The aim of this report is to discuss the situation under which the retail industry of Australia has been working. This report has aimed to analyses the strategicenvironmentof the food retail sector in which Woolworths is a very popular and successful name.This company unlike other companies of the same market tolerates tremendous competitive pressurewhich is instigated by the internal and external factors of the company (Keller2017). This report however will discuss the company’s background and analyses the general environment, industry environment and competitive environment so that the opportunities and threats for Woolworths can be identified. In the aspect of internal environment of the company, the resources and capabilities of the corporation will be analyzed. The core competency of the company will also be discussed so that information system required by Woolworths can be understood. This report concludes with recommendationsbased on the proposedinformation present in the Australian market.
Woolworthsgroup limited is a chief Australian company which has an extensive retail interest in all over the Australian and New Zealand market. It has been the second largest company in the country after Wesfarmers by revenue. In addition to this the company is the largest takeaway liquor retailer as well as largest hotel gaming machine operator is the country. This company managers some of the most recognized and reputed brand of Australia. The main business of this company is focused on maintaining the largest supermarket chain of Australia which has more than nine hundred stores across the country and more than 115,000 employeesworking in these stores (Woolworths.com.au 2018). Woolworths is one of the most innovative retailers of the country as it understands the demand of the customers and provide all types of comfort whole shopping.
As the company is located in mainly Australia hence the general environment in which the company is operating is necessary to understand. Political factors of the count include its stable government and administrative systems. It has a stable federal government operating in the legislative, executive and judiciary sections (Hitt and Duane 2017). The government has full support for the growth of the retail business in the country which allows the company to operate with higher degree of certainty. The administrationhas an open, progressive and stable nature which makes it a safe destinationfor investment. The political system has been assessedto be a highly effective to respond to the economic challenges as well as policy direction. Economic stability in the region gives full support so thatthe company can easily operate. The cost of labor in this market is effective to be judged as this manipulates the revenue of the country (Ethiraj, Gambardella and Helfat 2018).The cost of living in this country is quite fordable and Currency exchange rates against euros and dollars are very favorable in Australia. The GDP growth in Australia is positive and supportive of the growth of the company.
Physical factor includes the physical presence of the company in the market of the country. As mentioned before, the company has more than 900 stores which anyone can access.moreover, this company also serves the customersthrough supplying their goods to their doorstops if booked online. Sociocultural factors include the standard of living of the people. It is high and the country has social stratification. The education level of this country is quite high which helps he company to have cheap yet skilled labor (Martins, Rindova and Greenbaum 2015). However, the relationship of the company with the customers and supplies is intense whish can create a loyal and dependable customer base as well as supply chain. The global factors of the market are associated with the sustainable growth. The companies focus on various environmental factors now a days so that this do not create problem in the all-inclusive growth ofthe company.
The government gives technologicalsupport to the companies operating in this particular market so that they can work on the new processes and products. This helps the companies to reduce costs and improve quality leading to innovation (Meyer, Neck and Meeks2017).Woolworths grab this opportunity resented and has developed unique merchandisingsystem to improve the efficient of the store as well as the firm.The Australian market has potential buyers for Woolworths. The company applies to the average to prime income level customers for any age group and gender if segmented the customers base demographically. However, the stores attract the women of the age group of 20 to 50 who usually take responsibilities of their households. The stores of Woolworths give all the facilities to itscustomers and gain competitive advantage.
Threats of New Entrants
For the retailing company like Woolworths, it is difficult to operate in the market of Australiaas the threat of new entrants in the market is high. These new entrants bring innovation and pressurizes Woolworths to lower their pricing strategiesand provide a new value propositionsto the customers. This is the reason why the company needs to build an effective barrier for safeguarding the competitive edge.
Bargaining Power of Suppliers:
All the organizations in food retailing industry buy raw materials from different suppliers the suppliers in the leading position diminish the profit margin of the company by using their negotiation power for extracting the higher prices from this firm. This is the reason why Woolworths needs to erect a well-organized supply chain with multitude of suppliers.
Bargaining Power of Buyers:
The buyers have demanding attitude and they want to buy best quality goods at the lowest price. It often puts stress on the company’s profitability in the long run. The smaller customer base of the company is more powerful which heightens the bargaining power of the buyers and their capabilities for seeking the increasing discounts as well as offers.
Threats of Substitute Products or Services
The competition level in the food retail market of Australia is quite high. This is the reason why the substituteproduct and services can be easily found in the market (Martinez-Simarro, Devece and Llopis-Albert 2015). The customers prefer buying high quality products at lower price hence they turn to the companies where they get more benefits. Moreover, the switching cost of the substitutes are also low which threatens the profitability of the company. The threat regarding the substitution of product or service is high for Woolworths as it offersvalue proposition which is exclusively different from the present offerings of the industry.
Rivalry among the Existing Competitors
As mentioned before, the market of food retail industry is highly concentrated but this particular company possess the position of second largest retailer in terms of revenue in the country (Molina-Azorín et al. 2015).However, the number of rival companies is constantly increasing as there is limited barrier for the new entrants. As the competitive rivalry is increasing in the market Woolworth is pressurized to drive down the prices which leads to decrease an overall profitability of the company.
To the critics, the competitors are now granted to be the stakeholders as they manipulate the price systemand quality of products and service ofthe companies (Saeidi et al. 2015). The competitive rivalry is highly effective in the retailingsector of Australian market. The competitive environment in which the company now operates have some features. Some of the rivals are famous for their unique services and some for availability. Woolworths mainly focusses on providing all types of comforts to their customers starting from catering all their demands by maintaining availability of the products in one hand and shipping these products to their doorsteps (Scarborough 2016).In addition to this Woolworths strengthens the financial assets in various ways and increase the strategic capabilities to maintain their good will in this market. Ion order to avoid the conflicts and empowerment of the suppliers, Woolworths has designed a strong network of suppliers to gain competitive advantage than that of the rivals. The company has also built a sustainable differentiation so that it can collaborate with the competitors to increase the size of the market (Martínez-Torres, Rodriguez-Piñeroand Toral2015).
Despite an intense competition present in the market. Woolworths can grab some opportunities presented in the market of Australia so also the threat to take care of. The company has a huge financial asset as well as a loyal customer basewhich they use while operating in the Australia and NewZealand market. Moreover, the company grab the benefit of marketing online. Through proper promotional strategies and advertisements,the market penetration can be achieved. In addition to this, Woolworths can spread market within the territory through collaborating with the competitors to increase the market size.
The first and foremost threat of the retail industryin the Australian market is its concentration. The number of similar companies working in the market is quite high. This keeps the pressure of reducing cost of the materials therefore remain constant upon Woolworths. In addition to this, the company has been under threat of supplier domination whichcreates issues in the company’s focus of serving their customerswith all types of comforts.Finally, the economic recession lurking over the world economy can affect the economy of Australia also.
From this analysis, the exact position of the Australian retail industry can be understood. From this opportunities and threat analysis, it has been understood that Woolworths need to gain competitive advantage by properly managing the threats and utilizing the opportunities efficiently.
Human resources – The major human resources which have been developed by the company in the retail industry of Australia are based on the huge number of employees who are considered to be an important part of the organizational operations. The company has been able to expand the human resources in effective manner in order to provide best level of services to their customers (Albrecht et al. 2015).
Financial resources – The huge amount of revenues which have been gained by Woolworths in the retail industry of Australia are thereby based on the services and products that are accessible to the customers.
Physical resources –The physical resources of the company are thereby based on the huge number of stores of the company which have been developed by Woolworths in Australia. The products and the services of the organization are provided to the customers with the help of the stores of Woolworths (Andrevski et al. 2014).
The different capabilities that are developed by Woolworths in the industry are mainly related to the methods that are used by Woolworths in order to offer fresh products to the customers. The organization can thereby provide the services and products to consumers by proper levels of coordination between growers and local farmers. The company is able to develop effective products that are fresh in nature. The levels of customer satisfaction can thereby be achieved by providing fresh products with the help of proper capabilities of Woolworths. The customer first related strategy which has been developed by Woolworths is an important approach based on its operations (Shujahat et al. 2017).
The core competencies of Woolworths –
The information system that is thereby proposed for implementation in Woolworths can be termed as management information system or MIS. The decision making of the company will be related to effective analysis of the information that is related to the sales, profits, and choices which are made by the consumers. The collection of effective data will be an important part of the implementation of MIS. The confidentiality of the data will play a major role in the implementation of information system. The software which can be used by Woolworths in management information system is Oracle.
The application of the management information system is related to the ways by which the company can manage data related to the customers. The entire system can thereby be managed and can help Woolworths to use the data in an effective manner to develop strategies. The performance of the employees can also be managed with the help of data which can be collected with the help of proper information based system. The company structure will play an important role in the application of information system. The managers of the stores will be able to play a vital role in the ways by which the company can use the data to improve the operations of Woolworths. The proposed information system will thereby be able to play a major role in the ways by which the company is able to use relevant data in order to operate in the competitive retail industry. The proper analysis of needs and demands of consumers is also possible with the help of management information based systems. The company will be able to analyze the data based on previous purchase of the customers in order to offer them appropriate products and services. The proper analysis of data will be helpful in the management of employees and their levels of productivity based on different organizational processes.
Conclusion:
Therefore, it can be concluded that Woolworths despite has the huge market share in the retail market of Auisralia, can have potential threat by different factors. The external analysis of the firm reveals the issue that the high level of competition present in the market is one of the major reasons that affect the profitability of the company. In addition to this, the threat of new entrants, customer demands and constantly changing regulations of the country have been leading this company towards problems. Through proper understanding of the opportunities that company will be able to develop innovative changes in the corporation. This will also lead to the development of resources which can help to company to identify proper information system and implement them for the growth of the corporation. This will alsohelp the company to make changes in the HR policies and mitigate issues regarding employees as well as different stakeholders.
References:
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Andrevski, G., Richard, O.C., Shaw, J.D. and Ferrier, W.J., 2014. Racial diversity and firm performance: The mediating role of competitive intensity. Journal of Management, 40(3), pp.820-844.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2018. Theory in strategic management. Strategic Management Journal, 39(6), pp.1529-1529.
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