Woolworths Corporate Strategy Analysis - Case Study Example

Table of contents 1.0 Introduction ………………………………………………………………………………..2 2.0 Background information ………………………………………………………………….2 3.0 Woolworths Limited customers focus strategy…………………………………………..4 4.0 Article discussion ………………………………………………………………………….5 5.0 Conclusion………………………………………………………………………………….7 References …………………………………………………………………………………….8 Woolworths’ Corporate Strategy Analysis 1.0 Introduction Corporate strategy can be defined as an overall plan of action developed by a leadership of a company to reflect its mission, vision and core values in its goals and business strategies to be adopted in achieving the goals (Colley & Doyle, 2002). It therefore means that a corporate strategy not only identifies the goals of a company but goes ahead to define ways in which the goals are to be achieved. The corporate strategy provides a clear path to be followed by all business units in an effort to meet shareholder expectations but also providing value to other stakeholders such as the customers and employees. In light of this understanding, this paper discusses an article by Langley, (2013a) on Woolworths retail chain to analyze how the discussion by the article is brings out the application of corporate strategy by Woolworths. 2.0 Background information Woolworths limited is a big player in the Australian retail industry. It has its main interests in the retail industry being the largest retail industry in Australia in terms of market capitalization. Woolworths was founded in 1924 by Percy Christmas and four other founding investors (Murray, 1998). Apart from the retail industry, Woolworths has also diversified into hotel and gaming industry. Since then it has been a story of perseverance as the company steered through tough economic times to become the retail giant it is today. Woolworths’ business unit consists of: Australian food and Liquor Supermarkets Petrol Hotel Big W Consumer electronics In an industry where customer satisfaction is a primary focus of any company, Woolworths has been able to adopt many innovations to improve customers experience such as self-serve check outs, Woolworth shopping cards and discount programs. The company has had to go the way of vertical integration in its supermarkets in response to stiff competition from it main rivals in the retail industry which are: Coles ALDI Metcash The vertical integration is mainly concentrated in food and dairy products (Burch, 2007). Recently the company announced plans to buy milk directly from dairy farmers in south Wales (Langley, 2013b). The plan will see the price of milk reduce and reflect in the final price to its customers. According to Burch (2007), this kind of vertical integration is not new to the company nor in the Australian market since the company has been contracting farmers to grow its groceries in an effort to gain leverage when it comes to price based competition which is gaining root in the Australian supermarket sector due to increased competition. House brands of fast moving consumer goods is another way of ensuring lower prices for consumers while maintaining good profit margin for the company. The company is on a growth trajectory if it sticks to its strategy of using customer satisfaction as its center of focus. Much of the company’s revenue is realized from its supermarkets sales. In the year 2012, the company made sales of $ 48,565.2 million. This is by far the most profitable of the groups operations since the total company’s profits in the same year totaled $ 56700.1 million (http://www.woolworthslimited.com.au). 3.0 Woolworths Limited customers focus strategy. Woolworths’ current growth strategy as communicated on the company’s website is built on four strategic priorities (http://www.woolworthslimited.com.au): Extend and defend leadership in food and liquor Act on our portfolio to maximize shareholder value Maintain our track record of building new growth businesses Put in place the enablers for a new era of growth In understanding of the above priorities, Woolworths acknowledges that the retail industry is a dynamic sector with customers being the focus of competitive strategies adopted by the players in the industry (http://www.woolworthslimited.com.au). Customers are seeking more value and choices than used to a few years ago. It can be argued that customer satisfaction is the main focus of attention in as far as devising new competitive strategy for Woolworths is concerned. It should be noted that customer behavior and decision making process is changing dramatically as information becomes readily available. This is changing how businesses operate. The world is moving slowly but steadily into the information age. Sticking to the old ways of doing things is simply engineering the demise firm. Customers have for the first time the ability to when, where and how to shop. The amazing thing is that all this is being facilitated by technology through mobile technology and computing. Woolworths has identified the need to become multi-option by using websites, virtual stores and new delivery options to complement its stores (http://www.woolworthslimited.com.au). It is in the backdrop of this knowledge that Woolworths is laying foundation for future growth and opportunity exploitation by placing customer satisfaction at the centre of its corporate strategy. According to Woolworths’ website, Woolworths serves more than 28 million customers every week (http://www.woolworthslimited.com.au). To keep these customers, the company has developed several innovative ways of delivering value to the customers such as: Fresh Sushi Bars within its stores to provide fresh handmade Sushi from expert chefs in the store Fish, Bag and Bake to provide with restaurant quality seafood to be cooked at home MSA Beef and Lamb making Woolworths one of the few stores stocking Meat Standards Australia (MSA) beef and lamb 4.0 Article discussion The article in reference is “Woolworths focus on ‘customer experience’ as Q3 shows solid sales” by Sophie Langley, April 15 2013: sourced from Australia Food News, Available online at: http://www.ausfoodnews.com.au/2013/04/15/woolworths-focus-on-%E2%80%98customer-experience%E2%80%99-as-q3-shows-solid-sales.html According to the article, Woolworths made a 5.7% increases in sales during the third quarter posting sales of $14.4 billion by the end of March 2013 (Langley, 2013a). Woolworths CEO reiterated that the company has been able to sustain a profitability momentum from its first quarter due to a great of focus on the company’s core businesses and work on strategic priorities (Langley, 2013a). It should be noted that customer experience lays the foundation upon which Woolworths has focused the implementation of its strategic priorities. Despite the positive growth, the CEO, Mr. O’Brien, acknowledged there is still a lot to be done in achieving growth for the company while at the same time improving customer experience in an effort to solidify the growth potential for the company in the future. From the above discussion it is evident that the company is determined to ensuring that its corporate strategy priorities are well taken care of from the approach of satisfying customers and boosting sales to ensure shareholders have value for their money. The approach is double edged since it ensures good dividend pay in the short run for the shareholders. It ensures good service for the customers, and at the same time solidifies future growth prospects for the company by improving customer experience and thereby building loyalty among its customer base and attracting new customers. The CEO in the article is quoted as saying that the sales are a direct indication of success in the investments the company has made in customer engagement. To the CEO, this is an indication of customers’ approval of the innovative options provided by Woolworths’ stores in an effort to deliver value in new ways. Mr. O’Brien believes that the company has a better understanding of convenience, range and value it needs to give in regards to offering solutions to the challenges faced by their consumers in their busy lives and tight budgets (Langley, 2013a). From this, we can say the company is well on its way to delivering its strategic priorities of growth, profitability and value to customers through customer experience in innovative ways to attract and retain customers. Woolworths’ online sales increased by 36%, according to the company this is a reflection of success in its quest to use technology to its advantage as it seeks to respond to advancement in technology as far as buyer behavior is concerned (Langley, 2013a). Woolworths has a multi-option strategy of using websites, mobile apps and virtual stores to complement its stores sales. The basic strategy is to respond to customers preferences and make profit for the shareholders. In this article, it is evident that Woolworths is making profit not only from the supermarket business. The Hotel sales have also increased by 20.5% as a result of acquisition in first half of the 2012 financial year. Its home improvement sector has also expanded with the opening of 4 more Masters Stores in the third quarter. Food and liquor sales are reported to have increased by $0.5 billion. These diversified sources of income confirm that the company is applying its corporate strategy in achieving its strategic priorities one of them being to act on the company’s portfolio to maximize shareholder value (Langley, 2013a). It should be remembered that another strategic priority by the company is to extend and defend leadership in food and liquor. This is a positive direction then towards realizing its strategic priorities all anchored on a central focus of delivering value to the customer and the shareholders too. 5.0 Conclusion From the discussion in the article being analysed in this paper, it is evident from the results and the statements from Woolworths’ management that the company has applied its corporate strategy towards the realization of the companies goals as stipulated in its strategic priorities. Customer focus seems to be the foundation of the company’s corporate strategy judging from the importance the company ahs placed in satisfying customers who to the company hold the key to the future growth of the company. References Burch, D. (2007). Supermarkets and Agri-food Supply Chains: transformations in the Production and consumption of foods. Edward Elgar Publishing . Colley, J., & Doyle, J.(2002). Corporate Strategy. McGraw-Hill Ryerson . Langley, S. (April 16, 2013a).Woolworths focus on ‘customer experience’ as Q3 shows solid sales. Australian Food News. Retrieved from: http://www.ausfoodnews.com.au/2013/04/15/woolworths-focus-on-%E2%80%98customer-experience%E2%80%99-as-q3-shows-solid-sales.html . Langley, S. (April 16, 2013b). Woolworths opens new battlefront to secure cheaper drinking milk. Australian Food News. Retrieved from: http://www.ausfoodnews.com.au/2013/03/28/woolworths-opens-new-battlefront-to-secure-cheaper-drinking-milk.html . Murray, J. (1998). Woolworths: A Great Australian Success Story, Focus Publishing . http://www.woolworthslimited.com.au Read More