he $argaining power o& suppliers
Aopting /orter#s &ive &orces moel there are a num$er o& noteworthy consierations that must $e mae when concerning the strategic management o& +oolworths. Currently +oolworths &aces competition &rom its two eisting rivals Coles an A@'. 't remains the market leaer at 7?.7E market share closely &ollowe $y Coles at 72.>E an A@' at 12.1E(Chung 2016). @uring the history o& +oolworths it has $een traitionally :uite sa&e o& threat o& new entrants coming into the market ue to high $arriers to entry o& the market. However this has signi&icantly change in recent years with the entry o& A@' into the market in 2001 (A@' 2016). 4urthermore it is likely to &ace increase threat in the &uture with the Ferman grocer il soon to enter the Australian market (Freen$lat 201>). !he threat o& su$stitute proucts is high within the &oo an grocery market. %u$stitute $rans are mae availa$le to all companies within the market an this will $e a threat +oolworths will have to eal with in the &uture. !he $argaining power o& $uyers is high within the market an a potential risk to +oolworths company per&ormance i& not taken into consieration. !he primary stakeholer an customer $ase o& +oolworths is the Australian people. !he $argaining power o& suppliers within the market is low an avantageous to +oolworths. 5ven so +oolworths is eicate to working &airly with suppliers (+oolworths 2016). *y &irst taking these &actors into consieration we can $egin to analyse the strategic management o& +oolworths. A cost leaership strategy is use $y +oolworths in terms o& prouct range an pricing in the company#s :uest &or competitive avantage. 4irms aopting the cost leaership strategy aim
to increase market share $ase on creating a low;cost position relative to their peers (*anker et al. 201-). 4irms can aopt i&&erent resource allocation methos to achieve cost leaership large;scale &acilities process improvements cost minimiBation !G $enchmarking an overhea control (*anker et al. 201-). +oolworths o&&ers a $roa range o& proucts at a low cost to accomplish its mission o& “offering the best possible convenience, value, range and quality to the 28 million customers we serve each week” (+oolworths 2016).
!he cost leaership strategy is the most appropriate strategy taking into the company#s history an the current market environment. !he cost leaership strategy clearly aligns with +oolworth#s organisational vision an mission which is consiere critical in setting organisational strategy. Aitionally the cost leaership strategy is most appropriate in the current environment. As previously iscusse through /orter#s > &orces moel +oolworths is situate in a market where the $argaining power o& $uyers is high. 'ncreasing costs may result in $uyer issatis&action. As $uyer power is high there is an increase risk that potential customers can easily switch to a competitor i& prices are set high. Coles an A@' the competitors o& +oolworths $oth aopt similar strategies when it comes to cost. 'n comparison all three companies aopt a low cost approach to com$at the risk pose $y the high $argaining power o& $uyers. Coles aopts a similar cost leaership strategy o&&ering $roa range o& proucts (Coles 2016) where A@' o&&ers a cost &ocus strategy o&&ering low costs $ut a more &ocuse limite range o& choices in $rans (A@' 2016). As outline in our previous &ive &orces iscussion. !he current Australian grocery market is &acing the potential entry o& il. il is etremely similar to A@' an will most likely aopt a cost &ocus strategy in o&&ering low costs $ut a small choice in $rans (Freen$lat 201>). +oolworths will nee to continue in its current cost leaership strategy in the &uture $y o&&ering a $roa range o& goos to aress the risk o& high $uyer power. !he company will nee to continue to o&&er a $roa range o& proucts to i&&erentiate $etween its current competitor A@' an the threat o& il as a potential entrant into the market. !he &ailure elements o& +oolworths can $e seen through recent evelopments. 'n recent evelopment o& +oolworths limite there have $een accounts o& clear &ailures in strategic management. !he most recent news +oolworths has recently announce that it will $e closing own its asters stores $y the en o& 2016 (Hatch 2016). asters is a chain o& harware stores starte $y +oolworths limite only recently in 200, as a joint venture with owe#s. +oolworths 7 $illion ollar investment in asters currently accumulates losses o&
up to >00million (%tewart 2016). %tewart (2016) $reaks own the &ailures o& +oolworths# venture into the home improvement market to &ive contri$uting &actors 1. /oorly thought;out strategy I 'nstea o& opening 1 store at a time to make sure each store was pro&ita$le +oolworths opene 1> stores in &irst 12 months an >0 stores within - years. 2. +rong locations I +oolworths were una$le to &in suita$le locations &or its asters stores as the $est sites were alreay occupie $y competitors. 7. %elling the wrong stu&& I Catere only to the pu$lic an i not cater to trae customers who accounts &or a $ig portion o& the market. -. 4lawe workplace culture I +oolworths i not evelop a workplace culture that encourage growth where challenging the $oss an &ee$acks o& ieas were welcome. >. /oor shopping eperience I +oolworths unerestimate the competitive response o& *unnings an were una$le to eliver a $etter shopping eperience. /rices o& asters were perceive $y the pu$lic as $eing higher than its competitor *unnings. !he importance o& strategic management can $e seen through the recent &ailures o& +oolworths limite in its venture with asters. 't is important &or organisation strategy to align with the vision an mission o& the organisation. any elements o& the corporate mission o& = offering the best possible convenience, value, range and quality (+oolworths 2016) was missing in +oolworths# strategic management o& its asters stores. +oolworths eviate &rom its mission o& o&&ering the $est possi$le convenience as it was una$le to &in suita$le location &or its asters stores. Aitionally +oolworths were una$le to provie a $etter shopping eperience as its asters stores were una$le to compete with the competitors. As such this can $e seen as a clear inication o& organisational strategy not aligning with the vision an mission o& the organisation ultimately leaing to a &aile venture.
+onc"u$ion All organisations nee to aopt proactive strategic management. !o "stan still# is not an
option. !his oesn#t mean that organisations always get it right $ut it#s important that they o it. +oolworths is a great eample o& aopting proactive strategic management. 't contains elements o& $oth success an &ailure can $e seen a&ter care&ul analysis o& management tools strategies an recent events &rom +oolworths. A&ter etaile analysis o& the vision an mission o& +oolworths against pu$lishe literature it can $e seen some elements consiere important $y many authors are missing. !his coul $e ue to the age o& the company. !he analysis shows one key element missing in the vision an mission o& the company is &uture orientation. 't must $e &orwar looking in terms o& planning an management to ensure continue growth an aapt to &uture i&&iculties &or continue success. !he organisational environment as analyse through /orter#s &ive &orces also point to &uture challenges. +oolworths must maintain its current market ominance $ut also $e reay &or threats arising &rom new entrants into the market. ver the &ollowing years +oolworths must aapt the strategy to changing environmental pressures cause $y the entry o& it as a competitor into the Australian market. %ince 1,2- +oolworths has esta$lishe itsel& has the market leaer. However it has &ace numerous challenges in recent times. 'ts recent venture into home harware with the asters chain has come to a misera$le en with the announcement o& the closure o& its stores $y the en o& 2016. A&ter etaile analysis it can $e see that the strategy use i&&ere &rom the core values o& its vision an mission o& +oolworths limite which le to the company#s previous success. Aitionally +oolworths &aile to aress some important environmental &actors such as competition an location with its new venture into home harware. !hrough our analysis o& important strategic management &actors it can $e seen that +oolworths has not consistently show elements o& success in terms o& strategic management. 8umerous elements o& &ailure eist in the analysis o& recent events an actions. !hese recent elements o& &ailure is a result o& past strategic management ecisions not going accoring to plan. !o ensure &uture ongoing success an growth o& +oolworths the management will nee to learn &rom past mistakes in strategic management an re;evaluate the company#s current position to plan &or a $right an pro&ita$le &uture.
e'erence$: Ali (2016) "A$out A@'# JK LhttpsMMcorporate.ali.com.auMenMa$out;aliMN ODiewe
2-M02 'ss > pp.
meta;analysis o& 20 years o& researchQ Management ecision Dol. -, 'ss 7 pp. -6< I -<7 2011 @rago +. Clements C. (1,,,)Qeaership characteristics an strategic planningQ Management &esearch !ews Dol. 22 'ss 1 pp. 11 I 1< 1,,, Freen$lat 5. (201>) "il as to its port&olio o& Australian registere traemarks# 'he (ustralian < @ecem$er 201> Hatch /. (2016) "4ire sale asters announces closing ate# )ydney Morning *erald 2-
August 2016 Hyvari '. (2016) = Koles o& top management an organiBational project management in the e&&ective company strategy implementation +rocedia )ocial and -ehavioural )ciences, Dol. 266 pp. 10<;11> 2016 achaner 8. ing . %tewart %. (2016) Q4our $est practices &or strategic planningQ )trategy # "eadership Dol. -- 'ss - pp.26 I 71 2016 ang %. orris %. %nell %. (200?) =Kelational archetypes organiBational learning an
value creation etening the human resource architecture (cademy of Management &eview Dol. 72 8o. 1 pp. 276;>6 200? anta$utra %. Avery F. (2010)Q!he power o& vision statements that resonateQ %ournal of -usiness )trategy Dol. 71 'ss 1 pp. 7? I -> 2010 aragiannopoulos F. Feorgopoulos 8. 8ikolopoulos . (200>)Q4athoming /orterSs &ive
&orces moel in the internet eraQ .nformation Dol. ? 'ss 6 pp. 66 I ?6 200> asters (2016) "asters news# JK LhttpsMMwww.masters.com.auMiy;projects; ieasMsupport;helpMmasters; news3jsessioniT!UVWwD,@!,s2FkecJ%gXX.nclmorasp1201N ODiewe 2-M0
Doronov . (200<) =!owar a practice perspective on strategic organiBational learning 'he "earning Organi$ation Dol. 1> 8o. 2 pp. 1,>;221 200< +ang Y. 5llinger A. (2011)QrganiBational learningQ .nternational %ournal of Manpower Dol. 72 'ss >M6 pp. >12 I >76 2011 +illiams K. orrell @. ullane U. (201-)QKeinvigorating the mission statement through
top management commitmentQ Management ecision Dol. >2 'ss 7 pp. --6 I ->, 201+oolworths (201>) "Annual Keport# JK LhttpMMwww.woolworthslimite.com.auMpageM'nvestX'nXJsMKeportsMKeportsMN ODiewe 2-M0
