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General Management Environment

Contents

Introduction.

Situational Analysis.

Macro Environment Analysis.

Industry Analysis.

Micro-Environment Analysis.

Key resources of Woolworth.

Competencies.

VRIO Framework.

Competitive Dynamics.

Pareto Principle.

SWOT Analysis.

Strengths.

Weaknesses.

Opportunities.

Threats.

Recommendations to board of Woolworths.

How to sustain its key strength.

How to overcome its key weakness.

How to exploit its key opportunity.

How to mitigate its key threat

References.

Introduction to Woolworth Holdings Limited

Woolworths is one of the largest organizations which operate retail and grocery business in Australia. It was established in the year 1924 and has its contribution of around 40% of the market share in Australia. Woolworths is an organization that is vigilant about its environment in which it operates surrounding marketing management (Knox, 2015). They do not only focus on the customer base and attracting them towards their business but also are involved in understanding their external and internal environmental factors so that they can prepare themselves concerning the ever-changing business strategies and business. The company is required to act according to such forces to brace themselves against the cut-throat competition and enhance the idea of money and value for its customers.

This report is going to conduct a situational analysis of Woolworths with the help SWOT analysis model. It will also analyze the macro as well as microanalysis of the company along with the understanding of its competitive dynamics.

Situational Analysis of Woolworth Holdings Limited

Macro Environment Analysis

Factors making up the macro-economic environment functions outside the organization are regarded as macro-environment which are specific to the organization and cannot be controlled by them.

Political

Woolworths comprises of appropriate constitution outlining the proper rules and regulations of the company. The diverse political factors can tremendously influence Woolworth's performance within the international and domestic markets. The government of Australia has developed some of the legal frameworks concerning tariffs, tax, fair benefits, consumer protection, equality at workplaces, and food quality (Underjill & Rimmer, 2017). Such regulations have somewhere created challenges for the company in conducting business effortlessly.

Economic

Economic factors like saving rate, interest rate, inflation rate, unemployment rate, and foreign exchange rate can influence the performance of the company. Within the environment of the domestic environment, certain challenges are encountered by Woolworths for retaining a high level of performance of business due to the reduction of GDP growth rate (King & Thobela, 2014). The inflation rate increased from 1.9% to 2.1% in July 2018 in Australia.

Socio-cultural

Huge barriers are created for the company due to the constantly evolving social demands in attaining its objectives. Woolworths faces challenges in engaging health-conscious people and who avoid staple food. The change in the food habit of people also increases challenges for the company (EI Ogrban, 2016).

Technological

The advanced technology has made the company to bring in more opportunities for the company. The emerging technology is being utilized by huge scale retailers in the key functions like performance, promotion, customer relationship management, and feedback collection (McCormick et al., 2014). The rise in the cost of technology is a major concern for the company. It has recently enhanced investment in the field of technology in managing business operations.

Environmental

The government of Australia has begun promoting the environment-friendly business practices. One of the key objective s of Woolworths is the reduction of carbon footprint along with the depletion of natural resources like water.

Legal

Woolworths is required to put up with wage regulation along with the food quality regulation. Acquiring food licensing has become quite difficult and time-consuming. Fair trade policy has been developed by the government for breaking the monopoly (Fisher, 2014).

Industry Analysis

To analyze the microenvironment of the company, Porter Five Forces have been used which is a tool for examining the current circumstances as well as the performance of the organization.

Bargaining power of buyer- there are plenty of supermarkets as well as retail stores available in the country that is useful in offering necessary products to the consumers. The entry of new players within the market can give more power to the consumers.

Bargaining power of suppliers- The retail trade is highly competitive and a considerable amount of market share is acquired by the majority. This makes the bargaining power of the suppliers high in the industry.

Threats of new entry- Various new businesses desiring for getting into the industry of retail, find it challenging due to the presence of larger companies that have conquered the market. Therefore, the threat of new entry is comparatively low for Woolworths.

Rivalry among existing firms- the main competitors of Woolworth are Aldi, Cole, and Asda that compete for higher market share making the rivalry high that further affects the profitability level of the company. The reduced profitability has made the customers shop from the stores of competitors. 

Micro-Environment Analysis of Woolworth Holdings Limited

Microenvironment analysis entails the analysis of resources and the capabilities of the company using the VRIO analysis.

Key resources of Woolworth

There are two types of resources that are tangible and intangible. The tangible resources are those that can be evaluated positively and compared against the rival’s resources. These are described as follows:

Human resources: The important human resources of the Woolworth Company are its talented operational workers that are approximately 15000 in Australia. The operational team entails the distribution centers, stores’ employees, and the support staff. All the staff members are reliable, knowledgeable, and have executive capabilities. All its human resources are the strength of the company's triumph and efficiency (Winker, 2017).

Wide range of stores: The stores of the company are widely spread around all the areas of Australia that 990 in number (Morrison, 2016).

Technology: Modernization is a significant resource that helps it to outshine in the presence of such an enormous competition. It made use of contemporary technology in most of its activities. Besides, its online presence over the web is much appealing to the clients.

Intangible resources are those that can be evaluated in the economic terms and are of greatest significance. These are as follows:

Intellectual property rights: The Woolworth holding ltd has an outreach to a big number of IP rights that aid it to carry out activities effectively. Intellectual property rights are the key resource for the company as they are hard to access.

Brand name: The Company has made it's brand a reputable one in Australia that results in effective footfall to its stores.

The efficiency of management: The Company’s leadership and management team are extremely efficient in that they constantly evaluate the macro environment and prepare the firm to combat the competition and build a competitive advantage.

Robust association with the dealers: The ability of the company to make a strong association with its suppliers and dealers is extreme. It has strong relations with them that allow it to be successful in offering an accurate product at a reasonable price and at the correct time.

Competencies

There are numerous capabilities of the Woolworth holding ltd that are described as follows:

  • Decent financial returns: Since the past many years, the company has been earning a huge amount of profits by excellently performing in the industry.
  • Marketing competencies: It adopts an exclusive marketing strategy that further aids it to certify that it is capable to perform significantly well.
  • Efficient customer service: The Company is capable to provide efficient customer service even after the sales due to the presence of its hardworking and talented employees.
  • Distribution strategy: The Company has its versatile distribution strategy that is proposed to enhance its worldwide penetration and existence that further upholds high excellence criteria to confirm the satisfaction of customers.

VRIO Framework

VRIO analysis is the framework that helps the companies to protect the resources and capabilities proposing a persistent competitive advantage (Almada & Borges, 2018). The core competencies of the company can be evaluated using this framework that is tabulated below:

Resources/capabilities

Value

Rare

Imitation

Organization

Competitive advantage

Distribution network

Yes

Yes

No

No

Sustained

Brand image/ position

Yes

Yes

Can be copied via vast investment

Yes

Sustained

Technology/ Innovation

Yes

Yes

No

Yes

Temporary

Stocking abilities

Yes

No

Yes

No

Parity

Financial abilities

Yes

Yes

No

No

Temporary

Marketing abilities

Yes

Yes

No

Yes

Sustained

From the above VRIO analysis, it can be inferred that the marketing, brand image, and the distribution channel are the core competencies of the Woolworth holding company.

Competitive Dynamics

Woolworths has been considered to be the biggest competitor in the industry of retails. The company has greater dominance in the market. The major competitors of Woolworths are Coles and Aldi. These companies have greater dominance within the market. The prominent supermarket chains and retailers have been facing a massive amount of competition. The company has enormously managed in gaining a competitive advantage in terms of the domestic level and also has gained customer loyalty. It has been able to manage its presence in most of the remote areas for making the products accessible to the customers and hence has led to the enhancement in the customer base. The supply chain management of its competitors such as Aldi is extremely stiff as well as functioning. However, due to the strong competition between Woolworths and Coles, the marketing strategies has been turned to be ineffective for Aldi. Woolworths has gained a competitive advantage within the market because of the product and services value that produced a substantial amount of customer attention.

Pareto Principle

The Pareto principle can be defined as the technique that aids to fix priorities for addressing the main issues of the company. It considers than 80% of the effect is originated by only 20% of the efforts or causes (Zhang, 2019).

This analysis can be applied in SWOT based on 80/20 rule as it can be said that 80% of the profit can be earned by 20% of its strengths and opportunities or profit can be increased to 80% by declining 20% of its weaknesses and threats.

SWOT Analysis

The dominant position of Woolworths within the market can be maintained by attentively analyzing and reviewing its strengths, weaknesses, opportunities, and threats with help of SWOT analysis model. It is simply a decision-making tool that assists the company in assessing and prioritizing the diverse issues by comparing the benefit incurred by solving each. This principle can also be used in the SWOT analysis that is discussed below using the key findings of the situational analysis.

SWOT analysis is one of the most interactive approaches that require immense coordination among different departments in the organization such as operations, marketing, strategic planning, and management information systems. The framework of SWOT analysis is beneficial for the organization in identifying the internal strategic factors like strengths and weaknesses and external strategic factors like opportunities and threats. The SWOT analysis of Woolworths is described below:

Strengths

Since Woolworths is one of the leading organizations, it comprises various strengths enabling it to thrive within the marketplace.

Over the past many years the company has made investments into establishing a firm brand portfolio which is extremely useful for the company in case it wishes to expand further into novel categories of products. Moreover, automation in the processes and activities brought in the steadiness of quality in the products of the company that has made it enabled to scale up and down based on demand conditions within the market.

Woolworths is comparatively successful at implementing new projects along with the generation of good returns on capital expenditure with the help of establishing new systems for revenue. Furthermore, it consists of a strong base for a steadfast supplier of resources that makes it capable of removing any bottlenecks related to the supply chain. It has a highly skilled workforce with the help of learning and training programs. Woolworth has built a kind of culture among dealers and distributers wherein the dealers not only facilitate products of the company but also make an investment in the training and development of the sales team.

Weaknesses

Woolworths is not so good at forecasting the demand for the product which has led to a higher rate of opportunities to be missed in comparison to competitors. There are also loopholes in the range of products which is sold by Woolworths and this deficiency in the choice can provide the competitor with an opportunity of a foothold within the market. In comparison to its competitors, the day’s inventory is greater that makes the organization raise extra capital for investing in the channel (Berning, 2014).

Even though the company is considered to be the leading one within the industry, it is facing challenges in shifting towards the various other product segments in the presence of its current culture. The company is incompetent in tackling the issues that are presented by the rivals within the segments because of which it has lost diminutive market shares within the niche categories.

Opportunities

With the adoption of advanced technology and government free trade agreement, Woolworths have the opportunity of entering into an emerging market. Additionally, the new taxation policy can have a significant effect on the methods of carrying business and can also have the chance of increasing profitability. Moreover, another opportunity is provided through government green drive which is related to the procurement of products of Woolworths by state and federal government contractors. Over the last few years, the investment has been made by the company into the online platform which has opened the doors for a new sales channel. In the future, this opportunity can be leveraged by Woolworth in understanding its customer appropriately along with serving their demands and needs with the use of big data analytics.

Threats

The company has to produce several products but those products are usually a response to the growth of its competitors. The new product supply is irregular that can result in low and high swings in the number of sales over a while. Moreover, one of the major threats for the company would be the changing purchasing behavior of the consumers from online channels to the existing physical infrastructure which is driven by the supply chain model. There is a lack of skilled workforce within the global market representing a threat to the stable growth of profits of the company.

Recommendations to the board of Woolworths

How to sustain its key strength

The key strength of the company is constantly earning good returns from the business. To sustain it, the company is recommended to follow the below strategies:

  • Develop a strategic plan: When a company is experiencing higher growth in respect of higher returns from the business, they must plan to sustain the same so that than can maintain a robust balance sheet and healthy equity positions. To do so, high-level planning that informs strategic directions is recommended.
  • Develop more customer base: It is recommended that rather than acquiring a newer customer, it must retain the existing clients as acquisition requires more expense than retention. This helps the company to sustain the financial position of the business by cutting the costs to the business.
  • Managing the cash flow effectively: There must a good practice of managing the earned cash flow and to be earned money effectively to sustain the financial strength of the company.
  • Make improved decisions via data analytics: This tool is proved to be successful in maintaining profitability, improving decisions, and enhancing the performance of the business. Moreover, the data-analytics tool aids the business to build a competitive advantage in the market (Weed et al, 2018).

How to overcome its key weakness

The key weakness of the company is less global presence as compared with its competitors. This weakness could be overcome by the following strategies:

  • Familiarize with the environment and create a go-to approach in the market: The firm must develop the marketing strategies that are suitable for the global business and adapt to that environment.
  • Search for the right partnerships and develop associations with them: To overcome the weakness, the partnerships with the local businesses of the overseas country play an essential role and help the business to grow and excel in the market.
  • Develop a separate team for the overseas business: This is required for fulfilling the increasing demands of the expanded business globally. With this capability, the company can overcome its weakness (Moltz, 2018).

How to exploit its key opportunity

The key opportunity of the company is its online presence of the business. To exploit this opportunity, the strategies are recommended as follows:

  • Connect with clients through social media platforms: The business can take advantage of its online platform by using social media accounts like Facebook, Twitter, Instagram, and more. The concerns and queries of customers could be solved via these platforms. It is a cost-effective method of building robust relationships with them.
  • Collaborate with clients via email: Email marketing has been proved the best way to promote the business and increase the sales virtually over the web that requires negligible cost. The more are the virtual marketing channels of business, the more competitive it is in the market (DeMers, 2016).

How to mitigate its key threat

The key threat of the company is the changing purchasing behavior of the consumers. This threat can be mitigated by using the following strategies:

  • Use technology: There are numerous technological tools available by which a company can track on the tastes and preferences of the customers. Big data analytics, artificial intelligence, and others can help the business to know the desires of clients. Therefore, the threat of changing demands of customers can be eliminated by the adoption of a suitable technical approach.
  • Be in contact with customers even after-sale: This strategy is suitable for knowing about the changing tastes of customers so that a company could create tailored-made products and services in the future.

References for Woolworth Holdings Limited

Almada, L., & Borges, R. (2018). Sustainable Competitive Advantage Needs Green Human Resource Practices: A Framework for Environmental Management. Revista de Administração Contemporânea22(3), 424-442.

Berning, A. (2014). Sustainable supply chain engagement in a retail environment: the case of Woolworths food suppliers (Doctoral dissertation, Stellenbosch: Stellenbosch University).

DeMers, J. (2016). The 6 Online Marketing Strategies Every Entrepreneur Needs. Retrieved from https://www.entrepreneur.com/article/278923

El Ogrban, I. E. (2016). Food preferences of international students at the University of the Free State (Doctoral dissertation, University of the Free State).

Fisher, E. (2014). Jurisdictional facts and hot facts: legal formalism, legal pluralism, and the nature of Australian administrative law. Melb. UL Rev.38, 968.

King, L., & Thobela, S. (2014). Woolworths farming for the future. International Food and Agribusiness Management Review17(1030-2016-83014), 161-166.

Knox, M. (2015). Supermarket monsters: The price of Coles and Woolworths' dominance (Vol. 6). Black Inc..

McCormick, H., Cartwright, J., Perry, P., Barnes, L., Lynch, S., & Ball, G. (2014). Fashion retailing–past, present and future. Textile Progress46(3), 227-321.

Moltz, B. (2018). 6 Disadvantages of International Trade (and Tips That May Help Solve Them). Retrieved from https://www.americanexpress.com/en-us/business/trends-and-insights/articles/6-disadvantages-of-international-trade-and-tips-that-may-help-solve-them/

Morrison, K. (2016). Woolworth: adding character to the British high street, 1909–1939. History of Retailing and Consumption2(2), 85-96.

Underhill, E., & Rimmer, M. (2017). Private governance, state regulation and employment standards: how political factors shape their nexus in Australian horticulture. Relations Industrielles/Industrial Relations72(1), 33-55.

Weed, T., Gifford, D., Bagley, D., Gantner, R., Cresa, P.M., & Gilbert, P. (2018). Five ways smart companies maintain growth and profitability. Retrieved from https://www.plantemoran.com/explore-our-thinking/insight/2016/10/5-ways-smart-companies-maintain-growth--profitability

Winkler, J. K. (2017). Five and Ten: The Fabulous Life of FW Woolworth. Pickle Partners Publishing.

Zhang, X. (2019). Evaluation of the diversification of Macau’s hotel market. In International Conference on Advances in Business and Law (ICABL), Vol. 3 (1), pp. 68-75.

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