Woolworths Situation Analysis - Case Study Example

Woolworths Situation Analysis Name: Instructor: Course: Date: Woolworths Situation Analysis Executive Summary Woolworths is an Australian company that operates in the retail grocery market controlling a considerable market share compared to its competitors such as Aldi and COSTCO who are rising rivals among others such as IGA’s and Foodlands. Woolworths just like any other company faces competition and is affected by factors outside its environment. This paper seeks to present a situation analysis of Woolworths as the target brand and its strategies towards achieving a competitive advantage in the face of increased competition from rising ALDI and other rivals such as Coles Myer and COSTO. In Australia, retailer’s competition has enabled delivery for the consumers through reduced prices, rapid innovation, and better access of most goods. Different reforms in the market have created competitive and healthy markets which have been beneficial to consumers. This paper therefore discusses Woolworth as a target brand within the Australian market, analysis of the external environment, and an analysis of the Political, economical, sociological, technological, legal, and environmental (PESTEL) forces. Introduction Consumer needs have been rapidly evolving necessitating companies to develop innovative marketing approaches towards achieving a competitive advantage. Woolworths experienced failed marketing strategies and a drop of 35% in profits in 2015 making the business establish innovate ways to compete effectively with its competitors Coles, rising Aldi, COSTCO, and Foodlands. Different factors contributed to these failures such as the low prices from other players like Aldi (Business Think, p.5). Consumers therefore chose the cheaper brand equivalents and Woolworths was no longer a shopping preference. A consumer group reported a great difference of over 50 per cent between ALDI and Woolworths. Price is an important aspect in marketing that can greatly determine the overall success of a marketing campaign. For instance, Woolworths introduced an innovative program to bring back customers while at the same time retain the existing ones. The promotion of low prices was further aimed at promoting customer loyalty thus improving the brand towards gaining a competitive advantage (Australia Competition & Consumer Commission, p. 24). This paper provides a situation analysis of Woolworths by focusing on competition issues in the Australian supermarket retail industry. Statement of the Problem Woolworths needs to strategize in order to compete with both rising rivals and other major competitors to achieve a competitive advantage. It is evident that Woolworths must ensure effective marketing methods to thrive in a highly competitive market. Rising competitors like Aldi and others such as Coles Myer, Foolands, and IGA’s have launched similar marketing techniques focusing on price reduction and therefore Woolworths must seek other innovative and unique approaches that will not only boost sales but also win back customers and develop their brand loyalty. This would ensure achievement of a considerable market share and sustainable growth in this highly concentrated retail grocery market in Australia. The giant supermarket retailers Coles and Woolworths have experienced criticism for their aggressive pricing tactics and market control over their fresh produce and foods. In fact, other competitors such as Aldi and COSTCO who have focused on meeting consumer needs appealing to them. This negative publicity has prompted some reaction from various quotas, including a defensive 2008 proclamation titled “The Facts About Grocery Retailing” in which Woolworths notably emphasized their low profit margin and a relatively small share of the fresh food market (Woolworths Limited, 2008). Surprisingly, this statement also indicates customer dissatisfaction with Woolworths’ produce: this fact sheet postulates that 71% of their customers’ fruit and vegetable expenditure is spent externally from Woolworths (Keith, P.16). External Environmental Analysis for Woolworths The external environment where Woolworth operates has potential threats and opportunities that impact on its performance and profitability as well as its effective functioning in Australia. Some of these threats include other rivals such as Cole, Aldi, and COSTCO among others who provide similar products in the market. The general force analysis is a vital tool that can be utilized to carry out an assessment of the forces at work within Woolworth’s external environment (Porter, p. 19). Woolworth’s ensures that emerging changes in the external environment and operational area are proactively anticipated and planned for to mitigate any potential negative impact to the business. The environment Woolworth operates has a remote environment that comprises a set of forces economically, politically, socially and technologically key for its growth in a rapidly changing global environment, (Gasparotti, 2009). During Woolworth’s analysis, the Five Forces model serves as an important tool in determining political, economical, social, technological, legal and, and environmental factors that are manifest in the Australian market in which the company operates. Woolworths therefore seeks to use the most effective strategies through a better understanding of these forces at a given time in order to take appropriate actions to ensure such forces are controlled and do not adversely influence business operations. An organization like Woolworths impacts greatly on people’s lives, is position to advance the society, and thus must set standards that portray best business practices consistently. Woolworths has identified shifts and other changes within its operations to help the business device either defensive or offensive strategies to strike a balance in its grocery industry as well as remain profitable sustainably through healthy competition with its rivals. Woolworth’s external environment has had several challenges that could have potentially hindered the company’s effort towards a realization of strategic positioning in the Australian market. However, the organization ensures the monitoring, scanning, forecasting and assessment of the external environment is regularly carried out to establish opportunities and threats are exploited and prevented respectively (Woolworths Limited, p. 8). To understand the PESTEL analysis of Woolworths, the porters five forces which include the new entrant threats, suppliers bargaining power, substitute threats, and competing firms intensity of rivalry can be used. These five analysis model is an important tool for the identification of the sources of market power as well as providing a deeper insight of the strength inherent in the current market situation with rivals like Aldi and Coles and future expected situation for Woolworths (Porter, 2008). The porter’s five forces help Woolworth to clearly identify the profitability of the various new products and services in order to enjoy a competitive advantage. For instance, new entrants to a given market serve as a potential threat to the already existing market share of the available rivals within supermarket retail operations. In addition they also increase the production capacity to a given industry. New entrants to a market may also experience entry barriers or experience retaliation in their market of interest. Suppliers on the other hand also have influence and may use their power increasing price or reducing the quality of goods and services. Bargaining power of the consumers or buyers is characterized by their want to purchase at the lowest price possible while at same time demanding higher quality of the products and services from the producers. Substitutes serve as a threat in that they perform similar roles with the grocery industry goods in a fairly competitive price and sometimes low costs making them appealing to the buyers. Woolworths has applied PESTEL analysis towards the improvement of their ability to serve its customers effectively and profitably in a high competitive and saturated market in Australia (News.com.au, p.1). Therefore, Woolworth’s situation analysis presents an evaluation of the organizations overall strategic position and competitiveness potential in relation to other key players ALDI, Foodlands, IGA’s and Cole Myers in the industry. The analysis provide a sound basis for Woolworths to compete and constantly evaluate the specific forces both internal and external that impact on the area of function either positively or negatively. The situation analysis is typically a focus on one fundamental growth decision specifically competition in the evaluation of a product or service viability in a given market (Porter, p. 12). Socio-culturally, Woolworths has embraced the green lifestyle aimed at sustainability of best practices and social corporate responsibility. Consumers have increasingly become environment conscious and choose companies who impact minimally to the environment. Additionally Woolworths seeks to better understand consumer needs and improving on their shopping experience as a strategy to improve their competitiveness (Dunford, Palmer & Beneveniste, p. 8). Technologically, Woolworths has invested in innovation particularly in information technology improving the overall efficiency through customer satisfaction is realized. For instance, the company uses self check automated machine that facilitate customers operations in weighing and purchasing the goods. Different other software that serve to enhance service delivery and quality assurance to the consumers. The Visa pay wave was a great innovation that is aimed at reducing the waiting time. Therefore, Woolworths as among the leading retailer supermarket in Australia has achieved a balance on its macro environment efficiently (Woolworths Limited, p. 12). Conclusion Woolworths just like its competitor Coles, Aldi, COSTCO, UGA’s and Foodland has had challenges in facing a turbulent market with rapidly evolving consumer needs. Woolworth’s business operates in a market that is concentrated and attaining a competitive advantage calls for a deeper insight into the retail industry and external environment awareness to ensure all the needs of the different stakeholders are met. Pricing has particularly been one of the main marketing tools that have seen Woolworth’s rivals grow while at the same time it has also been one marketing strategy launched by the rivals such as Aldi. A PESTEL analysis has revealed that Woolworths is increasingly alert to changing demands and consumer needs. Woolworths clearly owns a considerable market share in the Australian supermarket retail market. The companies’ practices and policies promote a competitive advantage and consequently profitability while at the same time engaging in social corporate responsibility endeavors. References Australia Competition & Consumer Commission 2008, Report of the ACCC Inquiry into the Competitiveness of retail Prices for Standard Groceries, viewed 15 August 2016, https://www.accc.gov.au/system/files/Grocery%20inquiry%20report%20- %20July%202008.pdf Business Think 2011, Milking the Market: What’s Behind the Coles Woolworths Price War, viewed 15 August 2016, https://www.businessthink.unsw.edu.au/ Dunford, R, Palmer, I, & Beneveniste, 2009, Strategy for Successful Entry into a Concentrated and Highly Competitive Market, viewed 15 August 2016, http://www.anzam.org/wp- content/uploads/pdf-manager/2374_DUNFORD_RICHARD_BSP-01.PDF Gasparotti, C, 2009, The Internal and External Environment Analysis of Romanian Naval Industry with SWOT Model, viewed 15 August 2016 http://www.managementmarketing.ro/pdf/articole/154.pdf https://lastfreelance.wordpress.com/2013/11/23/strategic-management-analysis-of- woolworth-supermarketupd/ Jones, E, 2006, The Australian Retail Duopoly as Contrary to the Public Interest: Report for the Fair Trading Coalition. viewed 15 August 2016, http://sydney.edu.au/arts/political_economy/downloads/JonesRetailDuopoly&PublicInter est406.pdf Keith, S, 2012, Coles, Woolworths, and the Local, The Australasian-Pacific Journal of Regional Food Studies viewed 15 August 2016, http://localejournal.org/issues/n2/Locale%20n2%20-%2007%20-%20Keith.pdf News.com.au 2015, Why Woolies is Failing in the Supermarket Wars, viewed 15 August 2016, http://www.news.com.au/finance/business/retail/why-woolies-is-failing-in-the- supermarket-wars/news-story/95ec07c0ab9b4c5c841ae489a4bd744f Porter, M, 2008, The Five Competitive Forces That Shape Strategy, viewed 15 August 2016, http://www.exed.hbs.edu/assets/documents/hbr-shape-strategy.pdf Woolworths Limited 2014, Response to Competition Review Issues Paper, viewed 15 August 2016, http://competitionpolicyreview.gov.au/files/2014/06/Woolworths.pdf Woolworths Limited 2015, Afresh new offer in home Improvement, viewed 15 August 2016, http://www.woolworthslimited.com.au/icms_docs/128788_Woolworths_to_enter_24_bill ion_hardware_sector_-_Presentation.pdf Read More