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Content
Contents
Page Number
Overview of Woolworths Limited
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Strategy and Objectives
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External & Internal Environment Analysis
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Solution to Question no. 1
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Solution to Question no. 2
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Solution to Question no. 3
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Conclusion
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Recommendation Recommenda tion
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References
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Overview of Woolworths Limited
Woolworths Limited is a company committed to serving the customer - to providing Australian customers with the best possible value, convenience and choice whether they are shopping in one of Woolworths‟ more than 3,100 “bricks and mortar ” stores across the country or logging on and purchasing from Woolworths‟ growing portfolio of online channels. A commitment to the customer is at the heart of everything Woolworths does, across all its business units and across all its retail formats and channels. Woolworths‟ stores serve an average of 26 million customers per week. Woolworths operates, and has introduced to the Australian market, a number of Australia‟s leading retail brands many of which have a “bricks and mortar” and online presence including Woolworths and Safeway supermarkets, BIG W department stores, Dick Smith electronics outlets, Woolworths Petrol sites and Dan Murphy‟s and BWS liquor outlets. Late 2011 will also mark the opening of the first Masters store - a chain of large-format destination Home Improvement store being developed by Woolworths in conjunction with its joint venture partner Lowe‟s Inc. of the United States. Woolworths has announced plans to secure 150 sites for these stores over the next five years. Delivering a world-class retail offer to customers can only be achieved through having the best possible team in place and investing in their ongoing development. In this respect, Woolworths is a major employer in Australia employing more than 170,000 employees across the country, 50,000 of whom are located in rural and regional Australia. Woolworths is also one of Australia‟s largest training organizations with over 5,000 trainees and apprentices as part of the Woolworths team. The majority of Woolworths employees are permanent full-time or part-time staff (approximately 70%) and women constitute 54% of the Woolworths workforce.
Woolworths also recognizes that as a significant employer, it has an responsibility and capacity to provide flexible employment opportunities to suit the diverse needs of people across all parts of the community - such as working parents, indigenous employees and people living with a disability. Woolworths currently employs over 500 staff members who identify as having a disability with Woolworths being a gold member of the Australian Network on Disability (a group targeted at increasing employment opportunities for disability). Woolworths is also actively focused on increasing indigenous employment opportunities with Woolworths being a partner in a number of indigenous pre-employment programs.
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Woolworths is committed to being a leader in responsible and sustainable retailing, particularly where sustainability is becoming increasingly important to our customers. In 2007, Woolworths developed a comprehensive Sustainable Strategy in which it committed to a number of key environmental sustainability targets including:
40% reduction in carbon emissions on projected growth levels by 2015 (bringing emissions back to 2006-2007 levels). Achieving a 200ML reduction in water use in our stores compared to 2007. Generating zero food waste in the general waste stream by 2015.
Woolworths‟ commitment to responsible retailing is not confined to environmental sustainability. To provide customers with confidence, Woolworths has in place responsible sourcing practices and is committed to upholding human rights with respect to its own employees and also in relation to its supply chain. This includes Woolworths Ethical Sourcing Policy which suppliers are expected to comply with and which addresses issues including bribery and corruption, labor rights, working conditions and environmental compliance. As is discussed in further detail below, Woolworths is also introducing innovative produc t ranges to meet the growing customer demand for organic, fair-trade and sustainably and ethically sourced products across our business.
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Strategy
Growth Plans Woolworths' current business growth plan is built on four key strategic priorities. 1. Extend leadership in food and liquor 2. Act on our portfolio to maximize shareholder value 3. Maintain our track record of building new growth businesses 4. Put in place the enablers for a new era of growth
Objective of this Assignment:
Our main objective is to go through the case “Woolworths Limited: Retail leader in Australia” in detail and solve the given questions and answers. We are also to provide information in relevance to our class lectures.
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External Environment Analysis External environment is very much important as we cannot or should not develop strategies in a vacuum. The strategies must be responsive to the external business environment; otherwise the firm could become the most efficient producer of obsolete items which have no value in market. Here we have explained the external environment of Woolworth Limited.
Political/Legal Environment: Government has a direct impact on the supermarket industry in regards to legislating trading hours, and through the monitoring and regulation functions of the Australian competition and consumers commissions (ACCC), the commonwealth government, the trade practices act (TPA) and the Foreign Investment Review Board (FIRB) Technological Environment: Woolworth was adopted a new technology. It was the first major retailer to subscribe to GEMMnet (Global Electronic Marketing and Merchandising Network) in 1994. It also invested to improve its supply chain and distribution system which has significant impact in cost savings. It also increased the online shopping facilities and developed company website, which gave a Woolworths a first mover‟s advantage. Global Segment: Woolworths has expanded its business operation in New Zealand and India to sustain its growth in retail industry and capitalize on its market strengths. Economic Segment: The slow growth and uncertainty in the Australian company in recent times poses a threat for the retail players, as their growth may be stagnant in future if the situation prevails for long. The growing unemployment rate, possible increase in fuel prices and wages are also a matter of great concern for the participants in the industry. Demographic Segment: Australia‟s population was 21 million in 2008 and there is a mix of ethnic and religious groups due to its immigration policy. In Australia those over the age of 65 currently constitute approximately 12% of the population and the forecast is a 25% growth by 2051. The 85+ group is experiencing the fastest growth rate; with the number of people in this age group expected to almost quadruple to approximately 5% in 2051. Socio Cultural Segment: Changing social concerns, attitudes and lifestyles have resulted in dramatic changes in the supermarket industry in Australia. People are very much concern about health and obesity now a days. Hence there is a demand for low fat foods, easy to cook foods, organic and GM free foods. The participation of women in workforces has also increased in recent time
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Porters Five Forces Analysis:
Internal Environment Analysis: Internal environment analysis is very much important for identifying a firm‟s strengths and weaknesses. Here we have explained the internal environment of Woolworth Limited.
Resources: At the end of 2008 calendar year, Woolworth operated 3000 stores across the Australia and New Zealand, and employee approximately 180000 people It means Woolworth‟s tangible and intangible resources are very strong. It has efficient management and human resources, wide range of product and product innovation skill, well designed logistic management, strong brand image and reputation for quality and fresh food. Capabilities: Capabilities refers to an organization‟s skill in coordinating its resources putting them to productive use. From 1924 Woolworth is running business very successfully, it means they are capable to use the right person in right positions and know how to use or set the resources. Core Competencies: World class supply chain: Woolworth‟s innovation and competitive advantage have developed through its supply chain. It has significantly focused on efficiency and cost cutting in managing unnecessary expenses 6
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Branding and Market: Woolworth has positioned its stores with “The Fresh Food People” slogan, creating a differentiated image of quality and healthy product range at responsible prices. Innovation: Woolworth has implemented several projects including “re-fresh” “new idea program” petrol retailing Integration: Woolworth has vertically integrated some of its supplies by producing its own inputs to increase its market power and to respond to the private level trend. Value Chain Analysis: Inbound logistics: It uses its own distribution centers as a result it can take advantage to procure bulk quantity and reduce cost price and take advantage from suppliers as a discount. Operation: Woolworth has their own farmers as a result they can take supply from root level as fresh product with reduce cost. . Outbound Logistics: In store vendor quality management system is used, ensuring product quality and freshness of product. Marketing and sales: It spends more amounts for marketing It makes successful brand awareness Customer Service: Refund policies and reduces the waiting time by using trolley mounted scanner.
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Question 01: Identify the main characteristics of industry in which Woolworths operates. Answer:
Woolworths operates in the Australian retail supermarket industry which consists of a very few major domestic and international players. The main characteristics of the indu stry are:
There is direct government interference in trading hours and close monitoring of the business activities of the players.
Consumers„ demographics, societal concerns, attitude and life styles are changing
Huge capital requirement for running large supermarket chain, i.e. overhead cost is high
The entry barriers are moderate.
The bargaining power of buyers is very high, with the exception of specialized stores.
The bargaining power of suppliers in the supermarket retail industry is high to moderate.
The availability of industry substitutes in supermarket industry is moderate to high.
The retail industry in Australia is mature and intensely competitive due to the population size and the presence of multiple supermarket giants in the market.
Hence, the Australian domestic supermarket industry is not an attractive industry to enter, with a low profit potential.
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Question 02: What is a business model? Critically examine the principal features of Woolworths’ business model.
Answer: According to Magretta (2002), business model is one of the great buzzwords of the Internet boom, to glorify all manner of half-baked plans. A good business model remains essential to every successful organization, whether it„s a new venture or an established player. Business models are, at heart, stories that explain how enterprises work.
According to Thompson et al. (2010), ―A company„s business model explains the rationale for why its business approach and strategy will be a moneymaker. Absent the ability to deliver good profitability, the strategy is not viable and the survival of the business is in doubt‖.
According to Johnson et al. (2008), a business model consists of four interlocking elements that, taken together, create and deliver value. Johnson (2010) believes that the basic architecture underlying all successful businesses consists of the four interdependent elements that can represented by four boxes.
1) Customer Value Proposition (CVP): The CVP describes how a company creates value for a given set of customers at a given price. 2) Profit Formula: This describes the way a company will capture value for itself in the form of profits. 3) Key Resources 4) Key Processes – the means by which the company delivers value to the customer and itself.
We can critically analyze the principal features of Woolworths‟ business model using the four – box business model framework (Johnson, 2010, Johnson et al., 2008). Woolworths‟ Customer Value Proposition (CVP): Meet customers‟ needs by delivering competitive low prices, consistent high quality, greater ranges, and better shopping experiences across all the brands.
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Woolworths‟ Profit Formula:
Low prices
Cost savings through efficient supply chain management & economies of scale; differentiation increase profit
High volume & low margin
High resource velocity
Woolworths‟ Key Resources:
Efficient management and human resources
Wide range of product and product innovation skills
Well-designed logistics management
Strong brand image and reputation for quality and fresh food
Partnership and alliance management
Strong relationship with vertically-integrated businesses
Woolworths‟ Key Process:
Continuous improvement and adopting best practices in operation
Aggressive advertisement and promotional activities
Overall value chain initiatives
To the reengineering of processes,
To stop needless work
To get every process pointed in the direction of consumer satisfaction
To reduce cycle time 10
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To achieve total quality
Outside directors on Board of Directors to avoid conflicts of interest and maximize shareholder value
Offering more services e.g. one-stop-shop concept: combination of petrol retailing with grocery retailing
Product development & related diversification
High standard of customer service
Despite the intense competition and low profit potential, Woolworths have a 10.7% growth in its sales (Woolworth‟s limited company results, 2008) which is a clear indication of its superior business model. And a profitable business is the best early indication of a viable business model (Johnson et al., 2008).
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Question 03: Which important competencies did Woolworths use to add value to its strategic management practices to ensure its sustained growth? Answer:
Competencies of Woolworths:
World class supply chain:
Woolworth developed innovative and competitive advantages through supply chain.
It focused on efficiency in managing and cost cutting in unnecessary expenses.
It maintained to move inventory into stores more efficiently.
Branding and market position:
Woolworth made a great positioning with 'The fresh food people ' slogan.
Woolworth created a differentiated brand image.
Woolworth ensured the quality and healthy product at reasonable prices.
Innovation:
Woolworth implemented several projects for making variation and differentiation as refresh, new idea program, petrol retailing etc.
It made more facilities for consumers as introducing 'everyday money' credit card in partnership with HSBC Bank and MasterCard.
It gave promotions like different consumer reward and convenience programs as every day reward, everyday money shopping cards.
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Integration:
Woolworth integrated some supplies vertically to produce its own inputs.
It integrated some techniques to increase market power.
It maintained private label trend.
Wide range of high quality products as "Woolworths S elect" brand.
Marketing and sales:
Woolworth marketed itself as "The fresh food people", a great b rand.
Woolworth established a strong foothold in retail market.
Value for money, real spot sales, petrol discounting, reward programs and banking facilities were its great advertising and promotions activities.
Its core competencies supported high volume and low margin.
Woolworth deployed the increased resources and enhanced capabilities.
Creating human capital, introducing well-designed logistics and supply chain management and branding products supported the strategic mission of Woolworth.
Through some strategic missions Woolworth was able to
Maintain competitive low price; Create efficiency and reducing costs; Pursue high standards of customer service; Initiate growth in existing and new business.
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SWOT Analysis of Woolworths
Strength:
Clear strategic direction
Strong financial position
Market leader (31% market share in supermarket industry)
Wide range of product and product innovation skills
Good technology and supply chain management
Brand image and reputation
Market recognition for quality and fresh food
Economies of scale and low cost advantages
Geographic coverage
Strong relationship with vertically-integrated business
Partnership and alliance management
Opportunities:
Potential to increase the customer base
Potential to increase market share
Growth opportunities in the health food sector(low fat products, organic & GM-free etc)
Health consciousness
Population increase and diversity
Metro and convenience markets
Opportunity to use ICT to cut costs and to pursue new sales opportunities
Opportunity to capitalize on brand names.
Weakness:
Introduction of Home brand by Coles
Continuous improvement of product lines by competitors
Gaps in customer service and consumers responses
Too large to manage 14
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Debt increase
Weak population size
Higher overall cost
Exposure to discount market, no competitive offering
Reduced petrol margin
Homogenous nature of supermarket products in Australia
Occasional limited control over suppliers
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Threats:
Slow growth and uncertainty in the Australia econ omy in recent times
Recession and growing unemployment
Possible increasing fuel prices and wages
Campaign by small National Association of retail Grocery Agencies representing 1000 small businesses
The proliferation of substitutes
The growing power of suppliers
Technological advancement
Shifts in buyers' needs and taste
Increasing regulatory standards and govt. Legislation
Debate on climate change and business sustainability
Takeover of Coles group by Wesfarmers
Smoking bans
Possibilities of increasing dependency on overseas suppliers
Woolworth‟s competitive position in the retail industry is extremely strong. Woolworths also needs to improve and protect its position. Woolworths also need to be aware of its strengths and of the opportunities for exploiting and sustaining its competitive advantage.
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Woolworth‟s competitive strategies
Woolworths traditionally focused on market penetration, growing its market share by focusing on quality, productivity, efficiency and increased market activity.
Woolworths used diversification as a tool to increase profit and market power.
Woolworths enhanced the convenience of the shopping experience for consumers by offering more services.
It implemented 'one -stop-shop' where consumer need less time for different n eed.
Diversification made Woolworths corporate level strategies
Existing strong supply chain
Operation in different industries like petroleum and electrical industries.
The alliances made great opportunities to create loyal customer for Woolworths
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Conclusion
To conclude it can be said that Woolworths is the oldest supermarket in Australia. It has strength, weakness, opportunity and threats in various areas as well as good brand value among consumers. It has its own supply chain and distribution network by which are able to meet their consumer demands effectively and efficiently. Woolworth‟s success is a way of their establishing core competencies and effective business practices.
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RECOMMENDATION(S)
With severe competition Woolworths was able to sustain in the market as a market leader, so it should increase the volume in different business field.
Woolworth could increase its R&D finance in alcohol-related diseases to protect itself from the introduction of new government regulations restricting or further regulating the sale of alcohol.
Woolworth can introduce less hierarchical structure into its various diversified industries so that it can encourage employee empowerment and foster more innovative ideas.
Though it had strong management chain it should create some vertical operations and integrations.
For going forward it should identify the potential threats, diversification, future and societal trend according to consumer demand and legal barriers.
It should focus more on health awareness since Australia has created an increase demand for convenient, low-fat products and organic foods both in house and community.
Woolworth needs to pursue international dimension strategy to prevent foreign competitors from entering new geographical locations.
Woolworth could also focus on social concern including childhood obesity and working hours.
Woolworth could also focus on social corporate responsibility practices.
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Reference
Alom, Q & Majumder , N. A.2011. Woolworths Limited: Retail Leader in Australia. Cases in Business and Management. 2nd ed: Tilde University press, Victoria, Australia.
(Accessed 9 July 2013)
(Accessed 9 July 2013)
Porter, M.E. 1996. What is strategy? Harvard Business Rev iew, 74, 61-78
Thompson, A.A, Strickland, AJ & Gamble, J.E. (2010). Crafting and Executive strategy: The Quest for Competitive Advantage, 17th edition, McGraw-Hill/ Irwin, New York.
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