Discuss About The Strategic Management Supermarkets Woolworth?
Strategic management is the process for analyzing the current strategy and finding out the efficiency and position of organization in industry. It is helpful for developing more beliefs and value systems for a company. This report includes strategic management of a well-established retail organization in Australia, i.e. Woolworths Supermarket. The discussion analyzes the internal and external environment of the organization by using different tools, like; Porter’s five forces and PESTLE analysis. Furthermore, it describes capabilities and resources of the organization and related issues in both external and internal environment.
Woolworths Supermarkets is one of the Australian leading players with broad retail business throughout New Zealand and Australia. It is the second largest retail organization in Australia in terms of revenues after Wesfarmers Limited. The organization has started its business operations in the year 1924 by launching its first store in Sydney. In the year 2012, the organization has become one of the largest retail stores in Australia and New Zealand. This is the subsidiary of a well-known brand, i.e. Woolworth Limited. It operates different brands, such as; Dick Smith Electronics, Safeway Supermarkets, Big W, BMS, Tandy etc. Currently, Woolworth has 1000 retail stores across Australia, from which 968 are supermarkets and 19 are convenience stores, which carry similar logo of Woolworths. Mostly, the company sells the groceries, like; fruits, vegetables, meat, packaged food products etc. with this, it also sells magazines, stationary goods and DVDs. With Coles, this organization makes a duopoly of supermarkets in Australia, accounting approximately 80% of the Australian industry (Woolworths, 2017). Here is the discussion about the internal and external environment of the Woolworths Supermarkets and the factors, which impact the growth and performance of the organization in Australian retail industry.
It is very important for each and every organization to understand the impact of external environment on the growth and profitability of the strategies of organization. There are some external factors, which affect the performance of organization. For analyzing external environment, here are two strategic tools, i.e. PESTLE Analysis and Porter’s five forces analysis.
PESTLE analysis includes many factors, like; Political, economic, social, technological, legal and environmental factors. This analysis includes how these factors affect Woolworths Supermarkets and all over retail industry in Australia (Arli, Dylke, Burgess, Campus & Soldo, 2013).
Woolworths is a well-known brand name in the retail sectors, which is taking advantages of close Economic Relation Trade Agreement between New Zealand and Australia. This organization carries two countries where Woolworth is running its business operations in a sole economy. This organization and its shareholders, whether domestic and foreign, are very safe in political strength of both the nations. On the other side, there are some political conflicts, which discourage the investors and businesses from investing in the supermarkets because there is a risk of having low return on investment and more risk of business letdown (Barney, 2014).
There are some economic factors, which are favorable for Woolworths Supermarkets, because both the countries, New Zealand and Australia have environment with the economic stability. Both the countries have maintained a higher living standard in comparison to other nations. Apart from this, the position of company has been affected adversely due to global financial crisis. Due to this global crisis, the organization had closed its business operations in United Kingdom and it faced a considerable loss. Still, the organization is able to perform in an effective manner regardless of this financial trouble (Chung, 2016). The economy of Australia is supporting Woolworths Supermarkets in continuing its business operations after closing in UK.
In modern environment, people prefer to purchase the products from the organizations, which focus on being environmental friendly and commit to offer organic and products with green-tag. So, Woolworth is one of the organizations, which has engaged in setting the trends for healthier and greener life style. It has used various eco-friendly tools and techniques in its sustainability strategy. It is engaging in the corporate social responsibility. It is considering the needs of consumers with a short period for shopping (Cole, 2013).
Technological factors play an important role for the organizations in retail industry. Woolworths is engaged innovation and developing the better technologies that can assist in increasing the effectiveness and efficiency of its products and services ad fulfill the needs and expectations of customers. The organization has installed self-checkout machines in the retail stores. The machines of its retail stores enabled the customers to scan and make payment for the products and groceries via credit and debit cards or cash (Cheng, Green & Ko, 2014). As the people are actively engaged in using new technologies, so they are positively influenced with the technology innovations of Woolworths.
The trading policies of government and other policies impact the retail sector in Australia. The consumer commission, competition and Trade Practicing Act and other trading policies in Australia have positive impact on the supermarket business in the country. So, it can be stated that regulatory and legal factors are favorable for the growth and development of business of Woolworth’s retail business.
The environmental aspects of retail sector is indicated in the form of using the eco-friendly practices in the business and engaging in the processes that decrease the harmful impact on people and environment (Dwivedi, Merrilees, Miller & Herington, 2012). This organization is engaging its resources in minimization of the carbon footprint of the organization and with this, it is reducing the wastage of resources like; water. In external environment, there are some environmental factors, which mainly impact the sustainability of the retail business.
Thus, most of the external factors are favorable for the growth of Woolworths in the country.
Porter’s Five Forces Analysis
Porter Five Forces analysis is a model, which can assist in analyzing the situation and trends in the perspective industry. This model evaluates the current situation of the industry and the ways in which various factors impact the company’s performance (Dos Santos, Svensson & Padin, 2013).
In Australian retail industry, the rivalry among competitors is intense. There are so many competitors in the industry, like; Wesfarmers, Coles, Asda etc. that are competing against each other for gaining large market share. In the industry, the competition is majorly based on price factor, but other factors of competition are such as; location of stores and product choice. The industry is increasing due to some driving factors; one is the entry of American supermarket, i.e. Costco and turn-around of Coles (E. Dobbs, 2014).
Threat of new entrants
Threat of new entrants is low in the retail industry in Australia, because already established larger companies have made the entry very difficult. It is not easy for new players to enter the industry. There are some reasons, like; establishing a retail business with a number of retail stores and higher quality to compare with its competitor, like; Coles requires a high amount of capital (Eden & Ackermann, 2013). Moreover, Woolworths and its large competitors are governing players, having access to different channels of distribution and well-known brands in the retail sector.
Bargaining Power of Suppliers
For Woolworths, the bargaining power of supplier is moderate. There are two major leading players, i.e. Woolworths and Coles, which are controlling over 80% of the retail industry. This bargaining power of suppliers changes in the supermarkets depending on the brand name of suppliers and size of retailer. There are some large suppliers, like; Coca Cola, British American Tobacco, which have strong power in the area of supermarket (Fernie & Sparks, 2014). Therefore, the bargaining power of suppliers in Australian retail industry is higher to moderate.
Bargaining Power of Buyers
In the retail industry, retail and supermarkets provide mostly similar products that have low switching costs among stores and offered purchasers with very high bargaining power. Customers have several options to buy the grocery and packaged food products. To meet the needs and demands of the customers, the companies are making effective strategies and becoming highly competitive in the industry.
Threat of Substitutes
In the retail or supermarket industry, there are so many substitutes for customers, like; grocery stores, online stores, convenience stores, pharmacies and fresh food markets (Flax, Bick & Abratt, 2016). In the country, the customers are ready to pay comparatively higher prices for their convenience, for instance; close to their homes, easy parking, no waiting time or queues etc. So, the threat of substitutes in retail industry is medium to high.
Thus, the major threats for the company are threats from competitors and substitutes in the retail industry.
Analyzing internal environment is very important for recognizing the strengths and weaknesses. Evaluating the strengths and relationships among processes, which create a value chain of the firm can be the resources of revealing the possible resources of competitive advantage for the organization. For instance, the weak performance in the year 2011 caused several supermarkets to look back at business model and to evaluate the opportunities in the online business, in an atmosphere, where the confidence of customers is weak (Ho, 2014). So, from internal analysis, an organization can shifted in the market with new products and services by adjoining its weaknesses. Here is the discussion about the different components of internal environment at Woolworths Supermarkets.
Resources, capabilities and core competencies
Effective Supply Chain Process
Distribution network and supply chain of Woolworths work as both the resources and capability as well. It works in both the out-bound logistics and in-bound logistics. The relationship with suppliers is highly valuable because it is a major cost-savings, which are attained during its entire supply chain network and logistics process. This resource and capability enabled the Woolworths to attain comparatively higher EBIT than Coles (Keith, 2012).
Woolworths has made a great brand reputation over past years. It was done by providing consumer experience with its products and services that can be recognized to its inflexible quality evaluation processes in its supply chain network. The brand reputation of the organization is valuable, because it offers significance differentiation to the competitors, like; Coles and Wesfarmers (Landrum, Gardner, & Boje, 2014). This resource of the organization is contributing to the higher customer satisfaction. This resource is neither rare, nor difficult to imitate.
Effective Top Management
Even there were increasing rates of inflation and recessionary pressures, but still Woolworth is able to attain the growth rates at higher levels (Ho, 2014). It is contributed to the top management of Woolworths. Its top management is significant resource that is enabling the organization to effectively compete with Costco in the coming future.
Innovation and Integration
Woolworths Supermarkets have implemented different projects and innovations, inclusive of “new idea program” and “re –fresh”. There are so many processes at Woolworth’s retail stores, which reflect its innovative capability in the competitive business environment. Moreover, the organization is vertically integrated its supplies by generating its inputs to enhance its market coverage and to react to the trends at private level (The Guardian, 2017).
Woolworths Supermarket possesses more efficient and effective employees and workers in comparison to its competitors, like; Coles. The organization prefers to hire the people of middle aged and who have experience in the field. In addition, it emphasizes on conducting training and development program for employees. In the year 2011, the company invested $60 million in education and learning program across its branches.
In-store services of Woolworths Supermarkets are mainly focused in the strategy priority of Woolworths. The organization has offered a number of in-store services to its consumers, for instance, delivery service for some specific products and purchases in a day with reasonable prices. Fresh food initiatives of Woolworths helped the organization in expansion of new in-store kitchen to serve the different tastes (The Guardian, 2017).
Thus, these resources and capabilities are effective for the organization. They are leading the organization to gain higher competitive advantage against its major competitors, i.e. Coles, Wesfarmers etc.
However, the internal and external environment factors are favorable for Woolworths Supermarket, but still there are some issues, which are hampering the performance and productivity of the organization.
Environmental and community issues
According to a research, Woolworths Supermarket is facing the issues related to environment and community. People are demanding more information about the products, like; where the goods and products are coming from and they are expecting products to possess environmental and ethical characteristics without increasing the costs (Rothaermel, 2013). It means the customers of Woolworths are demanding “Value with Values”. With this, organization is facing some transformational and social issues in the country and the people wish to see the job opportunities, which are created and retained by the organization, which they assist.
Threat from competitors
There are so many players in the industry, which are posing threats to the growth of Woolworths in Australia and South Africa. The biggest threat to this organization is the growth of cut-cost supermarket competitors, like; Aldi and entry of other global rivals, i.e. German supermarket, Lidi. These new entrants in the market are dangerous is not only for their capacity to gain their market share, but Aldi has over 10% but the major pressure is on the margins, which these low costs and home focused retailers produce (Morschett, Schramm-Klein & Zentes, 2015).
Weak Staff morale
Although, Woolworths is conducting training and development programs for motivating its employees, but still they are facing the issues related to weak staff morale. The morale of staff and suppliers is comparatively low at Woolworths because of disengagement and lost sales opportunities. There is high staff turnover, which is making it very difficult to adopt new strategies and focused on the requirement to shake up the culture at Woolworths Supermarkets (Chung, 2016).
Thus, the organization is facing these issues in external and internal environment. Now, it is using some effective ways and strategies to deal with these issues.
To deal with these issues, Woolworth supermarket should implement effective strategies in its business operations. The organization should invest in the advertising and promotional campaigns, which promote environmental concerns. Hereby, it is recommended that Woolworths should focus on an enjoyable shopping experience and convenience of customers. It should have enthusiastic, cheerful and helpful staff members, so that the customers may have the good shopping experience. Moreover, it should engage the employees in the processes of organization. Along with the customers, the organization should focus on employees and enhance their morale by conducting motivational programs.
From the above analysis, it can be concluded that Woolworth Supermarket is a leading player in the retail sector in Australia and New Zealand. From the PESTLE analysis, it can be said that the external factors are favorable for the growth of organization in the country. From the Porter’s analysis, it can be concluded that Woolworth is facing high competition in the retail industry with the high threat of substitutes. Moreover, the organization has many resources and capabilities, which are enhancing its growth in the market. Despite of this, the organization is facing some issues related to staff, competitors and community
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