In April 2014, Australian retail industry (especially for department chain store) is undergoing an earthquake when the South African retailer Woolworths Holdings Limited (JSE Code: WHL) announced A$2.15 billion acquisition offer to one of the largest Australian department chain store company, David Jones Limited (ASX Code: DJS). On Wed (9th April 2014), David Jones board recommends this $4.00 cash per share offer made by Woolworths. This
action has immediately received significant attention from the public.
Note: Woolworths Holdings Limited (JSE: WHL) is not Woolworths Limited (ASX Code: WOW).
You are now required to use knowledge learned from MGT306 to analyse this real world case in accordance with following instructions:
1. From the vision, mission and core values of WHL and DJS to analyse whether or not this acquisition will fit both of these two companies;
2. Analyse both WHL's and DJS's current competitive strategies (i.e., low-cost provider, broad differentiation, market niche, and best-cost provider, etc.)
3. Use five force model to analyse why WHL want to acquire DJS? What are the competitive advantages for this acquisition?
4. Use SWOT model to analyse if the acquisition is successful, will it strengthen WHL's competitiveness? If yes, will this competitiveness be achieved in Australia or globally?
5. Analyse this South African retailer's international marketing strategies. Why does it choose acquisition strategy?
6. Analyse why WHL choose now to acquire DJS. Is it a good timing for it to implement this acquisition strategy?
7. Analyse if this acquisition is successful, what would be the defensive strategies for their major local market competitors (i.e., Myer, Kmart, etc.) and global rivals (e.g., Inditex SA, Hennes & Mauritz AB)?
Strengths and weaknesses of WHL and David Jones
1. The analysis of the vision and mission of both the firms critically evaluates the fact that both are engaged in delivering the best quality of the products to all its customers. WHL have the desired ability to reduce the cost prices of the products and on the other hand, the primary mission of David Jones Limited to capture the entire market segments by delivering online retail products to all its customers (Dos Santos, 213). This particular acquisition offered can prove to be more beneficial to WHL as this will help in expanding throughout the Australian market segments concerned. the percentage share of David Jones have risen up by 23% which is close up to A$3.91 and this is good for an acquisition of the both the firms concerned.
2. The current competitive strategies as adopted by WHL is to become the low-cost provider throughout the concerned market areas in order to increase the number of customers for the firm (Eden, and Ackermann, 2013). Moreover, it is focusing on differentiation all its products as per the competitors concerned. WHL has created its name as to be the low-cost provider as well as it has the desired ability to reduce the cost prices of the products as per the reliability of the market segments. On the other hand, David Jones Limited is focusing on delivering the finest quality of the retail products by appealing to the customer needs; moreover, it has developed its strong presence throughout the competitive market segments (Ethiraj, 2016). David Jones is also using differentiation in their respective products as like that of WHL to attract a number of the customers.
There is large involvement of the big brands like Zara, H&M etc. throughout the Australian market segments concerned and entry of the new brands offering lower price of products with appropriate quality can affect both of these firms.
WHL has developed its brand name throughout the global market segments by providing satisfactory services to all its customers and thus, the power in the hands of the buyer does not affect the growth of the brand (Hill, 2014). The innovation and creativity in the products have helped both of the firms to retain the buyer power into their respective hands.
The competition level has significantly increased throughout the newer as well as the older brands present throughout the market areas. It has become more important for the well-established brands like David Jones and WHL to maintain their steady growth with the help of new and effective strategies as to gain potentials advantage over the competitors.
Opportunities and threats faced by WHL and David Jones
The concerning market areas critically evaluate the fact that the power is in the hands of the supplier and this helps in providing the desired advantage to the respective organization such as WHL along with David Jones.
There is the critical threat from the similar products offered by many of the well-known firms throughout the Australian market segments such as Zara and many others which need to be reduced with the help of effective strategies.
There are competitive advantages for the acquisition of WHL and David Jones as this will help in increasing the market share as well as it will boost the productivity and profitability of the organization concerned.
· Strong brand presence
· Low-cost service providers
· Ability to cut costs
· Superior quality of products
· Expansion of market share
· Global reach for both the firms
· Lack of collaboration
· Development of one particular brand
· Focusing on building strategies to enhance one particular brand name
· To capture the entire retail market segments throughout Australia
· To enter into other countries
· To expand the global reach effectively
· To increase the growth as a whole by increasing the number of customers worldwide
· Substitutes from competitors
· Entry of newer brands throughout Australian market segments
· Offering of low-cost products
This competitiveness will help in expanding the barriers of the firm throughout Australian markets along with the other countries of the world.
5. WHL wanted to expand their business at the international level and to achieve the competitive advantage on the new entrance of the northern hemisphere market and also to capture the entire southern hemisphere market. The CEO of WHL know Australia very well and also the market of Australia so for them to capture the market of Australia will become easy as DJS is the oldest supermarket of Australia and they have the good brand image. Therefore, it will be easier for WHL to capture the market of Australia by acquisition strategy applied on David Jones (Klein, 2014).
6. WHL chooses to acquire DJS because the company Myer wanted to merge with DJS and expand their business in the Australia. This is the best time for the company to merge or acquire the DJS because in the month of January Myer wanted to merge with DJS but they rejected the offer because of WHL. It is a good time for the company to apply this acquisition strategy because the company will get the competitive advantage on the northern hemisphere and also it will be able to capture the entire southern hemisphere market (Klettner, 2014). The strategy is the best to give competition to the local and the global brand according to their fashion brand. For the company, the time was good as they want to expand their business at the international level and the CEO of WHL knew the country Australia very well. Therefore, they get the benefit of acquisition of DJS as they are the oldest and the branded market of Australia (Renz, 2016).
7. The defensive strategy for the company for both the local and the global competitors is that they have to work hard for the betterment of the market and the organization. In the global competition, the deal provides the power to compete with the international fashion brand like Hennes and Mauritz AB. The deal will create the biggest southern hemisphere brand for the company and for them it will become easier to compete with the local and the global competitors (Ross, 2011). The company has got the scale and the seasonality in the southern hemisphere and for that, they get the competitive advantage for the northern hemisphere.
Dos Santos, M.A., Svensson, G. and Padin, C., 2013. Indicators of sustainable business practices: Woolworths in South Africa. Supply Chain Management: An International Journal, 18(1), pp.104-108.
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2016. Replication in strategic management. Strategic Management Journal, 37(11), pp.2191-2192.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Klein, S., Wöcke, A. and Hughes, J.M., 2014. Leaving home: Relocation choices of South African multinational enterprise (MNEs). African Journal of Business Management, 8(8), p.253.
Kettner, A., Clarke, T., and Boersma, M., 2014. The governance of corporate sustainability: Empirical insights into the development, leadership, and implementation of the responsible business strategy. Journal of Business Ethics, 122(1), pp.145-165.
Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John Wiley & Sons.
Ross, J.W., Beath, C.M. and Quaadgras, A., 2011. The IT unit of the Future: Creating the strategic value from IT. Research Briefing-Center for Information Systems Research MIT Sloan.
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