Discuss about the Strategic Issues Faced By a Particular Business Or Organisation.
The company was formed in 1924 and had it’s first store at Sydney’s Pitt Street. Woolworths is one of the largest supermarkets of Australia. The company provides clothing, general merchandise and wide range of food products. It has 995 stores worldwide. Woolworths includes various sections like supermarkets, food and petrol and hotels. It is a recognised company and listed on the JSE Limited Securities Exchange. The company is owned by the Woolworths Limited. It sells household products, groceries, stationery items, DVDs, health and beauty products etc. The company offers high quality merchandise at reasonable prices. The company meets expectations of customers with increased consistency. Woolworths ensures that it delivers quality, reliability, value for money and sustainability to win trust of customers.
The food industry is complex. The company includes functions of production, processing, packaging and marketing of food products. Woolworths uses refined technology to oblige customers. It has tied up with a new merchandising system to remove manual product information process and enables electronic data receipt. The company continuously improves way of conducting operations. This report defines the strategic analysis of Woolworths. The strategic analysis examines how successfully an organisation operates and uses resources to achieve goals of company. It is also the process of developing strategy by researching and environment in which an organisation operates. The analysis includes strategic issues faced by the company. The company faces strategic issues in supply chain, conduct of employees and changing regulations of government. Further the strategic recommendations are discussed along with strategic tools.
The strategic issues greatly influence operations and activities of the business. It affects the sales and customers of the company. The strategic issues are certain trends that appear from the internal and external situations of the company. The strategic issues are responsible for the low performance and create a barrier to the development of Woolworths. Recently strategic issues are faced by Woolworths in Australia (Azeem, et. al. 2018). The company is also known as Woolies in Australia. The marketing strategies are used by the company to attract customers and improve quality of services.
Because of the uncertainty in demand Woolworth carries smaller inventories. So at the same time, uncertainty in supply is carried out by the company. There are some factors which make supply chain of Woolworths more challenging than ever such as changing prices of commodities, increase in weather-related interferences and increased competition for raw materials (Brandenburg, Govindan, Sarkis & Seuring, 2014). Due to supply chain issues costs is increased and risk is maximised. Woolworth has conducts operations worldwide. The company have Small Business Units (SBU). Woolworths renovated supply chain operations. The company faced threat from 2000 warehouses workers in Victoria as they voted to strike and close warehouses (Supply Management, 2017). Globalisation is one of the reason company faces supply chain issues. The company has moved it’s operations to other countries which offers low taxes, labour costs and low cost of transport for the raw materials. The outsourcing extends operations of company globally. But at the same time having suppliers in different geographical location complicates the supply chain. Woolworths has to deal with various stores across borders regarding storage, manufacturing and logistics. It also requires a significant change in supply chain to adopt preference of customers globally (Pagell & Shevchenko, 2014). There is risk of proper management over inventory. The supply chain is also affected by the fast- changing markets. The market changes frequently due to cultural, social and psychological factors. The main reason behind change is technology and globalisation which results in changed consumer behaviour. The life cycle of products changes rapidly due to the changing trends of market demands. The company is pressurised to keep itself update with the latest trends. The company is supposed to introduce innovative products to keep it’s manufacturing cost low (Methner, Hamann & Nilsson, 2015). The challenges faced by company are not to introduce new products but to update product features constantly. Due to the influenced consumer behaviour the company is required to maintain quality of products. The online business of company is affected due to the negative reviews, comments and feedback on the social media. The social media has raised expectation of customers regarding the quality of products and services. The pressure is increasing on the company to create high quality products consistently. The company is needed to be ensuring that it meets local and international regulatory standards in developing, packaging and shipping of products. The compliance documents are also required to be maintained such as license and certification which can devastate the supply chain system of company (Stadtler, 2015).
Woolworth faces issues related to employees which are becoming a serious issue nowadays. The company faced trouble as 200 workers went to strike over pay and job security. The giant warehouses in Victoria and NSW create a serious problem for the company in supplying to supermarkets and liquor stores. The workers are pushed for job security, full- time work and greater termination payouts. The strikes caused disruption in Victoria to it’s local supply chain. The company also faced an allegation that the trolley collectors are underpaid. The company reverted to this matter that it pays fairly to workers and undertakes a regular audit of trolley collection contractors to comply with the employment law and regulation.
The changing policy and regulations of government are always concern for the Woolworths. The environmental and financial policies complicate the decision making of company (Chopra & Chopra, 2012). As the company is expanded globally so it is required to follow rules and regulations of the particular country. The new policy of becoming green is becoming threat for the company as it has increased costs due to corporate taxes (Fahimnia, Sarkis & Davarzani, 2015). The other strategic issues faced by Woolworths are:
Woolworths pursuit shoppers through it’s famous strategy ‘cheap-cheap’. Despite the offer economic pressure have made shoppers progressively price conscious. The company has lost sight of power which resides in it’s brand. It has lost confidence due to uncertain and ambiguous strategy. Due to such policies customers are even not clear that what they should shop at Woolworths (Schuetz & Schrefl, 2017). The grocery companies need to be interesting or cheap. The company trying to compete on price and it feels like no-win strategy.
From the sales figures of Woolworths, it has been concluded that cheap-cheap strategy has been nothing other than a miserable failure. The decision of removing Tony Phillips deeply distressed former Coles market (Keith, 2012). The company also admitted that it’s promotional programs were not successful as it was expected. The cheap-cheap campaign was received well by customers but no improvement was seen in price perception. The company anticipated during the quarter. If the comparison of Woolworths is done with other competing companies than it is still the most expensive and savings can be made by shopping at ALDI.
The success of Down-Down had been highly successful. But the admiration did not last long. This promotional activity seemed complicated and confusing as well. The marketing can only hit the mark but there is no clarity and matter to support it (Smith, Heley & Stafford, 2011). The company have become uncompetitive in the terms of branding and caught without even a sense of purpose.
The strategic analysis indicates that Woolworths has achieved a significant level of dominant position in the retail industry. The strategic recommendations are used by Woolworths. The company includes leadership in all segments to track record of business and maximize shareholder value. The following recommendations are considered essential:
(Source: Woolworth’s Group, 2018)
The strategic tools such as SWOT analysis and PESTEL analysis are used to improve strategic issues faced by the company. The SWOT analysis of the company is:
Market share: The company has the advantage of largest market share in retail and fresh food grocery stores. Woolworths is a powerful brand and policy of maintaining low prices and quality of service. The company provides a wide range of products and fresh foods.
(Source: Roy Morgan, 2016)
Location: Woolworths has more than 700 supermarkets and serves over 13 million customers in Australia. The company is in every major shopping center in Australia. The supermarkets provide convenience and accessibility to customers. The core competencies of company help company to operate effectively (Blockeel, et. al. 2016). The company always ensure availability of fresh food.
No differentiation of products: The company makes available various types of products under one which makes it harder for the company to differentiate between fresh and selected brands (Rauch, et. al. 2015).
Huge size: The size of business can be potential weaknesses due to a huge area of operations.
Global expansion: The company is growing rapidly in the retail sector. Woolworths is even moving to the new market segments like New Zealand and South East Asia. The company finds out the merging and forming alliances with organizations globally.
Multi-option retailing: The company makes use of Multi-option retailing to cope up with the changing need of customers. It also increases operations of the company in the market (Kouzani, et. al. 2017).
A higher level of competition: Woolworths have a higher level of competition in the industry. It mainly competes with Coles and Aldi.
Government intervention: The intervention of government is another factor which affects the growth of company within the retail industry (Bull, et. al. 2016).
The Pestel analysis is appropriate in providing an understanding of the internal aspects of the company. The factors of macro environment are external to the company. The organization cannot control them. The company needs to modify it’s strategies in order to deal with the external factors and changes which occurs time to time in these factors (Luiz, Bowen & Beswick, 2011). These factors can be defined as:
The political factors are strong in the business environment of Woolworths. The political factors create opportunities by various rules which obligate to a certain level. The political factors affect the retail industry and as a result, the performance of the company is affected to a certain level (Yüksel, 2012). For instance, the federal government in Australia have introduced a competition policy which is helpful in preventing major players like Coles and Woolworths in eradicating competition. The increased dominance of the major retailers in the market results in adverse conditions for small retailers to perform in the industry.
The decline in the economic market conditions has affected the performance of the company. it is due to the decline in the economic activity of the markets in various countries. The capital budgeting decisions are taken on the basis of interest rates, exchange rates and other important factors (Dos Santos, Svensson & Padin, 2013). The fluctuations in the currency exchange rates and weakening of dollar have affected international operations of Woolworths. The economic factors also have a role in determining purchasing power of customers. The market share of Woolworths have important role in the economy of Australia which is revealed from the diagram below:
(Source: Roy Morgan, 2014)
The social factors affect Woolworths to achieve higher societal and community development. It is because of the recent social trends. The customer also prefers to the organizations which are highly socially responsible and undertakes social responsibility. Woolworths creates an impact on customers by undertaking societal initiatives (Spillan & Ling, 2015). The company also encourages it’s employees to socialise and work in a happy and relaxed environment. Woolworths have implemented a broad range of environmental strategies to give back to it’s customers and local communities.
The 24-hour delivery strategy of Woolworths needs to be backed up with a fully automated ordering system. A hand hlding ordering device is used by the company to make orders instantly. It reduces the cost of stockholding and improves the decision-making process of management (Dockalikova & Klozikova, 2014). The company has considered the application of green refrigerator technology to store perishable products for the longer time period.
The environmental factors are responsible to affect the the performance of the the company. It can be evident from the petrol and winemaking a a business of Woolworths are posing an adverse impact on the environmental conditions. Therefore the profitability performance of the company in the particular segment is affected. The company provides various initiatives which help to achieve a better and sustainable environment. The company aims to use environmentally friendly practices which aim to reduce harm to the environment. The company has also taken initiative by using environmentally safe bags in the stores. The company is also using recycling activities to reduce the amount of wastage. Woolworths also makes use of recyclable materials in production (Dos Santos, 2011).
The legal framework for the industry includes taxation policies and regulations of recruitment and employee management. The legal aspects such as food licensing requirements have an important role in the retail sector. Being a part of the retail sector the company need to comply with these regulations. The rules and regulations of consumer commission affect the operations of the company. The fair policies in performing business operations have also affected the performance of the company. The staff of the company is required to have knowledge of food handling (Jaber, Elkarmi, Alasis & Kostas, 2015). So the staff should be trained properly.
Conclusion
A critical strategic analysis of Woolworths has been carried out. The important strategies have been undertaken to assess strategies which have been used by Woolworths. These strategies are used to focus on growth and operation. This growth is supported by strong commitment towards workers and employees. The analysis of external environment conditions faced by the retail industry shows that the factors such as political condition in the form of government influences, changes social patterns and trends within customers and contrary economic conditions. Such conditions include highly competitive business environment conditions which have effect on strategy and growth of company in a negative manner. The analysis also indicates that the internal environment conditions have impacted the potential of Woolworths in terms of growth. The active participation of company in the community services and social responsibility reflects the devotion of the company towards society. The company is able to update strategy over the years and it makes company even more successful. So the employee should be properly implemented and analysed. It has been noticed that the company is able to change strategy over the years which has made it more successful. Further the company need to implement new and improved strategies to expand operations successfully overseas. There are some strategies which can be implemented such as increased brand awareness. The appropriate strategies should be adopted in order to differentiate it’s identity. It is difficult for the company to survive and dominate the market without an effective strategy.
References
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