Strategic Planning for Woolworths in Australia - Example

Strategic planning for Woolworths in Australia Name Class Unit Table of Contents Table of Contents 2 Introduction 3 Woolworths and Australian retail industry 3 Vision statement 4 Mission statement 4 Statement of values 5 Objectives 6 Internal analysis 6 Resources 7 Capabilities 7 Core competency 7 Value chain analysis (value creating activities at Woolworths) 8 SWOT analysis 8 External environment analysis 9 Microenvironment analysis 9 PESTEL analysis 9 Porter 5 forces analysis 10 Developing new strategies for Woolworths 12 Conclusion 13 References 14 Introduction Woolworths and Australian retail industry Australian retail industry is highly competitive with over 140, 000 businesses. Despite this, there are very few top players in the supermarket industry with the major ones being Woolworths, ASDA, Coles and Foodworks. The industry is one of the largest sources of employment and contributes highly to the country GDP. The large retail businesses are more profitable than the smaller counterparts (Jacenko and Gunasekera, 2005). Woolworths Limited is an Australian retail chain which opened its first branch in 1924. Over the years, Woolworths have expanded to become the largest Australian supermarket chain with a market share exceeding 31%. The supermarket chain has over 3200 stores across Australia and New Zealand where 840 supermarkets are located in Australia and 156 in New Zealand. The supermarket has also ventured into other countries such as India where they operate a joint venture with Tata and South Africa. The supermarket core strategy has been to achieve sustainable growth in the competitive retail market and online business (Woolworths holdings Limited, 2014). This report is based on strategic planning for Woolworths Australia. The report will locate Woolworth’s vision, mission, values and formal objectives. The report will then carry out an internal and external analysis of Woolworths using strategic management tools. Lastly, the report designs a strategic plan for Woolworths. This involves explaining the importance of the implementation, execution and evaluation of the proposed strategy. Vision statement “To be a world leader in retail brands that appeal to the people who care about quality, innovation, value and sustainability” (Woolworths Limited, 2016). This is an appropriate mission for Woolworths since it is connected to the business strategy. The organisation has been able to make progress in becoming a customer centric business due to their vision. The vision helps the business to gain a deeper understanding of their customers and strengthen their relationships. The industry requires players who are able to deliver appealing brands to people. This is attained through innovation, value and sustainability offered by Woolworths. The company has strategic imperative associated with vision in every department. This ensures that there is consistency in the organisation offer. Woolworths have been able to attain sustainability (Woolworths Limited, 2016). Mission statement Woolworth’s mission statement is to “deliver to the customers the right shopping experience each and every time” (Woolworths Limited, 2016). This mission statement is appropriate for Woolworths since it reflects what the supermarket believes in. it is well aligned with the supermarket strategy. Woolworths believes in giving their customer value through quality products. Woolworths is a customer centric business and is based on knowing what the customers want so that they can provide for them. This is achieved through proper segmentation and knowing the customers shopping habits. This is a mission statement that is able to define Woolworth’s business and their relationship with customers. Despite this, Woolworths can improve their mission by making it communicate more to the employees. Statement of values Woolworth’s statement of values is made of seven core values. These are values that guide the organisation and acts as their foundation (Woolworths Limited, 2016). Woolworths have proved to live by their values: Quality and style-This is a value that implies Woolworths is ready to give their products in the best standards possible. Value- This implies giving the customers a quality offer at a good price. Service- This is a value that involves putting the customer first. Service is about understanding what the customer needs and offering more than what is expected. Innovation-Woolworths values innovation and hence continue discovering new ideas, products and processes for their customers. Integrity- This involves keeping the promises to the customers. This has helped in earning trust for Woolworths. Energy: The organisation is passionate for what they do. They believe in being inspiration to others and being inspired by success. Sustainability- Sustainability is one of the most successful values for Woolworths. This is through conservation, sharing expertise and contributing to secure future. Objectives The objective for Woolworths is to attain sustainable growth in the competitive retail market and rapidly changing online market scenario (Woolworths Limited, 2016). Woolworths is in a rapidly changing market environment. Customers are more demanding and seeking for greater value. Woolworths through their objective are able to fit in the rapidly changing market. The company is aware of the market trends and hence is able to keep up with changes in a sustainable manner. Customers are attracted to brands which are sustainable. This goes well with Woolworths who are more committed to sustainable growth in their main objective. The company apparel division has recycled denims and most of the products used are recycled or recyclable. To attain growth in their objective, the company puts their customers at the heart of their business. They listen to what they need and come up with innovative ways to help them shop at Woolworths. The success of the organisation objective is expressed by the fact that they are able to serve 18 million customers in every week. The company loyalty program has over 9 million members (Woolworths Limited, 2016). The organisation can broaden their business objective to include affordable prices for quality products. At the moment, Woolworth products are sold at a higher price locking out low income earners. As the company expands to low income countries, they have to include low cost objective to their main objective. This will ensure that they are able to gain customers. Internal analysis Internal analysis is a very important tool in identifying the business strengths and weakness. Through analysing the firm strengths and weakness, it is possible to uncover the competitive advantage of the firm. From the internal analysis, it is possible to reposition the firm with new offering by addressing the weakness (Craig and Campbell, 2012). Resources Woolworths have a lot of tangible and intangible resources which puts it in strong market position. Woolworth’s efficient management of human resources, products, innovation and a well-designed logistics puts them in a good market position. The firm has a strong brand image and reputation in the industry for their quality and fresh products (Moullakis, 2003). Capabilities Capabilities imply the firm ability to coordinate their resources and put them into productive use (Craig and Campbell, 2012). Woolworth’s business is run very successfully with the right people being recruited into right positions. Woolworths knows how to utilise their resources well (Moullakis, 2003). Core competency World class supply chain- the firm has been able to develop innovation and competitive advantage through their supply chain. This is through high focus on efficiency and reducing any unnecessary expenses (Moullakis, 2003). Branding and market-Woolworths have been able to brand themselves as the best in the industry. This is through their slogan “fresh food people” (Woolworths Limited, 2016). The retail stores are known to offer healthy and quality products in the market. Innovation- Woolworths is well known for their creativity and innovation. The supermarket has brought a lot of new ideas into the market. Integration- through producing some of its own inputs, the supermarket has managed to vertically integrate some of its supplies. Value chain analysis (value creating activities at Woolworths) Inbound logistics-Woolworths have own distribution centres. This enables them to make bulk procurement hence reducing cost price and gain suppliers discounts (Moullakis, 2003). Operation –Through engaging with producers such as farmers, Woolworths is able to have fresh products at reduced costs (Moullakis, 2003). Outbound logistics-Use of vendor quality management ensures that the product is of high quality and fresh. Marketing and sales-The firm spends a lot in marketing and creating brand awareness. Customer service-Best in customer service, the supermarket has trolley mounted scanner and refund polices which reduces waiting times. SWOT analysis Strengths Weakness Strong brand image Good financial position Wide variety of products Better management Good reputation Market leader High operating costs High total costs High competition Opportunities Threats Increasing customer base Ability to increase market share Growing health and food sector Increasing population and diversity in Australia Rise of new technology to cut costs and increase sales channels Slow Australian economic growth Recessions Level of unemployment Government pressures Increasing suppliers powers External environment analysis Analysing the external environment is very vital when coming up with strategies. The strategies designed must be responsive to the firm external business environment (Worthington and Britton, 2009). To make sure that Woolworths is able to come up with appropriate strategies, it is vital to analyse the external environment of the industry where Woolworths operates. Microenvironment analysis PESTEL analysis Political/legal Government have a great impact on the supermarket industry. This is due to regulation on legislating hours, coming up with business policies and ensuring fair competition. Woolworths is highly affected by laws in their country of operation. Australia has a stable government that ensures Woolworth business is able to thrive in a safe business environment. The Common Wealth government has its trade practices based on the Trade Practices Act (TPA) which affects the operations of Woolworths (Woolworths holdings Limited, 2014). Economic The economic growth has a great impact on the business. The slow growth of the Australian economy has been a major threat to retailers. This is due to fact that future business growth may be stagnant if the economic growth is slow. The rate of unemployment and fuel prices has a great impact on business. At the moment, the oil prices in Australian market are low while the rate of unemployment has been reduced due to growth in mining industry (Asefeso, 2012). Social cultural The changes in the social cultural concerns have an impact on the business. Attitudes and lifestyle changes affects consumer purchase behaviours. At the moment, there has been an increase in concern about health. This has led to consumers making healthy choices when purchasing in supermarkets. There has also been an increase in women participation in Australian labour force (Asefeso, 2012). Technology Woolworths has been able to adopt modern technology in their operations. The supermarket was the first retailer to adopt the GEMMnet in 1994. The retail chain has invested heavily in technology to ensure that their supply chain and distribution system are efficient. Woolworths have an online shopping facility through their website (Woolworths Limited, 2016). This has given them a first mover advantage. Porter 5 forces analysis According to porter (2008), being aware of the five forces helps in understanding the industry structure and takes a profitable position which is not venerable to intense competition. Competition is driven by the industry structure. From the analysis of the five forces, it is possible to determine the industry position (Grundy, 2006). Bargaining power of the buyers Supermarkets in Australia have homogenous products. There is low switching costs between the stores hence the consumers have high bargaining powers. This leads to customisation of the offering for specific markets. Bargaining powers of the suppliers Suppliers bargaining powers is medium to high. The power also depends on the size of the supplier, their brand name and the size of the supermarket. Suppliers with strong brand names have higher bargaining powers. Availability of substitutes There are various substitutes in the supermarket industry such as convenience stores, pharmacies, online stores and grocery stores among others (Woolworths holdings Limited, 2014). Consumers may become willing to use a convenience store rather than queue or lack a parking space in a supermarket. The availability of substitutes is moderate to high. Threat of new entrants Threat of new entrants is moderate. This is due to fact that the industry is not highly attractive and there is scarcity of land. The industry also requires high capital and has a government restriction which acts as barriers. The existing players have already established distribution lines and have strong relationships with the suppliers. Rivalry among competitors There is strong competition rivalry in the industry. There are a lot of large retailers such as ASDA and Coles who makes the market highly competitive (Keith, 2012). Developing new strategies for Woolworths At the moment, the strategies being used by Woolworths are generic. The company is selling clothing and food products as well. Woolworths have also been manufacturing their own products. The supermarket has also been engaging in differentiation strategy to set distinguish themselves from the competitors (Woolworths Limited, 2016). Through the environment analysis, it is evidence that Woolworths is facing several weaknesses. This requires more effective strategies that will help them win against their competitors (Thomson Strickland and Gamble, 2001). One of the strategies is changing their pricing strategy to cater for their customers in the lower social status. This involves selling their products at a reduced price while at the same time maintaining the quality. This is in line with their vision, mission and objectives. Their vision to become a world leader in retail brand and appealing customers who care about quality and innovation will be attained. This is due to fact that they will gain more customers while at the same time offering quality products. The strategy will also ensure that Woolworth mission is attained through delivering the right shopping experience to their customer every time. This is due to fact that more customers will be able to enjoy the shopping experience at lower prices. The prices should be set in such a way that they do not compromise the firm profits. Through the strategy, the firm will be able to meet its objective of attaining sustainable growth in the industry despite the competition. As the firm expands, they are faced with changes in economic situations. For example, when the firm expanded to South Africa, they were able to make profits (Dos Santos, Svensson and Padin, 2013). This may not be applicable to all African countries. Unlike Australia, some of the African countries are poor and have lower disposable incomes. The buying power is less in some of the African countries the firm is expanding to. Thus, it would be very important for Woolworths to lower their prices especially as they expand to lower income markets. Another strategy that Woolworth should be considering is market development. This is a strategy that will enable the business to grow based on the objectives while still focusing on what they are doing at the moment. The strategy will build on the existing strengths and skills at Woolworths. The strategy involves selling their current products in new markets through additional outlets. This is especially in the growing suburban areas. This is in line with Woolworth’s vision of becoming a world leader in retail business (Woolworths holdings Limited, 2014). The company will also be able to attain their mission of bringing great shopping experience to their customers especially through convenience. By opening new stores, customers will be able to make purchases in their localities hence enhancing efficiency. Conclusion Woolworths is one of the most successful supermarket chains in Australia with operations in different countries globally. The supermarket is in the Australian retail industry which is highly competitive. The major players in the industry are ASDA, Woolworths, Coles and Foodworks. Woolworths is market leader in the Australian retail industry. Woolworths have well designed mission, vision and objectives which are very appropriate for their business operations. The supermarket objective is to attain sustainable growth in the competitive retail market and rapidly changing online market scenario. Through internal and external environment analysis using strategic management tools, it is evident that Woolworths is in a better market position. Despite this, the supermarket has several weaknesses that can be addressed through new strategies. The tools used are Pestel analysis, porter five forces analysis and swot analysis. The report recommends Woolworth to come up with price strategy that caters for the customers in low social economic status. This is in line with the company mission, vision and strategy. This will also aid the firm expansion strategy to low income countries. The report also recommends market development strategy for Woolworths through additional outlets to enhance growth. References Asefeso, A. 2012. CEO Guide to Doing Business in Australia, AA Global Sourcing Ltd. Craig, T. and Campbell, D. 2012. Organisations and the business environment. Routledge. Dos Santos, M.A., Svensson, G. and Padin, C., 2013. Indicators of sustainable business practices: Woolworths in South Africa. Supply Chain Management: An International Journal, 18(1), pp.104-108. Grundy, T., 2006. Rethinking and reinventing Michael Porter's five forces model. Strategic Change, 15(5), pp.213-229. Jacenko, A. and Gunasekera, D., 2005. Australia’s retail food sector, Some preliminary observations. Australian Bureau of Agricultural and Resource Economics. Keith, S., 2012. Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, pp.47-81. Moullakis, J., 2003. Woolworths leads the way on cutting costs. The Australian Financial Review, 11. Porter, M.E., 2008. The five competitive forces that shape strategy. Harvard business review, 86(1), p.78. Thomson, A., Strickland, A.J. and Gamble, J.E., 2001. Crafting and executing strategy. Tata McGraw Hill. Woolworths holdings Limited, 2014. Annual Report 2014, retrieved 21st January 2016 from, http://www.woolworthsholdings.co.za/investor/annual_reports/ar2014/whl_2014_integrat ed_reprt1.pdf Woolworths Limited, 2016. Who we are, retrieved 21st January 2016 from, http://www.woolworthslimited.com.au/page/Who_We_Are/ Worthington, I. and Britton, C., 2009. The business environment. Pearson Education. Read More