Woolworths Strategic Management

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WOOLWORTHS STRATEGIC MANAGEMENT 3

WoolworthsStrategic Management

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Strategicmanagement entails the design and application of the primary goalsand initiatives undertaken by an organization’s top management. Theimplementation considers the resources and evaluation of internal andexternal environments which affect the company. In a global context,the corporation considers the dynamic nature of internationalmarkets. Before venturing into the international market, it is vitalto understand the different dynamics involved. For instance,essential commodities are affected by the fuel prices. Therefore,whenever the prices of oil and its products are hiked, so does theessential goods such as food. Additionally, the global market isquite competitive. Due to the intense competition, some companies candominate a particular industry. For instance, Norsk Hydro is adominant firm in the fertilizer industry. Conferring to Porter’sGenericStrategies,there are three core approaches of staying competitive in themarkets. The three aspects are also vital when venturing into themarket. They include cost leadership, differentiation, and focus. Inaddition to that, the three facets were broken down further toinclude cost focus and differentiationfocus.

WoolworthsLimited is one of the leading retail companies in Australia and NewZealand. Ever since it was founded, the company’s principle hasbeen to ensure every man, woman, and child has access to the rightthings at an affordable price. Its key operations include liquorretailing, supermarkets, pubs, and hotels. It serves over 28 millionclients per week. The company’s business development plan isfounded on four main strategic priorities [ CITATION Woo16 l 1033 ].They include:extending their leadership in food and liquor, incorporating theenablers of novel period of growth and development, ensuringconsistency of building fresh growth businesses, acting on theportfolio to maximize the shareholder value.

Therefore,this paper will discuss the key strategies of venturing and stayingcompetitive in the industry. Understanding the strategies will assistto determine the most suitable approach for Woolworths. In additionto that, the paper will utilize porter’s five forces to conduct theenvironmental analysis in relation to Woolworths. These aspects willassist Woolworths to venture into the global markets.

TheCost Leadership Approach

Accordingto this approach, a corporation can gain competitive advantage andheighten profits by minimizing costs, but vending at industry-averageprices. In other words, a company reduces its costs and maintains theprices of the goods and services thereby increasing profits. Costleadership is also achieved through increased market share andlowering of prices. A company lowers the prices of the products andservices and increases its market share. In that regard, thecorporation maintains a reasonable profit margin by increasing itsmarket share. For this strategy to be efficient, a company must havevery effective logistics, access capital with ease, and low-costbase, that is, labor, facilities, and materials [ CITATION MDF16 l 1033 ].

TheDifferentiation Approach

Acompany that utilizes this strategy must ensure its goods andservices are distinctive from the competitors. The services have tobe more attractive than fellow competitors to entice customers. Itmostly depends on the kind of industry. When a company is venturinginto the market, it is important to establish whether the productsare unique to draw more customers. For the approach to succeed,organizations must ensure that research, development, and innovationmust be efficient, goods and services delivered must be of highquality, the sales and marketing team is efficient. This approachusually fits large organizations who have loyal customers [ CITATION MDF16 l 1033 ].

TheFocus Strategy

Inthis method, a company focuses on a particular niche market,comprehends their distinctive needs as well as the market dynamicsbefore developing unique products at favorable costs to fit themarket. This particular approach is favored by companies having loyalcustomers since they are met at their point of need. However, it isless appealing to competitors [ CITATION MDF16 l 1033 ].

Choosingan appropriate strategy depends on the organization and the targetmarket. For instance, in the technology industry, companies couldgain more by indulging in focus differentiation. In other words, acompany establishes the needs of its consumers and produces uniqueproducts to meet the respective demands. Due to the competitivenature of the global market, companies have to be unique in more thanone way to attract a considerable customer base [ CITATION Bus13 l 1033 ].

Retailingis a dynamic endeavor that requires substantial information beforeventuring. The growing customer needs and demands have streamlinedthis industry to the extent that companies must be efficient. In thatregard, Woolworths works by the above strategies to appease itscustomers. Through acquisition and expansion, the company has managedto dominate the industry especially the supermarkets. It has a chainof supermarkets representing 31 percent of the market share(Majumdar, 2011). The company’s revenues hit $3.3 billion in the2011 financial year, with roughly $3.1 billion from the Australianmarkets and another $196 million from New Zealand [ CITATION Maj12 l 1033 ].

StrategicOption: Environmental Analysis

Toestablish the best strategic choice, it is important to analyze theexternal environment. One of the external aspects entails thelegal/political system. The system has a direct impact on Woolworth.It controls the trading hours as well as the ethical standards. Inrecent years, there has been a rise in alcohol-related diseases. Inthat regard, the government has attempted to control the liquorcompanies. Technology is another environmental aspect affecting thecompany. Due to the advancements in technology, the corporation hasadopted current technologies to keep hold of its customers. Forexample, it was the first retail company to subscribe to the GlobalElectronic Marketing and Merchandising Network (GEMMnet). The companyalso invested immensely in advancing its supply chain as well as thedistribution system resulting in significant cost savings. Onlinefacilities have also exposed the company to global markets [ CITATION McG12 l 1033 ].

Socio-culturalis another facet that impacts on Woolworths. Over the years, therehas been an increase in societal concerns emanating from foods. Theattitudes, lifestyles, and concerns have drastically changed thesupermarket industry across the globe. People are more aware of theobesity and health issues. Hence, the demand has shifted towardslow-fat and GM-free foods. Additionally, there is an increasedparticipation of women in this industry [ CITATION Ala11 l 1033 ].

Porter’sFive Forces Assessment

Porter’sfive forces are also necessary to comprehend the structure of anindustry. Based on the effects, Woolworth’s market position can bedetermined. The five forces include:

  1. Bargaining power of the buyers: In Australia, the supermarkets provide virtually homogenous goods with low switching prices between the stores. This gives the customers exceptional bargaining power. In other words, the consumers have very high bargaining power that forces supermarkets to customize their services.

  2. Bargaining power of the suppliers: This aspect is dependent on the suppliers’ brand name and the supermarket’s size. Coca-Cola is one of the leading traders dealing with supermarkets. Therefore, providers within Australia have high to moderate bargaining power.

  3. Industry substitutes: The supermarket industry has several substitutes. Some of them include online stores, pharmacies, grocery stores, fresh food markets, convenience stores, non-affiliated petrol stations, and delicatessens. Buyers are ready to purchase items at high prices e.g. easier parking or closer to homes rather than supermarkets. In that regard, substitute’s availability is moderate to high.

  4. The threat of fresh entrants: The supermarket industry is not enticing due to the low pricings and profit potential. The high price of land, government restrictions, and large capital requirement hinders new entries. Existing players are also quite dominant since they have strong relations with their suppliers. Such features prevent new entrants from venturing into this industry.

  5. Rivalry among the competitors. There is intense competition between players in this industry.

Fromthe strategies mentioned earlier, Woolworths Limited would benefitmore from the cost leadership approach. In this plan, the companywill ensure all its products are charged within the market price. Inaddition to this plan, a shift in organizational behavior could alsobe beneficial. Companies such as Starbucks practice a mechanismwhereby Employees are regarded as partners. Therefore, they are givenpriority when it comes to shareholding. Since Woolworths wants totraverse across the globe, it ought to involve their employees evenin profit sharing. When an employee is treated as a partner andallowed to share the benefits, he/she will work extra hard inmarketing [ CITATION Woo16 l 1033 ].

Thisstrategy also needs the company to be flexible. Flexibility can beachieved by embracing diversity. Around the globe, people differ inculture. For instance, the goods people purchase in Australia mayvary in America or Africa. Therefore, for the company to attractcustomers in the different countries, they must adopt the respectiveculture and provide products in line with the customers’ needs. Agood example can be drawn from Starbucks. The company has a widerange of products and services that suit the different countrieswell. When they venture in China, they provide goods and servicesthat are in line with the Chinese people. In the same manner,Woolworths Limited could utilize the same mechanism to sell itsproducts in new markets [ CITATION Gee10 l 1033 ].

Asa matter of fact, Woolworths’ dominance could be extended if itventured more on the health food sector. In addition to that, thecompany should lay more infrastructures to improve the onlineservices. The company wants to extend its boundaries to othercountries around the globe. It is predominant in Australia and NewZealand, but further strategies can be incorporated to make it aglobal entity [ CITATION Woo15 l 1033 ].

Thecost leadership technique mandates companies to adopt mechanisms thatmake prices favorable. One fruitful method is giving discounts. Sincethe company offers products online, customers can incur slightlylower shipping charges. Apart from that, if a customer purchasesgoods above a certain level, the shipping costs can be ignored.Discounts attract most customers.

Conclusion

Strategicplanning can be quite complex during expansion of a company. Theprocess requires a comprehensive market research to determine theclient needs. Porter’s five forces can ascertain the type ofmarket. Additionally, there are three key strategies for venturinginto a new market and staying competitive. The approaches includedifferentiation, cost leadership, and focus strategy. WoolworthsLimited is dominant, especially in the supermarket industry. However,it could achieve more by appreciating the cost leadership approach toentice more customers. The strategy would ensure products are offeredat friendly prices. In addition to that, adopting a mechanism whereemployees are regarded as partners and allowed to own shares wouldheighten their morale to market the company. The corporation mustalso embrace diversity to venture into the global markets.

BIBLIOGRAPHY

Arthur, T., Strickland &amp Gamble, J., 2015. Crafting and Executing Strategy: Concepts and Readings. S.l.:MCGRAW.

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Greenblat, E., 2013. Lion boss adjusts to supermarket duopoly, s.l.: s.n.

Ken, M., 2012. Senator Nick Xenophon moves to smash Coles and Woolworths duopoly. [Online] [Accessed 25 August 2016].

Majumdar, A. a., 2011. Strategic management.

Majumder, N., 2012. Strategic Management: Woolworth Limited, s.l.: s.n.

MDF Tool, 2016. Strategic Options. [Online] Available at: http://assets.sportanddev.org/downloads/strategic_options.pdf[Accessed 25 August 2016].

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Woolworths Limited, 2016. Strategy and Objectives. [Online] Available at: http://www.woolworthslimited.com.au/page/Who_We_Are/Strategy_and_Objectives/[Accessed 25 August 2016].

Woolworths, 2015. Woolworths Holdings Limted Business Journey Report, s.l.: s.n

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