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Business Strategies Of Woolworths

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Question:

Discuss about the Business Strategies of Woolworths.
 
 

Answer:

Woolworths supermarket, a famous retailer chain in Australia holds at least 78% market and it encounters a strong level of competition from Coles, which is another grocery and supermarket outlets in Australia. Woolworths enjoys duopoly in the Australian supermarket industry with 82% market share. The specialisation of Woolworths involves selling vegetables, meat, fruits, daily stationeries, DVDs and magazines (Woolworthslimited.com.au 2016). More than 981 outlets are operated in the various cities of Australia and headquarter of this company is in New South Wales. Brad Banducci holds the position of the director of Woolworths supermarket and the slogan of this company is The Fresh Food People. The sales revenue of this company is more than AU$40.123 billion at the end of 2015. The main agenda of Woolworths supermarket is to provide only 100% fresh products to their customers from the Australian growers and farmers.

Major strategic issues

The current growth of the business of Woolworths is solely based on the better understanding of the management regarding the actual demands and criteria of the consumers in Australia. Arliet al.(2013) have mentioned that the concept of retailing has been constantly changing in this contemporary era as it has a large scope and possibility of dynamic and exciting business future. Even the shopping behaviour and attitude of the customers are constantly changes and it is the major reason of the increasing business success of Woolworths supermarket in Australia. The business experts and the marketers of Woolworths have made effective strategies in order to determine a complete new phase of opportunity and growth. Like the other companies, Woolworths also keep it consumers in the priority list and every change in their business strategies are directed to provide a perfect shopping experience with high quality products to them (Phillipov2012). Woolworths supermarket helps its customers with a perfect facility of shopping when they want to with the online shopping website. The innovation in technology rapidly changes the online shopping trend throughout the world and the management of Woolworths engage software developer for making changes of the online shopping website in order to provide the customers more facilities and availability of products to the consumers. Even there are facilities of virtual stores with the help of mobile-apps and the perfect door-to-door delivery option. All of these strategies are made by the higher management of the company in order to increase the customer base and customer loyalty.

 

Losing loyal customers:

Woolworths encounter a problem of losing its existing loyal customers to its competitor companies, which directly influence its annual sales revenue and ultimate profitability. Woolworths Rewards strategy is another important strategy employed by the management, which is very significant loyalty program for its existing customers. After incorporation of these strategies, Woolworths supermarket enjoys at least 18 million customer base every week and this number is constantly increasing day by day. The online strategy of Woolworths involves the easy process of online shopping of products (Ariyawardanaet al. 2016). Even the marketers and business experts of Woolworths provide relevant and adequate information regarding every product, which they sell for helping the customers to choose their preferred products. Even Woolworths provide a great facility of choosing the products online and collect it from the supermarket outlets. The marketers  promotes, advertise and launch the new products with a vast use of social media platform, such as Facebook, Twitter, Snap chat, Instagram and blog in order to attract the new generation of Australia. There are different gift cards for different offered items by Woolworths. Baileyet al.(2015) have mentioned that customers are at the heart of any kind of business. Woolworths understand this and selected few customers as their corporate customers, who are very regular to buy products from Woolworths. Mobile money app strategy of Woolworths helps the customers to keep a track of the balance of gift cards and buy products online for availing doorstep delivery (Jie 2012).

Issues regarding technology challenge:

The management of Woolworths after facing a severe strategic issue within the competitive retail market of Australia has recently introduced the online shopping website. Therefore, the management analyses the present trends and starts to offer products on online. Even, the innovation strategy of Woolworths involves fresh Sushi bars for the customers in order to offer them an appropriate choice of healthy meal. There is also outlet development strategy, which includes in-store facilities of collecting seafood from specific counter and selects a tasty sauce and the experts put it in a ready to cook bag, therefore it provides seafood of restaurant quality in home.According to Keith(2012), business strategy helps an organisation to achieve its goal and objectives within fixed period and holds thebest position within the market and hold desirable market share at the end of the annual year. Woolworths stocks strategy of lamb and beef is also outstanding as while storing these easily rotten products, the staffs follow the Meat Standards Australia in strict manner. The CEO of Woolworths, Ian Moir always concentrates on the profitability and costs down with proper implication wining strategies. Woolworths’ credit card strategy involves an automatic tracking of the purchase in the supermarkets. This shopping card also give pay back points to the card, therefore, the consumer can avail the discounts on their next purchase.

Competition issue:

Woolworths will face a huge level of competition from its existing competitor companies like Coles and Aldi in near future. Even there are possibilities of new entrants, which may come with innovative strategies to destroy the leading position of Australia. Therefore, Woolworths should change its present strategies in order to prevent the possibilities of new strategic issues that will hamper its business and brand name. There are also seasonal offer strategy followed by Woolworths supermarket, which gives the customers flash sales and discounted coupons for buying selected products. With all of these above-mentionedstrategies,Woolworths enjoys its superbly managed and unique retailer position in Australia.Gupte and Doyle(2014) have mentioned that all of the strategies are made by the business experts in order to increase the sales revenue for easy success of an organisation. The brand strategy of Woolworths plays the role of winning strategy, as this company always provides fresh products to the customers for retaining the customer loyalty. With employing this particular business strategy, Woolworths creates a strong and vast customer basein the various cities of Australia (Woolworthslimited.com.au 2016).

Issues regarding promotion and campaign of products:

As the population of Australia and New Zealand is constantly increases, therefore, Woolworths faced campaigning and promotional issues i order to attract a large number of consumers. In the promotional strategy of Woolworths, the business experts and the marketers incorporate innovation and creativity in order to attract the new customers and retaining its existing customers. The marketers have used social media platform essentially in order to promote and launch new products, the seasonal sales, offer and the quality of the offered products in the supermarket and online shopping website. Woolworthscampaign strategy is also amazing as during the launches of any kind of new product, the management organises street campaigns and outlet campaigns for attracting the customers. The higher authority of this company also engages lump sum money on the branding and promotional strategies as it determine the future success of the entire business of Woolworths. Richardset al.(2012) have mentioned that every organisation creates strategies in order to compete with the competitor companies in this competitive business world. Similarly, all of the above-mentioned strategies here will help Woolworths to retain its strong and leading position in the supermarket retail industry and give a tough competition to Coles in Australian market. The business experts have thoroughly examined and analysed the current market situation before creating a completely new business strategies for business future. Even these strategies are updated with the constant requirements and demands of the consumers of Australia and no business strategies are fixed in this competitive market. According to Budisantoso and Teoh(2013), every organisation should transform the existing strategies in order to cope up with the contemporary market.  Woolworths as planned of rebranding of the private label ranges for satisfying the demand of shoppers of Australia and combating the gradual growth of the new threat Aldi, which operates its business in the supermarket retailer industry in Australia. All the strategies are made for fulfilling the expectations of customers and to maintain a good awareness of the quality and standard of food (Woolworthslimited.com.au 2016).

 

PESTLE Analysis

According to Zurzoloet al.(2013), PESTLE analysis of an organisation usually helps to understand the existing external factors, which has a great power to impact the business operation of it.

Political

·         Political environment of Australia has direct impact on the business operation of Woolworths.

·         Some instability of various regions also influences the business of this company.

·         Wuet al.(2015) have mentioned that political condition has the capability to shape and design the entire business environment of an organisation.

·         Australian government provides effective business opportunities for further growth of Woolworths.

·         The stable political condition of Australia also influences the foreign trading partners and investors to invest on Woolworths for better business operation.

·         There is very low chance of low rate of return and any kind of high risk in the Australian market for Woolworths.

Economical

·         Higher unemployment rate of Australia influences the business operation of Australia.

·         However, there was some financial crisis during 2009 in Australia because of global financial crisis.

·         The recession had a great impact on the sales turnover of the company.

·         However, during the global financial crisis, the retail industry of Australia has perfectly maintained a stable position in the market with a fixed market share.

Social

·         Chan(2012) has suggested that as consumers are central force of the sales revenue, therefore every business entity identifies the basic requirements of the targeted and segmented customers before making any plan for sustained profitability.

·         The management of Woolworths is successful to identify the demand of the consumers in this changing shopping trend.

·         Woolworths offer a wide range of essential products to their customers within a pocket friendly price, which its competitor companies, Coles and Aldi fail to provide(refer to Appendix).

·         Woolworths offer discounts on selected products both on their online shopping website and in store.

·         Woolworths launched loyalty program for their regular existing customers.

·         Woolworths always provide 100% fresh products to their customers as the company supports the healthy lifestyle choices and food option.

Technological

·         Woolworths has adopted the process of self service checkout with incorporating the modern technology.

·         The online shopping website of Woolworths provides adequate and relevant information about every product, which help the customers to choose best product according to their choices.

Legal

·         The taxationpolicies of Australian government influencethe entire business operation of Woolworths.

·         Woolworths strictly follows the rules, regulation and legislations regarding employee and recruitment management.

·         Economou(2012) has suggested that any retail company requires governmental authority before opening a new outlet in the market.

Environmental

·         The business operation of Woolworths is environment friendly and it has established policies for waste management.

·         The business experts of Woolworths invest innovative ideas in order to minimise the carbon footprint and reduces the basic wastage of the natural resources.

·         Woolworths supports the recycling practices for a better environment of Australia.

·         The sustainability business practices involve the sourcing process of food products only using approaches, which are ethically sound (Lees and Winchester 2012).

Table 1: PESTLE Analysis of Woolworths

(Source: Lawrenceet al. 2013)

SWOT Analysis

SWOT analysis helps an organisation to know about the internal environment while continuing the business within a particular marketplace (Bailey 2016). Even Woolworths’ SWOT analysis will help to understand the position of its competitor companies, like Aldi and Coles in the retail industry of Australia. However, Australian retail industry is stable and mature and there is less scope of the entrance of a completely new company, which can become the potential threat for Woolworths.

Strengths

Weakness

·         Woolworths enjoy the leading position in the retail industry of Australia.

·         Woolworths possess a strong and stable financial position in the market.

·         Woolworths offer a wide range of essential products.

·         The market share of Woolworths is minimum 63% in the last year.

·         The reputation and brand image of Woolworths are excellent for retention of customers.

·         Woolworths has the better supply chain management in consideration to other existing companies in the retail industry of Australia.

·         The costs of the offered products are bit expensive.

·         The operation cost of the business is too high.

·         The level of debt has been increased.

Opportunities

Threats

·         The strong customer base can increase the sales revenue of Woolworths.

·         In the sector of healthy food, Woolworths has a perfect growth opportunity.

·         The constant incorporation of modern technologies opens up the scope of further growth in Australian retail industry.

·         The increased population of New Zealand and Australia denote the existing opportunities for Woolworths.

·         Growing rate of unemployment is the great threat for Woolworths.

·         The slow growth of Australian economy may influence the business operation of Woolworths.

·         Constant advantages in the modern technology become the potential threat of Woolworths.

·         The suppliers of Woolworths are becoming dominating and it will hamper the entire business process of Woolworths.

Table 2: SWOT Analysis of Woolworths

(Source: Chapmanet al. 2014)

 

Recommendations for Woolworths

Although Woolworths holds the leading position in Australian retail industry for its marvellous and potential business strategies, still the following recommendations will help this company to increase the market share.

  • The management of Woolworths should employ strategies that may reduce the operation costs.
  • The management should engage more number of suppliers than previous in order to reduce their domination.
  • The management should employ completely new strategies, which are more consumers focussed.
  • The business experts should offer relevant policies, which will attract the foreign investors and trade partners.
  • The management should communicate clear and transparent expectations and objectives to the associated employees as they are also an essential part of compelling business future.
  • Woolworths should encourage the process of open communication in between the suppliers, consumers and the employees in order to understand the business activities in proper manner than previous time.
 


All these above mentioned recommendations are appropriate for Woolworths in order to continue its business operations in today’s competitive market. Rivalry is best for an organisation to grow, however, excessive rivalry may hamper the entire business activities of organisation. Woolworths has perfectly understood the process of their business future with proper and adequate incorporation of strategies and opens up a vast scope and possibilities for the suppliers and customers.

 

References

Ariyawardana, A., Ganegodage, K. and Mortlock, M.Y., 2016. Consumers' trust in vegetable supply chain members and their behavioural responses: A study based in Queensland, Australia. Food Control.

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), pp.27-46.

Bailey, J., Price, R., Pyman, A. and Parker, J., 2015. Union power in retail: contrasting cases in Australia and New Zealand. New Zealand Journal of Employment Relations (Online), 40(1), p.1.

Bailey, M., 2016. Absorptive Capacity, International Business Knowledge Transfer, and Local Adaptation: Establishing Discount Department Stores in Australia. Australian Economic History Review.

Budisantoso, T. and Teoh, T.T., 2013. Shopping Experience and Their Influence on Satisfaction in Australia and Indonesia. In Proceedings of the International Conference on Managing the Asian Century (pp. 583-589). Springer Singapore.

Chan, K., 2012. Legislation of a historic but politically unpopular carbon tax in Australia. Carbon Management, 3(3), pp.243-247.

Chapman, K., Kelly, B., Bauman, A., Innes‐Hughes, C. and Allman‐Farinelli, M., 2014. Trends in the cost of a healthy food basket and fruit and vegetable availability in New South Wales, Australia, between 2006 and 2009. Nutrition & Dietetics, 71(2), pp.117-126.

Economou, A., 2012. Meat monopolies. Dissent, (40), p.36.

Gupte, J. and Doyle, J., 2014. Woolworths becomes a'healthdestination'.AJP: The Australian Journal of Pharmacy, 95(1125), p.4.

Jie, F., 2012. The roles of trust and commitment in the Australian Lamb Retailers/Wholesalers. Australian Farm Business Management Journal, 9(1), p.49.

Keith, S., 2012. Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, pp.47-81.

Lawrence, G., Richards, C. and Lyons, K., 2013. Food security in Australia in an era of neoliberalism, productivism and climate change. Journal of Rural Studies, 29, pp.30-39.

Lees, G. and Winchester, M., 2012. Do competing supermarkets generally have the same sort of shoppers?.

Phillipov, M., 2012. ‘Helping Australia Grow’: supermarkets, television cooking shows, and the strategic manufacture of consumer trust. Agriculture and Human Values, pp.1-10.

Richards, C., Lawrence, G., Loong, M. and Burch, D., 2012. A toothless chihuahua? The Australian Competition and Consumer Commission, neoliberalism and supermarket power in Australia. Rural Society, 21(3), pp.250-263.

Woolworthslimited.com.au (2016) Home Page Available at: https://www.woolworthslimited.com.au/ [Accessed on Sep 22, 2016]

Wu, J.H., Neal, B., Trevena, H., Crino, M., Stuart-Smith, W., Faulkner-Hogg, K., Louie, J.C.Y. and Dunford, E., 2015. Are gluten-free foods healthier than non-gluten-free foods? An evaluation of supermarket products in Australia.British Journal of Nutrition, 114(03), pp.448-454.

Zurzolo, G.A., Koplin, J.J., Mathai, M.L., Taylor, S.L., Tey, D. and Allen, K.J., 2013. Foods with precautionary allergen labeling in Australia rarely contain detectable allergen. The Journal of Allergy and Clinical Immunology: In Practice, 1(4), pp.401-403.

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