Strategic Environmental Analysis Of Woolworths Company

General environment analysis

The report helps in the analysis of the different strategic environmental analysis of Woolworths Company which is situated in Australia. Furthermore, the macro and micro environmental analysis is required to be done which will help in understanding opportunities along with threats along with the rivalry from the different competitors in the entire market as well.

Woolworths is one of the largest Australian grocery stores which is situated in New South Wales, Australia (Woolworths.com.au, 2018). The company was founded in the year 1924 and the company has more than 995 locations in Australia. The company also specialises in various departments such as health and beauty care products along with selling DVDs to the customers as well. The revenue which has been earned by the firm is A$42.132 billion and the number of employees working in the company is more than 111000 till the year 2017.

The sector in which Woolworths belongs to is the retailing industry in which there are different other competitors such as Target, Big W and Kmart companies in the competitive market of Australia. There are different retail markets in the entire Australian industry in which this has been seen that Woolworths, Target, Coles and Kmart are the different competitors in the market in which all of them are performing effectively and Woolworths was the first retail store in the market of Australia.

Political environmental factor is the first aspect in which this has been seen that there is enormous political pressure against the duopolistic nature of the retail market in Australia. Furthermore, this has been seen that there are various trade regulations along with tariffs related to the retail services are rigid and this can affect the business of the firm in an ineffective manner (Albrecht, et al. 2015).

Economic environmental factor is the other aspect in which this has been analyzed that there are easing kind of regulations in paving way of retailing for the new entrants in the entire market. Furthermore, this has been noticed that there is lackluster spending of the customers in Australia is impacting the different retailers in the organization as well. Cost of the labor is the major aspect which is required to be analyzed as this has affected the revenues of Woolworths. Moreover, the company has been criticized for paying less wages to the employees or workers who are working in the organization.

Physical factor is considered to be analyzed in which this has been seen that there are more than 995 locations of Woolworths across entire Australia. Woolworths store has their branches in New Zealand and Australia and this helps them in becoming more effective in nature in becoming more effective in their approaches and gain more competitive advantage in the future (Andrevski et al. 2014).

Industry environment analysis

Socio-Cultural factor is the aspect in which this has been analyzed that Woolworths has poor relationship with their suppliers and this is affecting the overall growth of the firm in a negative manner. Due to the poor relationships, this brings ineffective changes in the culture of business and this leads to ineffectiveness in the tasks which are being performed by the company (Mittal and Dhar 2015).

Global factor is the other aspect in which the company needs to provide huge focus on the different kinds of environmental factors as taken care by the different competitors in the market. The Woolworths company is required to be provide attention of environmental factors such as no carbon emissions as this will help in improving overall growth of the company (Hill, Jones and Schilling 2014).

Technological factor is the aspect in which technological advancements will improve the overall efficiency of the organization in a positive manner. Furthermore, this has been seen that implementation of the SAP based merchandising system helps in improving the overall efficiency of the firm in contrast to the other opponents in the market (Scarborough 2016). 

Legal factor is the aspect wherein there are legal compliances which are being affecting the Woolworths company. Furthermore, this has been seen that there is legal battle with Australian Competition and Consumer Commission and this affects the overall growth of the firm as well (Ethiraj, Gambardella and Helfat 2018).

Demographic factors are the aspect which includes the different kinds of households between the age group of 22-45 years of the women customers in the market. The target customers are inclusive of middle and higher income group individuals and this helps the company in providing them with variety products at a reasonable rate as well (Hitt and Duane Ireland 2017).

From the general environmental analysis, this has been identified that there are different kinds of issues relating to legal and political factors which affects the overall image of the Woolworths company. Furthermore, this has been noticed that there are different kinds of demographic and global factors which are required to be improved which will help in improving the overall efficiency of the firm in an appropriate manner.

Threat of Substitutes is high for Woolworths as the company faces indirect competition from other companies which includes convenience stores along with other grocery stores. There has been huge increasing trend on the healthy alternatives in which different convenience stores are selling various organic products and this is potential future threat for the company.

Competitive environment analysis

Rivalry amongst the existing competitors is the second aspect in which there is high degree of rivalry which is existing and there is lack of differentiation as well. The competition primarily based on price and there are other competitors such as Coles wherein they offer value added costs to the customers in the market which is helpful in managing the ineffectiveness (Meyer, Neck and Meeks 2017).

Bargaining Power of the Suppliers is the third aspect in which the power is low and both Coles and Woolworths is controlling more than 85%of the market share in the entire market.  Moreover, this has been noticed that there are local Australian producers in the market which makes limited selection of the intermediaries, in such case Coles and Woolworths are the major purchaser and therefore, the other companies face huge issues in terms of gaining suppliers in the entire market.

Bargaining Power of the Buyers is the other element in which the power is low and the buying power of the different consumers will increase in future. There are different customers in the market in which this has been seen that the customers prefer to buy the similar kinds of products at lower prices and this can affect the bargaining power of Woolworths as well.

Threat of New Entrants is low for Woolworths in which this has been observed that the different competitors in the Australian market do not have the power to compete with Woolworths and this has influenced the overall development of the firm in a positive manner as well. Woolworths and Coles are the two major competitors in the market and the other firms do not have any importance in competing with Woolworths in the market as well (Molina-Azorín et al. 2015).

From the Porter’s Five Forces Analysis, this can be analyzed and ascertained that there are different forces which are needed to be taken into consideration as this will provide the company with different ideas as to become more competitive in nature in contrast to the other competitors in the market in an efficient manner (Saeidi et al. 2015). Lastly, this can be ascertained that the major competitor of Woolworths is Coles and the other competitors lack such supplier’s presence in the market and this does not affect the brand image of the company.

The competitive environment that has been developed by Woolworths is high in nature and this will require for Woolworths to take into consideration the different kinds of factors which will help them in becoming effective in the different operations (Ausfoodnews.com.au, 2018). The main competitive approach of Woolworths is customer centric approach which helps in providing products and services as per needs of the customers effectively (Hill 2017). The other strong and prominent competency of Woolworths is strong kinds of financial assets along with goodwill of the firm in the market.

Resources	Valuable	Rare	Imitable	Organisation	Advantage
Integration of Information Technology	Yes	No	Yes	Yes	Permanent
Supply chain management of Woolworths	Yes	No	No	Yes	Temporary
Analysis of Workforce of Woolworths	Yes	Yes	No	Yes	Temporary
Unique kind of format of the store	Yes	Yes	Yes	Yes	Permanent
Efficiency related to Cost	Yes	Yes	No	Yes	Permanent

Opportunities and Threats

Figure 1 – VRIO factor analysis

From the VRIO analysis, this can be analysed and identified that the website of the company Woolworths is the strategic capability of the firm and this helps the company in providing sheer convenience along with comfort to the different customers in the entire market (Robson 2015). The supply chain management system of Woolworths has been designed effectively which connects the company with the different suppliers as to gain more competitive advantage in the market in an efficient manner. Furthermore, the information technology aspect has been taken into consideration which helps in managing and improving the overall quality of the firm.

There are various opportunities and threats of Woolworths which are required to be taken into consideration which are being as follows:

Opportunities – This helps in promoting the brand with the help of promotions, advertisements along with sponsorships which will improve the efficiency of the firm. Furthermore, Woolworths can seek growth through different strategic kind of acquisitions along with adoption of franchise models in the emerging economies (Rothaermel 2015).

Threats- There is huge competition from the international players along with costs of the raw materials has been increased which can impact the profit margin of the company in a negative manner as well. lastly, the economic kind of recession can hinder the overall growth of the firm and this can lead to less opening of store sin the market as well.

From the different opportunities and threat analysis, this can be identified that there are various kinds of issues which are required to be analysed by Woolworths efficiently in order to improve their threats and turn them into their strengths and gain competitive advantage in the entire market which is competitive in nature as well. Lastly, the opportunities are required to be considered as this will help the company in becoming successful and gain more knowledge as to become more competitive in the entire business environment as well.

Human resources – The huge employee base of Woolworths has been able to provide support to the proper operations of company and the services which are provided effectively to the customers.

Financial resources – The financial resources are mainly built on the huge revenues that have been gained by the firm in the Australian retail sector is based on its products and services (Tantalo and Priem 2016).

Physical resources – The physical resources of the company are mainly based on the stores of Woolworths which have been effectively developed all over Australia and New Zealand. The stores are thereby able to provide effective products and services to the customers who are a part of the Australian retail industry.

The major capabilities which have been gained by Woolworths in the Australian retail industry are built on the methods by which fresh products are offered to the customers. The firm is thereby able to provide products to the customers with the help of proper coordination with the local farmers or the growers. The products which are developed by the company are fresh in nature and the levels of customer satisfaction can also be achieved in an effective way. The major capabilities of the company are thereby based on the ways by which customer first based strategy of Woolworths is implemented in an effective way (Berry 2014).

Core competencies of Woolworths –

• The major competency of Woolworths which is able to improve its position in the retail industry is based on the methods by which the firm is able to provide fresh products to the consumers.

Valuable – High

Rarity – Moderate

Imitability – Moderate

Organization – Yes

• The process by which the firm is able to improve itself into a lean retailer with the help of end-to-end based systems and processes (Shujahat et al. 2017).

Valuable – Moderate

Rarity – Moderate

Imitability – Moderate

Organization – Yes

• The generation of sustainable income the with the help of Food based products that are offered by Woolworths.

Valuable – Moderate

Rarity – Low

Imitability – High

Organization – Yes

• The development of the Drinks based business in such a manner which are help value which is provided to the consumers (Rugman and Verbeke 2017).

Valuable – Moderate

Rarity – Moderate

Imitability – High

Organization – Yes

The information system which can be proposed to Woolworths is based on the implementation of proper MIS or management information based system. The decision making based process which is used in the analysis is based on the proper analysis of information based on profits, sales and the choice of the customers. The management information system will thereby be developed in a such a manner which will help in the proper analysis and gathering of data. The levels of confidentiality of data will be maintained with the help of proper security based systems. The software which will be implemented in the company for management information system is Oracle.

The implementation of proper management information system will be helpful for the company to manage the data of customers in an effective manner. The systems need to be managed in such a manner which will help Woolworths in order to use the data of the customers which are available to the company. The management of the performance of the employees will also be made possible with the help of the implementation of MIS. The structure of the company is an important part of the proper implementation of the information system which can be managed in an effective manner. The store managers play a key part in the proper processes of information systems that can be implemented by Woolworths.

Conclusion

The report can thereby be concluded by stating that the external and internal environment based analysis of Woolworths plays a main role in the methods by which the company is able to develop its resources. The implementation of proper information system is an important part of the proper analysis of the environment of the organization. The resources of the company are able to play a key part in proper operations of the information system which can be implemented in the Australian retail organization. The implementation of information system will play a crucial part in the management of human resources of the firm.

References 

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