The aim of this study is to analyze on the strategic management practices of Woolworths limited. Woolworths limited is one of the major Australian retail organizations and is ranked second largest in the globe in terms of revenue. The main operations of this company involve liquor retailing, hospitality, restaurants, pubs, and departmental stores. This company came into news for the past two years due to its low financial performance. Woolworths attained a revenue of 60,868 and 58,276 dollar in 2015 and 2016 respectively, which is quite less as compared to the past ten years. However, the profit of this organization also declined in 2015 and 2016 in comparison with previous years. This highlights that thus entity’s strategic management practices was not successfully implemented in the last two years. This study also highlights on how the implementation of strategic management gain competitive advantage. Further, recommendation for stimulating management practices is also analyzed in this study.
Strategic management practices in Woolworth
The vision of Woolworths is to deliver the customers proper experience of shopping every time. The company’s goal is to understand their customers through business excellence and by providing proper knowledge about their products (Wheelen,and Hunger, 2017) The main strategic concern for this entity is to grow up multi-types of retailing that includes low product price, high quality goods and services in order to meet the requirement of customers. In addition, expanding its leadership role in each segments of the market, utilization of portfolio and maintaining proper financial track record are some other strategic management that they implements for expanding their business growth and attaining highest rank in the competitive marketplace.
This organization strategies to innovate the product according to the customers tastes and preferences for satisfying them to the maximum extent. The company’s strategy towards their workers aims to provide good business environment and proper pay for their work. The corporate strategic priorities that the entity follows includes-
- Extending leadership in liquor- Woolworths sets up marketing campaign of enhancing growth of the business and provide value for the stakeholders for expanding their market share in Australia (Hitt et al., 2012). For the past two years, the company did not concentrate on the promotional activities including advertisement and hence this reduced their overall sales.
- Developing their portfolio for maximizing shareholder value-The company develops a strong portfolio in order to attract more customers from the market.
- Placing the enablers in new growth area- Woolworths implements new policies in order to perk up relationship with their shareholders in the long term and tries to provide value for these shareholders by investing in business. They also try to change staffing policy for gaining benefit of using best international talent. The entity’s supply chain facilitates them to attain higher profitability in the business.
The external environment also influences their profitability and strategies in business. The external environment is mainly divided into two parts that includes- macro-environment and industry environment. The macro-environment refers to the general influence variable while industry environment relates to the factors that influences outside the boundaries of the organization.
The factors that influences strategic management practices in the industry are analyzed by applying strategic tool such as Porter’s five forces and PESTLE. The Porter’s five model is one of the theories that aid in explaining the strategic management of Woolworths:
Suppliers bargaining power- As there are many large firms in the industry that holds huge market share, large number of goods are being sold in the market. This raises the bargaining power of manufacturer, which means their suppliers have weak bargaining power.
Customers bargaining power- The purchaser’s bargaining power with respect to retail industry in Australia is considerably higher as there are huge number of retail stores that sells basic necessity goods to the consumers. However, as the customers have many options in selecting the goods, their power of bargaining automatically increases (Wang and Feng, 2012) . This forces the organization in reducing the product price. Thus, Woolworths strategizes to deliver low priced goods in order to meet the needs of the customers.
New entrant threats- New entry threats is regarded as low in this industry as big firms creates difficulty for new entities in entering the industry. As a result, this lowers the new entry threat into the market conditions (Rosenbaum-Elliott et al., 2015). As Woolworths and its rivalries are leading players with access to channel distribution and brand value, new entrant faces huge risk in terms of investment and high competition prevailing in the industry. Though this firms is dominant player, for the last few years they are facing risk from the new entrant in terms of pricing strategy.
Substitute goods threat- The supermarket in Australian industry creates innovative strategies for attracting their purchasers and increasing brand reputation. However, competitive strategy in goods pricing is the vital factor in this retailing industry. Woolworth faces huge competition from rivalries such as Coles as they provides rewind pricing strategy for customers.
Rivalry among the entities- Existence of rivalries including Asda, Coles limits this entity’s market share and add high concentration level (Peppard and Ward, 2016). This competitor’s intensity forces Woolworths to create competitive strategies for differentiating themselves from other rivalries.
Figure 1: Porter’s five forces model
Source: (Authors creation)
The internal business environment helps in assessing the strenghth and weakness of the organization based on their resource availability and capabilities in organizing resources for effective use. Though the company has applied the resources and strategies in effective way, it lowers their financial performance over the last two years.
Strategic management to attain competitive advantage
Recent statistics reflects that the core competitors of Woolworths like Coles have adversely affected their sales performance for the past two years. However, this reflects that the strategic practices implemented in the business were not competitive in this business environment. In order to neutralize rivalries impact on sales, they waves to implement new investment strategy program such as :
- Woolworths strategies to match online pricing of goods with its store pricing
- They plans to focus on improving the product range in terms of freshness and quality in order to attain customers loyalty (Hitt et al., 2012).
- The management of this firm tries to reduce $125 million goods price from 2017 in order to improve its value position to highest competitive level.
- Their strategizes also involves rebalancing capital spending among the stores where there is no existence of branded alternatives.
Woolworths food strategy is also one of the determinant that lowers the business sales performance. The company does not provide new range of options in online process and hence this lowers customer’s convenience. They use 20 metric systems for evaluating their sales performance and this fails to produce accurate results (Hill et al., 2014). Therefore, the company must plan to replace this system with 8 metric scorecard for giving details in their balance sheet. Moreover, refurbishment of 80 stores is included in their strategic priorities for attracting more customers in the market. Therefore, implementation of these strategic management practices will help them in attaining high competitive advantage in the industry.
Recommendations for enhancing strategic management practices in Woolworth
Woolworths must focus few areas that would aid them in enhancing management practice and achieving their strategies. These include:
Cost leadership ethnicity- Woolworths has adopted actions that are designed to deliver products at lower cost (Foss and Knudsen, 2013) Though this strategy has been successful in lowering the prices, the company faces huge pricing competition from rivalries. Therefore, it is suggested that cost- leadership plan must be considered for gaining maximum productivity at low cost.
Proliferation of goods- As substitute goods are present in this industry, Woolworths must implement this strategy of goods proliferation for providing new product range to the customers and meeting their wants.
Strategic alliance- They develops strategic alliance among various operations in the business in order to understand the target markets that includes customers and competitors (Fitzroy, et al., 2012). In order to gain benefit of this strategy, it is recommended that they must combine strategic alliance with reward agenda. This agenda will help the firm to build customers loyalty in long term by offering consumers to gather reward points.
Core competencies and capabilities- The main competencies of Woolworths is their experienced employees in comparison with other rivalries. It has been noted that for the past few years, the employees turnover decreased due to improper utilization of strategies (Dos Santos et al., 2013). Instead of hiring young age laborers, they prefer in employing middle-aged people and this reduces the work efficiency in the business. Thus, it is suggested to shift their focus and search the best talent with the help of recruitment process.
It can be concluded from the above report that strategic management is important in firms for expanding their business and improve their financial performance. Though Woolworths has gained reputation over the years, improper implementation of strategy lowers their brand value and progress in business. However, the organization is being suggested to focus on few strategic priorities in order to move to the highest position in the retail industry. In addition, it is also recommended to understand their rivalries pricing strategy and customers preference before innovating new product.
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