Marketing Strategy and Analysis Report of a Australian Local Supermarket- Woolworth - Case Study Example

Marketing Strategy and Analysis Report of an Australian Local Supermarket – Woolworth Table of Contents Introduction 3 Growth opportunity 4 Analysis 5 Macro-environmental factors 5 Political analysis 5 Economic analysis 5 Major financial data and analysis 6 Social analysis 7 Technological analysis 7 Ethical analysis 8 Legal analysis 8 Competitors 9 Industry 9 The firm’s current marketing 10 Target markets 10 Recommendations 13 Goals and objectives 13 Short term 13 Medium term 13 Long term 14 Growth Opportunity Marketing Programme 14 Target markets 14 Positioning 15 Product range 15 Value of the marketing 15 Green marketing 16 CSR programme(s) 16 Pricing 16 Promotion 16 Place 17 Environmental 17 Social 17 Contingency plan 17 Works Cited 19 Introduction The Woolworths Company is a business that was commenced as a store. The store was first opened in Sydney (Datamonitor, pr 1). The company deals with the sale of electronic goods, general merchandise, liquor (Safeway liquor) as well as grocery. One of the major challenges that face the company is competition. This is because the supermarket industry in Australia is very competitive. The company’s major competitors are the composite buyers, Cole’s/ Bi-lo and the franklins. Moreover, the company also faces competition from the IGA (Datamonitor, pr 1). In addition, the company is committed to making sure that the practices and policies governing the critical areas for instance financial reporting, corporate governance as well as remuneration reporting meet high levels of compliance and disclosure (Woolworths). Besides, the company also has the health and safety policies that ensure that they are committed to ensuring workplace safety. They include a risk management approach, effective employee consultation as well as effective implementation of the policy (Datamonitor, pr 1). The company also has policies as well as procedures that make sure that personal information is protected irrespective of its source; it is handled with care and in a manner that conforms to the National Privacy Principles. This report aims at providing an analysis of the major industry in which Woolworths Company competes in, an analysis of its environment and competitors, an assessment of its marketing and an overview of its green marketing and corporate social responsibility (CSR) programmes. Besides, the report will identify one growth opportunity for the company and a set of recommendations for establishing a competitive advantage for that growth opportunity. Growth opportunity The Australian Woolworths Limited board of directors has ratified the company’s plans to venture into the over 24 billion US dollars hardware sector (Round, 72-85). The plan has a multi format strategy that has been developed to address the daily improvement needs of the customers of Australia. The offer for new home improvement will be based on a combination of substantial international and local experts within the industry, the appropriate range demonstrating choice and value as well as a combination of the right traditional hardware store formats and big destination home enhancement stores to widen the choice of the consumer (Round, 72-85). The decision of the company to venture in the hardware as well as home destination improvement sector matches its overall provisions aimed at delivering value to its customers’ everyday (Woolworths). It is apparent that the present status of home enhancements in Australia is under-serviced. As a result, Woolworths Limited sees this as an opportunity to ensure growth and competition in the sector with great effort (Round 72-85). Individuals in Australia believe that it is of paramount to maintain and improve homes in their daily lives. Therefore, with Woolworths Limited expanding the hardware sector will be an advantage to the retail industry and the consumers. One of the company’s platforms for future growth is the category expansion. This expansion into the hardware sector is a clear indication of the extension of the current retail capabilities, skills and technology of Woolworths Limited (Round 72-85). As evidenced by research, the company has closely analyzed the category over time and it believes its best-in-class supply platforms alongside its worldwide sourcing as well as distribution capabilities will guarantee its better placement, in conjunction with Danks and Lowe’s, to expand the hardware sectors of Australia (Round 72-85). Analysis Macro-environmental factors In their day-to-day running businesses are affected by macro-environmental factors, which are analyzed, using a pestle analysis. A pestle analysis is simply a framework that classifies environmental influences as political, economic, social, technological, legal and environmental (Kotler et al 68-108). The analysis scrutinizes the effects of these factors and their relationship with each other on an industry. Political analysis It is apparent that the political environment in Australia has led to the success of the Woolworths limited company. Their success can also be linked to the peaceful environment. It is evident that, peace has prevailed in Australia due to political stability. This has not only seen the growth of the retail industry, but also many businesses in the region have succeeded. It is evident that, a stable political environment results to an effective economic environment (Kotler et al., 68-108). Economic analysis The firm has indicated an upward growth since its establishment in 1924. Apart from the major and innovative strategies the firm has employed since then, its accelerated growth may be linked to stable macroeconomic environment (Smith 33-50). This encompasses general stability, low interest rates, stable currencies, and international and global competitiveness, which have formed a basis for the firm’s growth. Nevertheless, the Woolworth Limited may be affected greatly by a depressed economy, making the firm modify its marketing strategies, which may affect its success. Major financial data and analysis Evidently, Woolworths Limited over the years has been in a position to grow its revenues from 51.7 Billion Australian dollar to 54.1 Billion Australian dollar (Bloomberg business week, pr. 1). Of great importance, the firm has been able to lessen the percentage of sales dedicated to the cost of goods sold from 74.27per cent to 74.22 per cent. As a result, this catalyzed the bottom line growth from 2.0 Billion Australian dollar to 2.1 Billion Australian dollar. Currency in millions of Australian Dollar 2008 2009 2010 2011 Revenues 47,034 49,594.8 51,694.3 54,142.9 Other revenues 123.3 103.0 90.5 136.6 Total Revenues 47,158.1 49,697.8 51,784.8 54,279.5 Cost of goods sold 35,257.8 36,974.4 38,391.2 40,186.3 Gross profit 11,900. 12,723.4 13,393.6 14,093.2 selling general & admin expenses, total 9,535.5 10,056.3 10,490.8 11,043.0 Other operating expenses -129.6 -148.4 -179.3 -226.2 other operating expenses, total 9,405.9 9,907.9 10,311.5 10,816.8 operating income 2,494.4 2,815.5 3,082.1 3,276.4 Interest expense -230.8 -235.2 -238.5 -300.0 interest and investment income 35.9 20.8 27.0 38.5 Net interest expense 194.9 -214.4 -211.5 -261.5 currency exchange gains (loss) 3.6 25.2 -- -- Ebt, excluding unusual items 2,303.1 2,626.3 2,870.6 3,014.9 gain (loss) on sale of investments 4.4 -- -- -- Ebt, including unusual items 2,337.5 2,626.3 2,870.6 3,014.9 income tax expense 686.0 766.3 766.3 832.6 874.6 Minority Interest in earnings -24.7 -24.3 -17.2 -16.3 Earnings from continuing operations 1,651.5 1,860.0 2,038.0 2,140.3 net income 1,626.8 1,835.7 2,020.8 2,124.0 net income to common including extra items 1,626.8 1,835.7 2,020.8 2,124.0 net income to common excluding extra items 1,626.8 1,835.7 2,020.8 2,124.0 (Bloomberg businessweek, pr. 2) Social analysis This includes consumers’ tastes, preferences and demand and usually varies with disposable income. Woolworth Limited offers diversified products suitable to individuals of all ages and gender (Round 51-64). Most of these products, which include foodstuffs and groceries, are essential for human survival. The fact that Woolworths targets individuals of all ages, gender, and low and high income earners putting in mind their tastes and preferences contributes significantly to the firm’s competitive advantage (Round 51-64). Technological analysis The rapid technological growth in the modern society is influencing greatly the way companies operate (Woolworths). This is based on the fact that companies have to adopt the new technologies and combine them with the existing ones in order to remain competitive in the highly competitive market and respond positively to the amplifying technological development (Kotler et al., 68-108). In this case, Woolworth Limited has to keep up with the new technologies, for instance, customer-serving computers must be installed with the latest technology to ensure quick customer service. Other technologies such as CCTV cameras for monitoring customers during self-service must also be up to date to ensure efficiency. In addition to this, the use of social Medias such as Facebook, Twitter, Flickr, and You Tube can also assist the firm greatly in terms of advertisement. Ethical analysis Some companies may engage with environmental unfriendly acts to maximize profits without putting in mind people’s welfare (Kotler et al., 68-108). Woolworth Limited is deemed to be environmental friendly as it engages in ethical acts such as corporate social responsibility and green marketing. This has made the firms brand very successful and popular nationally. Legal analysis Countries have various legislations, which influences how businesses are conducted. Such legislations may either restrict or give opportunity to such businesses. Woolworth Limited is a chain that deals with different consumer products, which vary from sale of electronic goods, general merchandise, liquor (Safeway liquor) as well as grocery. As such, the firm has to abide by various rules and regulations in Australia related to the sale, packaging and labelling of foodstuffs. Such legislations may include FoodWorks Labelling Edition and FSANZ Food Standards Code. Woolworths must also abide by different set environmental laws, which include safe disposal thus the firm has to come up with measures to deal with this issue to make certain that it keeps in line with Australian legal requirements. Political uncertainties, which may result to economic instability, may also affect Woolworth Limited. Competitors Evidently, the Australian retail industry has a very high concentration. This is because it has few major players competing in the industry. They include Woolworths, Coles/Bi-Lo as well as IGA. The Woolworths is able to compete with its competitors as well as fight for their position in the industry by using such tactics as product introduction, advertising slugfests and price competition (Smith, pp. 33-50). The threat for new entrants within the Australian retail industry is relatively low and it is estimated that it will remain so. This is because the insidious conjunction of local zoning laws and leasing agreements has resulted to an artificial scarcity of grocery store sites (Australian Competition and Consumer Commission 42-65). Consequently, potential new entrants have been prevented from entering the Australian retail industry. Industry The retail industry of Australia is a major catalyst to the economy of the country. Additionally, it is the barometer to the economic health of future growth prospects of the country. The function of this industry is to serve as an intermediary for the producers and offer the services that complement its sales (Smith 33-50). The industry has experienced a tremendous growth in its revenue for the last four years taking the total revenue of the industry to 68,500 million US dollars (Smith 33-50). The Gross Domestic Product growth of the industry has also been so strong making the total growth in the industry to be 7,850 million US dollars. The industry has 3,760 businesses, which run 4,340 establishments. The major players in the industry include Woolworths Limited, Coles, Franklins and the IGA. It is apparent that the industry until now has presented relatively high-to-high attractiveness for the players in the industry (Smith, pp. 33-50). This is due to the high barriers to entry as well as the weak bargaining power of the buyers and suppliers making the profitability very high especially for Woolworths the company in question. Nevertheless, the future environmental changes are set to change the attractiveness of the industry to moderate. This means that even the profitability of Woolworths will also decrease in the future. This is due to the fact that it is postulated that the bargaining power of buyers and suppliers will increase. For this reason, Woolworths’ ability to beat its competitors as well as maintain a competitive advantage is highly dependent on the company’s capabilities and resources (Smith, pp. 33-50). Most importantly, it depends on how the capabilities and the resources will be exploited in the future when the attractiveness of the industry as well as profitability declines. The firm’s current marketing Target markets The Woolworths targets customers from all locations, of all ages, gender, and income, putting in mind their behaviours and lifestyles in order to satisfy their wants and needs (Woolworths). The firm targets Time saver buyers, Family Shoppers and International students (Round, pp51-64). This means that, the firm encompasses geographical, demographic, behavioural and psychological market segmentations. Positioning Woolworths positions its high quality and innovative products at affordable prices. Additionally, they achieve this through ensuring that their systems and staff guarantee customer loyalty (Round, pp51-64). Product range Woolworths Limited deals with final consumer products/organic products ranging from foodstuffs, groceries and liquor, which have short life, cycle (Round, pp51-64). Value proposition Woolworth’s main focus on its food business has been providing the best quality, innovative products conveniently to its customers in a way that their customers can trust (Round, pp51-64). Green marketing Woolworths took a great step in the far-reaching good business by introducing green marketing. This was meant to help its customers distinguish the various items made from sustainable sources (Press Release, pr. 2). This was meant to lessen the environmental impacts of the products as well as the processes. Additionally, it was meant to change how the company does its business by addressing the challenges as a result of social development, transformation as well as environment and climate change (Press Release, pr. 4). The company believes it has a role to take in terms of its behaviour as well as offering its customers products fitting their ethos. Woolworths is committed to making the universe a better place than they found it. CSR programme It is apparent that the company takes social responsibility seriously. Studies indicate that the retail operations of Woolworths accounted for 0.66 % of greenhouse emissions. Additionally they also affected the environment in a number of ways for instance fuel consumption, waste production and high energy as a result of refrigeration use and the air conditioning machine (Round, pp51-64). To address this they introduced recycling and packaging, The Woolworths Australia Communities Foundation to manage the charitable activities. In addition, they developed quality assurance programs to ensure healthy products. Pricing Woolworth Limited offers its range of products conveniently and at affordable prices to ensure a competitive advantage (Round, 51-64). Promotion In order to emerge successful in the retail market, the company employs a combination of promotion strategies, which include advertising, public relations, personal selling and sales promotions. By so doing, they are able to ensure effective communication in the marketing process (Round 51-64). Place Woolworth Limited has a number of stores within Australia. The company seeks to make direct contacts with its customers as this is believed to be an efficient approach that can be employed to demonstrate the offering of the products to the chosen target market (Round, pp51-64). Environment Woolworth Limited is deemed to be environmental friendly as it engages in ethical acts such as corporate social responsibility and green marketing. Social Woolworth Limited offers diversified products suitable to individuals of all ages and gender. Most of these products, which include foodstuffs and groceries, are essential for human survival (Round 51-64). Recommendations Goals and objectives Minimalize loss of customers and revenue Uphold public image as well as reputation Short term In the short term, Woolworths Limited ought to venture more into advertising. The firm should develop advertisements demonstrating how their fresh range healthy meals fit in the everyday activities of its customers (Kotler et al., 153-167). It is believed that this would increase the brand recall of the company in the minds of its consumers thus increasing purchase likelihood. Of most importance in investing more in advertisements linking the firm to health and easily prepared meals available at affordable prices is that Woolworths will become synonymous with convenience as well as healthy consumption, which are a vitally important factor in differentiation within a market whereby low prices and fresh foods are points of parity (Kotler et al., 153-167). Medium term In the medium term, the firm should emphasis on a convenience and an enjoyable shopping experience (Kotler et al., 153-167). In the firm’s current refurbishment of the stores, they should include measures to enhance the atmosphere in the stores by having relaxing music and enthusiastic employees to ensure an enjoyable shopping experience. Long term In the long term, Woolworths limited should ensure that it ventures more into the businesses and industries. As is evident in the report, the profitability and attractiveness of the Australian supermarket could fall in the coming years. Therefore, the company should invest in the businesses whose sales are set to increase in the long run for instance up-market organic produce or hardware business (Kotler et al, pp.153-167) Growth Opportunity Marketing Programme A marketing programme is a synchronized, and considerately planned set of actions, which assist an organization attain its marketing goals and objectives. It encompasses particular activities for each component of a firms marketing strategy (Grover, and Vriens 2-6). In order to achieve its short term, medium term and long-term objectives, in addition to its growth opportunity, Woolworths ensures that the various activities required to make this happen are put into considerations. The company’s growth opportunity, which encompasses the decision, to venture in the hardware as well as home destination improvement sector necessitates an efficient marketing program. Target markets For its new venture, Woolworth’s targets customers who at least have a home or who want to have one. Generally, these are individuals who have an income thus can afford to have a home. However, the company’s products are well priced to enable its customers even those with low incomes to afford to purchase. Positioning Woolworth’s products are well positioned in the market. The company has created an image and identified in the minds of its clients for its products. This, in addition to offering quality and innovative products as well as ensuring customer loyalty is what has led to the success of the company’s growth opportunity (Woolworths Ltd, 2006, p.5). Product range Offering upgraded and quality products is what will help Woolworths achieve its objectives and succeed in its growth opportunity. The company is the leader in the Australian retail industry and it has been evidenced to achieve this as a result of offering quality products and services to its customers (Schulz, 2008, pp.16-21). In order to make certain that venturing into the hardware sector and home improvement emerges successful, quality of the product and service should be put into consideration. It is true that individuals want most excellent quality, thus any enhancements in quality generally transforms to increased gains. Value of the marketing The decision of the company to venture in the hardware as well as home destination improvement sector matches its overall provisions aimed at delivering value to its customer’s everyday. It is apparent that the present status of home enhancements in Australia is under-serviced and therefore Woolworths Limited sees this as an opportunity to ensure growth and competition in the sector with great effort. Woolworths provides the best quality and innovative products conveniently to its customers in a way that their customers can trust (Schulz 16-21). Green marketing The introduction of the green marketing strategy by Woolworths was a great step towards its success. This strategy was aimed at assisting it clients to differentiate the diverse items made from sustainable sources. Certainly, this is a great step towards ensuring Woolworths growth strategy is a success. CSR programme(s) The company has various corporate social responsibility programmes. Apparently, CSR is a main component for the success of any company. Such programmes encompass WACF and recycling which are aimed at ensuring a healthy environment as environmental factors are one of the factors that affect a company’s external; environment. Pricing With an objective of increasing its sales Woolworths offers its products at an affordable price, which its common customers can be able to purchase. The company pricing encompasses various adjustments including discounts as well as price-oriented incentive to purchase (Woolworths Ltd, 2006, p.8). Woolworths have also realized that offering quality products in spite of the prices set will attract customers towards purchasing the products as research has indicated that quality is highly valued by the customers. Promotion To ensure that the decision to venture in the hardware as well as home destination improvement succeeds, Woolworths makes use of various promotion strategies. Such strategies encompass displays, advertising, and the internet, amongst other communications intended to inform and convince individuals regarding the company’s product. The main aim why Woolworths promotes its products is to stimulate individuals to purchase the same. Place To ensure efficiency, Woolworth’s products are found in various placements. This includes in catalogues, retail stores, and web pages all, which are aimed at presenting the products to the clients (Hephaestus Books, 2011, pp. 46-52). Building stronger commitment from the clients necessitates the company to put into consideration logistics and distribution as improving these means enhancing placement. Environmental Unlike some companies that engage in environmental unfriendly activities with an aim of maximizing their profits, Woolworth Limited is deemed to be environmental friendly as it engages in ethical acts such as corporate social responsibility and green marketing (Hephaestus Books, 2011, pp.46-52). The company is committed to making the universe a better place than they found it. Social Considering the tastes and preferences of customers is one of the major factors that offer competitive advantage to companies. Woolworth’s has realized this and in order to ensure that its growth opportunity is a success, it provides products to all its customers considering their tastes and preferences, as well as demand as this will motivate and stimulate them to buy. Contingency plan The main objectives of the contingency plan are: Minimalise loss of customers and revenue Uphold public image as well as reputation Lessen the critical decisions to be made in the advent of a crisis (Gregory and Demand, pr. 6) With Woolworths venturing into the new hardware business, there is no guarantee that they will be profitable. This is due to the fact that the unforeseen disasters can adversely affect the business. Therefore, the business needs to lay down the actions to be taken in response of such events (Gregory and Demand, pr. 2). Woolworths will assign certain individuals to implement the plan in the advent of a disaster in its various departments. They include; Plan Coordinator, Sr. Management, Line Management, Human Resources, Safety Director, Security, Community Relations, Sales/Marketing, Finance, Legal (Gregory and Demand, pr. 4). Woolworths will also aim at avoiding disruption by a single vendor of their equipment, goods and services by having a number of suppliers to support the business. By so doing the company will be able to contribute positively to its business profitability. Works Cited Australian Competition and Consumer Commission, Report to the Senate on Prices Paid to Suppliers by Retailers in the Australian Grocery Industry, Canberra. pp. 42-65, 2002 Bloomberg business week, Woolworths ltd (WOW:ASX), Accessed on May 30, 2012, http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=WOW:AU Datamonitor, 2007, Company Profile, Woolworths Limited, accessed on May 30, 2012http://web.ebscohost.com.ezproxy.lib.monash.edu.au/ehost/pdf?vid=17&hid=102&sid=5260edbf-16b0-46d4-a1bc-974f7f0264e9%40sessionmgr106 Gregory Hamel and Demand Media, Example of a Business Contingency Plan. Accessed on May 30, 2012, http://smallbusiness.chron.com/example-business-contingency-plan-12292.html Grover, Rajiv and Vriens, Marco. The Handbook of Marketing Research: Uses, Misuses, and Future Advances. London: SAGE publisher, 2006. Hephaestus Books. Articles on Supermarkets of Australia, Including Aldi, Coles Supermarkets, Franklins, Sims Supermarket, Woolworths (Supermarket), Action (Supermarkets), IGA (Australian Supermarket Group), Bi-Lo (Australia), Food for Less. Hephaestus Books, 2011. Kotler, Phillip and Kevin, Lane Keller,Mairead Brady, Malcolm Goodman, Torben Hansen Marketing Management. New Jersey, Prentice Hall. pp. 68-108, 2009 Press Release, WOOLWORTHS INTRODUCES ‘OUR GREEN LABEL’ FOR SUSTAINABLE FIBRES, 2007, Accessed on May 30, 2012, http://www.woolworthsholdings.co.za/media/news/news_display.asp?Id2=18 Round Davis, The power of two: squaring off with Australia’s large supermarket chains, Australia journal of Agricultural and Resource economics, 50(1), pp51-64, 2006 Schulz, Peter. CRM and the Australian Food Retail Industry. GRIN Verlag, 2008. Smith Robinson. The Australian grocery industry: a competition perspective, Australia journal of Agricultural and Resource economics, 50(1) 33-50, 2006 Woolworths Ltd. Woolworths Item Sales Ranking Reports, Queensland, 2006. Woolworths. Home. http://www.woolworths.com.au/wps/wcm/connect/webSite/Woolworths/ Read More