Woolworths Strategy Essay Example
Woolworths Strategy Essay Example

Woolworths Strategy Essay Example

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  • Pages: 12 (3265 words)
  • Published: November 25, 2017
  • Type: Case Study
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Executive summary Woolworths’ mission statement and main strategy is ‘to deliver to customers the right shopping experience each and every time. ’ Woolworths’ vision is to provide quality products and services to its customers all the time through price strategies, fresh food strategies and human resource strategies. Woolworth’s main strategies are to increase efficiency and be cost effective. To achieve this Woolworths has integrated and implemented several strategies which include every-day low price strategy and; Project Refresh strategy.The every-day low prices strategy addresses this, and attempts to offer customers everyday lower prices through price reductions on all products. Project Refresh is a strategy designed to drive the cost of doing business down.

Organisational structure, staff leadership and stakeholders all play an important role in implementing and integrating strategies. Woolworths’ has experienced great success and should continue along the same path through innovative, tactful and profitable strategies.Woolworths fulfilment of its strategies it due to it core competencies and its ability to reposition itself on the market and efforts to differentiate itself. Woolworths are now recording their first billion

...

-dollar profit. Due to implemented strategies profit is up 24. 3 per cent.

“Earnings before interest and tax topped $1. 7 billion - an increase of 32. 3 per cent” (ABC2006) Table of contents Executive summary…………………………………………1 Table of contents……………………………………………2 Introduction…………………………………………………3 Strategic analysis…………………………………………...

. 3,4,5,6Strategic directions; strategic objectives……………………. 6 Key strategies – current……………………………………. 7 Strategic implementation; general perspective………………7 Key strategic implementation issues…………………………9 Evaluation of strategy………………………………………. 10 Conclusion………………………………………………….

12 Reference……………………………………………………. 13 Appendix……………………………………………………. 14 Introduction. Woolworths limited is the second largest retailer in Australia.

Grocery represents 85. 6 percent of Woolworth’s business. The reminder includes Big W and other variety stores (11.

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%) and specially stores (2. 7%).

Woolworths supermarkets are owned by Woolworths limited, and are a multi-category supermarket chain. Woolworths Ltd has annual sales of $38 billion. Major brands are as follows: Woolworth’s supermarket, Safeway, Metro, Big W, Dick Smiths Electronics and Dan Murphy’s (BUSINESS MONITER2007) (Refer to appendix1) Strategic analysis. Internal and external. Analysis of both internal and external elements helps to define “.

. strategic position and possibilities. [Strategic analysis] allows for strategic management that “manages today from tomorrow” (Viljoen and Dann, 2003) SWOT Analysis. refer to appendix2) •Strengths.

Market share: Woolworths has the advantage of having the largest percent of market share in the retail and fresh food grocery industry. Woolworths is a powerful retail brand and has a reputation of low prices, convenience, quality of service, wide range of products as well as fresh food (which Woolworths is trying to communicate to customers and make a main strength) Location: Woolworths has over 700 supermarkets and serves over 13 million customers Australia wide. There is a Woolworths in almost every major metropolitan shopping centre in Australia.The large number of supermarkets creates convenience and accessibility. Woolworths is operating effectively due to its core competencies, such as its unique retail format, fresh food strategy, 24 hour delivery strategy and the low prices strategy. These strategies combined ensure that food is always fresh and available, which is hard to replicate, giving Woolworths a competitive advantage.

•Weaknesses: Woolworths offers many similar products under one roof which may make it harder for Woolworths to differentiate its “fresh” or “select” brands.Woolworth’s mere size may present potential weaknesses due to the huge span of control. •Opportunities: Woolworths is growing rapidly in

the Australia’s fast paced retail sector. They are moving into new market segments within Australia as well as international markets such New Zealand and South East Asia. Woolworths are always looking at merging or forming alliances with other global organisations for example wow joint venture with the Tata group in India. •Threats: Woolworths experiences ongoing competition threats from other major retailers such as Coles, FoodLand and Aldi.

Woolworths experiences price wars with Coles’ introduction of its ‘price rewind’ strategy, which was in response to Woolworths ‘everyday low price’ strategy. Coles, as Woolworths has superior access to channels of distribution, which is seen as a threat. Woolworths must dominate Coles in this area in order to rise above. Because Woolworths is the largest retailer in Australia they are the biggest target of competition, locally and globally. Woolworths' prospect of expanding to New Zealand may present many opportunities such as increased market share and positive reaction from New Zealand retail customers.

However this may also present weaknesses as the New Zealand market may not welcome the large supermarket as intended. FoodLand enjoys a large market share already in New Zealand. Environment analysis. Pestel Analysis. This analysis is appropriate in providing understanding of Woolworths' internal aspects.

Social: Woolworths encourages its employees to socialise and work in a happy environment. Woolworths has implemented and integrated a broad range of community and environmental strategies to give back to the customer and local communities. Woolworths supports many charities.Technological: Woolworth’s 24 hour delivery strategy needs to be backed up by a fully automated ordering system, which Woolworths have created. Woolworth’s employees use hand held ordering devise that are used everyday in store and allows

ordering to be done instantly.

This reduces stockholding and cost and “…further improves the quality of management decision making” (Treadgold,. 1996) Environmental: Woolworths provides a wide range of initiatives that help to achieve a better and more sustainable environment. In store initiatives include environmentally safe bags. Legal: All staff has the opportunity to be train properly.

All staff is required to have correct food handling and safety knowledge. Porters 5 forces. Specific/industry environment – Porters 5 forces can be used to analyse specific environments such as industry analysis, customer analysis, competitor analysis, supplier analysis. Woolworths is striving for a competitive advantage over other major retailers. The intensity of rivalry in the retail supermarket industry is low as the retail supermarket industry is dominated by only a few large organisations.

The retail industry has a high level of concentration ratio which indicates that a high concentration of market share is held by Woolworths.The intensity of rivalry amongst the large players in the supermarket industry is intense as Woolworth is continuously trying to create a competitive advantage. Because Woolworths have highly perishable products they need to sell stock as soon as possible, as do Woolworth major competitors. Rivalry will intensify as all supermarkets try to off load products at the same time. Woolworths have over come this threat by integrating and implementing their 24 hour delivery service and by creating a new customised supply chain system that supports Woolworths’ strategies.Threat of new entrants: As Woolworths and only a few other major supermarkets dominate the industry and it would be very difficult for new or small supermarkets or fresh food grocers to complete on the same level.

Woolworth’s market

share, size, number of locations as well as power and profit makes is hard for many to enter this industry in Australia. Bargaining power of suppliers: Woolworths has many suppliers and needs to be particularly careful in how they use their power to attract quality farmers and producers that will support Woolworths’ strategies and mission statement.Threat of substitute products: All of the major supermarkets in Australia offer substitute products. Woolworths needs to employ strategies to retain customers and build brand loyalty. Woolworth is subjected to price competition from its competitors. Aldi offers imported brands at very low prices and Coles is constantly having employing price strategies in response to Woolworths' prices and strategies.

Bargaining power of customers: Woolworth’s customers are highly powerful as they can easily switch to other major supermarkets who offer similar products.As supermarket products are standardised Woolworth’s needs strategies in place to differentiate itself from the competition such as project refresh strategy Strategic direction: strategic objectives (satisfy key stakeholders) Woolworths’ mission statement and main strategy is ‘to deliver to customers the right shopping experience each and every time. ’ Woolworths’ vision is to provide quality products and services to its customers all the time through price strategies, fresh food strategies and human resource strategies.Woolworths provides appropriate training and development programs, in order to achieve the ultimate goal; fresh produce, best service, lowest prices.

Woolworths’ mere size and dominance satisfies key stakeholders, new or small competition may not be able to compete due to Woolworths’ high market share. Woolworths holds the largest number of shareholders in Australia (Treadgold 1996) Woolworth is trying to encourage not only customers but also employees to become shareholders.

The Employee Share Plan gives employees the option to share in the Woolworths’ success.It was created to provide all eligible employees the opportunity to buy shares in Woolworths LTD and gain a loan from Woolworths, with 10 years interest free.

(Woolworths Limited2007) Key strategies – current •Woolworth’s main strategies are to increase efficiency and be cost effective. To achieve this Woolworths has integrated and implemented several strategies which include; •every-day low price strategy and; •Project Refresh strategy. Other strategies: •Increase service levels, customers bases and market share strategy •Create competitive advantage, increase profit strategy and build a strong brand image •Diversification strategy: Expansion and market share increase strategy. Strategic implementation; general perspective (how will they work) Increase efficiency and be cost effective: •Every-day lower prices strategy. Woolworths' strategy is to offer customers very low prices all the time, not just sale specials.

The every-day low prices strategy addresses this, and attempts to offer customers everyday lower prices through price reductions on all products. For Woolworths Every-day lower prices strategy to deliver as it promises to customer, while also making a substantial profit from price cutting, an everyday lower cost strategy must be in place.Woolworths have responded by implementing and integrated the Project Refresh strategy. •Project Refresh strategy.

(supply chain strategy) This strategy was implemented to ensure that the every-day lower prices strategy work as it was intended and produce successful results. Project Refresh is a strategy designed to drive the cost of doing business down. What project refresh hopes to achieve is a new, more time and cost effective and efficient supply chain. Woolworths have responded to this need by building and entirely new supply

chain system.

So far the first stage of this strategy has been successfully implemented and integrated. -Stage 1: “First stage is complete and delivered $1. 67billion in savings. Mainly line items and reorganisation. ” (Woolworths Limited2007) -Stage 2: “Second stage is still being integrated, will be further integrated and implemented over the next few years.

Savings expected: $5. 2 billion. This stage will be increasingly logistics driven. ” (Woolworths Limited2007) •Increase service levels, customer bases and market share strategy.

Woolworths is constantly developing strategies and programs to increase customer base service levels and market share Woolworths have development programs that help to demonstrate its mission statement and main strategy. •Create competitive advantage and increase profit strategy and build a strong brand image. Woolworths has integrated and implemented these strategies and as a result they have produced their own private brand, ‘select. ’ Woolworths ‘select’ range is not only a direct response to the strategies above but were also formed due to growing customer issues.A short term local strategy in the near future involves the further development of its select range, which will be increased to 1000.

(Shoebridge , N)The fresh food people strategy has shown to increase profit and build a strong brand image and identity. •Expansion and market share increase strategy. Woolworth’s long term strategy for the future is to expand its stores and customer bases and increases market share. Woolworths intends to implement this strategy by expanding to New Zealand.

The strategy is to add between 15 and 25 supermarkets to its chain.This strategy, a three year project, has come after FoodLand demonstrated high successful and made the prospect of expanding in New Zealand more

attractive. Woolworths needs to strategically manage this strategy with time horizons. (Mitchell 2007) •Increase market share and create higher growth strategy. Woolworths LTD will be opening new channels for its retail liquor.

Woolworths hopes to in the future implement and integrate a strategy that will open up channels with pubs and club, thus broadening market share. Key strategic implementation issuesMckinsey 7s model is useful to evaluate which strategies work and which don’t, as well as what could be changed. The McKinsey 7 s model is useful for Woolworths to evaluate any issue of internal consistency, help examine what should be changed and how the possible change will affect other systems, strategies or steps. Woolworths needs to anticipate change internally and externally in order to implement appropriate strategies and meet the changing needs of a today’s and tomorrows ever changing market. Woolworths must remember that strategic implementation takes time, money and effort and is often difficult.McKinsey 7 s model highlights many elements that need to be addressed by Woolworths in order to successfully integrate and implement strategies that work.

Four steps from McKinsey 7 that this report will highlight are as follows: •Organisation structure. Woolworths has a multidivisional structure as it has many stores that operate independently. For example all of Woolworths liquor stores operate independently and all offer different price ranges and specialised products. This supports and helps the strategy of increasing market share and creating higher growth to be successful.

Woolworths have undergone extensive developments in store which support its fresh food strategy and reflects the ‘fresh’ concept that Woolworths is trying to promote. Woolworths’ supermarkets are becoming more spacious and fresh, they are set

out less complex and more convenient. •Staff. Woolworths offers all staff the opportunity to receive the correct training and development. Woolworths offers on job training and apprenticeships.

This also relates to knowledge management and a learning organisation. Woolworths' employees need to be highly trained and knowledgeable on their products in order to offer quality service.Human Resource support is vital in Woolworths success, Woolworths has a large emphasis on HR activities which focus on training and quality of service. (The Age2007) This is valuable as the employees are those who integrate and implement strategies and witness their effects first hand. Woolworths needs to invest in improving skills and competencies (The Age2007) in order for strategies to be integrated and implemented effectively and efficiently.

•Leadership. Over the past 20 years Roger Corbett has been the CEO for Woolworths and has demonstrated outstanding leadership and success.He created the project refresh and low prices strategy and completely rebuilt a new, more effective and efficient, completely customised supply chain system. The new system gives Woolworths a competitive advantage and the ability to execute its low prices strategy as it produces low costs.

Corbett showed initiative and chose the correct strategies for Woolworths over the last 20 years, hopefully the new and current CEO, Luscombe appointed in 2006, will be as innovative and willachieve similar or greater success. •Stakeholders.Woolworths’ stakeholders include shareholders, directors, management, suppliers, government, employees, and the community. All stakeholders play a major part in the success of Woolworths’ strategies as they the key implementers and integrators of the strategies. All supermarkets have separate managers which allows for issues to be resolved easily and efficiently and uniquely.

“Woolworths' business

decisions and accountabilities are a focal point of Woolworths structure” (The Age2007) Managers need to be educated on the current trends, values etc of the local community in order for them to respond appropriately.Evaluation of strategy- current future Project Refresh produces success as it allows for the low prices strategy to be achieved, by obtaining low cost. The Refresh strategy allows for instant reordering due to new technology and anew customised supply chain. This strategy also attempts to eliminate waste and duplication (The Age2007) A new strategy that needs to be addressed is creating and increasing brand loyalty. As Woolworths finds it difficult to differentiate itself from competitors as the market is standardised and there is a large number of substitutes, Woolworths' needs to find ways of attracting new customer and retaining them.Woolworths needs to employ this strategy in order to continue to achieve growth.

Woolworths' current strategies have produced much success, for Woolworths' to continue to create a competitive advantage all strategies should be assessed and if appropriate renewed. Many strategies don’t need to be changed, however some may need to be reconsidered. For example Project Refresh needs to be updated in order to incorporate competitor’s responses, such as Cole’s huge strategy development, ‘Price Rewind. ’For Woolworths to be able to achieve their intended strategy of increasing service levels, customer bases and market share they must integrate and implement the appropriate strategies. Many issues need to be considered such as resourses, ethical and financial issues.

For this strategy to be successful in terms of building customer numbers and market share staff (resource) issues need to be addressed such as correct training and employees advancement

opportunities. Woolworths gives their employees a chance to start their career with apprentices, trainee ships and in store training.This is vital for customers to demonstrate the mission statement. For this employees need to be happy, properly trained, given the right opportunities and be knowledgeable on products and services Woolworths needs to implement and integrate new and improved strategies to successfully expand overseas. Woolworths' huge success in Australia proves that it is an eligible player on the international field. Strategies such as increasing brand awareness need to be integrated.

Woolworths needs to implement and integrate the appropriate strategies in order to differentiate itself in New Zealand against FoodLand Within south east Asian countries there are large dominate supermarket chains and Woolworth’s needs to implement and integrate effective strategies that will help it to differentiate itself amongst large foreign, international competitors. Without an effective strategy in place and even with these strategies Woolworth may find it difficult to move into this market and dominate it.Rather Woolworth may simply add to the blur extremely large dominate supermarket competitors in South East Asia. Conclusions Store structure and development needs to be further analysed. Woolworths needs to be aware of its key competitor’s strategies and anticipate moves of retaliation or response to Woolworths’ strategies. Defensive strategies need to be implemented.

Woolworths has achieved success through its turn around over the past 15 years, which included implementation and integration of new meaningful, profitable and attainable strategies.Great examples of this are the Low-Price Strategy and the Project Refresh Strategy. If Woolworths it to continue to expand it must constantly try and implement more innovative and successful strategies. Organisational effectiveness could be improved through

strategies related to satisfaction of staff. If staff is satisfied, customer are satisfied. Woolworths must be continually improving its supermarkets to reflect current trends, respond to competition and satisfy customer needs and wants.

Strategies need to be in place to promote the ‘fresh’ concept and create awareness.Woolworths’ has experienced great success and should continue along the same path through innovative, tactful and profitable strategies. Woolworths fulfilment of its strategies it due to it core competencies and its ability to reposition itself on the market and efforts to differentiate itself. Woolworths are now recording their first billion-dollar profit.

Due to implemented strategies profit is up 24. 3 per cent. “Earnings before interest and tax topped $1. 7 billion - an increase of 32.

3 per cent” (ABC2006) References •Hollander, SC. , Omura, GS. ’Chain Store Developments And Their Political, Strategic and social interdependencies’ Journal of Retailing; 1989; vol 65, Iss 3; pg. 299 •Mitchell, S. , 2007 ‘Woolies finds NZ a hard nut to crack.

’ The Australian Financial Review. Page: 73 •Treadgold, A. 1996. ‘Food retailing in Australia - three retailers, three strategies’ International Journal of Retail & Distribution Management.

Bradford. Vol. 24, Iss. 8; pg. 6 •Shoebridge , N,.

2007 ‘Woolworths Select hits 1000 products. ’ The Australian Financial Review. Page: 47 •2006, The Age, Fairfax DigitalURL:http://www. theage.

com. au/news/Business/Analysts-back-Woolworths-strategy/2006/04/19/1145344140312. html (Accessed 22/10/2007) •Viljoen and Dann, 2000: copyright Pearsons Education Australia, 2000 •ABC, 2006. Woolworths posts billion-dollar profit.

ABC News online URL: http://www. abc. net. au/news/newsitems/200608/s1719701.

htm (Accessed 24/10/07) •Woolworths Limited, 23/10/2007. URL: http://www. woolworthslimited. com. au/ (Accessed 24/10/07) •2007 ‘Australia Food & Drink Report’ Company Profile - Woolworths BUSINESS MONITER

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