Discuss about the Strategic Marketing Management of Woolworths South Africa.
This report primarily focuses on the analysis of the marketing strategies and challenges facing Woolworths South Africa. Woolworths is a supermarket retailer that among the leading players in the retail industry. It offers a broad range of food, clothing and general merchandise to the customers (South African edition, 2012). However, the brand has failed to sustain the competitive advantage due to the unpleasing feedbacks from the customers from social media. There are several complaints regarding the poor quality of products sold and the low competency portrayed by the client service personnel of the organization. It is also said that the supermarket promises customers of instant response to their needs but fails. People prefer to seek alternatives from their competitors such as Shoprite Group, Spar, Pick ` Pay and Massmart that ensure efficiency in meeting the needs of the local market and convenient distribution (Ehimario, et al. 2012). For example, if the supermarket want to accelerate the growth of its market share and exposure in the food retailing, the management has to implement new market strategies and principles that can lead to customer loyalty and satisfaction. Hence, the organization can reestablish its operations and maintain a reputable brand name across South Africa and the other locations. It is from this perspective that the report shall analysis the market situation using the SWOT analytical tool, the retailer’s current positioning, challenges, the marketing strategy and action plan to implement in the company.
The marketing objective
This report primarily aims at providing an insight situation analysis of Woolworths South Africa current marketing strategy and provide appropriate recommendations that can enable it to overcome its current challenges and limitations. Therefore, it can revitalize its brand to ensure sustainable growth in future. The achievement of this objective will majorly depend on the ideal marketing mix strategies used by Woolworths. The changing trends in the retail industry of South Africa are influenced by the consumers’ demand for best shopping experiences accompanied by value, loyalty and low prices (Vivek, et al. 2012, pp. 122-146). Also, the report will provide the management with excellent competencies in its strategic practices and action plan that ensure Woolworths brand name sustains its competitive edge across south Africa and worldwide.
Strengths
Woolworths’ ability to generate adequate capital can facilitate faster expansion and opening of more stores across South Africa is a strength that can aid in improving its market share. Hence, over time it will outdo the central market leader, Shoprite whose market share is around 36% (Luiz, et al. 2011, p.1-21). Secondly, people trust the brand, and it has a good reputation. It is a result of its distinctive competency where they ensure freshness and high quality of products that they sustain a competitive edge. The implementation of the right business journey marketing strategy that aims at creating a multiplier effect that influence the buying behavior of customers. Moreover, the organization has maintained a better supply chain management due to its ability to establish a close relationship with the producers and its suppliers (Partrick, 2016).
Weaknesses
Over the past few years, the company has been facing negative responses from the customers’ regarding their products. Some of the complaints include plastic bags and cockroaches found in the food and the poor response from the incompetent customer personnel. Hence, the consumer’s perception of the quality of products is diminishing. The limited market share is also a weakness as the competitors have occupied a significant portion of the retail market, hence unable to compete other competitors internationally (Descubes & McNamara, 2015). The company has failed when it comes to speeding up the new technologies, for example, the integrated marketing which can aid in dominating the South Africa’s retail market. The managers of the supermarket also fail in making strategic decisions that can improve the growth levels.
Opportunities
South Africa’s retail industry portrays excellent growth potentials due to various factors that includes; the advances in the supply chain, computerization, and the changes in the citizen’s lifestyle. Its ability to invest appropriately in food prices gives it a competitive advantage (Hems, 2010). Hence, Woolworths utilizes this opportunity to formulate multi-option retailing to meet the emerging trends in the industry. The increased group sourcing gives them an opportunity to unlock the additional margin. The emerging economies give a chance for further strategic acquisitions and franchise. Moreover, a positive perception of customers regarding the company’s attention to detail and modernization of its products gives it an opportunity to extend the distribution channels and technological advancements and offer a broad range of goods (Woolworth’s integrated report, 2012).
Threats
There is stiff competition from other retailers both locally and internationally and from players like discounters and catalog-based retailers, hence making penetration to the market is quite difficult. Due to the increased oil prices in South Africa, it becomes quite difficult for Woolworths to continue with its competitive pricing strategy (Phambuka-Nsimbi, 2015). They also face the threat of high costs of raw materials which further impacts the profits margin negatively. The frequent economic recessions also hinder the organization from opening more stores. Finally, direct government interference cause uncertainties concerning the market changes and economic conditions.
Political factors
The political stability of the region allows the retail industry to prosper as the companies can carry out the business activities both national and internationally. The import of raw materials from suppliers outside the country and export of end products to customers at various destinations. The government encourages international trade, therefore giving an opportunity for Woolworths to operate both in Africa, Australia, New Zealand and other continents where the brand has established stores.
The fluctuation of the South African rand negatively impact the growth of the Woolworths brand. Additionally, the economic recessions being experienced in the region leads to losses of, hence failure of many companies. Other economic factors that affect the retail industry include, low rate of savings, high oil prices and a decrease in the GDP which impacts the consumer spending patterns.
The South Africans are culturally diverse and they prefer high quality products. They believe that highly priced goods and services tend to satisfy customer needs and preferences and therefore the supermarket can gain a competitive advantage due to its competitive pricing strategy. The high demand for a better retail shopping experience is a factor that challenges the retailers to focus more on providing a broad range of products which consumers can select. The food security policy is a social factor that the country is achieving hence accelerating the exports to other countries.
The use of new technologies, e-retailing and the internet accelerates international competitiveness through expansion of the operations to other foreign markets. The advanced technologies is one of the strengths that enables Woolworths to let their customers have a lasting shopping experience and enables the company to develop a better supply chain management.
Woolworths has put in place various measures that ensure protection of the natural environment and resources. For example, then combined waste initiatives that focus on the reduction of waste to the landfill, the recycling project and water management best practices in its supply chains.
The laws of the country require that all retailers put measures to protect employees, customers and the public at large. The increased taxation negatively impacts the performance of Woolworths. Further, the government laws protect the consumers from harmful food products that may impact the health status of its citizen. Corporate social responsibility is a mandatory fact that all retailers should comply with as per the regulations of the country.
Current positioning of Woolworths
Perhaps, Woolworths brand is still trusted and reliable to customers. The company is among the top 100 companies listed on the securities exchange of Johannesburg in South Africa (Mitchell, 2015). It has a strong market position in the southern hemisphere, however has failed to sustain its leadership which led to losses. The annual report of December 2015 showed that Woolworths earning per share increased by 30.6%, and the gross profits grew by 48.1%. It is evident that the company continues to expand across Africa and other continents at a high rate and hence increasing the market share from 11% (Woolworths, 2015). Despite the complaints on social media, it continues to provide quality products and services and uses various promotion strategies that aim at gaining a competitive advantage and increase the market share. However, it has not yet gained a greater market share since the Shoprite seems to dominate the food sector however they are leading in the retail industry of South Africa. The performance in 2016 evidenced that Woolworths recorded a customer base of 3.2 million and continued to attract young customers (WHL Integrated Report, 2016). They aim at becoming a leader in fashion and food retailing. Currently, statistics on the fresh produce and prepared food show a significant growth in the market share of the brand.
Woolworth launched a brand campaign of fresh food people that aimed at freshening the positioning in the market. The target market of Woolworths constitutes the local consumers shopping both from the stores and online. Also, it targets high income earners and online shoppers and its future focuses on the black and upmarket (Chu & Chiu, 2013). Their brand is gaining a better positioning in the market due to the following activities conducted by the company. Firstly, there is understanding customer needs through the world of difference loyalty program and product availability at the right place and time. Further the organization takes into consideration the environmental concerns and supporting the SA school. Woolworths’ strategic plans, goals and objectives show that they are customer centric and aim at providing quality products at cheaper prices. Hence, an essential step to grow the business and expand the product line (Rehan, 2014, pp.222-230).
Current challenges
Woolworths brand faces a slow market growth due to a slowdown in the South Africa’s economy since 2014 (Matsoma & Ambe, 2016, pp.194-210). Hence there is a reduction in shopping confidence which has forced the company to cut its prices and focus on customer loyalty initiatives. Negative customer responses where product quality is the issue as discussed on the media. They also face the challenge of customer acquisition and retention. Moreover, the high employee turnover and weak staff morale is a great challenge which is as a result of failure to give compensation and benefits to employees accordingly (Hem & Teslo, 2012). For example, the case that was raised on Facebook regarding a worker who injured herself but the organization failed to cater for her hospital bills. They also face the challenge of negative perception by customers regarding the price and value and inability to provide trans-seasonal merchandise. The market discounting led to profit downgrade of Woolworths. In addition, there is greater competitive pressure from the rivals. For example, Shoprite has come with new strategies of segmentation, and engaging customers thus shall continue maintaining its market leadership (Prinsloo, 2010).
The impact of such challenges on Woolworths depends on how they control them. They may either build or destroy brand image and reputation and therefore the marketing managers should ensure that they retain customer by offering quality products that are free from defects. The adverse effects may include, reduction in repeat business, decrease in brand recognition and market share (Kapferer, 2008).
However, this organization may use the following recommended strategies to overcome the challenges discussed above. The company should come up with innovative marketing strategies that differentiate their products from the competitors to change shopping habits and customer interaction with the brand. Additionally, the marketing managers have to increase the frequency of promotional campaigns and events which in turn improves sales volume. It can also ensure full participation in corporate social responsibilities activities and offer GM- free foods (Chowdhury, 2013). Moreover, the embrasure of Omni channel processes and advanced networks can result to a unified retailing and maintenance of employee efficiency. It may carry market surveys to identify areas that customers need improvement and convince them to continue shopping from their stores. Lastly, they should hire staff personnel that focus on better services to customers and respond to customers’ complaints on the spot rather than giving promises that cannot be fulfilled in the long run (Veneto, 2013).
Effective marketing strategy to apply
There are six strategies that Woolworths South Africa can adopt to revitalize its brand from the current positioning in the market. First, it should refocus itself by defining the goals of the brand and improve the financial discipline. Secondly, it has to restore the brand relevance. This strategy requires that the organization has got a clear understanding of the marketplace, market segments, customer insight and brand promise (Hollebeek, 2011, pp.555-573). Thirdly, it should have to reinvent the brand experience which can either be emotional or functional hence leading to brand distinctiveness. Another strategy includes reinforcing the resulting culture. For Woolworths to revitalize its brand it has to identify the measurable and appropriate milestones, implement the reward and recognition systems. Next, it has to rebuild its brand trust by predicting the consumer behavior patterns. Thus, establishing a long lasting brand loyalty in its trademark. Lastly, Woolworths should realize the global alignment by rebuilding its internal and external marketing principles. Hence, by using the six strategies, it can be able to redesign the product range to satisfy the target market needs (Bose, 2012).
For the organization to revitalize its brand, it has to periodically monitor and change its pricing strategy from a competitive one to a market penetration pricing. New pricing can neutralize the competitor’s impact on sales. The measures to use may include but not restricted to, lower pricing, targeted customer offers and better range of the brands (Beneke, et al. 2012). The pricing strategy adopted by a company determines its profit and survival, and the adjustments impact the overall marketing strategy used by the firm. Therefore, they can give a discount on prices and promotion offers that can help in attracting more customers. Customers claim that Woolworths sets high prices which are not proportional to the quality. (WHL Integrated Report, 2016). Providing high-quality products can be a strategy that can change the minds of customers and be convinced that the brand is still healthy and wholesome. It is also paramount to place value on Woolworths’ privately labeled products to cherish the core shoppers. Hence, customers can have a new brand experience through unique brand attributes. However, it needs to expand its business by developing new stores and provide regular refurbishments of the existing ones in places where there is potential for growth. As a result, the demand for its products can increase which can lead to revitalization and sustainability of the brand. The use of the drive-thru collection techniques and new Click and Collect location facilitates convenience and customer loyalty through multi-channel customer experiences (Ferguson and Brown, 2012, pp.391-404).
It is paramount to persuade and convince the customers that the brand is still of high quality and the management ensured that they addressed and rectified the issues regarding the quality of products offered by the company (Ghodeswar, 2008, pp.4-12). Revising of the pricing strategy leads to targeting a significant market share of the brand in South Africa and worldwide and survival afterward. For it to achieve growth of the brand, there is need to integrate both the traditional and emerging marketing communication channels that can lead to a successful conveyance of the message regarding the brand and its new features. The promotional tools may include social media, online and public relations to gain back customer trust and greater market share. (Kanagal, 2014). There is need to analyze the product’s life cycle and current positioning of Woolworths before embarking on the promotion strategies to use to revitalize, sustain and grow the market share of Woolworths. The marketing team should perform a thorough research on the people that is the target market and their demands. The company employees play a significant role in ensuring delivery of quality services especially the customer service personnel that always receives and responds to customer’s claims and feedbacks (Hollebeek, 2011, pp.555-573).
Action plan
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