Strategies That Ensure That Woolworth Maintains Its Position as the Market Leader - Case Study Example

Running Head: WoolWorths Cover Page (to be given in class) Marking criteria (to be given in class) WoolWorths Name Institution Letter to CEO April 18, 2011 CEO’s name xxxxx Woolworths Woolworth’s address xxxx Dear CEO: I am submitting to you this report that is geared towards the analysis and recommendation of strategies that ensure that Woolworth maintains its position as the market leader. The report goes by the title Woolworths. The report’s rationale is to analyze Woolworth’s organizational problems and to make a recommendation for its solution. The content of the report is mostly majored on the organizational internal and external analysis by the use of SWOT and porters five forces. Incase of any queries pertaining to the report feel free to get in touch with xxxx and phone number. Sincerely, name; xxxx WoolWorths Executive Summary The supermarket’s major function is to perform as an intermediary for a number of producers together with the provision of services that complement its sales. The Australian industry has undergone great change in revenue for a number of years that have transcended the last couple of years with its 2008/2009 growth being 4.1% which has laid claim to the total industrial revenue reaching a peak of $68, 500 million (IBIS, 2009). The industrial GDP growth has been robust in the past five years that culminates to a growth of 4.4% in the previous years that culminates to $7,850 million. It has been noted that there are around 3,760 enterprises that operate 4.340 establishments that transcend Australia. The major market players are inclusive of Woolworths, Costco, Foodworks, Foodland, IGA and Franklins. Woolworths runs 802 stores in Australia and recorded a total sales of $49, 595 billion in the period 2008/2009 this showed a 7.5% rise in its profit. It is therefore the market leader. Woolworth’s has currently three vital value creating functions that transcend inbound logistics for instance the control of its distribution network for its products and as such ensures distribution and quality efficiency. Operations via strict procedures of quality and inventory management which aid in value creation, sales and marketing in which the promotional activities facilitate Woolworth’s competitive edge. Their most notable capabilities and resources are its supply chain which is highly efficient, brand reputation and effective top level management. It is recommended that Woolworths should invest in advertisement in the short run so as to become associated with their consumer’s minds in the production of healthy produce. The longer term recommendation is the emphasis of Woolworth’s differential factors for instance the improvement of customer service and store atmosphere which further diversifies into profitable businesses due to a decrease in industrial profits Introduction The report will scrutinize Woolworths which is a Sydney Based grocery retailer in Australia and is located in Australian Supermarket industry. Through scrutinizing of the internal operations of Woolworths it is speculated that a good understanding of their strategy is achieved and their subsequent success can duly be gathered. It is also noted that future recommendations can be made in-light of their findings through an examination of several external environmental and internal factors that affect the industry. The report transcends the analysis of the company’s mission statement, its internal analysis and its external analysis. The internal and external analyses are carried out by the use of SWOT and Porters five forces. SWOT analysis looks into the analysis of opportunities, strengths, threats and weaknesses of Woolworths. Porters five forces looks at the threat posed by new entrants, competitive rivalry, power of suppliers, power of buyers and the threat posed by substitute products. Company’s situation The main strategy and mission statement is ‘to deliver to customers the right shopping experience each and every time.’ It follows that their strategy is to increase cost efficiency and also to be cost effective. In the bid to achieve its mission it has duly integrated and implemented a large number of strategies which are inclusive of their day to day low price strategies and to utilize Project Fresh 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. This part of the report will also entail the analysis of Woolworths by the use of Porters five forces and the SWOT analysis of the results which are attached at the end of the paper. Porter’s five forces Diagrammatic representation of Porter’s five forces It was first developed by Michael Porter in 1947 and it provides a simple assessment and analysis of Porter’s competitive position and strength of the business or corporation. Porter’s five forces are made use of in the assessment of the state of Woolworth’s competitive environment and at the end the assessment of the industry’s attractiveness (Porter, 1980). It lays emphasis on profitability/attractiveness of Australian’s supermarket industry. The results are attached at the end of the paper. SWOT analysis It is a useful tool for the comprehension and decision making for a number of business situations. SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities and Threats (BusinessBalls.com, 2011). It accords the necessary framework for the review strategy, position and the company’s direction. The results of the SWOT analysis are attached at the end of the document. Recommendations They may be classified as short-term and long term. Short term recommendations stipulate that Woolworth should formulate advertisements that depict the manner in which Woolworth’s Fresh range healthy meals that are prepared to go are fitted to consumer’s everyday routines. The aforementioned move would ultimately heighten Woolworths brand recall in their consumer’s minds which would increase their likelihood of purchase. The concept of linking Woolworths to healthy eating leads to the preparation of easy to eat meals that are easily available at pocket friendly prices. The long term recommendation is for Woolworth to lay emphasis on convenience and enjoyable shopping experience. Woolworth’s current program is that of store refurbishment which is supplemented by the improvement of store’s atmosphere for instance the inclusion of relaxing music and that which has enthusiastic, cheerful and helpful staff that takes great pride in the creation of enjoyable shopping experience. In the long run, Woolworth is urged to invest in profitable businesses and industries. Profitability and attractiveness of Australian supermarket is forecast to fall in the future. Woolworth is recommended to diversify in novel businesses which accords them sales growth which is thought to be able to raise over a given span of time for instance hardware business, up-market organic produce and homes. Conclusion From the analysis of Porters five forces the Supermarket presents moderately high to very high attractiveness. The most notable reason is the high entry barriers and the supplier’s weak bargaining power. It is projected that profitability would be high for Woolworths at the particular point in time. However, their profitability is likely to plummet due to environmental changes and as such it would be seen to stagnate at moderate. It is therefore deduced that for it to maintain its market leadership then it should focus on its capabilities and resources. Hence, its short-term recommendation for the increase in advertisement. Woolworths has managed to develop the following significant capabilities and resources over the years since its inception; a supply chain which is highly effective, conducive location, brand reputation and effective top management. To further ensure that it maintains its position as a leader requires that it increases its advertisement and develop strategies that ensure that consumers enjoy convenience during shopping. References BusinessBalls.com (2011). SWOT Analysis. Retrieved April 17, 2011 from http://www.businessballs.com/swotanalysisfreetemplate.htm. IBIS World (2009). Supermarkets and the other Grocery Stores in Australia Industry Report. Hewett, J (2009). Woolies and Coles face Lease Challenge. Retrieved 21st August, 2009 from The Australian: http://www.theaustralian.news.com.au/story/0,25197.html Palmer, D (2009). Coles Turnaround Gathering Momentum. Retrieved 22 August 2009 from Australia Food News: http://www.ausfoodnews.com.au/2009/08/20/coles-turnaround-gathering-momentum.html Porter, M (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. McGraw-Hill. Wade, M (2002). Green Giants and Gobbling up the Little Growers. Retrieved 21st August 2009 from smh.com.au: http://www.smh.com.au/articles/2002/07/10/1026185061953.html SWOT Analysis of Woolworth Strengths: Effective supply chain. Superior technological capabilities. Superior brand reputation. Non substitutable brand. Effective top management. It has a huge market share. It has favorable local zoning Weaknesses: Its shopping experience is outdated. Opportunities: It has weak market rivals due to its economies of scale. Small number of vital market players Threats: Changing market horizon which may result in smaller market share New market regulations will trigger consumer buying power Changing market tastes Minimal level of differentiation among market players Porters Five Competitive Forces The threat of new entrants: This threat is very minimal and is thought to not change. Leasing agreements and local zoning laws in conjunction with landlords have led to “artificial scarcity of a given number of grocery store sites” (Hewett, 2009). The existence of numerous stores has barred new market players. The economies of scale garnered by Woolworths have also blocked the entry of other market players (Mckinna, 2009). Competitive rivalry: There is very high rivalry in the market which is as result of a small number of major market players and their very minimal level of differentiation which is as a result of the generic products and services that are offered. It therefore follows that competition is pegged on price, although there are other competitive factors such as location and store choice. American retailer Costco also poses a major future threat (Palmer, 2009). The threat of substitute products: These threats are very high as Woolworths is faced by numerous indirect competitors for instance convenience stores, farmer’s markets and specialist grocery stores. It has been reported that indirect competitors form viable substitutes to the supermarket, Woolworths and as such pose serious future threats. Convenience stores have as such experienced expansion in the offerings of products and would as such be competing with supermarkets in the availing of ‘one stop shopping’ and choice. Farmer’s markets that sell organic products are also a threat. On the other hand threat that is triggered by specialty stores is seen as minimal with the emergence of time poor customers. The power of buyers: It is thought that consumer buying power will increase in future. This will be as a result of lax market entry restrictions facilitated by ACCC and the Federal Government that will ultimately increase consumer choice (Hewett, 2009). Consumer buying price will also increase due to price comparison websites for instance grocery.bestpricedirectory.com.au which facilitates consumer price and choice comparison. The power of suppliers: Woolworths or Cole is the most vital purchaser, maybe the only purchaser of a manufacturer’s production. It is noted that Kellogs or Nestle are not competitors (Wade, 2002). It is noted that the dynamics is prone to change by Costco’s entry and the expansion of Aldi in conjunction with ACCC’s and Federal Government (Hewett, 2009). Read More