In the current business scenario, it is essential for all business firms to formulate an effective business strategic model that will help them to sustain in the uncertain environment in a constructive manner. This paper on strategic analysis keeps Woolworths supermarket at its focal point and assesses its current business strategy after taking into account its internal and external environment. It also identifies some growth opportunities for the firm that will help it to have a stronger position in the market (Barney & Hesterly, 2015).
Woolworths supermarket is an Australian based supermarket chain that was established in 1924. It has strong market presence in the continent and Woolworths along with Coles account for approximately 80% of the Australian market. It mostly deals with grocery items like fruits, vegetables, packaged food items, meat, etc. Currently it is widespread in the nation since it has over 1000 stores, 968 supermarkets ad 19 convenience stores. Its success has encouraged us to analyse its strategic model that has helped the business to profitably sustain in the unpredictable and competitive market (Bettis, et al., 2015).
The strategy adopted by Woolworths is primarily focused on its customer, it follows certain steps to set its business objects which align with the strategic framework.
The diagrammatical representation below gives a clear idea about its strategic and objective model. As per Dess, Lumpkin & Eisner, The business retailer has a solid and efficient business foundation which focuses on its target audience. Then it believes in offering something at a reasonable price to its customer (Dess, Lumpkin & Eisner, 2014). It presents its goods or services based on the needs of its audience. It makes sure that the quality of offering is of high standard so that the customers get its real worth. The retailer also takes steps to create a future which revolves around its customers by introducing programmes which allow it to change its operations based on the changing needs and trends of customers. Hence it strongly follows its business objective that has a Customer 1st culture (Eden & Ackermann, 2013).
It is important to identify Woolworths supermarket’s current business model which encompasses its strategy that assists it to have a solid presence in the market. From the performance and delivery of operations of the Australian supermarket chain it has been observed that it puts the customers first, across all of its brands (Bettis, et al., 2014). In order to understand the needs of its target audience, Brycesaid that it has set out its top 5 priority areas which includes building a team that is based on customer and store-led culture, adopting a positive sustainable sales momentum of food products, evolving its drinks business operations which can provide added value to customers, empowering its portfolio businesses and have better strategies that enhance shareholder’s value and becoming a lean retain chain that has full control over its business processes (Bryce, 2017).
Hence Woolworths’ foundation is laid down in such a manner that the starting point is its stakeholders including customers, suppliers and internal customers. The brand has also initiated a number of programmes across its business so that it can collect valuable feedback from them and make changes in its business operations accordingly (David & David, 2015). This strategically approach allows it to enhance its offer which further improves customer experience. Its purpose to serve its customers in a genuine manner is understood from the statement adopted by it “we bring a little good to everyone every day” (Davidsson, Wennberg & McKelvie, 2016).
The thorough analysis of business environment is essential since it determines the performance and productivity of a business. Woolworths has been sustainable existing in the business environment for 92 years. While analysing business strategic model, it is vital to evaluate its environment which has a vital impact on its strategy planning process (Ethiraj, Gambardella & Helfat, 2016). This section includes Porter’s five force analysis which helps to understand the competitive intensity that prevails in the market. A number of elements including suppliers, buyers, competitors, substitutes and new entrants have been evaluated (Frynas & Mellahi, 2015).
As per Rothaermel, while assessing the business strategy of Woolworths it is essential to evaluate its internal fit which includes resources, capabilities, etc. This study helps to identify the scope of its strategic decisions (Rothaermel, 2015). The analysis of Woolworths’ internal environment is a must since it will help to gain a better idea about the strengths and weaknesses of the business organisation so that accordingly its available resources and capabilities can be used in a manner so that it will generate optimum results (Stead & Stead, 2013).
Strength – A vital resource of Woolworths is its 1,15,000 team members that work in its stores, support offices, distribution centres, etc so that they can offer the best quality experience to its customers (Teece & Shuen, 2016). The retailer prides in working closely with Australian farmers in order to ensure that its customers get 100% fresh products like fruits, vegetables and other dairy products. This resource base makes it Australia’s largest supermarket chain that offers fresh food to people.
Woolworths’ capability lies in its innovative strategic model. It is considered to be one of the most innovative retailers that operate in Australia. It understands the basic need of its customers which is to shop in a new and simple manner. Thus it has introduced Woolworths Supermarket App which allows its customers to shop from the comfort of their computer as per their convenience. The supermarket delivers the products directly to kitchen bench of its customers.
Weakness – A significant weakness of Woolworths is its lack of global presence especially outside Australia. This limitation restricts its profitability in the market.
Opportunity – Since Woolworths has a solid brand name, it can use to expand its business and introduce new products in different sectors which will help it to have a wider presence. It must also focus on further enhancement of its B2B marketing model.
Threat – Major threat faced by Woolworths relates to competition from big Australian supermarket chains. This threat has severe influence on its profit generating capacity in its supermarket business.
Bargaining power of Suppliers – Currently Woolworths has a very positive relationship with its suppliers as compared to its rival Coles. Both Woolworths retailer and its suppliers have similar power while conducting its business operations. One of its suppliers had stated that it was easy for them to negotiate with the retailer since it had a positive sales momentum it was really committed to “promote its brands” (Hill, Jones & Schilling, 2014). Another important grocery supplier had stated that Woolworths was winning over them since it was “supporting brands”. This indicates least threat from the supplier side (Hubbard, Rice & Galvin, 2014).
Bargaining power of Buyers – Since Woolworths is a reputed retailer, most of its buyers are individual customers; this makes their bargaining power significantly strong as compared to the retailer. This might sometimes force the retailer to decrease its price of commodities so that its purchases do not decline. In order to meet the wants and needs of its customers, Woolworths believes in maintaining a reasonable price for its offerings.
Threat of New entrants – The threat from new entrant is minor for Woolworths since it is not easy for a new participant to set up the retail business with requires huge amount of funds for establishing a number of stores that are excellence enough in quality to compare with the organization (Morden, 2016). The requirement of huge start-up capital for fixing business facilities and operating business makes it difficult for new entrants to enter the market.
Threat of Substitutes – In the retail industry, Woolworths faces stiff competition since the retail daily consumable commodities like meat, sea food, bakery items, health food, etc are offered in different Australian supermarkets that are introduced with innovative aspects. The strategy that is adopted by Woolworths retailer to tackle this competitive scenario is the use of competitive pricing strategic model.
Threat of Industry rivals – Currently Woolworths and Coles rule the Australian supermarkets by forming an almost duopoly. Together these two retailers account for 80% of the Australian market so the major threat that it faces if from Coles.
Impact of Environment
The thorough analysis of the external and internal environment helps Woolworths to match its resources and capabilities with the current requirements so that it can have a sustainable performance in the ever changing business environment. (Stead & Stead, 2013)The external environment analysis helps it to understand the competitive intensity that is prevalent and its internal assessment helps it to identify its resource base and various capabilities that can be used by it to have a competitive advantage in the market against the industry rivals.
The impact of business environmental of Woolworths is largely felt across its entire value chain including its suppliers, service providers, operations, etc which drives it to enhance its innovative strategy for a healthy business. Various factors including social, economical, political affect its business decision-making process and overall business strategy.
Thus the environment, in which Woolworths operates its business, has a direct bearing on its performance and profitability in the supermarket industry.
Since Woolworths has been operating in the grocery industry for so long, it must try to explore new growth opportunities that will help the retailer to have a wider presence in the market. Woolworths can adopt new business strategies after assessment of market environment in other industries or same industry and think of expanding new products and services which match with the needs and requirements of the target audience.
Another important growth opportunity that Woolworths can use is to expand its presence in the global market platform. Currently it is one of the most reputed supermarket chains in the Australian continent but it does not have a similar brand presence in the international market. Hence it can formulate growth strategies in order to expand its business and generate more profits.
Once Woolworths retailer identifies the model that it wants to use in order to expand into, it needs to conduct a thorough study and evaluation of the industry so that it will be able to understand its current stand and the strategies that it needs to develop in order to face the uncertain environment and the various factors that have an impact on the productivity of the industry participants (Eden & Ackermann, 2013).
The main focus of this section is on different business strategies which can help Woolworths’ business to further expand in market. The first relates to brand extension by Woolworths which will enable the business to use its brand goodwill to introduce new products that are in high demand in the market. The other strategy is to adopt a measure to expand its business presence in a global scale. To grow in the competitive environment, Woolworths needs to assess various elements like opportunities, threats, strengths and weakness which will give it an idea to create business strategies accordingly (Teece & Shuen, 2016).
Conclusion
The paper on business strategy uses the successful retailer Woolworths as the subject so that its current strategic model can be studied and understood. A number of internal and external environmental aspects have been considered which influence the strategic planning of the supermarket retailer. Recommendations that could help the business to sustain in a better manner have been included.
Further new growth strategic model has been identified and evaluated for Woolworths which would help it to expand its presence in the market and earn better profits. Some suggestions have been included do that the business would prosper in its new venture.
Recommendations for higher growth performance
In order to have a higher level of growth performance of Woolworths a number of suggestions have been made in this section of the paper.
Woolworths must focus on forming strategic alliance with the core businesses that are profitable in nature. This strategy would enhance its presence in the global market and it would be able to target a bigger set of audience in the market. In current business scenario, business partnerships can give a competitive advantage to firms and help them to gain a better share in the overall market.
In order to introduce some new products into the market that meet the needs of the customers, Woolworths must make its innovation model a prominent strategy which would help it to differentiate its product in the market and thus it would help the retailer to have a competitive advantage against industry rivals.
Recommendations to improve current performance
This section is important since it includes a number of suggestions and recommendations that can help the Woolworths chain to enhance its current business performance and generate higher profits. Some important recommendations have been highlighted below.
Since Woolworths already has a strong brand name and it has sustainably existed in the business environment for so long, it must try to adopt some brand extension strategies by introducing wider product categories. This would help it increase its performance and profits in the market since it already enjoys the advantage of having a loyal base of customers.
The Australian supermarket must also focus on its business customers since they form an integral part of the business scenario. Currently its business to business marketing strategy is in a formative stage. It must focus on having a better presence in this market segment since the business to business grocery market in Australia is in a fast growing phase. Woolworths needs to change its brand perception from business to customer to both business to customer (B2C) and business to business (B2B) marketing scenario.
References
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Bettis, R., Gambardella, A., Helfat, C. and Mitchell, W., 2014. Quantitative empirical analysis in strategic management. Strategic Management Journal, 35(7), pp.949-953.
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