HI5019 Woolworths Largest Supermarket Chain in Australian

Woolworths is regarded as the largest supermarket chain in Australian retail industry and it is owned by the Woolworths Limited which was established in 1924 at Imperial Arcade of Sydney. Woolworths started its business activities with a bargain basement outlet. Since its inception, Woolworths has developed as a giant in Australian supermarket retail industry and today it has become the foremost choice of almost every household of Australia and New Zealand. In the year 2012, with weekly 28 million customers the company has become the largest supermarket chain. The brands which are operated by Woolworths are Big W, BWS, Woolworths / Safeway supermarkets, Dan Murphy’s (Woolworthsgroup.com.au, 2018).

2) Industry type:

            There are nearly 140,000 businesses and retail companies in Australian retail industry and the industry is regarded as one of the most well developed markets. The Australian supermarket retail industry is considered as world’s one of the most strongest and concentrated industry. Yet, due to oligopoly there are few major players in the retail market (Price, Bailey and Pyman 2014). As a result, larger player such as Woolworth, enjoy better returns than the smaller businesses. Due to its market share of 31 percent in retail, Woolworth is one of the major contributors into the Australian economy. Woolworths and Coles are the giants in the Australian supermarket retail industry (Arli et al. 2013).

3) General environment analysis:

            The general environmental analysis of the firm is called the PEST or PESTEL analysis. It analyses the Social, Economic, Political, Environmental, Technological and Legal factors that needs to be considered for developing the organizational strategic plan.

Political Factors: The Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) combines the two countries and due to this agreement, Woolworths is in advantageous position as it works as a single community to serve its customers’ needs. In addition, political stability of both countries provide security to the domestic and foreign shareholders of Woolworths (Campling 2015).

Economic Factors: Economic factors are also favourable for Woolworths as compared to other countries both New Zealand and Australia have an economically stable environment and also high living standards are maintained by the New Zealanders and Australians.

Socio-cultural factors: Through its sustainability strategy, Woolworths has incorporated many environment friendly techniques. Woolworths is one of leading company that became trend setter for a healthier lifestyle. The trends and demands of the consumer changes with time and they are more likely to be attracted towards new design and fashions. Apart from these as low prices are considered they prefer quality over prices (Sanin 2015).

Technological Factors: Woolworths provides innovation and persist in development of better technologies to strengthen the efficiency of its services as well as to meet the quality expectations of customers. In all its stores the firm has integrated the self-checkout machines so that the consumers have the option to weigh, scan as well as make payment through cash, credit/debit cards for their products. The firm also incorporated the Service Oriented Architecture (SOA) software to monitor and identify the congestion in its operations and services which helps in cost reduction (Ekanayake 2014).

Legal Factors: The trading policies as well as other policies of the government directly affect the Australian supermarket retail industry. The Australian Competition and Consumer Commission and the Trade Practicing Act as well as other policies of foreign trading highly favour the retail business supermarket in Australia. Thus, the regulatory and legal factors favour the growth and augmentation of Woolworths’ business (Pentony et al. 2013).

Environmental Factors: The environmental factors have a remarkable affect on the sustainability of supermarket retail business. Woolworths’s environment friendly policies along with its various initiations towards producing organic products makes the firm to establish itself as a market leader (Richards et al. 2013).

4) The industry environment:

            The industry environment of the firm can be described by porter five forces which examine the firm’s current situation and performance. The tool assesses the following areas.

Buyers’ bargaining power: In Australian retail industry, the availability of retail stores and supermarkets provide necessary products to consumers and this enables them to have wider variety of products to choose. This gives buyers high bargaining powers.  Generally, individual buyers are the major customers of Woolworths and they have strong bargaining power. One important strategy of Woolworths is to distribute low-priced products as per customer requirements (Schleper, Blome and Wuttke 2017). 

Suppliers’ bargaining power: The suppliers’ dependence level for Woolworths is low, particularly in Safeway Supermarkets. This implies that the suppliers have weak bargaining power. The primary reason for this is major portion of retail market share in both New Zealand and Australia and along with sales of massive number of products to the industry. In addition, the seasonal changes affect the supply in foods and due to this changes if the supply reduces, then the suppliers usually have more powers (Grimmer 2018).

Threats of new entry: New firms find it is extremely strenuous to set foot into the retail industry as the industry has already been dominated by larger companies. Hence, the threats of new entry for Woolworths are considered to be lower. In addition, Woolworths and its present competitors are dominant players having trusted brands as well as variable access to the retail industries distribution channels. Thus, new entrants will have the possible risk of losing their investment (Kizil et al. 2013).

Rivalry among existing firms: In Australian retail industry, the main competitors of Woolworths are Coles supermarket, Myer, Aldi, Asda. Their competition for high market share makes the rivalry to be higher.  The profitability level of Woolworths has been significantly reduced because of this competition as some customers now prefer shopping from competitor’s stores instead of Woolworths (Das Nair and Dube 2017).

The threat of substitute products and services: These substitute products are always available and similar to existing one these products can serve as an alternative purpose. Woolworths has adopted the pricing strategy in Australia to tackle this. Consequently, these strategies will lead to profit maximization through increased sales. In term of industry rivalry, Woolworths’ business particularly Woolworths Supermarket or Dick Smith have got the high competition. Its competitor Coles offered rewind price to the consumers. Thus, in term of substitute products and services Woolworths’ business has got a high threat (Strydom 2015).

            Hence, by considering these five forces and customer requirements Woolworths must apply marketing strategy, formulate feasible strategies to control suppliers and enhance quality, and completely totally incorporate technology in its processes. This will help Woolworths to manage the competition and expand further.

5) Competitive environment:

            The grocery industry of Australia is highly competitive and the entry of Aldi in the market has fierced the competition. Aldi introduction of pricing strategy has posed a threat to Woolworths’ differentiation strategy. The pricing strategy offers quality products at a low price. The sound amount of market share that has been enjoyed by Woolworths and Coles for quite long period has been affected by this strategy. Strong competitors such as Coles, Myer is likely to limit the market share of Woolworths. These competitors’ intensity forces the firm to create effective competitive strategies to differentiate themselves from competitors (Tate, Ellram and Gölgeci 2013).

            The agenda of competition reform must protect and enhance healthy as well as competitive markets for customers’ benefit.

6) Opportunities and threats:

Opportunities: There is good potential for retail industry throughout Australia and the factors such as changes in consumer lifestyle, advances in supply chains, computerization have considerably affected retailers’ abilities and provided good opportunities for their growth. To adapt with the changing customer requirements Woolworths also capitalize this option by way of complying the strategy of multi-option retailing (Hummerston 2013).

Threats: In the Australian retail market the threats to Woolworths are primarily due to its high level competition in the industry with the Coles Supermarket. In addition, interference by the government also affecting the Woolworths growth particularly, within the Australian retail market (Hummerston 2013).

Internal Analysis and proposal:

1) Tangible and intangible resources:

Across Australia and New Zealand, Woolworths operates on 3000 stores along with 1,80,000 employees. This implies that both intangible as well as tangible resources of Woolworths are extremely strong. The firm has efficient management resources, human resources, innovation skills, well-designed logistics management, vast product range, and strong brand image, high reputation for fresh, healthy and quality food along with strong vertically integrated business, partnership and alliance management (Harman2013).

2) Capabilities of the firm:

Capabilities of the firm are its skills or ability to coordinate its resources by putting them together to productive use. It has been found that since its inception, Woolworths is running the business extremely successfully, which means Woolworths is capable of using the right person in right place and the firm knows about resources usage or their setting (Methner, Hamann and Nilsson 2015).

3) Core competency analysis:

World class supply chain: Through its supply chain, Woolworths have developed its innovation and competitive advantage. In order to manage the unnecessary expenses, the firm has considerably focused on cost-cutting and efficiency.

Branding and market: Woolworths has developed a demarcated image of healthy and quality products with reasonable prices by placing its stores with “The fresh food people” slogan and the consumers have positive experience with the products. This brand reputation is highly valuable.

Innovation: Besides implementation of various projects such as the new idea, re-fresh, program petrol retaining. Woolworths has also introduced different convenience programs as well as consumer’s rewards such as everyday rewards, daily money shopping carts. These types of innovation in products with offerings clearly indicate Woolworths’s competitive advantage over its competitors.

Integration:-. To respond to the private level trend as well as to increase its market power through production of its own inputs, Woolworths has vertically integrated some of its supplier. With this integration, the firm under its brand can avail an ample range of products that targets to deliver expected high quality (Safrudin et al. 2014).

4) Proposal of information system solution:

            The place where goods/products are sold is called retail. Retailer purchases large quantities of goods/products from the suppliers/producers and sold them in small quantities.  Large retailers have their outlet, shops, stores across different geographical areas. Hence, managing all the shops, stores is important for them and this can be done with the help of an information system called retail management information system. Such system uses softwares and hardware along with procedures for managing finance, point of sale (POS) transactions, inventory control, planning. As Woolworths deals with all these activities, so retail management information system can be the proposed information system solution for Woolworths. The proposed retail management information system must have the following features:-

• It must link distributed stores and support the instant information exchange so that through stay in contact store managers can effectively control the firm’s profits.
• It must include mobile user interface to meet the requirement of sales and inventory managers.
• It must monitor daily sales volume along with sales of product mix.
• It must include product management handling as well as support detail analysis of customer data.
• It must have the flexibility to integrate regular evolving needs of consumer market.
• It must be flexible to align with business and strategic plans of the organization.
• It must support cost structures, currencies, tax systems, and multiple languages.
• It must support different business models such as consignment, franchise, direct sales or online (Fernie and Sparks 2014).

5) Evaluation of proposed system and suggested recommendation:

            A retail management information system can be evaluated in terms of the following parameters.

Ease of use: It is the primary requirement of the proposed system. Thus, the design of the proposed system must have intuitive user interface with built-in applications and POS procedures which can be easily learned by the employees.

Functionality: The rretail managers’ information requirements is anticipated retail management information system  which collects, organises and stores relevant data and directs the information flow to the proper decision makers.

Cost: The cost must be reasonable for all hardware and software that needs to be incorporated in proposed system.

Compatibility with existing systems: The proposed system must be compatible with the existing systems.

It is recommended that the database needs to be exploited and sophisticated data mining techniques must used for identification of new customer and personalize their service. In addition, overstocking must be avoided on the basis of analysis of market requirements and customer behaviour to predict sales.

References

Arli, V., Dylke, S., Burgess, R., Campus, R. and Soldo, E., 2013. Woolworths Australia and Walmart US: Best practices in supply chain collaboration. Journal of Economics, Business & Accountancy Ventura, 16(1).

Campling, L., 2015, April. Assessing Alternative Markets: Pacific Islands Canned Tuna & Tuna Loins. In Honiara: Pacific Islands Forum Fisheries Agency.

Das Nair, R. and Dube, S., 2017. Growth and strategies of large, lead firms-Supermarkets.

Ekanayake, C.C., 2014. Consolidation of business process model collections (Doctoral dissertation, Queensland University of Technology).

Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.

Grimmer, L., 2018. The diminished stakeholder: Examining the relationship between suppliers and supermarkets in the Australian grocery industry. Journal of Consumer Behaviour, 17(1), pp.e13-e20.

Harman, S., 2013. Managing the private label supply chain. MHD Supply Chain Solutions, 43(6), p.54.

Kizil, C., Eddy, V., Clary, L. and Crowell, K., 2013. Hershey's Entry to the Australian Market with a New Brand: An Accounting and Marketing Perspective.

Methner, N., Hamann, R. and Nilsson, W., 2015. The Evolution of a Sustainability Leader: The Development of Strategic and Boundary Spanning Organizational Innovation Capabilities in Woolworths. In The Business of Social and Environmental Innovation (pp. 87-104). Springer, Cham.

Pentony, B., Graw, S., Parker, D. and Whitford, K., 2013. Understanding business law. LexisNexis Butterworths.

Price, R., Bailey, J. and Pyman, A., 2014. Varieties of collaboration: the case of an Australian retail union. The International Journal of Human Resource Management, 25(6), pp.748-761.

Richards, C., Bjørkhaug, H., Lawrence, G. and Hickman, E., 2013. Retailer-driven agricultural restructuring—Australia, the UK and Norway in comparison. Agriculture and Human Values, 30(2), pp.235-245.

Safrudin, N., Rosemann, M., Recker, J.C. and Genrich, M., 2014. A typology of business transformations. The 360º Business Transformation Journal, 2014(10), pp.24-41.

Sanin, J.D., 2015. A BIG RESPONSIBILITY! The Moralization of markets and Rise of supermarket patriotism. Sites: a journal of social anthropology and cultural studies, 12(1), pp.83-106.

Schleper, M.C., Blome, C. and Wuttke, D.A., 2017. The dark side of buyer power: Supplier exploitation and the role of ethical climates. Journal of Business Ethics, 140(1), pp.97-114.

Strydom, J., 2015. David against Goliath: Predicting the survival of formal small businesses in Soweto. The International Business & Economics Research Journal (Online), 14(3), p.463.

Tate, W.L., Ellram, L.M. and Gölgeci, I., 2013. Diffusion of environmental business practices: A network approach. Journal of Purchasing and Supply Management, 19(4), pp.264-275.Hummerston, J., 2013. Options and Directions for the Continuous Improvement of the Australian Meat Retail Qualifications.

Woolworthsgroup.com.au. (2018). The Woolworths Story - Woolworths Group.