Executive summary

Grocery stores and supermarkets rank among the industries with the highest levels of competition and concentration. This is especially true in Australia, where reports claim that four operators there generate 80% of industry revenue worldwide. Since the situation is favorable, there will be tremendous competition, especially from newcomers like Aldi. Industry veterans like Woolworth have been compelled to evolve survival tactics as a result, all of which strive to reclaim the constantly shifting market share.
We investigate some of these survival techniques by looking at the management philosophies of retailers in Australia like Woolworth, Coles, and Aldi. The major goal of the report is to conduct a comprehensive strategic analysis of Woolworth. The report examines the business model adapted as Woolworths strives to maintain its lead. Customer satisfaction is examined as a driving force to higher bottom lines amongst the key players. Finally, the report offers suggestion in a bid to enable the retail giant to take advantage of computerisation, advances in supply chains and changes in consumer habits.











Introduction

Woolworths, owned by the Woolworths Limited, is one of the biggest supermarket chains in Australia. The conglomerate, Woolworths Limited, was registered on 22nd September 1924 by Stanley Edward Chatterton, Harold Percival Christmas, Ernest Robert Williams, George William Percival Creed and Cecil Scott Waine. At its establishment, each of these investors was expected to contribute 25,000 shares each. In an effort to raise additional capital, the investors agreed to release 15000 shares to the public. This was however met with little excitement as only 29 people invested in the new enterprise.

Despite this initial perturbation, the investors decided to move on with their plans and the conglomerate opened its first doors in Australia at the Sydney Imperial Arcade. In an effort to attract the target market, the company launched an intensive marketing strategy. At its core, this strategy had the policy of the founding members; to sell goods in popular demand on cash and carry bases. In an apparent change in luck, the store experienced instantaneous success and in its first year registered a dividend of 5%.

As Australia’s economy grew so did Woolworths. Taking advantage of the increasing population, favourable weather conditions and a favourable retail market in Australia, the company went on to be a leader in the retail market setting up its headquarters in the country’s capital, Sydney. It purposed to deliver the best in convenience, value and quality to its customers. This worked in their favour since by the end of 1993, the chain had opened 23 new branches within the country and extra 8 branches in the neighbouring New Zealand. Their leadership has however been threatened in the recent past by the entrance of other players like ALDI, Coles and American outlet IGA.

Discussion

Woolworths Ethics

A company’s values and ethics are the policies and measures adapted by the company to ensure it satisfies all stakeholders especially the society it operates in. In light of that, it is important to note that Woolworths Limited has more than 3000 stores within Australia and New Zealand serving 21 million customers per week(Gans & King, 2004). Additionally, it employs 180,000 people making it the largest private employer in the country. This breakdown indicates the reach the conglomerate has in Australia’s economy necessitating a comprehensive strategy to maintain a healthy relationship with the various stakeholders. An example of an ethical policy adapted by the retailer is providing quality products and services to its customers(Smith, 2006). The chain sources its products from various locations as well as producing some products in-house in a bid to meet the global demand. In an effort to take care of their social responsibility to the suppliers, the retail store maintains a fool-proof contract to ensure mutual satisfaction and encourage delivery of quality raw materials and finished products. In compliance with the laws governing fair trade, Woolworths Limited is committed to dealing fairly with supplier and customers by avoiding to influence the competitors’ prices and barring their suppliers from dealing with the competing firms. In situations where there is a product recall, the supermarket chain is quick to clear their shelves and appropriately inform the customers of the recall(Gans & King, 2004) . As the company is moving towards more in-house products to ensure a greater profit margin as well as maintain their competitive edge, Woolworths is committed to clearly labelling their home brands showing their origin, ingredients and any safety warnings(Arli, Dylke, Burgess, Campus & Soldo, 2013).

Competitive strategy

Lowering the prices of fast moving consumer goods has been a strategy used by both Coles and Woolworths all in an effort to compete with Aldi. Additionally, the company has identified that while lowering of the prices is essential in acquiring customer trust, customer experience is king. Through creating of an 8-point score system, the senior management aims at creating a better employee reward system therefore increasing morale as well as customer satisfaction. This effort is aimed at recouping a sustainable sales momentum.

Other than lower prices, Woolworths has adapted a new pricing and value strategy which include improved loyalty systems that provides data to improve customer targeted promotions and offers. In addition, they have adapted detailed strategies that will help in the improvement of their own brands.

Seasonal issues

In an effort to increase their competitive edge, both Coles and Woolworths have resulted in heavy reliance on promotions. An example of this gross commercialism of products is evident in premature introduction of Christmas Mince pie in early September by Woolworths. Research by (Richards et al., 2012) indicates that this approach is however controversial as it only results in short term raises in sales. On the other hand, Aldi’s strategy has been highly effective as its seeks to provide low priced home based products. This strategy has put the supermarket chain in the lead as it attracts to all demographies as it successfully gains greater market share.



Survival strategy

In an effort to stay in afloat in the first growing Australian retail world, Woolworths has moved to hastily acquire more retail space. This coordinated logistic arrangements has been instrumental in keeping Woolworths afloat in the competitive retail market. There is evidence of increasing number of stores at prime locations for example on the fringes of urban hubs. Additionally, the Sydney –based chain store has embarked on an incredible expansion plan as well as adding fuel and alcohol to its portfolio. Further, Woolworths developed and adapted a new strategy that was customer- centered. The company is seeking to improve on customer loyalty by enhancing in-store and online experiences, provisions of the right product and reducing of the price. Finally, under the leadership of Claire Peters, Woolworths has dedicated resources into pricing strategy, promotional effectiveness and morale.

Woolworths has invested heavily in multi-channel customer experiences all in an effort to tap into its already large market share. This investment has majorly been focussed in creating a friendly online user experienced. The management has also moved to acquire state of the art software that align the online prices to the in-store prices. Finally, in line with the customer-centered approach, Woolworth has created a drive-through collection point system tapping into the need for convenience.

Conclusion and Recomendations

In the supermarket world, Australia has proved to be the environment to beat. Woolworths has long enjoyed this favourable market rising to recently form a duopoly with retail giant Coles (Richards et al., 2012). However, this positioned long enjoyed by the conglomerate is under threat as the retail business has been faced with poor management and wrong products.



At present, Woolworths is faced with tough competition in a market it one controlled. This has created the need for creation of an organization that was not only fluid but also adaptable to the changes in the market place especially prices.

Despite extended investment in audits to create an effective and profitable organization, Woolworths continues to lose its market share to Codes and Ald (Treadgold, 1996). To regain its position as the leading retail supermarket in the Australian economy, Woolworth will have to regain its momentum in the food industry. This will require the retail giant to improve on its offer. This should be coupled with a continued investment in the liquor division a venture that has proved to be profitable for the chain. The aforementioned recommendation will require the division invest in coming up with offers that fit every occasion (jones, 2003) . To increase overall profitability, the company should look into gaining a new range as well as exploring different store setups (Richards et al., 2012) . Finally, a critical look into the management of the portfolio and capital allocation should take center stage. This approach will avoid controversies over















References

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Jones, E. (2003). Supply chain technologies – at Woolworths. Work Study, 52(1). http://dx.doi.org/10.1108/ws.2003.07952aaf.003

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Smith, R. (2006). The Australian grocery industry: a competition perspective*. The Australian Journal Of Agricultural And Resource Economics, 50(1), 33-50. http://dx.doi.org/10.1111/j.1467-8489.2006.00326.x

Treadgold, A. (1996). Food retailing in Australia ‐ three retailers, three strategies. International Journal of Retail & Distribution Management, 24(8), pp.6-16.