Discuss about the Real Options Theory in Strategic Management.
Woolworths limited is a major Australian company, which has the specialisation in the retailing sector. The business of this organisation is also popular in New Zealand. Eden & Ackermann (2013) mentioned that Woolworths is the second largest organisation by revenue in Australia. Woolworths opened it’s first outlet in the year of 1924 in Sydney. On the other hand, Woolworths has also grocery store chain in Australia owned by Woolworths limited. The Headquarter of this company is at Bella Vista, New South Wales, Australia. Woolworths form a duopoly market in the Australian supermarkets, along with the accounting of 80% of the Australian super market.
Woolworths has the specialisation is the selling groceries such as vegetables, fruits, meat, packaged foods etc. Woolworths presently operates 980 stores throughout the Australia. In this connection, it can be stated that some of the Woolworths supermarkets trade as Safeway store. The stores are located in Victoria, consisting three outlets in Melbourne’s suburbs as well as in the surrounding areas. On the other hand, four stores are also situated in rural region of Victoria and in the southern New South Wales. According to Rothaermel (2015), it can be mentioned that Woolworths has initiated loyalty scheme, which include a large number of incentives for purchasing stores by subsidising the petrol prices at the Caltex Woolworths petrol stations. On the contrary, the company has announced a loss of $1.235 billion in the year of 2016. Due to the loss of $2 billion in masters business and in Big W businesses, the performance of Woolworths has decreased in 2016.
In order to discuss the business strategy of an organisation, it is necessary to discuss the goal of the organisation. The goal of the business of Woolworths is to give priority to the consumers of the organisation at the first position. To achieve this business goal, Woolworths has aimed to the five business strategies. Woolworths build a consumer and store led culture and team. Secondly, it formulates sustainable sales momentum in grocery. Thirdly, this organisation evolves drinks to the business in order to provide more valuation and convenience to the purchasers. Fourthly, Woolworths empower the portfolio business to follow the organisation strategies in order to deliver the shareholder’s valuation. Lastly, Barney & Hesterly (2015) opined that Woolworths become a lean retailer in terms of end to end procedure.
More specifically, it can be mentioned that the business strategy of Woolworths is focused upon the three major principles such as offer, growth and efficiency. As per the principle of offer, Woolworths is improving the basic offer to assure that the purchasers put the company first. The growth strategy highlights the business innovations to achieve the necessities of the consumers. Lastly, the efficiency is helpful to create the further consumer valuation by arranging success. In addition, Morschett, Schramm-Klein & Zentes (2015) cited that efficiency strategy also follow to execute the “lean retail” model in their business.
In addition, it can be stated Woolworths has aimed to the building of retail tem, who are listening to the consumers, other team members and also the suppliers. Therefore, in this purpose, it can be mentioned that Woolworths always tried to give priority to the stakeholders of the organisation. In addition, the organisation also focused to collect daily feedback from the consumers, which can make the performance of the organisation better from the previous. As a result, the team of Woolworths always aimed to improve the shopping experience of the consumers.
The drink business of Woolworths such as Dan Murphy and BWS always aimed to implement innovation in their business in order to provide the optimum valuation as well as convenience to the consumers, in their outlets and in online.
From the above figure, it can be observed that the business strategy of Woolworths is depending upon five main components. They mainly work as a team. In this respect, Morden (2016) mentioned to maintain their teamwork, communication among the management and the workers require to be greater. In addition, they tried to reduce the price of the products in order to make the business successful. The consumers are willing to purchase the products from this company. In this context, Frynas & Mellahi (2015) opined that Woolworths always focused to the new pricing and the value strategy, which can neutralise the competition with Coles and Aldi. The business performance of Coles and Aldi also make an impact on the sales of Woolworths. Woolworths include lower pricing and better ranging. Therefore, it can be mentioned that the key concept of Woolworths regarding the pricing structure of the products can be described as “higher quality and better price”.
Moreover, it can be noted that to make a business successful, the organisation requires to keep update their products. Hence, Woolworths aimed to develop their cohesive brand in order to expand their business more in the national market as well as in the global markets. They also provide their consumers offers on the selling products. This can increase the sales of the organisation. Moreover, Woolworths also offer the consumers loyalty program. This organisation sometimes provides discounts to their customers, so that they feel interested to purchase the products from their stores.
As per the statement of Carroll, Primo & Richter (2016), it can be stated that the business of retailing sectors never stand still. This is the reason why Woolworths always change their business strategy as per the changing business environment. It is depending upon the demand of the consumers. Woolworths are responding this new era by following three manners:
Woolworths has aimed to implement mobile technology in the business. In this context, Stead & Stead (2013) opined that most of the consumers are willing to purchase the products through online rather visiting the store. As a result, the consumers can purchase products from each of the corner of the world. Customers want to move effortlessly between physical and the virtual stores in this term. In addition, Woolworths include websites, mobile apps, delivery options and the virtual stores. It can be identified that Woolworths serves approximately 18 million consumers in each of the week and they value each of the consumers. The organisation rewards their loyalty to earn the consumers. In addition, Woolworths aims to provide unique money off proposition. According to Hubbard, Rice & Galvin (2014), Woolworths’ reward program is the most attractive super market loyalty program of Australia. It provides the members of the organisation the capacity of earning Woolworths dollars as well as get money off their shopping.
On the other hand, it can be added that Woolworths tried to communicate with the consumers and they listen the consumers in order to give them priority. In this purpose, they tried to take feedback from the consumers in order to improve their performance and the consumer experiences. Furthermore, Certo et al., (2016) cited that consumer talkback is a new initiative. With the help of this strategy, the consumers are able to provide the feedback directly to the management of Woolworths. Therefore, a better understanding between the management and the stakeholders has developed.
Woolworths has developed a relationship of trust with the stakeholders in order to make a long-term relationship. In addition, Trigeorgis & Reuer (2017) mentioned that this retail organisation focused on the three basic business strategies such as collaboration, fairness and the sources.
Value chain activities of Woolworths:
Woolworths’ mission statement is “strives to provide the customers the freshest products”. Therefore, all the value creating functions of this company involved in the delivery of firm’s promises:
Woolworths controls the distribution network of the manufacturing goods. Within these activities there are two effective functions such as: Procurement and logistic.
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Procurement |
· Nationalise the purchasing behaviour in order to meet the higher cost savings. · The stringent certification method ensures greater quality of products. |
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Logistic |
· Ownership and the operational control involved in the distribution chain. · Using of modern technology, which assures the optimal distribution efficiency as well as the cost cutting (Davidsson, Wennberg & McKelvie, 2016). |
The two primary activities of operations are quality assessment and the inventory management. Quality assessment deals with the standardise production, which can detect and then remove the detective products from the manufacturing products. Vogel & Güttel (2013) opined that inventory management can predict whether the demand for the retail products will be increased or decreased.
In order to increase sales, Woolworths mainly aimed to follow two activities such as in store promotion and the organisational dynamism. As per the concept off in store promotion, the organisation can achieve the short-term sales, whereas organisational dynamism focused to the continuous investment approach in the consumer research. The organisation can also efficiently compete with the others in the market.
In order to identify and evaluate the organisation’s current business strategy of Woolworths, it is necessary to discuss the external and thee internal factors, which influence the performance of the organisation. Therefore, organisational performance can be measured in the following manner:
Woolworths is a renowned organisation in the Australian retailing sector. According to Mitchell & Leiponen (2014), the political environment of the country is associated with the performance of the company and the retail organisation will be affected by the political climate of the country. Moreover, political condition will give a shape to the environment of the business. As a result, the growth opportunities of thee organisation will be increased. The foreign investors as well as the trading partners can carry out the business related operations, which in turn affect the organisational performance. Somsuk & Laosirihongthong (2014) added that political disturbances demotivate the business and the investors from entering into the market. The risks, which arise due to the lower rate of return, make a negative impact on the organisational performance of Woolworths. However, the rate of risk is lower in the business of Woolworths.
The economic factors, which influence the financial performance of Woolworths, are recession and the higher unemployment rate of the country. This will in turn lowering down the sales and the financial health of the organisation. On the other hand, due to global financial crisis, the organisation has been suffering from some serious issues in financial aspect. Carraher (2014) mentioned that Woolworths suffer from a major loss when the company has it’s operation in UK. The rate of unemployment was then increased and near about 30000 employees was jobless during that time.
The consumers are the major source of revenue earning for the business entity. Therefore, the target market and the development plan of Woolworths have aimed to the necessity of the consumers’ experience as it can increase the sales and the profitability. In addition, Woolworths focused to introduce new means of completing the consumers’ requirements. This would in turn emphasize the notion of consumer delight. In addition, Rao et al., (2015) mentioned that the position of the outlets of Woolworths is required to be convenient, so that the consumers would like to visit the stores. The organisation has offered lowest prices of the products; which can be afforded by the visitors. Lastly, in this connection, it is necessary to mention that Woolworths has launched loyalty program for the consumers in order to maintain a long-term relationship with them.
The use of RFID technology is helpful to manage the operation of inventory of Woolworths. With the help of this technology, the store visitors will be able to identify the stock availability of Woolworths. In order to support the operation of technology, Woolworths has implemented Service Oriented Architecture (SOA) in their operation. According to Greco, Cricelli & Grimaldi (2013), the retailing sector requires to recognise and then incorporate the technologies in order to hold a stronger position in the industry. On the other hand, Woolworths has aimed to start self-service check out. However, Engert, Rauter & Baumgartner (2016) argued that consumers do not accept the self-service check out strategy and it has created a negative impact on the consumers.
Hill, Jones & Schilling (2014) mentioned that taxation policies and the employee management regulation are the basic two legal frameworks of Woolworths. In addition, food-licensing requirements are the major aspect, which can make an impact on performance of retailing sector. On the other hand, it can be mentioned that if Woolworths will plan to open a new store in the different region, then it requires to take the permission of government. Therefore, legal permission is required for opening of new stores.
The environmental aspect of Woolworths is reflected due to the use of eco-friendly business practices. The main purpose is to reduce the harmful effect on the environment. Therefore, Woolworths has invested it’s natural sources in order to mitigate the carbon footprint of the business. In addition, it is possible to reduce the wastage of the natural resources such as water of the organisation. This will in turn recycle the activities, which can reduce the quantity of wastages. Moreover, the sustainability practices of the company will focus to the sourcing of food practices.
After analysing the above organisational strategies, it can be recommended that if Woolworths implement fair price policy and employee engagement these two alternative strategies in their business, then the performance of this organisation will be improved more in the future. Higher employee engagement will improve the overall performance of the organisation. It can be recommended that Woolworths require to focus to frame it’s own strategy consistently, which can predominate the political issues across the country. The organisation requires to adapt the strategy of fair price policy to the consumers.
In this section, this study will evaluate whether the organisational strategies of Woolworths make it’s business successful or not, whether the strategies will be able to improve the performance of the organisation. As per the statement of Eden & Ackermann (2013), it is found that Woolworths is at first position in the Australian retail industry. The leadership position of this company has increased the capacity of the organisation in case of exploit the overall market potential. The technological resources are supposed to be helpful to increase their organisational performance. These technological resources influence to reduce the carbon footprints and able to find out the cost efficient technique. Cost efficient technique is also benefitted to reduce the packaging and can achieve the wastage of zero food value by the year of 2015.
Moreover, Barney & Hesterly (2015) opined that this retail company highlights the good growth in their business. On the other hand, it can be added that Woolworths is good at their supply chain management. Customer lifestyle has also changed and this will in turn make an influence on the growth of Woolworths. As per the statement of Morschett, Schramm-Klein & Zentes (2015), in the country’s economy, Woolworths has a greater impact. With the passage of time, the financial performance of the organisation has been increasing. Therefore, the revenue earning and the sales volume of Woolworths have also risen. This proves that Woolworths is able to contribute a larger portion of national income to the economy. Therefore, the existing strategies, which are followed by Woolworths, can significantly increase the rate of GDP of the country. In addition, rise in thee sales volume has increased the rate of employment to the company. In this context, it can be mentioned that in order to increase the productivity, Woolworths also tried to recruit labours that are more efficient. Therefore, it can be inferred that the rate of unemployment off the company will be decreased. Morden (2016) cited that the economic well-being of the country will be improved.
However, Frynas & Mellahi (2015) criticised that Woolworths tried to treat it’s consumers as the monopolists. Woolworths aimed to set affordable and comparatively prices of the products. Hence, the consumers are willing to purchase the products from this company. Therefore, it makes a bad impact on the other retailers of the country. As a result, Australian government has restricted the movement of this organisation such as government prevent the capability to set the prices of the products. On the other hand, Woolworths belongs to the monopolistic competitive market and make a tough competition with Coles. Therefore, it can be predicted that the overall sales structure of Woolworths has affected. Furthermore, it can be added that government intervention has an adverse impact in the growth of Australian retailing sector.
Woolworths has been carrying out a business assessment, which describes the important business strategies. These strategies are helpful to improve the performance of the organisation. The performance of the organisation demonstrates that Woolworths has aimed to achieve the higher growth level in their organisational activities. The growth is mainly associated by the strong commitment towards the subordinates and the employees. However, the external environmental conditions make an effect on the Australian retail sector. This will in turn indicates that the determinants such as political factors and the government intervention can change the social patterns and trends of the business. The consumers will also be affected indirectly. On the other hand, it can be mentioned that the indirect economic conditions reflect the competitive business environment situations. As a result, the growth strategy of Woolworths will be affected in an adverse way. By identifying the shortcomings of the organisations, the following recommendations can be developed:
Conclusion
This study has highlighted the organisational operation of Australia’s largest retailer store, Woolworths. The above analysis demonstrated that Woolworths mainly aim to meet the consumer’s requirement. The major principles of this company are offer, growth and the efficiency. In order to improve their revenue earning, Woolworths used to offer their products to the consumers at a comparatively cheaper price. Woolworths has a tough competition with Coles in the retailing industry of Australia. On the other hand, this study also described that sometimes government intervention make a negative impact on the business. Government can impose tax on the products in order to give opportunity to the importers, which will in turn boost up the country’s trading situation and the country’s economy. Therefore, strategy of fair price policy requires to implement to the organisation in order to minimise this unfavourable situation.
References
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