Woolworths is one of the famous and largest supermarket chain located in Australia and the firm is owned by the Woolworths Limited. Woolworths was established in the year 1924 and initiated with a store in Sydney’s Imperial Arcade. The stated company was founded by Stanley Edward Chatterton and his partner Percy Christmas had started the first floor shop of Frock Salon in Queen Victoria Market. On 22nd September in the year 1924, the company got registered as Woolworths limited. About 15000 shares were given to public even if there was small confidence in the business firm(Woolworths in the community, 2006). And only 11707 shares got subscribed by 29 people by those who are close relatives and friends of promoters. The store was an immediate success as in its initial year the firm waged a dividend of 5%, in the second year 40% and in the third year about 50%.
Today, the company sells a wide range of products that includes digital products, food, home ware and also clothing. The company also has a financial service in a joint venture with Absa bank. The financial service includes services like store cards, Woolworths visa card and also loan service to customers. This report will demonstrate the market segments and target market of the stated organization with the help of PESTEL analysis. It will also show the nature of competition of the company by describing the strengths and weaknesses of the firm with their competitors.
Woolworths is a strong business with lots of growth potential and the firm is already aware of the challenges it confront to realize that potential. The company always places its customers at the core of their heart and it has updated their operating framework for indicating evolving customer’s demands and expectations(Walsh, 2011). Woolworths has framed its three year growth and development strategy on the basis of a new Lean Retail operating framework. This model allow investment in developing all factors of the customer’s demand that includes a commitment to pioneering, better convenience, lower costs and improved and modified customer services.
The company uses Lean Retail framework which establish according to their traditional approach of driving growth through searching competence, as well, as by investing in customers with a simple recognition that the approach requires to be modified to a modern world("Woolworths Group", 2017). The Lean Retail Model of Woolworths mainly focuses on three areas for reducing the cost, those three areas are growing customers, improving cost efficiency and cost position through conducting original dollar costs out in less inflation situation("Woolworths Group", 2017). As it is known that price is the most effective key for growth, so the firm invests in ensuring that it will not be compressed on price but customers are now demand for major use of technology and modern offers to make their shopping experience enjoyable and easier.
Woolworths mainly focuses in the supermarkets, liquor and food as all this business sector is the large contributor to the company’s revenues. The sale of the company has been increasing continuously from 2015-2017 and the enhancement in the sale has been steady from $47,034 in 2015 to $54,142 in 2017. The launch of a new framework ‘Lean Retail’ model helps the company to concentrate on line items, end-to-end supermarket improvements in supply chain management and also on reorganization("Woolworths Limited – Business Case and Beyond", 2017). The company has taken huge reformation activities for launching supply chain effectiveness and costs saving practices. This is simply proved from the matter that cost savings of Woolworths have been predicted to around $0.8 billion in the past 10 years. With the effectiveness and rationalization initiated in the non-food department, it has been estimated that there cost savings could be increased in the future(Walsh, 2011). The major accomplishment for Woolworths is the declination in the cost of goods sold. This simply highlights the effectiveness in sales and the major exchange rate of receivables to cash.
The higher revenue growth can be credited to the development in customer share at Australian supermarket. With the launch of online shopping facility and through its goodwill in the market, allows the company to access as a large team of population. Online sales are the large contributor to the revenues and profitability of the company and in the future food and liquor will continue to be the major revenue contributors to the company("The Australian Food Industry - Retail Sector: Woolworths", 2017). It has been observed from the data that, food and liquor contributed around 36176 in 2015 which is increased by 4% i.e. 34675 in the year 2017. So, it can be said that food and liquor sector will continue to be the competitive benefit and for profitability in the future and Woolworths should concentrate on increase its potential for this sector.PESTEL Analysis
Political- The political situation affects the performance of Woolworths to a huge level. Australian Federal Government has currently introduced a competition rule that prevents large independent company like Woolworths in eliminating rivalry.
Economic- Declination in the situation of economic situation in Australia has an impact over the performance of Woolworths specifically because there has been the reduction in the economic activity in Australian markets.
Social- The social factor affects Woolworths in terms of that, the companies operating all around the Australia have to gain higher communal and societal growth as the current social trends into consumers involves that they mainly prefer socially accountable companies and Woolworths create important influence over its consumers.
Technological- Technological factor affects the Woolworths as it can be observed from the fact that the company has determined the claim of green refrigeration technology so that the unpreserved goods can be reserved for long term period.
Environmental- The environmental factors influences Woolworths in the sense that the petrol and winemaking business of Woolworths are pretence unfavorable threats on the activities of environmental situations.
Legal- The legal aspect in the term of carbon tax as executed all over the Australia has effected certainly Woolworths("The Australian Food Industry - Retail Sector: Woolworths", 2017). An evaluation of Woolworths shows that the policy by Australian Consumer Commission has affected the performances of the firm all over the economy.
A market segment is a group of individuals that shares one or more same characteristics, combined together for the marketing purpose. Each and every market segment of Woolworths is quite unique and the firm’s management uses different criteria in order to create a target market for their services and products. Marketing expertise method each segment distinctly after completely understanding the personality, demands, lifestyle and needs of the target customers. For meeting the basic criteria of market segment, Woolworths presents uses three characteristics of criteria, firstly, there are homogeneity between the same needs of the segment(Stiegert & Kim, 2009). Secondly, there are different needs that form the segment unique from others. And lastly, there are also needs of a common reaction that predictable to marketing.
Market segmentation includes segmenting a market into groups with different needs and demands("Price Determination in the Australian Food Industry", 2017). Segmentation strategy is a concept which helps in creating a dominant position, which rivalries are unable to get that position successfully.
Woolworth’s segmentation variables are described in the following:
- Geographic segmentation- Woolworths, apart from its base situation in Australia, also operates in 13 international markets. A segmentation of the market is accordance with the way country is going on and major attention is delivered to the particular needs of every geographic segments("Price Determination in the Australian Food Industry", 2017). Additionally, subdivision is formed among the local markets and cities of every nation to implement its products to local situations.
- Demographic segmentation- Demographic segmentation is related to the variables like sex, family size, stage of life, age, education, income, social class and many more. Woolworths conduct this information from the Woolworth’s Club card in combination with the data of the same user and also help the company to classify their customers based on their particular needs(Klan, 2007).
- Psychographic segmentation- Woolworths acknowledged the original psychological wants of the customers and selects to cover up those for which the customer really cares(Klan, 2007). So the company has created various different lifestyle magazines which basically targets to different tastes and personalities of people.
- Behavioral segmentation- Club card is the main tool which allows Woolworths to establish a extraordinary knowledge of the buying behavior of the customers(Klan, 2007). This involves knowledge of when, where and what customers purchases, their commitment to particular brand, the rate of product utilization and also where customers spend their time in shopping.
The target market of Woolworths is higher income earners. The lifestyle of the customers has to bear the product’s higher cost. Woolworth targets at social growth and concentrate on the environmental wants of the people in Australia. Woolworths sells its commodities to major ranges of consumers. The main strategy of the company is to raise its share of market in future as well(Economic structure and performance of the Australian retail industry, 2011). The target market of the company aims to attract more people according to a range of age. The advertising targets at every age group of individuals. The company believes that it is essential to sell the commodities to a huge range of customers for gaining competitive benefit.
Customers buy and use the Woolworth’s product for daily use only. So customers does not spend more time on selecting the products and comparing those with the others, as the products are for daily use and easy to find its substitutes. Woolworths can divide the market by business type and customers(E. A., 2016). As the online business has established by Woolworths, the company should focus on the online B2C market. Additionally, the oversea markets like Chinese market will drive attention of huge customers. So, Woolworths should also choose traditional type and online in China as the targets.
Nature of competition
Woolworths is one of the largest growing retail supermarkets in Australia. So, the retail business of the firm confronts competition for products, customers, store sites, employees and various other essential areas from non-traditional retailers. Woolworth’s ability for attracting customers is relied in large part upon a brand recognition, quality, promotional strategies and continued development into new markets(Dunford, 2017). Moreover, the nature and extent to which their competitors execute different promotional and pricing activities, in response to enhancing competition and firm’s response to all these competitive actions. The supply chain service of Woolworths is mainly wholesale distribution and involves a third- party logistics part.
The distribution part of the firm’s supply chain business competes nationally in a major segmented market area, with major domestic and international firms and various smaller firms, according to the transportation and warehousing logistic specialists(Dunford, 2017). The ability to provide asset, non-asset and cost based design manages consumer supply chains. Woolworths as a whole is hugely segmented, particular segments are recently experiencing few consolidations that results in rivalries with hugely developed financial resources, development in their competitive places and major market penetration(Crothers, 2012). Woolworths retailing business can result in the provision of major ranges of services and products at competitive costs by such consolidations firms, which can affect the financial condition of the company.
Comparison of Weaknesses and Strengths
- Strength-It is one of the oldest and famous retail brand situated in Australia. It has a powerful branding and many youngsters of the country have started their jobs at Woolworths firstly. The company has large market share and major number of supermarket("Competition Issues in the Food Chain Industry", 2013). The strength of Woolworths is that, the company is the market leader in retail industry of Australia and its leadership position increases the potentiality of the firm in exploiting the market potential by its powerful resources in a technological resources form, better presence around the industry.
- Weaknesses- Woolworths has its weakness in its growth strategy that mainly affects through external atmosphere situation that has its impacts over it potentiality in dominating the retail industry in Australia.
- Strength- Coles is the second largest grocery company situated in Australia and mostly controls around 24% of market share in the retail marketing business for mainly petrol. The products produced by the company is 100% cost saving products("Competition Issues in the Food Chain Industry", 2013). The combination of different products offered by Coles leads to a considerable amount of savings for the customers.
- Weaknesses- Coles faces issues with the suppliers as Australian suppliers are not very good with the supermarkets("Australia Consumer and Retail Trends", 2014). If the company does not have win situation with the major players then it can cause severe damage to the retailers because the suppliers creates the huge backbone of the retailing companies.
As compared to Coles, Woolworths have cheap baskets of groceries in comparison to identical basket at Coles. On the basis of data, it has been identified that a basket of 110 packaged fresh foods and groceries at Woolworths cost $573 in comparison to $586 at Coles("Competition Issues in the Food Chain Industry", 2013). According to the promotional costs, the Woolworth’s basket is 23% and more cheap that 26% at Coles.
According to Wind, a product positioning is the place that a product occupies in the given marketplace as perceived by the relevant groups of customers. Positioning starts with a product, a piece of merchandise, a service, a company or even a person. Positioning is not what is done to a product or retail brand, but it is about the image it has created in the minds of target customers. The positioning of the product is in the minds of the target customers. It is important to state here that in order to create a perception, the product or service of a company must be perceived by the selected target customers to have a distinct image("Australia Consumer and Retail Trends", 2014). As in the case of Woolworths, which is the most trusted and reliable brand in Australia has a great image in front of its primary target customers. The branding strategy is one of the most important factors behind the success of the organisation and each element of the branding strategy of the company is very well managed and implemented.
Figure 1: market share of Woolworths
Source: ("Australia Consumer and Retail Trends", 2014)
From the above report it has been analyzed that Woolworths has framed its three year growth and development strategy on the basis of a new Lean Retail operating framework. The sale of the company has been increasing continuously from 2015-2017 and the enhancement in the sale has been steady from $47,034 in 2015 to $54,142 in 2017. It has been also found that Woolworths sells its commodities to major ranges of consumers. The main strategy of the company is to raise its share of market in future as well. The target market of the company aims to attract more people according to a range of age.
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