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WOOLWORTHS LIMITED
Woolworths Limited is a major Australian company with extensive retail interest throughout Australia
and New Zealand. It is the largest retail company in Australia and New Zealand by market capitalization and
sales and the largest food retailer in Australia, and the second largest in New Zealand. In addition,
Woolworths Limited is the largest takeaway liquor retailer in Australia, the largest hotel and gaming
poker machine operator in Australia, and was the 19th largest retailer in the world in 2008. Woolworths
Australia is the largest supermarket chain in Australia. Australias Fresh Food People is
Woolworthss well-known slogan throughout Australia. Woolworths Australia is own by
Woolworth Limited. It has been launching in Australia more than 80 years and focusing on
providing quality products and services to its customers by using different product promotions,
pricing strategies, and human resource management strategies. Coles Supermarket is the major
rival of Woolworths Supermarket in Australia. The big two supermarkets in Australia have
deep influencing consequences on food production and retail at the local level. As Australian
supermarket is in the growth stage in product life cycle, Woolworths Supermarket has to
evaluate new strategy to maintain its marketing leadership position, such as improve its logical
and customer service efficiency by technology and innovation development. This report provides
a qualitative and quantitative analysis of Woolworths supermarket contemporary condition and
forecast its performance in Australia in the future with some recommendations.

INTRODUCTION
Since Woolworths first store opened up in Sydney in 1924, it has a huge growth and becomethe
leader household supermarket in Australia. Woolworths opened its first store in Sydney in 1924
as a bargain basement outlet. Through acquisition and expansion Woolworth has become the
largest supermarket chain in Australia, with a 31% market share. Woolworths Home brand
provides a wild range of grocery products across its retail stores in different sections. In 2012,
Woolworths sales totaled some $56.7 billion in fresh food, liquor, entertainment, electronics,
and home items (see Appendix 1 for financial information).Woolworths marketing strategy aims
at provide greater
Variety product choices and cheap price to their customers. Its long-term marketing plan is to
continue to develop multi-option retailing and online sales (Woolworth, 2012). This report aims
at the marketing strategies of Woolworths focusing on the data of its situation in Australia
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including marketing, product, distribution, competitor, and macro environmental situation; and
through PESTELS and SWOT analysis method to identify Woolworths major strengths,
Weaknesses, opportunities, and treats and to highlight the emerging issues Woolworths facing. A
conclusion of Woolworths marketing situation and some suggestions are provided at the end of
the report.

PRODUCT-LINE OVERVIEW
Woolworths HQ in New South Wales Australia and operate as a retailer through supermarkets,
petrol stations, common merchandise stores, liquor stores, and hotel serious. The retail products
generally comprise fresh food, grocery, beverage, home items, electronic products, and
petroleum. Currently there are 3,329 retail stores under different banners such as Woolworths
Fresh Food, BIG W, BWS, Dick Smith, Countdown, and Dan Murphy. The company mainly
focuses on Australian and New Zealand market, but also has developed its subsidiaries in Hong
Kong, China, Africa, and India (Woolworths, 2012).

THE MARKET SITUATION

Woolworth limited is positioned in the market as Australias dominant retailer. Woolworths
principal activities are currently in the food, liquor, petrol, general merchandise, and consumer
electronics retailing through chain store operations, together with hotel, gaming and entertain
operations.

TARGET MARKET AND CONSUMERS

Woolworths domestic market is basis indifferent Australian regions. In approximately 830
stores, there are at least 14 million customers shopping in the stores every week. The product
positioning of Woolworths is providing wild range of choices of fresh food, grocery, liquor,
general merchandise and other varieties. Fresh Food and liquor is the largest driver of the
Woolworths business and makes up approximately 85 percent of the companys revenue.
Woolworths works with grower farms in Australia to ensure the quality of their products on
shelves. The sales volume regards to different regions.
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Loyalty programs have long been used by general retailers and grocery retailers alike both to
increase customer retention and also for the valuable customer insights that can be gleaned from
loyalty program data. Despite some consumer skepticism regarding the value of loyalty
programs, membership and the number of programs have grown and remain extremely relevant
in Australia. Woolworths Total Rewards program is estimated to have almost 6 million
members.

In the last 80 years, Woolworths has grown from a single grocery store to the most recognized
supermarket brands with stores across most of metropolitans in both Australia and New Zealand.
Its total employees are 195,206 by the end of 2012, and its sales reached $56.7 billion in 2012,
EBIT increased to 3.1% to $3,377 billion compared to 2011, direct economic contribution $6.6
billion in wages and benefits for employees, $2.1 billion in taxes to government, $36.6 million
investment in local communities (Global Data, 2012). In addition, its average customer served
weekly is 28%, net profit after tax increased to $ 2,200 million, indirect economic contribution
729,900 full-time equivalent jobs, contributes to Australian GDP $108 billion (Global
Data).Since 1993, Woolworths has been listed on the Australian stock exchange with
shareholders 416,638,earnings per share increased to $1.79. Its Global-retailing ranking is at 18th
in global retailing, which is the highest ranking of Australian retailer.

WOOLWORTHS MAJOR COMPETITORS

The major competitor of Woolworths is Coles owned by Wesfarmers Group, Coles, Metacash,
Aldi, Franklins, and Mass Merchants in Australian supermarket industry. In 2008 Woolworth
and coles/Bi-Lo both chain supermarkets held markets shares of 31% and 23% respectively.
Estimations are that Coles has 37% of the Australian market share while Woolworths holds of
which 43% (Global Data, 2012) .In 2014 Woolworths it has declined at 40%.
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OBJECTIVE
The objective of the Wool Worth Retail Company is to answer the following questions with a
short internal and external environment analysis.
Identify the main characteristics of the industry in which Woolworths operates.
What is a business model? Critically examine the principal features of Woolworths
business model.
Which important competencies did Woolworths use to add value to its strategic
management practices to ensure its sustained growth?

EXTERNAL ENVIRONMENT ANALYSIS

External environment analysis is a primary study and analysis of macro-environmental forces,
industry analysis and competitor analysis in purview of an organizations growth. Macro-
environmental forces are dimensions in the broader society which influence the firms within it. It
focuses on the future probability of events. Industry environment includes set of contingencies
which have a direct influence on the firms action and response. It focuses on the factors
influencing the profitability of a firm within an industry while competitor analysis focuses on
predicting/ anticipating the competitors dynamism in action, responses etc.

MACRO ENVIRONMENT ANALYSIS

The macro environment affects every business. It consists of many factors that, if left unchecked, can
destroy a business. To reduce the effects of negative factors, you must first understand what macro
environment analysis is and how to do it yourself. Macro environment include: The Global segment,
Economic segment, Political/legal forces, Demographics, Technological and Socio cultural etc.

THE GLOBAL SEGMENT

Woolworths has expended its business in New Zealand and India to sustain its growth in retail
industry and capitalize on its market strengths.
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ECONOMIC SEGMENT
The slow growth and uncertainty in the Australian economy in recent times poses a threat for the
retail players, as their growth may be stagnant in future if the situation prevails for long. The
growing unemployment rate, possible increase in fuel prices and wages are also matter of great
concern for the participant in the industry.

POLITICAL/LEGAL FORCES
Government has a direct impact on the supermarket industry in regards to legislating trading
hours and through the monitoring and regulation functions of the Australian competition and
consumer commission (ACCC), the commonwealth government, the trade practices act (TPA)
and the foreign investment review board (FIRB).

DEMOGRAPHICS SEGMENT
Australian population was 21 million in 2008 and there are mix ethnic and religious groups due
to its immigration policy. In Australia, those over the age of 65 currently constitute
approximately 12% of population and the forecast is a 25% growth by 2051.The 85 plus group is
experiencing the fastest growth rate; with the number of people in the age group expected to
almost quadruple to approximately 5% in 2051(Pettigrew et al.,2005).

TECHNOLOGICAL SEGMENT
Woolworths has adopted new technology. It was the first major retailer to subscribe to
GEMMNET (Global Electronic Marketing & Merchandising Network) in 1994. It also inverted
to improve its supply chain and distribution system which has significant in the costs savings. It
also increased the online shopping facilities and developed company website which gave
Woolworths a first movers advantage (Alam and Majumdar, 2011).

SOCIO-CULTURAL SEGMENT
Changing societal concerns, attitudes and lifestyles have resulted in dramatic changes in
supermarkets industry in Australia. People are very much concern about health and obesity now-
a-days. Hence, there is demand for low-fat foods, easy to cook food, organic and GM-free food.
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The participant of women in workforces has also increased in recent time (Alam and Majumdar,
2011).

PORTERS FIVE FORCE ANALYSIS

Porter's Five Forces Framework is a tool for analyzing competition of a business. It draws from
industrial organization economics to derive five forces that determine the competitive intensity
and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability. An
"unattractive" industry is one in which the effect of these five forces reduces overall profitability.
The most unattractive industry would be one approaching "pure competition", in which available
profits for all firms are driven to normal profit levels. The five-force perspective is associated
with its originator, Michael E. Porter of Harvard University. This framework was first published
in Harvard Business Review in 1979.
Bargaining Power of Buyers
In Australian supermarkets offers almost homogenizes products, which have low switching costs
between stored and thus has provided buyers with extremely high bargaining power. The
Bargaining Power of Buyers in the industry is very high, with the expectation of stores
customizing their offering to a specific market.
Bargaining Power of Suppliers
The bargaining power of suppliers in the supermarkets retail industry varies depending on their
brand name of suppliers and the size of the supermarket. Such as British American Tobacco,
Coca Cola are the type suppliers who enjoy strong power in the supermarket. Hence, the
bargaining power of suppliers in the supermarket industry in Australia is high to moderate.
Industry substitutes
In the supermarket industry there are also a number of substitutes for customers such as
convenience store, grocery stored, online store, and fresh food market. The availability of
substitutes product moderator to high.
Threat of new entrants
The barriers to entry in supermarket industry are moderate
Rivalry between competitors
The rivalry between competitors in the supermarket industry is intense
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Strategic group mapping

Woolworths and Coles group has more than 2/3 of the total market share. All the firms included
in this diagram follow high quality, low cost strategy. However it is clearly displayed,
Woolworths and Coles has a wide product range.

Critical Success factors

Critical success factors are those things that most affect industry member ability to prosper in the
market. Woolworths critical success factor is maintain supply chain and online store. Improve
online services and delivering fresh food.

INTERNAL ANALYSIS
This section of analysis is now focused towards performing an internal analysis of Woolworths
with a view to analyze the effectiveness of the strategies as pursued by the company. The
internal analysis of the company is accompanied by the application of certain strategic tools in
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the form of SWOT analysis, value chain analysis etc. The application of these tools in analyzing
the strategic performance of the company is performed as follows:

Resources
At the end of the 28 calendar year, Woolworth operated 3,000 stores across the Australia &New
Zealand, and Employee approximately 180,000 people. This means that its tangible & intangible
resources are very strong. Woolworth has efficient management and human resources, wide
range of product and product innovation skills, well designed logistic management, strong brand
image and reputation for quality and fresh food, partnership and alliance management and strong
relationship with vertically-integrated businesses.

Capabilities
Capabilities refer to an organizations skills in coordinating its resources putting them to
productive use. We have found that from 1924 Woolworth is running business very successfully,
it means that it capable to use right person in right position and Woolworth knows how to use or
set the resources.

Core competency
World class supply chain: Woolworths innovation and competitive advantage have developed
through its supply chain. Woolworths has significantly focused on efficiency and cost cutting in
managing unnecessary expenses.
Branding and Market: Woolworths has positioned its store with The fresh food people
slogan, creating a differentiated image of quality and healthy product range at responsible prices.
Innovation: Woolworths has implemented several project, including re-fresh, the new idea
program petrol retailing.
Integration: Woolworths has vertically integrated some of its supplies by producing its own
inputs to increase its market power and to respond to the private level trend.
Value Chain Analysis: There have different value-creating activities of Woolworths.
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Primary Activities
Inbound logistic: It uses its own distribution centers as a result finally take advantages procure
bulk quantity and reduce cost price and take advantage from suppliers as discount.
Operation: Woolworths has a own farmer as a result they can supply from root level as fresh
product with reduce cost.
Outbound logistic: In store vendor quality management system used, ensuring product quality
& freshness of product.
Marketing and sales: Woolworth spends more amounts for marketing. It makes successful
brand awareness.
Customer service: Refund policies and also reduces the waiting time the use of trolley mounted
scanner.
Support Activities
Infrastructure: Woolworths has outside directors on its Board of Directors to avoid conflicts of
interest.
Human Resource Management: Online recruitment, psychometric testing and one fit training
programs are notable features of the recruitment process.
Technology Development: Woolworths has made significant investment in technology in a
range of operation; this experience has enabled it to further reduce cost through its investment in
supply chain technology.
Procurement: Woolworths runs its own logistics, trucks, distribution centers and supply chains.

SWOT Analysis
Strengths Weakness
* Strong Financial position. * Operating cost is more because too large.
*Wide range of product. * Debt increase.
*Better supply chain management. * Higher overall cost.
*Brand image and reputation. * Reduced petrol margin.
* Market leader with market share 31%
Opportunities Threats
*The potential to increase the customer base. *Slow growth and uncertainty in the Australian
*The potential to increase market share. economy in recent time.
*Growth opportunity in the health food sector. *Recession and growing unemployment.
*Population increase and diversity. *Growing dominant power of suppliers
*Technological advantages.
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The main characteristics of the industry in which Woolworths operates

Woolworths is an Australian dominant retailer. Woolworths Ltd is a Public Company that is
ranked number 2 out of the top 2000 companies in Australia. The company generates the
majority of its income from the Supermarkets and Grocery Stores in Australia retail supermarket
industry. The supermarket industry In Australia is very competitive which consists various
domestic and multinational companies. This industry has some specific features which are given
below:
The bargaining power of buyers is very high except the specialized stores.

The bargaining power of supplier in the supermarket retail industry is high to moderate.

This industry consists strong supply chain, large amount of capital, high price of land and
government restriction which create moderate entry barrier for new enters.

The rivalry between competitors in the supermarket industry is intense.

Australian domestic supermarket industry is not an attractive industry to enter, with a low
profit potential.

The availability of industry substitutes in supermarket industry in moderate to high.

Offering lower price and lower profit margin makes difficulties for surviving in this
industry.

Due to low price offering its complicated to create customer loyalty.

There is direct government interference in trading hours and close monitoring of the
business activities of the players.

The retail industry in Australia is very competitive due to the large population size.

Required advance technology to effectively handle the stores and supplier.

The uncertainty of the economy and changing socio-culture may hamper the industry.
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Critical Examination of the Principal Features of Woolworths Business Model

A business model is a company's plan for how it will generate revenues and make a profit. It
explains what products or services the business plans to manufacture and market, and how it
plans to do so, including what expenses it will incur.

According to Margaret Rouse- A business model is the conceptual structure supporting the
viability of a business, including its purpose, its goals and its ongoing plans for achieving them.

According to Dana Griffin- a business model defines whom you sell, how you make a profit and
what your position is in the supply chain. In the most basic sense, a business model is the method
of doing business by which a company can sustain itself.

Woolworths is the number two supermarket in retail super market industry. Woolworths
maintained a clear focus on meeting their customer needs. They offer lower price and wide range
of product which helps them to differentiate from other supermarket retail organizations. Despite
the high competition and lower profit its achieve 10.7% growth in its sales which is a clear
indication of a superior business model.

Customer Value Proposition (CVP)

A customer value describes the reason behind why a customer should buy a product or use a
service. In terms of Woolworths limited, it offers lower price, consistent high quality and
varieties of products give batter experience across all brands. Woolworths use fresh food
people branding to differentiate its products from others. Its the first business which uses
online shopping for their customers. Its intense marketing like red spot sales, petrol discount,
reward programs and banking facilities helps the organization to create values for their
customers.

Profit Formula

Woolworths offers lower price by effectively handle the supplier which makes lower profit
margin for the organization. It saves cost through efficient supply chain management, focused
efficiency, cost cutting in managing unnecessary expenses, economies of scale and
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diversification. As retail supermarket Woolworths buy large amount which offer lower margin.
Beside this the adoption of new technology also helps the organization to save its cost.

Woolworths Key Resources

Effectively management of logistics

Effectively handle the customer demand.
Maintaining lower cost strategy.
Wide range of product and product innovation skill
Efficient management and highly trained human resources.
The cost per unit is lower for the chains because of their size, allowing them to be able to
afford more staff.
Strong brand image and reputation for quality and fresh food.
Partnership and alliance management.
Adoption of new technology (like: GEMMnet, StockSmart) to effectively handle the
suppliers, forecasting, enhance sale as well as online shopping and save cost.
Vertically integrated with some of its suppliers by producing its own inputs to increase its
market power.
Woolworths have their own distribution centre and own farmers to satisfy its customers.

Woolworths Key process

Woolworths use insistent advertisement and promotional activities.

They use advance technology to reduce cycle time.
They develop their system continuously to satisfy their customer.
Product development and diversification.
Focus on training to build a highly skilled people.
Maintain competitive lower price.
Create efficiency and reducing cost.
Woolworths offer different food for different ethnic and religious group.
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Important Competencies Woolworths Uses to Add Value and To Ensure Its

Sustained Growth

Sustainable growth is the realistically attainable growth that a company could maintain without
running into problems. Every company wants to grow their business, yet few know how to
sustain it for the long-term or look beyond the next quarterly or yearly report. Growing a
business requires the right intellectual capital, carefully selected strategic partnerships, and
products or services with strong marketplace demand. Beyond these fundamentals, sustaining
growth requires a strong operational foundation to reduce the risks to the business over time.

According to Michel Porter there are three strategies to get sustainable growth which are cost
leadership, differentiation and focus strategy. Supermarkets in Australia usually try to follow
differentiation or low cost strategies in their almost homogenous product lines and they have
finally focused on differentiating their products through marketing. It offers unique brands to its
buyers.Woolworths have positioned its stores with The fresh food people slogan, creating a
differentiated image of quality and healthy product range at reasonable prices. Woolworths has
focused on efficiency and cost cutting in managing unnecessary expenses.

Strong Branding Image:

Woolworths has used the fresh food people branding image, high quality and healthy products
to satisfy its customer. Woolworths established a strong foothold in the Australian supermarket
through value for money and other programs such as red spot sales, petrol discounting, reward
programs and banking facilities. The larger supermarket carries 12000-14000 product lines
which give opportunities to customers with varieties of customers. It differentiates its products
by offering organic and GM- free products at reasonable price.

Innovation:

Woolworths use innovation to design its projects includes re-fresh, new ideas, and petrol
retailing. Without innovation its impossible for any business to survive in any business.
Woolworths thats way focus on the innovation to differentiate its products from others. It
introduced to its customers everyday money credit card in partnership with HSBC Bank and
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MasterCard. It will help their customers to finance their purchases. Woolworths has also
introduced different customers reward and convenience programs including everyday reward
and everyday money shopping card. These innovations in products and offerings are clearly
and offerings are clearly a competitive advantage of Woolworths over its rivals.

Integration:

Woolworths has vertically integrated some of its supplies by producing its own inputs to increase
its market power and to respond to the private label trend. Woolworths acquired Dick Smith
Electronics in 1983 to get growth in its business. Through this integration and acquisition it now
has a wide range of products available under the Woolworths select brand that to deliver
consistent high quality.

Strong Supply Chain:

Woolworths have a very strong supply chain. The growth of this business depends on its supply
chain. 3127 suppliers are working with Woolworths and of these more than 80% have been with
Woolworths for the past 10 years. For this strong relationship Woolworths being able to stretch
out suppliers payment options from 30 to 120 days. Woolworths strong supply chain gives its a
competitive advantage. Woolworths efficient distribution network is both a resource and a
capability in its inbound and outbound logistics. Woolworths has significantly focused on
efficiency and cost cutting in managing unnecessary expenses. A culmination of tangible and
intangible assets, such as technological capabilities and supplier relationships is highly valuable
as it contributes to the significant cost reduction throughout Woolworths entire logistics network.
The level of cost saving benefits provided by the efficient supply chain is non-substitutable by
any other resources and also resources and also difficult to imitate as the level and scope of the
technological capabilities involved is highly specialized and staggering.

Sustained Value Creating Initiatives:

Woolworths has its own distribution products which other competitors dont have. It has its own
farmers. At present 100% of fresh meat and 95% of fresh fruit and vegetables are from
Australian producers. An in-store vendor quality management system is used ensuring the
quality and freshness of produces on the shelves. It uses trolley-mounted scanners to reduced
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waiting time. Woolworths has outside on its Board of Directors to avoid conflicts of interest.
Beside this Woolworths uses world class technology to save cost and enhance productivity.

Conclusion
According to Porter (2008) Rivalry is especially destructive to profitability if it gravitates solely
to price because price competition transfers profits directly from an industry to its customers.
The retail industry in Australia is mature and intensely competitive with a low profit potential
and thus is not an attractive industry to enter. Despite the intense competition and low profit
potential. Woolworths have a 10.7% growth in its sales {Alam and Majumdar, 2011) which is a
clear indication of its superior business model. From the above discussion we can say.
Woolworths has understood the business as a process and expanded its boundaries to include
customers and suppliers. It has identified its strengths, added value to multiple activities in new
and innovative ways, and leveraged its capabilities to enhance the flexibility of operations
through close integration and coordination of independent activities. As the company broadens
its product offerings and expands into new markets, e.g. New Zealand and India, it is likely that
the benefits will only grow, entrenching Woolworths as the dominant player in the retail market
and preserving the sustainability of its competitive edge.

Recommendation
In the short-term,
Woolworths should adopt a social media strategy to take the advantage of low-cost
promotional activities.
Should offer organic and GM-free foods
should participate in CSR activities- which will improve the goodwill of the firm
In the long run,
Woolworths should increase its R&D finance for researching alcohol-related diseases, to
protect itself from the introduction of new government regulations restricting or further
regulating the sale of alcohol.
Woolworths should diversify in new businesses in which sales growth are projected to rise
over the long term, as the attractiveness and profitability of the Australian supermarket is
dry in the future
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