Australian Supermarkets: who will win and when?
Compare and contrast the organisations strategic management practices and outcomes against current research in the area, and evaluate how closely the organisation’s experience fits with the theory. Develop analysis and findings into a professionally presented report.
Case study is an important tool to analysis the different prospective. The given report is presented based on case study. In the given case study template, the discussion is done on various supermarkets. From the case study, Woolworths supermarket is selected that is the biggest supermarket of Australia. In the introductory part of the report, a brief description about Woolworths and major challenges faced by it in Australia is highlighted. Macro environment analysis of any country affects the company in positive as well as negative way. The macro environment analysis includes the political, economic, social, technological, environmental, and legal factor of any country. The PESTEL analysis of Woolworths, Australia is discussed in the report. Every firm has its life cycle stage in which it gone through difficulties. Furthermore, the discussion is carried on life cycle stage of Woolworths in terms of retail industry. Due to innovative strategies of Woolworths, it is able to compete in the supermarkets and became no. 1.
Woolworths is an Australian supermarket founded in 1924. The firm specialises in selling vegetables, meat, fruit, packaged foods, magazines, DVDs, household products, and stationary items. It currently has 1000 stores in Australia Woolworths Group, 2018). Despite of its best marketing strategies, the firm is facing biggest challenge from the Aldi. Besides it, Coles also posing challenge to Woolworths. All these firms are competing with each other as all are offering similar products in the market. There is only little difference between them in terms of strategies. In recent days, it is facing stiff competition from Aldi who provides various opportunities for consumers to buy their daily need product at lower prices. In order to compete with Aldi, Woolworths also started a cost leadership strategy in which it is successful.
Political factors- Political condition of country affects the working of any industry. The political condition of Australia is stable which can benefit the company in long term. Besides this, Australia has better trade relation with New Zealand due to which Woolworths has expanded its market in New Zealand. The government of Australia introduced a policy on removing trade protectionism so that open trade can be possible. By the emersion of this policy, various new firms can enter the market that can hamper the growth of Woolworths.
Economic factor- these factors include economic growth, inflation rates and interest rates which in turn affects the operations of business. In Australia, Woolworths operates in economically sound environment. As Australia has, high standard of living that puts positive impact on the company. As the GDP of Australia likely to expand 2.95% in 2018 that will help the company to have more growth opportunity (Heritage, 2018).
Macro Environment Analysis
Social factors- social factors include consumer’s lifestyle trends, demographics, brand image, and advertising. Social factors of Australia can have positive impact on Woolworths. It is founded that the citizens of Australia mostly prefer doing shopping at one roof. Besides this, they prefer store shopping instead of doing shopping online (Anna Patty, 2016). They tend to choose doing shopping one time in a week. So according to this Woolworths supermarkets are beneficial for them and it can increase the growth rate of Woolworths. The mobile app application of Woolworths will help it in satisfying the customers of Australia.
Technological factor- the technological innovation enhances the organisation growth as well as customer experience. Woolworths started anew service, the service of mobile app in which customers can order products from their home only. This helps the Woolworths in increasing its customer base. Woolworths is targeting to start natural refrigerants by 2020 to reduce refrigerant leakages in its stores. Therefore, Woolworths effectively manage the use of technology (Woolworths limited, 2018).
Environmental factor- Woolworths is successful in fulfilling the social responsibilities that are needed for the environment (News Pty, (2018) The main aim of the Woolworths is to provide quality product to its customer in ethical manner. Besides this, it is working with suppliers in order to improve its environmental practices.
Legal factors- due to easy entry of firms in market, the future of retail industry in Australia will face disruption. Overseas business entered the market with new approach. The new Australian competition law has affected the operation of Woolworths. As per the legal policies in Australia, it is required by Woolworths to adapt fair policy.
- Threat of new entrant- the threat of new entrant in Woolworths is not significant. As setting up of business requires large number of stores and innovative product to compare with Woolworths. Besides it, firms require lot of capital to start its business in Australia. Due to this, the threat of new entrant is less in Woolworths.
- Threat of substitute product- the threat of substitute product is high in Woolworths. In the retail industry in Australia, Woolworths is facing stiff competition from Coles and Aldi. In order to overcome from this threat, Woolworths has adopted innovative strategies such as low price strategy.
- Rivalry among competitors- the presence of many supermarkets is affecting Woolworths. Coles, Aldi and Wesfarmers is the major competitors to Woolworths. The intensity of these competitors forcing Woolworths to adopt effective and innovative strategies to differentiate it from other competitors.
- Bargaining power of customers- the bargaining power of customers is high in Woolworths because most of the Woolworths customers are individual buyers. Therefore, to meet the needs of the customers, Woolworths has adopted low price strategies.
- Bargaining power of suppliers- according to Jurevicius, (2013) more the important suppliers are, stronger they are. In Woolworths, the bargaining power of suppliers is less due to its brand name. Besides this, Woolworths has signed the tight contract for vegetables and fruits. There have also specified the time for delivery to the trucking companies.
In every industry, there are four stage of product that an organisation faces (McAuliffe, 2015). Four stages of Woolworths is discussed below-
Introduction- it is the first stage when company enters the market with its new brand. At this stage, company has to face stiff competition. Woolworths entered in the Australian market in the year 1930 (Woolworths Limited, 2015).
Maturity- at this stage, the sale of the company begins to fall. Therefore, to overcome from the decline in sales, the company at this stage start employing professional managers. The most effective way to increase the competitive position in the maturity stage is through cutting the costs. Woolworths attained most its cost cutting in the warehouse. It made Woolworths competitive compared to Coles. In the past years, Woolworths was better at providing customer service, but Wesfarmers had good reputation in the market.
Decline- in early 2016, the six-year venture of home improvement was closed down. Due to this, it suffered a loss of A$1 billion and approx. 7000 jobs were put to risk at this time. At this time, Woolworths again research the market so that it can get back to its growth stage.
Growth- in recent time, Woolworths is in the growth stage of product life cycle. From the report, it has founded that Woolworths posted a 37.6% profit. Besides it, Australian food sales increased by 4.9% and drink sales increased by $4.5 billion. In order to keep its brand image in Australia, it continuously focuses on adopting innovative strategies.
Woolworths has various core competencies due to which it is the no. 1 supermarket of Australia. It has varied tangible and intangible resources that are main competencies of Woolworths. Logistics of the company is the most important competency in Woolworths. In addition, it has following core competencies-
Innovative strategies - Woolworths work closely with the farmers to offer best quality product to its customers. The fresh food of Woolworths is the biggest advantage of Woolworths. It is one of the most innovative retailers of Australia due to its powerful strategies. Woolworths understands its customer by adopting innovative strategies (Focus Economics, 2018).
Effective human resource and technology- Woolworths has most efficient staff that is major capabilities of its firm. Instead of recruiting young workers, it prefers employing middle age persons by focusing on their training and development (Burns and Dewhurst, 2016) Besides the talented workforce, it spends lot of amount in research to adopt innovative technology.
Strong financial performance- Woolworths has great financial status in the Australia. Due to its strong financial position, the company is growing well in Australia (Knox, 2015). It spends the major cost in find out innovative technologies, in order to fulfil the changing need of the customers. Its ability to open varied stores and strong financial position is the major capability of Woolworths.
The major competitor of Woolworths is Aldi and Coles. Aldi made current strategy “Good Different” to focus on the differences in its own stores that set it different from traditional supermarkets. Besides this, Coles has done a research analysis about the needs of the customer. It analysed that people shop in small quantities (Australian Food News, 2017). So according to the customer needs, Coles is improving the fresh food offering. For future benefits, Coles started a strategy named “personalised weekly special email” in which company will send personalised email to solve the queries. All these strategies and objectives of Aldi and Coles put threats to Woolworths (KPMG, 2018).
Five forces analysis
The business level strategy used by Woolworths is cost-leadership. In the given case study, the company was engaged in price war with Coles. In order to overcome from the competition, Coles lowered the prices of milk that forced Woolworths to decrease the prices to similar level. Besides it, Woolworths started a campaign named as “cheap cheap” so that customers can shop the daily basis products at lower price.
In addition to this, Woolworths adopted a growth strategy. In this, Woolworths analysis the situation that all supermarket face. It started a mobile app technology so that customer can get easy access to their product anytime and anywhere. It understands the need of customer that they want to move affortlessly to shop in a way that suits them.
The both strategy is working well in the Woolworths supermarket. Due to its low cost, customers likes to shop from Woolworths supermarket.
Woolworths should adopt expansion strategy. It should start its business in those countries who are developing. By expanding its business in various new countries, it can get more competitive advantage and earn profit. Besides it, Company should adopt a strategy in which time-to-time feedback will be taken, this will help the Woolworths in knowing the changes that customer want. At every purchase, it should start giving feedback form that customers have to fill. Woolworths have unique competencies like skilled workforce and strong financial position. These competencies is assists the Woolworths to perform better in the market.
Conclusion and future assumptions
From the above discussion, it can be concluded that Woolworths is Australian no. 1 supermarket. It has varied strategies that help it in increasing its brand image. Despite of it, various firms are posing challenges to Woolworths. Aldi and Coles are the main competitors of Woolworths in Australia. All the firms have their own set of strategies. Aldi is posing the biggest threat to Woolworths these days. Due to skilled workforce and innovative technology, Woolworths is able to cope with the competitors. In Oder to Sustain in Competitive Environment, Woolworths is required to set up its business more countries.
In the next 10 years, Woolworths can win the Australian supermarket. Due to its strong financial position and effective human resource, it can spend more in innovative technologies. Despite of this, Woolworths can compete with its competitors due to its brand name and more customer base.
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