Strategic Management Approach Of Woolworths: Entry Into Indian Retail Market

Part A (Woolworths’ Entry into Indian Retail Market)

Global business environment can be defined as external forces which surround an organisation and further leverage its business decisions. At international level business enterprises exhibit tendencies to encounter challenges from diverse microeconomic determinants which are characterized by the practice of uncertainty instability along with this continuity within the market (Lasserre 2017). However, globalisation acts as a vital determinant which efficiently eradicates the obstacles between various countries and further increases the distribution of international resources in a more efficient manner. As a result, establishing a new business organisation or expanding current business while penetrating a new market necessitates an efficient evaluation of the macroeconomic environment (Lovelock and Patterson 2015). This paper will evaluate the strategic management approach of Woolworths in penetrating the Indian retail market whereby the company has considered certain unique microenvironment factors along with its unique positioning.

As a renowned leading Australian retail enterprise with wide coverage of the global market, Woolworths is identified for its strategic internalization approaches which have facilitated its business to expand and succeed in most of its other location across the world (Woolworths.com.au 2018). Hohenthal, Johanson and Johanson (2015) have revealed while the majority of countries have identified the organisation for entering and emerged as a lucrative market, each of these countries has posed new and exceptional challenges for the company. Lasserre (2017) has claimed the primary entry strategy of Woolworth’s into the international market may be push or pull whereby the push factors constitute of organization’s preferences in expanding worldwide. Furthermore, as pre the view of Lovelock and Patterson (2015), Woolworths need to improve their profit margins and further evaluate new markets whereby their retail business is still unorganized. Further to this, factors which pulled Woolworths to penetrate specifically into the Indian retail market are because the Foreign Direct Investments (FDI) in retail is highly considered in the country (Arora 2017). Thus any business enterprise which marks their significance first will eventually tend to prove the most powerful and the prominent retail organization in the world. For Woolworths, according to Stoian, Rialp and Dimitratos (2017) in order to penetrate Indian retail market the only recommendation that the company must consider is to efficiently plan their strategy by analysing risk factors in comparison to revenue rate of the company.

Hollender, Zapkau and Schwens (2017) essentially  have noted that while executing business operations in Indian retail market Woolworths have to implement a ‘high control’ strategy as it will to emphasize global operations. Woolworths can purpose to create a third company with other Indian reputed retail enterprises such as Reliance Retail or Future Retail Limited. Such a joint venture can facilitate the company to benefit from the partners’ infrastructure and gain local business knowledge and reputation (Stoian, Rialp and Dimitratos 2017). However, Woolworths before strategizing for collective venture must ensure its business goal is in alignment with its third party. Surdu et al. (2017) have claimed that such cooperative business ventures will enable risks and expenses of the business to be shared. Furthermore, a joint venture can be considered an exclusive method for Woolworths for entering into the Indian retail market.

Part B1 (SWOT Analysis of Woolworths for entering into Indian retail sector)

Hollender, Zapkau and Schwens (2017) have revealed that the retail sector in India is anticipated to develop at a rate of 17% by 2019. However, the initial step towards facilitating Foreign Direct Investment in the retail sector was attained in 2005. Since then almost 61 FDI sanctions have been accepted by the government and the country has achieved substantial cash flow of around A$ 21.18 million (Hoffman, Munemo and Watson 2016). Indian retailing according to Stoian, Rialp and Dimitratos (2017) primarily involve service establishment dealing with consumers who have been receiving goods as well as services for individualistic purposes rather than for resale. The Indian retail sector has been observing e-retailing business opportunities and further facilitating the sector to proliferate with its significant market potential. Thus retailers in India are rethinking their strategic approaches to their suppliers to attain the most beneficial pricing strategies to increase revenue growth (Surdu et al. 2017). At this juncture, Woolworths must consider its internal environmental factors to analyse its environmental factors before expanding its business operations into Indian retail sector.

Strengths (High) – Hohenthal, Johanson and Johanson 2015) have claimed that there can be identified several advantages for Woolworths to penetrate the Indian retail industry such as low cost young workforce.

• Employment Opportunities- As employment opportunities both direct and indirect have been increased, the company will receive a higher rate of female and male employees to get engaged into Woolworths’ business operations (Hollender, Zapkau and Schwens 2017). Furthermore, Woolworths’ primary strength of entering into the Indian market is facilitated with the increasing liking of Indian customers towards international brands with direct association from farmers along with accessibility of low cost agro products and wide-ranging variations of choices and preferences of Indian buyers.
• Multiple retail formats and banners- As Woolworths operates its retail business under diverse advertising strategies in Australia, its Big W segment will efficiently offer the Indian customers with daily economic products such as Apple, Bonds, and Morrissey. Its wide-ranging product stock of house brands such as Smart Value, Avella and Emerson will also collaborate with the shifting preferences of Indian purchasers (Surdu et al. 2017).
• Efficient supply chain management- Reports have revealed that Woolworths has transformed its supermarket supply chain through effective implementation of various systems like StockSmart (Chen et al. 2017). The StockSmart is referred to as a distribution centre forecast based replacement. Woolworths will be proficiently pursuing similar strategies while entering into Indian retail market. Thus Woolworth’s efficient business processes will facilitate the company to strengthen its rate of profitability.

Weaknesses (Medium) –

• The dominance of Local Traders in the Indian market-Woolworths’ strengths can be criticized by a certain number of gaps for the Indian retail market. Hoffman, Munemo and Watson (2016) have noted that a significant number of small size retail outlets and traders dominate every local street of India (Hoffman, Munemo and Watson 2016). These traders furthermore possess immense potential to magnetize substantial rate of customers with highly economical products and diverse designs.
• Political Uncertainty- According toSurdu et al. (2017), the announcement of FDI in Indian retail sector has shaken the political arena of India. The Indian government tends to encounter stringent resistance with its allies to pull out support of FDI . In such political situation, the way the policy has been formulated, retailers both international and local can establish their businesses in those states which have accepted or will approve in the prospective years to permit FDI in multi-brand retail.
• Reduced Infrastructure and Supply Chain Management- Stoian, Rialp and Dimitratos (2017) have claimed that apart from the unstable political and regulatory situation, weakened infrastructure will serve a contributory role in deciding the way this sector will emerge and global retailers will manage the supply chain. Woolworths while expanding its business will face challenges as the FDI regulation states that global retailers will have to invest at a substantial rate to build proper infrastructure but will be highly time-consuming (Woolworths.com.au 2018). Meanwhile, because of poor support and a high cost of fuel logistics will continue to sustain a high percentage of the price of the product.
• Lack of Customer Loyalty- Factors related to customer loyalty will also play a critical role for Woolworths in expanding its business in India. A significant proportion of Indian purchasers belong to medium income level and show immense inclination in buying goods from local traders than relying on foreign brands (Negi and Anand 2015).
• Limited International Prominence-Woolworths has restricted global recognition in comparison to its other competitors such as Aldi or Coles. Thus the company has to make significant strategic plans to develop a market position in the Indian retail sector.

Opportunities (High) – Furthermore, Deshmukh and Mohan (2017) reveal that apart from the significant strengths of Woolworths, there can be identified several opportunities for the retail industry in India.

• Unorganized retail sector-Indian retail trade and commerce in the rural sector is immensely exploited and unorganized. Thus inviting several foreign retailers to invest in its retail market and make a footprint (Venkatesh, Rathi and Patwa 2015).
• Digital Strategy- Indian retail market has been reflecting a higher degree of competitive intensity. Woolworths can take this as a significant opportunity and couple with hyper-local regional retail players to develop a strong position within the market. The critical factor according to Deshmukh and Mohan (2017) enhancing the level of competitive intensity is pricing along with the growth of well-invested large-scale e-commerce retailers. These retail players of the Indian retail market have efficiently influenced strategies of discounting and sale as a mainstream business model. Woolworths can implement this strategy and emphasize more on the online experience of customers to gather a more significant number of buyers in a shorter span (Venkatesh, Rathi and Patwa 2015).
• Indian retail market identified as a core market for global retailers- International retailers have been considering India as a key market and is rated as one of the most attractive retail markets that offer significant avenues to both local and global retailers. Dixit and Singh (2017) have indicated that the organized retail market is expected to develop stronger in comparison to the GDP growth in the next five years. Such significant growth is anticipated because of the shifting lifestyles as well as an increase in wage level along with favourable demographic structure. Most importantly Trebbin (2016) has claimed food and apparel retailing are identified to be critical drivers of growth. This has led the Indian retail industry to attain a position as one of the most dynamic and rapid-paced sectors with wide-ranging players entering into the market. Woolworths at this juncture must utilize this opportunity and develop relevant strategies to expand its business operations into the Indian retail sector (Gopalan, Sreekumar and Satpathy 2016).

Threats (Medium)-

• Ineffective Supply Chain Management- One of the most critical barriers to the growth of contemporary retail formats is the supply chain management challenges. Furthermore, the lack of adequate infrastructure along with low investments is identified as potential threats for foreign retailers like Woolworths to successfully penetrate the market (Venkatesh, Rathi and Patwa 2015).
• Large number of local retail rivals in the Indian retail sector- The last five years data on Indian consumer market revealed that elevating rate of broadband penetration along with growth of several local private brands introduced by local retailers namely Big Bazaar, Reliance Fresh, Big Basket and More with increasing economic insights of younger demographic have posed significant threats to foreign retailers across categories from home care to packaged foods and beverages (Deshmukh and Mohan 2017). This can be identified as a critical threat for Woolworths in establishing a competitive advantage in the Indian retail market.

Retail business is identified as the fast-growing sector in India whereby its positions ahead of Russia in relation to emerging markets potential in retail. Lovelock and Patterson (2015) have denoted that the Indian retail environment has been undergoing significant transitions in a highly rapid state. Indian retail market is signified by increasing the level of competition from local such as Big Basket and More and global players namely Walmart and Marks & Spencers. This has led buyers to seek stores whose image exhibit high congruency to their choice and preferences (Lasserre 2017). The segmentation analysis will evaluate the behavioural aspects of Indian retail market that consequentially will leverage strategic approaches of Woolworths of expanding its business to the retail sector of India (Hoffman, Munemo and Watson 2016).

Consumer behaviour in the Indian retail sector- Customers in recent times of Indian retail sector show greater inclination towards location-related attributes in evaluating both trade areas as well as retail patronage behaviour. However, Badgaiyan and Verma (2015) have revealed that assessing store image on objective criteria instead of accounting for personal subjectivity. Such individual subjectivity tends to be consequential to inadequate or erroneous knowledge related to retailers. Furthermore, store preference along with shopping trip timing decisions further show a tendency to vary for individuals and households (Kaura et al. 2015). As for Indian retail consumers, the experience is greatly dependent on future store choices, Woolworths must extend its business with highly innovative marketing strategies and offer great customer satisfaction to attain a high competitive advantage in the market (Rammal and Rose 2014). Furthermore, according to Badgaiyan and Verma (2015), store loyalty has also served a decisive role and intrinsically linked to business patronage factors such as repeated purchase rate that will signify dedication as related to behaviour and attitude towards the company.

Part B2 (Applying the Matching Process Model for Woolworths’ Indian retail market entry)

The behavioural pattern exhibited by buyers is regarded as the process by which individuals tend to select, buy, utilize or dispose of goods and services in accordance with their needs and demands. Paul, Sankaranarayanan and Mekoth (2016) have identified that many consumers in the India retail sector tend to reflect patronage behaviour and yet fail to show loyalty towards the company. Such a spurious loyalty must be efficiently identified by Woolworths’ market analysts from the intended loyalty in the short term and emerges due to exceptional price offers along with heavy promotions (Kaura et al. 2015). As deal or discount prone customers typically shift from stores which offer most productive offers along with heavy promotions, Woolworths should also aim to provide unique price deals such as Woolworths rewards similar to the pricing strategies they apply in Australia. Thus Paul, Sankaranarayanan and Mekoth (2016) have claimed that proficiently understanding of consumer behaviour will facilitate marketers to seek behavioural patterns of buyers. Furthermore, such understanding will promote retailers like Woolworths to explore the behaviour of consumers and further leverage consumer behavioural patterns to strategically manipulate the leveraging variables to gain significant benefits (Trebbin 2016).

Psychographic factors of the Retail market- Psychographic attributes of a buyer is typically analysed to unearth comprehensive motivations for buying products and brand. However, the process typically will incorporate studying purchaser’s values, opinions and lifestyles (Kumar 2015). The Indian retail sector as per Gopalan, Sreekumar and Satpathy (2016) primarily involves an economic segment which mainly constitute people establishing and highly affluent in respective domains. This segment is recognized to be slightly older and has been employed for a decade or more. However, according to Deshmukh and Mohan (2017), such a segment maintains utmost prosperity and prefers recognized and well-established brands which have been attaining a significant market advantage in the Indian retail sector.

Furthermore, as per the view of Bulsara and Trivedi 2016) another important sector recognized as the enjoyer segment primarily involves millennials and could be perceived as the apex segment in relation to urban consumers. This segment as per the view of (Bulsara and Trivedi (2016) possesses the highest monthly remuneration and is further employed mostly in private sectors. The millennials, however, reflect shifting preferences with diverse product choices and styles. As such a consumer segment significantly intends to enrich their lives; they show immense integration towards consumer rights and protection of the environment (Badgaiyan and Verma 2015). Woolworths can take this type of psychographic dimensions as a significant opportunity and develop its marketing strategy in a way to successfully magnetize higher rate of Indian consumers. In such situations, Woolworths should draw strategy from one of its toughest competitors Coles and further implement it while penetrating Indian retail market. Paul, Sankaranarayanan and Mekoth (2016) have revealed Coles recently has been focusing on ‘putting out fires’ in its business by proficiently shifting its strategy to emphasize more on satisfying affluent customer base and attaining demands of tech-savvy millennia buyers. As a significant proportion of Woolworths’ consumers in India will belong to the employment segment, they will show a higher degree of preference in shopping in the evening (Arora 2017). Thus Woolworths should ensure its all fresh departments are full and easily accessible in the evening so that the evening buyer segment is highly satisfied with their services.

Part B3 (Segmentation Analysis of Indian Retail Market)

Conclusion

Therefore, from the above discussion, it can be stated that Woolworth’s consideration to enter into the Indian retail sector can be considered as a crucial one. A growing trend inclining towards the widespread likeness to organic health products to processed food has witnessed the retail food market in India rise at a high rate. Furthermore, the high level of preference for Indian customers to purchase from a globally branded supermarket in contradiction to shopping centres or retail markets tends to develop the market as an appropriate choice for Woolworths to efficiently take into consideration in its internalization process. The entry mode would also facilitate Woolworths in strategizing its plan of successfully penetrating the Indian retail industry. As consumers in recent times are showing an immense level of quest for modern ways of shopping, the Indian retail sector has been increasing as well as its employment potential has been developing extensively. Thus wide-ranging foreign retailers have been strategizing to make their presence in the retail industry of India and pose threats to its local traders.

References

Arora, R., 2017. FDI in Multi Brand Retail in India. Journal of Retail Marketing & Distribution Management, 1(1), pp.7-12.

Badgaiyan, A.J. and Verma, A., 2015. Does urge to buy impulsively differ from impulsive buying behaviour? Assessing the impact of situational factors. Journal of Retailing and Consumer Services, 22, pp.145-157.

Bulsara, H.P. and Trivedi, K.G., 2016. An Exploratory study of factors related to Consumer Behaviour towards purchase of Fruits and Vegetables from different Retail Formats. Journal of Research in Marketing, 6(1), pp.397-406.

Chen, P.L., Kor, Y., Mahoney, J.T. and Tan, D., 2017. Pre?Market Entry Experience and Post?Market Entry Learning of the Board of Directors: Implications for Post?Entry Performance. Strategic Entrepreneurship Journal, 11(4), pp.441-463.

Coles.com.au., 2018. Coles Supermarkets. [online] Coles.com.au. Available at: https://www.coles.com.au/ [Accessed 31 Oct. 2018].

Deshmukh, A.K. and Mohan, A., 2017. Analysis of Indian retail demand chain using total interpretive modeling. Journal of Modelling in Management, 12(3), pp.322-348.

Dixit, R. and Singh, S., 2017. Growth of Retail Market in India. Journal of Retail Marketing & Distribution Management, 1(1), pp.13-17.

Gopalan, R., Sreekumar and Satpathy, B., 2016. Evaluating the Indian retail service quality enablers using interpretive structural modelling. International Journal of Business Performance Management, 17(4), pp.365-393.

Hoffman, R.C., Munemo, J. and Watson, S., 2016. International franchise expansion: the role of institutions and transaction costs. Journal of International Management, 22(2), pp.101-114.

Hohenthal, J., Johanson, J. and Johanson, M., 2015. Network knowledge and business-relationship value in the foreign market. In Knowledge, Networks and Power (pp. 187-224). Palgrave Macmillan, London.

Hollender, L., Zapkau, F.B. and Schwens, C., 2017. SME foreign market entry mode choice and foreign venture performance: The moderating effect of international experience and product adaptation. International Business Review, 26(2), pp.250-263.

Kaura, V., Durga Prasad, C.S. and Sharma, S., 2015. Service quality, service convenience, price and fairness, customer loyalty, and the mediating role of customer satisfaction. International Journal of Bank Marketing, 33(4), pp.404-422.

Kumar, K.S., 2015. Organized Retailing in India: Challenges and Opportunities. International Journal, 3(6).

Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.

Lovelock, C. and Patterson, P., 2015. Services marketing. Pearson Australia.

Negi, S. and Anand, N., 2015. Issues and challenges in the supply chain of fruits & vegetables sector in India: a review. International Journal of Managing Value and Supply Chains, 6(2), pp.47-62.

Paul, J., Sankaranarayanan, K.G. and Mekoth, N., 2016. Consumer satisfaction in retail stores: Theory and implications. International Journal of Consumer Studies, 40(6), pp.635-642.

Rammal, H. and Rose, E., 2014. New perspectives on the internationalization of service firms. International Marketing Review, 31(6).

Stoian, M.C., Rialp, J. and Dimitratos, P., 2017. SME networks and international performance: Unveiling the significance of foreign market entry mode. Journal of Small Business Management, 55(1), pp.128-148.

Surdu, I., Mellahi, K., Glaister, K. and Nardella, G., 2017. Why Wait? The Speed of Foreign Market Re-Entry after Initial Entry and Exit (No. jhd-dp2017-05). Henley Business School, Reading University.

Trebbin, A., 2016. Producer Companies and Modern Retail in India—Current State and Future Potentials of Interaction. In Organised Retailing and Agri-Business (pp. 277-288). Springer, New Delhi.

Venkatesh, V.G., Rathi, S. and Patwa, S., 2015. Analysis on supply chain risks in Indian apparel retail chains and proposal of risk prioritization model using Interpretive structural modeling. Journal of Retailing and Consumer Services, 26, pp.153-167.

Woolworths.com.au., 2018. [online] Woolworths.com.au. Available at: https://www.woolworths.com.au/ [Accessed 31 Oct. 2018].