This essay would be examining Woolworths, an Australian based grocery retailer and the strategic management approaches it is taking in the supermarket industry. Through evaluation of the concepts that are influencing its strategic management practices in the market, it is expected that a better consideration of the organization’s strategy and ensuing business practices can be obtained. Hence, recommendations for enhancing the strategic management of Woolworths can be formulated based on the findings and discussion.
Woolworths started out their business back in 1924 and with the help of acquisitions and expansion they have the biggest supermarket chain in Australia, with projected accounting for 36.8% of the industry’s share in 2017-18 (Nakos, 2017). The supermarket is operating 995 stores across Australia, relying on 115,000 team members in their organization (Woolworthsgroup.com.au, 2017). It is one the largest retailers of Australia in terms of sales revenue, geographic area coverage and number of supermarkets and stores.
The retail industry in Australia consist of lots of players in the market, however, the presence of major players are quite minimal is this market (Price, Bailey & Pyman, 2014). The key players in the market consist of companies such as Woolworths Ltd., ALDI and Coles Group Ltd. there is rapid growth in the market. Moreover, the retail industry is one of the significant contributors of the country’s GDP. The entry barriers in the market are moderate due to low potential for profit generation. Moreover, the capital requirement of entering this industry is huge and government regulations are a barrier to entry for new companies in the market. The bargaining power of the buyer is high in the market due to low switching cost in the industry. The bargaining power of suppliers in the industry is low due to the presence of large number of suppliers in the market. Thus, the cost of switching of the organizations is low and the threat of substitution is high in the industry due to the availability of large number of competitors in the market. The market consists of major players, which are competing to acquire the lions share. Thus, there is intense sense of rivalry among the business organization (Sutton-Brady, Kamvounias & Taylor, 2015). Thus, in order to make improvements to their market attractiveness, Woolworths will have to implement innovation in to their business model and make use of digital marketing for luring the consumers in to their stores. The retail industry in Australia is driven the price of the products due to moderate disposable income of the consumers and so cost effectiveness is a strategy, which would improve the market attractiveness of the organization.
Woolworths boasts of having an integrated competitive strategy, utilizing a mix of both cost leadership and differential factors for competing, with the help of Effective Supply Chain for minimizing costs and their brand image for differentiating itself founded on quality (Mitchell, 2014). Keeping these factors in consideration, the most significant, resources, capabilities and core competencies of Woolworths can be discussed. The tangible and intangible resources of the organization are very strong. They have a very well-organized distribution network, which is both a resource and capability in their in-bound and out-bound logistics (Crozier, 2012). A peak of both tangible and intangible resources like technological competences and supplier relations is extremely significant as through important cost savings acquitted from the whole logistics network that has helped enabling Woolworths to achieve more than its competitors. It has been found that since 1924 Woolworths has been operating successfully, their reputation built on the fresh food they provide and the positive customer experience they offer. Woolworths brand reputation is appreciated as it is providing significant differentiation to the competition and openly contributing to advanced levels of consumer satisfaction (Herbison, 2015). The benefits might be non-substitutable, but it is neither rare nor non-duplicable. This repute might not be a distinctive competitive advantage, but it is a point of parity that the organization should be possessing for competing. Woolworths can credit their long running success to the fact that they employ the right person for the right position and they are aware of how to use or allocate their resources (Pash, 2016). They have an effective top management that helps steers the organization through the changing economic climate and persistently attaining higher growth rates, making it a valuable resource. This is hard to copy as acquiring capable and effective managers is a difficult job. This point of parity is put to use in unification with other aspects like effective supply chain for enabling Woolworths to be outcompeting their rivals. Their innovation and competitive advantage have improved with the help of their supply chain, significantly focusing on cost cutting and efficiency in management of unnecessary expenses (Wowlink.com.au, 2017). Their “fresh food people” slogan has helped create a differentiated image of quality and healthy products (Edwards, 2017). Woolworths have even vertically integrated some of their supplies by the production of their own inputs for increasing market power and responding to the trend of private level (Insideretail.com.au, 2017).
It is tough in achieving competitive advantage in the market due to large number of players in the market. Woolworths’ does not have competitive advantage due to the scale and size of the organization. The quality of products sold by the organization is high and they have diversity in the product portfolio (Flax, Bick & Abratt, 2016). Thus, they have huge offerings and are the market leader in this segment. The organization has been able to add new revenue generation stream by the incorporating offerings from financial services. However, the organization is losing its market share due to rapid growth of ALDI, which is offering similar quality of products at prices lower than the other players in the market are. However, the diversity in product portfolio is low and the organization is lagging in this respect. ALDI has gained exponential growth in the market due to the use of aggressive marketing strategy they are using to penetrate in to the market. Moreover, ADLI has been using backward integration, which has been incorporated in to their business model for lowering the cost of production by diminishing the cost in logistics and supply chain management (Jie, Parton & Cox, 2013). Thus, Woolworths will have to employ backward integration to reduce the cost price of the products so that they can increase their profit margin. Digital marketing is another media, which will improve the market penetration of the products. Moreover, the quality of service provided by ALDI is better than Woolworths, which has caused them to lose consumers. Thus, the organization will be able to generate more repeat purchasing if they are able to provide them with better customer experience. Moreover, decreasing in the cost of the products in the market will increase the volume of sales. Product development will ensure that the organization is able to add value to the products, which reach out to ore customers in the target segment. Finally, innovation in technology and business model is another important strategy for Woolworths as it improves the overall efficiency of the processes and reduce the cost of production.
As a recommendation for the short term Woolworths can be investing in advertising more, depicting the way their fresh and healthy meals range can fit in everyday routines of their customers. It would be beneficial for improved brand recalling, increasing purchase likelihood. Creation of advertisements for their healthy and reasonably priced meals would help advance their chances of making the brand synonymous with healthy consumption and convenience. This would act as an important point of differentiation in a market in which fresh food and low prices act as points of parity. In the long run, it can be recommended for Woolworths to be concentrating more on having an entertaining shopping experience and convenience. They need to concentrate on improving the atmosphere of their stores like the insertion of relaxing music and employing helpful, cheerful and passionate staff for creating a positive shopping experience. It is also recommended that they invest in businesses and industries that are more profitable. Woolworths must diversify into new businesses where the sales growth have been projected for rising over the long term, like up market organic produce and home and hardware industries.
Conclusion
In conclusion to the discussion, it has been understood that the retail industry in Australia is established and highly competitive, with very low profit prospective. It might not be a striking industry to be entering into, but in this industry only Woolworths has managed to maintain a continuous growth in sales, indicating at having a superior business model. Woolworths has assumed the business procedure and strategically extended their limitations for including the customers and the suppliers. It has managed to add value to multiple activities in inventive ways and have leveraged their competences for enhancing the elasticity of operations with close integration and coordination of independent actions. With extended product offerings and expansion they would most likely be growing their benefits, making the supermarket the leading player in the retail industry and conserving their sustainability of competitive advantage.
References
Crozier, R. (2012). Woolworths outranks Wesfarmers in supply chain comparison. iTnews. Retrieved 12 December 2017, from https://www.itnews.com.au/news/woolworths-outranks-wesfarmers-in-supply-chain-comparison-309712
Edwards, P. (2017). Woolworths reaffirms ethical fresh food supply chain commitment | Logistics & Materials Handling. Logisticsmagazine.com.au. Retrieved 12 December 2017, from https://logisticsmagazine.com.au/woolworths-reaffirms-ethical-fresh-food-supply-chain-commitment/
Flax, J., Bick, G., & Abratt, R. (2016). The perceptions of supplier-buyer relations and its affect on the corporate brand.Journal of Brand Management, 23(1), 22-37.
Herbison, M. (2015). Woolworths remains Australia’s most valuable brand. Marketing Magazine. Retrieved 12 December 2017, from https://www.marketingmag.com.au/news-c/woolworths-australias-most-valuable-brand/
Insideretail.com.au. (2017). Woolies reaffirms supply chain commitments – Inside Retail. Inside Retail. Retrieved 12 December 2017, from https://www.insideretail.com.au/blog/2017/11/23/woolies-reaffirms-supply-chain-commitments/
Jie, F., Parton, K. A., & Cox, R. J. (2013). Linking supply chain practices to competitive advantage: An example from Australian agribusiness. British Food Journal, 115(7), 1003-1024.
Mitchell, S. (2014). Woolworths targets supply chain, customer loyalty gains. The Sydney Morning Herald. Retrieved 12 December 2017, from https://www.smh.com.au/business/woolworths-targets-supply-chain-customer-loyalty-gains-20140924-10lgfo.html
Nakos, N. (2017). Coles market share in Australia has declined | Australian Food News.Ausfoodnews.com.au. Retrieved 12 December 2017, from https://www.ausfoodnews.com.au/2017/10/18/coles-market-share-in-australia-has-declined.html
Pash, C. (2016). Woolworths finally has a CEO. Business Insider Australia. Retrieved 12 December 2017, from https://www.businessinsider.com.au/the-new-ceo-of-woolworths-is-insider-brad-banducci-2016-2
Price, R., Bailey, J., & Pyman, A. (2014). Varieties of collaboration: the case of an Australian retail union. The International Journal of Human Resource Management, 25(6), 748-761.
Sutton-Brady, C., Kamvounias, P., & Taylor, T. (2015). A model of supplier–retailer power asymmetry in the Australian retail industry. Industrial marketing management, 51, 122-130.
Woolworthsgroup.com.au. (2017). Woolworths Supermarkets. Woolworthsgroup.com.au. Retrieved 12 December 2017, from https://www.woolworthsgroup.com.au/page/about-us/our-brands/supermarkets/Woolworths
Wowlink.com.au. (2017). Supply Chain. Wowlink.com.au. Retrieved 12 December 2017, from https://www.wowlink.com.au/wps/portal/topic_centre?WCM_GLOBAL_CONTEXT=/cmgt/wcm/connect/Content%20Library%20-%20WOWLink/WOWLink/Topic%20Centre/SupplyChain
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