Discuss about the Organizational Context Woolworths Limited.
Woolworths has a competent leadership team who are clear about their future strategy. The company has focused on achieving higher profitability by deploying technologies and ensuring a seamless experience for their consumers. The company intends to use data analytics and study their customer’s preferences in order to have a dedicated user base.The management believes in making quality products over quantity sales in order to maintain their brand image. It also deploys the strategy of launching products at the right time in order to garner maximum attention (UK. Essays 2013). This strategy is different from the “always available” approach that many retailers deploy in order to maximize sales. The company intends to be a Leading fashion retailer in the southern hemisphere and looks forward to develop products most relevant to customers in these regions. This strategy also complements its vision to become a leader in multiple segments like fashion retail and food business (Woolworths Holdings Limited 2018).
Woolworths has a greater preference among high-income earners who prefer their farm products and have trust in the company to provide organic products. The company is a leading chain in South Africa, where it has a 10% market share (Moorad 2012) . Moreover, the fact that it attracts higher income group towards itself ensure that it is highly profitable and sustained customers. Consumers who prefer using digital modes of shopping are more likely to buy from Woolworths as it an early adopter of connected retail.
Woolworths procures its farm products from exclusive producers, who sell their produce to its local unit. Being a consistent buyer, it has a lot of influence among its suppliers and thus it maintains strict standards and methods of production (Wade and Bradley 2002). This ability ensures that the consumers get only high quality products from its stores. Woolworths acts as an intermediary between its suppliers and consumers, and it derives value from the way in which it supervises the distribution of products through its network of stores. It procures farm produce directly from the producers and distributes them through a regional center. This supply chain ensures cost savings as well as quality monitoring. Woolworths owns all the vehicles and distribution centers, which help it in moving the goods quickly and maintain less stock.
It is important for Woolworths to keep track of changes in its external environment in order to stay relevant. The five forces analysis of the company analyses the external factors affecting the company.
Threat of new entrants: Woolworths is less vulnerable to the impact of new entrants due to its large and dominant position. Any new entrant would have to make considerable investment and build a network in order to compete with Woolworths. Being a highly competitive market makes it tough to do so. In addition, the new entrant runs the risk of losing capital if it does not gain traction quickly.
The bargaining power of customers: To maintain steady sales and customers, Woolworths has to price its products competitively as customers have other choices in the market and easy availability. Thus, they have a good bargaining power.
The bargaining power of suppliers: Woolworths is a bulk buyer and a consistent customer. This factor helps it in dominating its suppliers. The suppliers have a weak bargaining position because they cannot afford to lose a big customer like Woolworths (Smith 2006).
The threat of substitutes: Substitute products and alternatives to supermarkets are a major threat to Woolworths. The availability of cheaper quality products in the markets can wean away customers from the company. In order to safeguard itself against such threats, the company has to monitor the pricing and quality constantly. Strong marketing strategy and maintaining good brand image is necessary to ward off threats from substitute products (Uddin, Hassan and Arafat 2012).
The rivalry among existing firms: Woolworths has to face stiff rivalry with its chief competitor Coles, which has been aggressive in marketing and pricing strategies. In addition, the presence of other strong player, Myer, poses threat to the company in terms of gaining market share.
The political factors of a country affect every business in one way or the other. Woolworths being a formidable player, it has to remain in the limelight of the public. If there is any change in the preferences of the government, especially related to farming policies or procurement, the company has to adapt itself quickly (Umberger, Stringer and Scott 2008).
Economic situations like recessions and the resulting layoffs can have adverse effect on the sales of the company. During the recession period, the company had to close its UK business, which led to loss of capital and unemployment. However, better economic outlook in its main markets presently and less uncertainty related to the economy has ensured that Woolworths is not in any imminent threat for its business.
The Social profile of the local market is an important factor in order to attract the right kind of customers. Woolworths has positioned itself as a seller of select quality food products. Thus if the local customers are brand or quality conscious, they are more likely to visit the store.
Technological factors are crucial for the company in order to achieve its vision of becoming a store with a difference. The adoption of new technologies for billing and inventory has helped it in maintaining efficient operations. However, the attempt to use self-checkout was not so successful and the company had to face backlash among its customers. Thus, technical factors are to be employed with caution and run the risk of failure.
The company has to be vigilant about any legal issues, which can hamper its image. The strict employment laws for large organizations and standards for maintaining food licenses are an important legal factor, which is to be taken care of (Adamkasi 2016).
Woolworths has to ensure that it has a minimal impact on the environment. It has to monitor the amount of waste material and the possibility of recycling in order to reduce impact on the environment. Use of systems such as water conservation methods and power saving equipment’s can help in reducing its carbon footprint. The company claims to have reduced its water consumption significantly at its South African units and looks forward to achieving conservation methods.
Value creating attributes: In order to maintain its leading position in the market, Woolworths has to provide fresh produce to its customers every time. This requires an efficient logistics management by the company, co-ordination among its various divisions in order to ensure smooth operations, and a strong sales and marketing strategy. These three factors help in creating the value of the product that Woolworths aims to sell.
Logistics: Woolworth’s primary concern is to keep its goods as fresh as possible and ensure that they reach the market in the shortest time. It maintains a sizeable fleet of trucks and warehouse all over the country in order to remove any supply and storage issues. This also ensures that Woolworths is in a position to take advantage of any demand supply gap by moving goods from less demand areas to areas of shortage (Wayhuni 2010).
Operations: Woolworths have an experienced team, which handles its daily operations in a planned manner. The team ensures stringent quality checks before they are procured and co-ordinate their pickup and storage at its facilities. They are also responsible for the timely availability of products at its stores by maintaining inventory records and identifying products that need to be delivered on time, which ensures that they maintain high margin of profits.
Marketing: Woolworths is quick to adapt to changing market scenarios and ran a successful loyalty program in order to gain customers and achieve. The rewards program for its customers ensures they get some form of cash back and redeem them at a later purchase. This strategy ensures that the customers are hooked to the store and make repeat purchases.
Strengths: Woolworths is a consistent performer with highest growth rates among peers. It has managed to run its business in an efficient manner and has achieved cost savings, which has helped it in maintain competitive prices. The innovative marketing strategies and quality consistence has helped it achieve a strong brand value and loyal customers. This brand value has also led to good relation among its suppliers, who are confident of selling their produce to such a reputable company.
Weaknesses: Woolworths had made several acquisitions in the past in order to remain competitive and expand business opportunities. As a result, it has raised significant debt from the market, which makes it vulnerable to risk. The impact will be more severe if the sales growth is not achieved consistently. Another factor for Woolworthsis it is focused mainly in Australia and New Zealand. The company has to look beyond its core areas and increase footprint in order to compete with the likes of Walmart.
Opportunities: Woolworths has a very attractive opportunity to expand its online presence. Being present in this segment provides it the first mover advantage. Another segment where the company can establish itself is health food and nutrition products. Being a strong brand will enable to market its products with ease and the products will bring in high margin of profit.
Threats: Woolworths is facing stiff competition from its rivals to gain market share. There is a risk of slow growth in sales due to the threats from other retailers. The profitability of the company can also be affected if the government takes any action regarding the sale of alcohol. Any such move can affect sales of the company and affect profitability (Vodanovich, et al. 2010).
Woolworths has scope for improvement in various areas and needs to evolve in order to stay competitive. Woolworths can invest in introducing healthy ready to eat meals, as they are convenient for people who do not have time to prepare their own meals .These products will also synchronize with the company’s image of an urban supermarket. They also have to invest considerably in promotional activities like in-store promotions and sales events etc. Buyers tend to make impulse purchase on such discount offers and events. The company also has to look for new verticals that it can enter, like dairy products or home improvement products. These products can be easily integrated to its existing offerings and will require fewer changes to its logistics model. Another key for the company is to focus on the shopping experience by providing in-store convenience and training their staff to be more helpful and informative. They can also provide small entertainment zones for the kids who come along with their parents and facilities for the elderly or handicapped. Although these recommendations can help in achieving growth, there is also risk involved with changing the company’s strategies. The health conscious consumers can view ready to eat products with doubt as there may be concerns regarding their nutritious value. In addition, any changes in the store format and entertainment should be decided with care as it can cause the store to lose its appeal among customers who like its look and feel. The discounts and promotional offers also need to be deployed with caution as it can go against the stated goal of the company to prioritize quality and profitability over volume growth.
References
Adamkasi. Freepestel analysis.com. January 31,2016. https://freepestelanalysis.com/pestle-pestel-analysis-of-woolworths/ (accessed May 25, 2018).
Moorad, Zeenat. Woolworths eyes full- line supermarkets. February 17, 2012. (accessed May 23, 2018).
Smith, Rhonda L. “The Australian grocery industry, a competitive perspective.” The Australian Journal of Agricultural and Resource Economics,, 2006: 39-43.
Uddin, Md. Mesbah, Kamrul Hassan, and Bahauddin Arafat. Scribd.com. July 3, 2012. https://www.scribd.com/doc/99563233/Woolworths-Ltd-A-Case-Study-Report (accessed May 25, 2018).
Essays.UK Essays.com. November 2013. (accessed May 23, 2018).
Umberger, Wendy J., Randy Stringer, and Emily M. Scott.”Australian Consumers’ Concerns and Preferences for Food Policy.”American Agricultural Economics Association Annual Meeting, 2008: 20-22.
Vodanovich, Ivan Matej, Evan Brownlee Blythe, KhaiHoong Leong, and Jia Yun Liang. Slideshare.net. January 13, 2010. https://www.slideshare.net/KyleL1/strategic-management-group-assignment-1 (accessed May 25, 2018).
Wade, Matt, and Michael Bradley.mh.com. June 9, 2002. (accessed May 23, 2018).
Wayhuni, Dina. “The Importance of Supply Chain Management in Competitive Business: A Case Study on Woolworths.” The Importance of Supply Chain Management in Competitive Business, 2010: 12-16.
Woolworths Holdings Limited. Our Strategy.2018. (Accessed May 23, 2018).
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