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Strategic analysis of the company refers to analyzing the internal and the external factors of the company that helps in identifying its position as well as its internal strength and weakness. This report initiated with the discussion of industry analysis and company profile of Woolworths Ltd. Australia. The later part of the report discusses about the external factors that affect the business of Woolworths Ltd with the help of macro environment analysis and porter’s five forces analysis. The internal analysis has been done by analyzing the competencies, capabilities and resources of the company with brief description of the SWOT analysis. Further, the report provides recommendations for the company in order to improve its strategies to achieve its defined objectives.
Industry and company analysis:
The retail supermarket industry of Australia is saturated. The market structure of the industry is oligopolistic in nature as few number of supermarket organizations are fighting with each other and act as the top player of the industry. The key players of this industry in Australia are Woolworth’s Ltd., Coles group Ltd., SPAR Australia etc. it has been analyzed that it is one of the largest industries in Australia and employees around 10.7% of the total population that is working in Australia. The firms in this industry serve the customers with range of products in lines such as groceries, food, packaged food, daily items, crockeries, vegetables, flesh, bakery products etc. This industry contributes a lot in framing the economy of the country. The industry contributes about 4.1% of the total GDP. The industry is very big and has high entry barriers. This is because it is very difficult for the new company to enter the industry with such huge investment. In addition to that, it is even difficult for the new company to reach at the point where the existing companies are. Another big reason is that the companies or the new entries in the industry finds it difficult to compete with the top player of the industry.(Ibisworld.com.au, 2017)
The focal point of this report is Woolworths Ltd. It is the company that act as the mediator between the manufacturers and the end consumers of the products. The first store of the company has opened in Sydney in 824. This company has served the customers since years and now expanded the business with strategies like acquisitions and mergers. The market share of the company is 31% of the industry market. The major brand that the company deals with are Dick Smith Electronics, Big W, Dick Smith Powerhouse etc. Woolworths Ltd. Can be considered as one of the largest supermarket firms in Australia in terms of revenue, sales and the area coverage. The company has its stores in Australia and New Zealand. Woolworths also has its presence in India as well with the collaboration of TATA. As far as the competitors of the company are considered, the biggest competitor of the firm is Coles that have 23% of the market share in the industry market. The major market of the company is Australia and New Zealand as the company earns around $3.1 billion from Australian operations and around $196 million from the operations in New Zealand.(Woolworthsgroup.com.au, 2017)
Vision, mission and values of the company:
As far as the company’s vision and mission are considered, it suggests that the company wants to develop a customer led culture. The company wants be the customer’s preference. It is important for the company to be on the top of the customer’s list so that there is no alternative left for the people to buy the products.(Woolworthsgroup.com.au, 2017) The company believes that building team that, listens to the customers is very important for achieving its mission and vision objectives. Below is their value statement of the company:
We are placing the customer at the heart of our business
We are listening to what customers want
We are creating new and innovative ways for them to shop with us
World class supply chain
The biggest competitive advantage of the company is its supply chain. The company has adopted lean retailing approach in its processes so as to cut the cost of unnecessary steps in between the supply chain.
In addition to supply chain, branding is also a factor that provides an upper hand to the company. The company has positioned itself as the store with fresh food and the slogan is like “the fresh food people”. This helps the company to achieve competitive advantage of being positioned as a great brand.(Li and Hu, 2012)
The company focuses on being innovative in its strategies. It always looks for making changes that provide them benefits. The project like “refresh”, “new idea program” etc. are very innovative.
The top management of the company is very effective in nature. Capability of the top manager of the company to deal with the changes and the difficult situation of the industry is a blessing to the company. This facilitates the company to achieve higher growth even in the times of recession.
Reputation and brand image of the company
Effective supply chain management
Effective top management
Range of product available
High operating cost
Expands the business in international countries other than New Zealand
Diversification in the products range with introduction of health products range
Investing in social media marketing
Less switching cost
Uncertainty in the economic condition of Australia
Threat of competitors
Threat of substitutes
According to the mission of the company to cater the quality products and to be at the top preference of the customers, the company should develop the values such as communication between the employees, better information flow, after sales support to the customers etc.
Objectives and its appropriateness:
As far as the company’s objectives are considered, the main objective of the company is to be at the top preference of the customers. To achieve this, the company has some of the priorities such as building cutomer-led culture, increseing the sales in food, becoming a lean retailer, developing the drinks business and empowering business to deliver values to the shareholders.
The objectives that the company have are appropriate in terms of their values and vision. The company wants to be the customer’s top preference and believes in making teams that helps the customers. Some of the improvements can be made in the company’s objectives like the company should focus on supporting the customers with better shopping experiences and should also focus on advertising about the brands.
External environment analysis:
External environment analysis of the company can be done by applying models and approaches such as Porter’s five forces and analyzing the macro factors of the environment that affect the business of the company in the industry. These are factors that are not internal but persists in the outer environment mad has its impact on the businesses.
Porter’s Five Forces:
According to this approach, the company can analyze the position in the industry and also the structure of the industry. Below is the Porter’s Five Forces analysis of Woolworths Ltd. Australia.
Buyer’s power: HIGH
The bargaining power if the buyers in case of the supermarket industry in Australia is high. This is because this industry provides homogenous products to the customers with very less differentiation. Thus, the customers can switch to another brand with very low cost. This is the reason power of bargaining remains in the hands of the customers or the buyers.(Ibisworld.com.au, 2017)
The power of supplier is moderate in nature in case of supermarket industry. This is because it depends on the brand name of the supplier and the market size of the supermarket. As the companies like Coca Cola and Pepsi are very known brands so they have higher bargaining power than the companies or the supplier with low brand name. if the supplier does not have the image in the market, it needs to take support of a well-known supermarket while supermarket takes the support of well-known brands to expand their business.
Threat of substitutes: HIGH
As discussed earlier that the industry is serving the customers with very homogenous products, it is very easy for the customers to switch, in that case the threat of substitutes for the company is very high.(Arli et al., 2013)
Threat of new entrants: LOW
It is very difficult for the new companies to enter the industry as the industry require huge capital investment. This act as the entry barriers of the new companies and thus treat of new entrants for the existing companies is very low.
Threat of rivalry: HIGH
As the structure of the industry is oligopolistic nature, few number of companies compete with each other and act as the top players. The biggest competitor of Woolworths Ltd. is Coles group that gives very intense competition the company.
Macro environmental factors analysis:
Political factors: ACCC this is Australian competition and consumer commission has the direct impact on the super market industry in Australia. It regulates the company’s trading hours. There are some other regulators also that monitors the activities of the supermarket industry as they have to keep a watch on the food products serving to the customers.(Worthington and Britton, 2006)
Technological factors:Technology has great impact on the industry. Woolworth is the company that believes in upgrading their systems according to the technological advancement in the market. The company was among the first retailers of the industry that has subscribed to GEMMnet.(Cherunilam, 2010)
Economic factors:Slow growth in the Australian economy results in reduction of the purchasing power of the people in discretionary products. People prefers to buy the private brands rather than the brands that are well-known and costly. To overcome this issue, the supermarkets like Woolworth started keeping private brand products to the supermarket so that people visit the market and do not depend solely on the retail outlets.
Socio-cultural segment: The change in the social and cultural aspect of the outside world affect the functioning of the companies. Now-a-days, people are very much concerned about their health so the companies like Woolworth has the oppptunity to serve the customers with the food products that are tasty as well as healthy. This also allows the company to large premium prices for the customers for the healthy products.(Dobson, Starkey and Richards, 2004)
Internal analysis refers to analyzing the factors that affect the strength and weakness of the company.(Thompson, Strickland and Gamble, 2010) Internal analysis of the company can be done by analyzing its resources, capabilities and conducting SWOT analysis:
As far as the resources of the company is concerned, the company owned around 3000 stores and 180,000 employees. This suggests that the resources available with the company in intangible or tangible way are string enough. Assessing the departments of the company suggests that the company is blessed with skilled human resource wit wide range of product serving to the customers. The logistic system of the company also compliments its objectives. Overall the company is operating in very satisfied manner in terms of resources.
As the duration of the Woolworth’s business is considered, the company is serving the customers successfully since 1924. This suggests that the company has the capability to perform the business while putting the resources at the right place. The company is efficient in making optimum use of its resources and know how to make decision serve right people on right lace and at right time.(Hough, 2008)
Core competencies can be defined as the capabilities of the company or the processes that act as competitive advantage for the company in comparison to its competitors. The core competencies of Woolworth are discussed below:
After assessing the internal and the external environment of the company, it has been analyzed that the company is performing very well in the industry. It is serving the customers since 1924 as has many competitive advantage over others such as value chain, wide range of products, effective top management etc. As far as the external environment factors are considered, the industry of Woolworths Ltd. is very much saturated and the company is facing tough competition from Coles Group. However, the company made its position in the market with its branding strategies as well as making innovative changes in the processes by application of lean retail approach to cut the cost.(Kaplan and Norton, 2001)
Some of the recommendation that has been made for the company after conducting it strategic analysis are:
On short term basis, the company should make investments in the advertising process. This is because the company has introduced the new healthy rage of food products. It is necessary for the company advertise about the new products range and create awareness about the products. The company can also use social media as the medium for advertising the products.(Kilner, 2010)
On long term basis, the company should make efforts to create an environment in the stores that make shopping an enjoyable event for the customers. Although the company is making efforts towards this but also have to supplement the actions in order to improve the environment of the stores so as to make the shopping experiences of the people so cheerful and enjoyable.
As the company has the objective to be at the top preference, the company should supplement its efforts towards after sales support to the people. This is because id the company provides after sales support to the customers, the customers may develop a feel of being important for the company and wants to shop from the Woolworths stores only.
Cherunilam, F. (2010). Business environment. Mumbai [India]: Himalaya Pub. House.
Dobson, P., Starkey, K. and Richards, J. (2004). Strategic management. Malden, MA: Blackwell Pub.
Hough, J. (2008). Crafting and executing strategy. London: McGraw-Hill.
Kaplan, R. and Norton, D. (2001). The strategy-focused organization. Boston, Mass.: Harvard Business School Press.
Kilner, A. (2010). Achieving excellence in management. New York, N.Y.: Business Expert Press.
Thompson, A., Strickland, A. and Gamble, J. (2010). Crafting and executing strategy. Boston: McGraw-Hill/Irwin.
Worthington, I. and Britton, C. (2006). The business environment. Harlow: Financial Times Prentice Hall.
Arli, V., Dylke, S., Burgess, R., Campus, R. and Soldo, E. (2013). WOOLWORTHS AUSTRALIA AND WALMART US: BEST PRACTICES IN SUPPLY CHAIN COLLABORATION. Journal of Economics, Business, and Accountancy | Ventura, 16(1).
Li, X. and Hu, J. (2012). Business Impact Analysis Based on Supply Chain's Knowledge Sharing ability. Procedia Environmental Sciences, 12, pp.1302-1307.
Woolworthsgroup.com.au. (2017). About Us - Woolworths Group. [online] Available at: http://www.woolworthsgroup.com.au/page/about-us/ [Accessed 10 Feb. 2017].
Ibisworld.com.au. (2017). Supermarkets and Grocery Stores in Australia Market Research | IBISWorld. [online] Available at: https://www.ibisworld.com.au/industry/supermarkets-and-grocery-stores.html [Accessed 10 Feb. 2017].