Strategy Report For Woolworths Supermarket

Strategic Analysis

From the parlance of management strategy is defined as the plan which is undertaken by an organisation to achieve certain set of objectives and aims for the success of an organisation. In order to determine the future of the business it is important for the organisation to develop a strong business strategy. The business strategy is mainly focused on developing a set short term and long term objectives which helps an organisation to achieve its business aims and gain competitive advantage in the market. Business strategy is a subject that needs to be taken care of effectively to get best possible result from it so, it is important for organisations to make sure business strategy review is undertaken in order to understand the strengths and the weaknesses of the strategy and accordingly to meet ends for the sustainable development of the business. The importance of undertaking this study lies in the fact that reviewing of business strategy helps organisations to improve their business performance by highlighting the key shortcomings of the strategy and accordingly helping to develop alternatives for them (Teece, 2010). Hence it could be said that undertaking strategy review of business definitely allows a strong platform to make changes in their business operations which serves as a medium to improve the business performance.

The present study will be done with reference to the organisation Woolworths Supermarket. Woolworths Supermarkets is one of the leading grocery retail chain organisations operating all across Australia and have been able to gather significant amount of market share. The organisation started its operations way back in the 1924 and is presently operating not only in Australia but also in some other parts of the world. The Macro Environment of the organisation is highly competitive which makes it imperative for the organisation to emphasis on doing regular review of the business strategy of the organisation. The present study will take an opportunity to review the business strategy of Woolworths for the operations in Australia but the possible limitations that can restrict the findings of the report is Time and procedure of implementation. Time is a big factor as without ample time no work could be successfully completed and the way report is approached. This is an academic project, and hence time allotted for the project might not suffice the requirements for data collection and implementation of the project could also hinder the result of the report.

Data collection is one of the key segments of any business strategy development or review process and hence it has to be kept in mind that data collected for the business strategy review of Woolworths is authentic and relevant for the study. The success of a research study or analysis largely depends upon effective data collection and analysis and so, in the present report the use of suitable and authentic sources have been inducted as it will help to gather the best possible relevant data for analysis. For the effective business strategy review there are number of sources which has to be used and in this report the analyst has used various sources from where suitable data could be collected. It could be said that most of the organisations in their strategy review focus on using the internal information received from the employees through questionnaire or surveys and also tends to gather information from the external environment and hence in the present the right mix of internal and external data has been kept to provide the best possible result of the strategy review. He has used internal information through the annual reporting of the organisation, different online sources, survey and questionnaire information on business strategy of the organisation, qualitative response from the managers of the organisation and information on business strategy review from different articles, books and journals.

Methods

The external analysis is an effective tool to understand the Macro environment of the organisation Woolworths Ltd Australia. The External analysis will involve PESTEL, Porter’s five forces and strategy Canvas to understand critical success factors of the organisation Woolworths.

Political: The visible success of an organisation largely depends on the political environment that the organisation operates in. Australia has a stable government and focuses on stretching its hands towards organisations like Woolworths. Woolworths has been able to develop its market with the help of the political environment. The organisation has experienced increased interest from foreign investors and for trading and other business related activities which has helped the organisation to do business successfully. As the organisation Woolworths is doing business in a fairly stable political environment it doesn’t face any problem politically.

Economic: There are number of economic factors which might affect the business performance of an organisation like recession and unemployment. The great recession of 2008 affected the Australian economy directly but the country due to its increased per capita income and better GDP has been able to recover quickly unlike UK and USA. The organisation did face significant financial crisis during the financial recession where it lost huge amount of market share in UK and also in Australia with Aldi and Lidl entering the Australian. Economic recovery has been effective but the company faces significant competition from these organisations and future economic fluctuation stand to be one of the concerns for the organisation (Casadesus-Masanell and Ricart, 2010).

Social: Woolworths has been able to recognise the needs and wants of the consumers in the market which has helped the organisation to come closer to the consumers not only in the Australian market but also in the global market but the organisation needs to continuously focus on understanding the changing pattern of consumption which could definitely create problems. There have been issues with the organisation in recent past for not being completely ethical with the products and services provided especially in terms of sustainability and hence this factor is also identified as one of the concerns for the organisation.

Technological: The organisation has been able to make improvements in its technological sphere as improve point of sale service and self checkout kiosks have stood out for the organisation. The improvement made in its online services and constant development in social media aspects has helped the organisation (Sorescu et al,, 2011).

Environmental: The organisation Woolworths have focused on continuously doing sustainable business. The organisation has invested significantly in developing its business with the help of using sustainable materials for packing and other purposes. It is important to mention that the organisation has also focused on reducing carbon footprints from the environment.

Legal: The organisation has conformed to the legal and taxation policies and also the data protection acts to make sure its interactions and transactions are legal. The organisation also abides by the recruitment and employee management policies which gives the organisation an upper hand in the market.

It could be said from the above analysis that social factors and economic factors are two of the most significant factors that might drive change in the business pattern of the organisation in the near future (Amit and Zott, 2012).

External Analysis

Fig 1: Porter’s Five Forces

Threats of New Entrants: The threat of new entrants is very low in the Australian market and is also likely to stay like this for a significant period of time. The legal issues with zoning laws and agreements with landlords have affected the presence of grocery store sites. This has hindered the entry of new organisations in the market.

Threats of Suppliers: The bargaining power of suppliers is low. Initially with Woolworths and Coles capturing 80% of the market suppliers cannot bargain on their business. Both the companies had been the major purchasers and hence suppliers cannot bargain on their business.

Threat of Substitutes:  The threat of substitutes is high as Woolworths face significant competition. The rise of convenience stores, grocery stores, specialist grocery stores et cetera have increased the threat of substitutes in the market (Verbeke, 2013).

Rivalry amongst Existing Competitors: Significant rivalry exists in the market. It is important to mention that major players in the market have captured huge market share which shows that the market is highly competitive and hence it is important for the organisation Woolworths to have suitable strategy.

Bargaining power of Buyers: The bargaining power of buyers is strong as the consumers have number of options in the market apart from Woolworths and hence the organisation has to develop a strong strategy to create competitive advantage in the market (Campbell et al., 2011).

Fig 2: Woolworths Strategy Canvas

Woolworths Strategy canvas shows that the three critical success factors are friendly staffs, price and proximity of outlets. The friendly staffs of the organisation are one of the major critical factors which have helped the organisation to gain competitive advantage in the market. Woolworths have also set its price a tad lower which has helped the organisation to gather effective market share in the organisation. Woolworth’s outlets are available within a close proximity which clearly gives the organisation upper hand in the market against its competitors (Amit and Zott, 2010). As per the strategy canvas the workforce is one of the key critical factors and hence it is important for the organisation to continuously work on their selection and recruitment process and later on the training and development program implemented. Woolworths should focus on improving its On Job Training program and allow the new candidates to communicate more with the consumers to understand the best way to provide customer service. The organisation normally places its price a little lower but it is important that it strategises its pricing accordingly the market trend. What Woolworths needs to do in this case is to understand the market and compare the prices of the similar products and make the prices fluctuate as per the market scenario. Woolworth’s has been able to set up its supermarkets in close proximity but the organisation should focus on making smaller stores like Tesco Extra and Metro which will be open 24*7 and this will help the organisation to get those consumers who are busy throughout the day (Campbell et al., 2011).

PESTEL Analysis

Innovation is a key aspect for every industry but retail industry tends to use innovation more than any other industry. Grocery retail doesn’t have much to innovate and hence its innovation is mainly implemented on products and customer service. Innovation has influenced grocery retail industry to a large extent as companies have not only focused on innovating products and services but it has also emphasised on technological and marketing innovation (Demil and Lecocq, 2010). The retail industry embraces innovation in order to get the best possible result in the form of revenue. Effective innovation implemented in the grocery retail industry helps to attract consumers effectively which naturally increases the sales and revenue of the organisation. The bottomline is that innovation in Grocery retail industry in Australia has been effective in attracting consumers and generating significant revenue for the organisation. It could be said that top retail organisations implementing innovation has helped the industry to become competitive and hence helps the organisations to provide better quality products which has helped to gain market share for the organisation (Panigyrakis and Theodoridis, 2009).

There are number of Key tools which help to understand the strategic capability of the organisation Woolworth’s. The VRIO strategy and the SWOT analysis are effective tools which helps to understand overall strategic capability of the organisation.

Resource/ Capability	Value	Rarity	Costly to Imitate	Organisation	Value Creation
Specialised labor	Yes	No	No	Yes	Competitive advantage
Customer Service	Yes	No	No	yes	Parity
Product Development	Yes	No	Yes	Yes	Competitive advantage
HR Strategy	Yes	No	No	yes	Advantage
Brand Reputation	Yes	Yes	Yes	Yes	Sustainable Advantage

Fig 3: VRIO Matrix Woolworth’s

Woolworth’s is having superior resources as compared to other organisations. The organisation has specialised talents and diversified capabilities which has contributed to the overall improvement of the organisational capabilities. Woolworth’s has professionally qualified staffs which help the organisation to handle the customers effectively and this creates the main difference between the competitors like Macro Wholefoods Ltd., Tesco, Aldi et cetera. The organisation has a valuable resource which is brand reputation which is not imitable and this completely gives upper hand in the market. It is important to mention that the organisation has been able to provide its services and gain competitive advantage in the market due to its excellent and unmatchable service quality and effective product development strategy which even though are imitable but still provides significant competitive advantage (Hitt et al., 2012). There’s hardly any rarity in the organisational strategy of the company but it could be said that the organisation has gained upper hand due to its brand reputation and customer service which has happened due to the effective development of the internal functions.

Strengths · One of the oldest retail organisations in Australia. · Huge customer following and turnover. · Strong brand name with overseas operations. · Great customer service. · Wide range of products.	Weaknesses · Weakening brand name. · Poor online presence. · Weak Growth Strategy. · Increased pricing of the products in the recent past.
Opportunities · Great Growth potential of the Australian Retail market. · Increase of consumer interest on the business. · Opening avenues in the Asian market. · The multi option retailing strategy adoption has helped the organisation to expand.	Threats · Increasing competition in the Australian retail market. · Government intervention and legal issues. · Involvement in place of origin controversies of products (Rothaermel, 2015).

The present analysis shows that the one of the main advantages of the organisation is its effective brand name and wide range of products which has helped it to be in competition even when the threat of competition has increased considerably. The SWOT factors also show that the organisation has not been able to control its pricing which has led to lose of market share. The organisation has adopted a multi retailing option which is likely to be effective in developing its market overseas. The constant increase in competition in the form of Aldi, Tesco Macro Group has been a menacing sign for the organisation which it needs to handle strategically. From the above table it could be concluded that the organisation needs to focus on improving its growth strategy which would help to make sure growth is visible and so that it could capitalise on the opportunities to move ahead (Peteraf et al., 2014).

Porter’s Five Forces Analysis

The culture and strategy have had a deep relationship in the organisation. It is important to mention that handing culture and strategy could be a tough if one doesn’t understand the relationship between each other. When strategy developed by an organisation is focused to drive people towards the consolidated goal of an organisation then culture binds people together in an organisation where different mindsets prevail and hence it could be said that culture and strategy could have a complementary relationship if handled well. The organisation Woolworth’s have focused on understanding its culture to develop strategy which would help to make sure the organisation is able to achieve its organisational objectives. The Cultural Web is a key tool which could help understand the relationship between culture and strategy at Woolworth’s (Eden and Ackermann, 2013).

Fig 4: Cultural Web Woolworth’s

From the above culture web it could be said that the strategy of the organisation is to gain best possible profit from its operations for which the organisation is focused on developing a strong customer centric culture which is mainly developed by the upper management and followed by the lower level employees. It could also be said that the organisation focuses on providing effective customer service through proper professional approach to customer service. The organisation follows a flat structure which helps to meet customer issues and complaints and helps to address them effectively. The control systems are centralised which means the organisation controls its powers effectively within the departments which helps to make decisions successfully. Hence it could be said that the organisation follows a role culture where each and every employee is aware of their roles and responsibilities and accordingly they contribute to the organisational operation to achieve a single goal of customer satisfaction (Peteraf et al., 2014). The strategy is developed by the upper management and the employees are focused on playing their role in strategy which clearly shows that for Woolworth’s the relationship between culture and structure is complementary and is suitable to achieve organisational objectives. Woolworth’s organisational culture is mainly role culture and hence it helps the organisation amalgamate the strategy of the organisation. The role culture helps the organisation to communicate its strategy among every level of the organisation allowing each and every employee to focus on their roles and responsibilities. The lower level employees of the organisation are given flexibility to perform their roles which helps the organisation to gain insights effectively to improve the overall organisational strategy (Verbeke and Yuan, 2010).

Every successful organisation tailors a customised competitive strategy to operate in the market. Woolworth’s should focus on developing a strong competitive strategy which would help to not only compete in the market but it will also help the organisation to gain sustainable competitive advantage in the market. Porter’s Generic Competitive Strategies lays the perfect platform for an organisation to develop a suitable competitive strategy. As per Porter’s generic strategies there are four different focus on competing in the market namely cost leadership, differentiation, cost focus and differentiation focus (Ambrosini and Bowman, 2009).

Fig 5: Porter’s Generic Strategies

The cost leadership strategy mainly focuses on being leaders in terms of cost. It focuses on providing products at a cheap cost which no other organisation could provide. This is often a good strategy but in a market high with competition it might not always be effective.

Differentiation strategy is one of the most used strategies where an organisation focuses on doing something better with products, price, customer service and overall approach towards customers. This is chosen by companies as it is an overall competitive strategy which not only focuses on pricing but helps to attract customers with an overall approach to meet their needs.

The low cost focus is basically cost leadership but with a focus on niche market and hence it is suitable for organisations who are focusing on a particular product at a cheap price.

Differentiation focus is same as the above strategy of differentiation but with a little difference as it mainly focuses on a niche market (Barney and Hesterly 2015).

Woolworth’s should be very prudent with its choice of competitive strategy. Since Woolworth’s focuses on a broader market and wants to be market leader it cannot go for cost leadership as consumers nowadays are equally concerned about what products and services they buy and hence Woolworth’s should avail the differentiation strategy as it will help the organisation to differentiate itself from the others in the market with the help of product differentiation, price differentiation, customer service differentiation and with its overall delivery approach. It will be effective in managing the macro factors of meeting the changing needs of the consumers and will also make sure the economic aspect is kept in mind. The differentiation strategy will largely be effective for the organisation as it will help the organisation to compete in any given market as differentiation mainly focuses on making innovation on the products that helps to offer consumers something different and better and also differentiating price helps the organisation that increases the interest of the consumers in the market. Since the strategic capability of the organisation is brand reputation and efficient and talented labor applying this strategy wouldn’t be tough and is likely to work effectively for the organisation. As a reputed brand the organisation would be able to engage its consumers all across Australia and also in the foreign markets which will help the organisation to gain competitive advantage in the market (Thompson and Martin, 2010).

The Mission statement of Woolworth’s should be to provide the best customer satisfaction and a great shopping experience to the consumers. This mission statement will help the organisation to move towards a particular goal and will also help to gain customer loyalty which is extremely important to sustain in the market for a long period of time.

The vision Statement of the organisation Woolworth’s should be to operate to provide the best possible service at an affordable rate. This kind of vision statement will help the organisation to make sure all the employees and the strategies developed move towards achieving the organisational goal.

The objectives of the organisation are given below:

• To increase its market share within the coming two years.
• To develop a strong brand image for customer reliability.
• To provide value for money and ultimate satisfaction.
• To ensure sustainable profit for the stakeholders (Eden and Ackermann, 2013).

For the above mission, vision and objectives the compelling strategy statement could be:

“Drive towards growth by engaging stakeholders and providing customer satisfaction through an effective differentiation strategy”.

Conclusion

A critical strategic analysis has been carried out in this report which clearly shows that the organisation is focused on gaining sustainable competitive advantage in the market with the help of its strategic capabilities like labor and brand image. The study has also revealed that the organisation needs to analyse its growth strategy which has affected its growth in a highly competitive market as well as in the overseas conditions. The analysis of the external environment shows that the organisation should look to understand the social and economic paradigms in the country. The company could do well with the following aspects implemented in the business:

• Continuous innovation is an extremely important aspect in the retail industry and hence the organisation should look to make innovation in its business operations.
• The organisation could effectively develop its growth strategy keeping in mind the macro factors of the nation which would help to create better business opportunities not only within the country but also overseas (Peteraf et al., 2014).
• The organisation’s key strength is talent and hence talent management and acquisition is important to be constantly improved.
• Finally, it could effectively involve the lower level employees in the strategic decision making process which will definitely help the organisation to improve its reach among the consumers (Rothaermel, 2015).

References

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