PESTLE Analysis of Woolworths (SWOT Analysis and recommendations)
Table of Content
Introduction to Woolworths:
Woolworths is an Australian company that has its retail outlets in Australia and New Zealand. Woolworths group was founded in 1924 and the main operations of the company include running up of supermarkets with the aim to provide suitable and convenient shopping to customers. This group of retail stores deals with various well-established brands in retailing. Woolworths is the second largest company in Australia and New Zealand. The main products of Woolworths include various grocery items such as DVDs, fruits, vegetables, meat, packaged food, health products, baby supplies, etc (Woolworths, 2019). Woolworths also has established an online presence i.e. Woolworths online to provide a “click and collect” option to customers.
Woolworths has earned revenue of the Australian dollar 55.669 billion in 2017 and the operating income of company in 2017 amounts to the Australian dollar 2.326 billion in 2016. The company has hired more than 2 lakhs employees in current times and the major divisions of the company include supermarkets, online stores, liquor retailing, general merchandise selling stores, hotels and gambling etc ("Woolworths Group: Quality Brands and Trusted Retailing", 2019).
The given report presented the internal and external analysis of Woolworths in order to know the abilities of the organization and success factors. Analysis tools such as PESTEL and SWOT have been used in order to critically analyses the different operations of the organization.
Various macro environment factors affect the working of an organization and analysis of a number of macro-environment factors affecting an organization is referred to as the PESTLE analysis. PESTLE analysis helps in defining strategies for the organization by analyzing various threats and opportunities likely to be confronted by the management team (Academy, 2019). Various factors evaluated in PESTLE analysis include political, economic, social, technological, legal and environment-related factors. A detailed review of all these factors helps in determining the factors likely to impact the working and operations of an organization. Following table shows the brief explanation of each factor evaluated under PESTLE analysis:
All these models have their own importance and are useful to know the internal as well as external factors that may influence the company. Further, the following three elements are considered in each of the different approaches of industry analysis:
|POLITICAL FACTORS||Political factors refer to interventions imposed by the government on business firms. Various political factors such as government policies, political stability, foreign policies, environment laws, trade restrictions, etc (Political Factors Affecting Business, 2019).|
|ECONOMIC FACTORS||Economic factors affect the economy as a whole which further impacts the working of business firms in the industry. Various economic factors include interest rates, tax rates, inflation rates, wage rates, employment rates and growth rates of the economy (Economic Factors, 2019).|
|SOCIAL FACTORS||Social factors refer to various social and culture-related factors which influence the purchase and consumption behavior of consumers regarding various products and services. social factors include various cultures, community, family and society-related factors. These factors also affect the lifestyle of consumers in the industry (Social Factors, 2019).td>|
|TECHNOLOGICAL FACTORS||Technological factors refer to various technological advancements taking place in the industry and influencing the business firm to bring various technical innovations. Technological factors affect various marketing actions in an organization by developing new ways of working and producing goods and services (Alkemi, 2018).|
|LEGAL FACTORS||Legal factors include the imposition of various laws and regulations by the government and other higher authorities. These factors affect the way business firms operate and consumer behavior in the industry. Thus, legal factors affect various decision making and operational activities of organizations. (Legal Factors, 2019)|
|ENVIRONMENTAL FACTORS||Environmental factors are ecological factors that influences growth, survival and operations of business organizations.|
External factors affecting Woolworths:
The above analysis helped in identifying that various external factors affect the operations of business firms. Various external factors are also affecting the operations of Woolworths. Following is the detailed PESTLE analysis of Woolworths:
|PESTLE ANALYSIS OF WOOLWORTHS||DETAIL|
|POLITICAL FACTORS||Australia is a politically stable country and there is decreasing the rate of corruption of the industry. Close economic and trade relations exist between Australia and New Zealand which further helps in establishing trade relations in the organization. However, it has been identified that difficult trading conditions in South Africa impacted the growth of Woolworths. Difficult trading conditions increased the cost structure of Woolworths (Omarjee, 2017). Thus, it has been identified that various political factors are increasing the uncertainty for Woolworths. However, the corruption rate in Australia is declining at a faster pace which is helpful for Woolworths to reduce its cost base. in addition to this, Woolworths comply with various state liquor laws and environmental laws to ensure the successful running of its operations in the industry.|
|ECONOMIC FACTORS||Australian economy plays a key role in influencing the growth of retail firms. Woolworths is one of the leading retail store in Australia that supplies a large number of retail products to consumers. Flourishing economic growth of Australia with reduced unemployment rates and increased GDP growth rate has positive influence on creation of huge demand of various retail products in the industry. Also, there is rising disposable income of consumers in Australia which further will increase the demand of various grocery goods. However, fluctuations in foreign exchange rates is impacting the import of various foreign products by Woolworths.|
|SOCIAL FACTORS||In the current times, consumers prefer to purchase environment friendly and sustainable goods and services. Woolworths has changed its operational strategies by moving to various products with green tag. Customers also prefer to have healthy and fresh food products which is one the key element of the mission statement of Woolworths. There is also rising trend of various organic products. Thus, Woolworths should increase organic produce in its product portfolio to gain large number of Australian and New Zealand customers. However, Woolworths has taken various sustainability initiatives to deal with various changes in social and cultural environment.|
|TECHNOLOGICAL FACTORS||Various technological changes are taking place in the retail sector. In order to cope up with various technological changes, Woolworths has increased its commitment to various technological innovations to enhance its service efficiency and to meet the quality expectations of consumers regarding various products and services. The number of initiatives taken by Woolworths include installation of self-check out machines and point of sales machines with the aim to increase the efficiency of services provided to consumers. Along with this, Woolworths has installed various other machines such as service oriented architecture to detect all the flaws in operations at retail stores.|
|LEGAL FACTORS||Various legal factors also affect the working of Woolworths in the industry. Woolworths ensures compliance with various Australian corporation laws, environment laws and regulations, employment laws etc. to provide quality products to customers and to ensure safety of its working staff (2019 SUSTAINABILIT Y REPORT, 2019). In addition to this, Woolworths has established various standards to ensure that Vendors also complies with various legal regulations. However, development of Various new regulations by government may affect the working of Woolworths. Further, Food standards Australia and New Zealand also lays down various regulations on grocery and retail firms ("REGULATORY REQUIREMENTS", 2019).|
|ENVIRONMENTAL FACTORS||There is rising concern for environment among the customers and people of society which has influenced various initiatives by retail firms operating in industry. Woolworths also has adopted number of environment sustainability initiatives in past 3 years to shift its business practices towards circular economy. Woolworths ensures that environmentally sustainable commodities are sourced from suppliers. However, development of various environment laws by Australian government may further affect the working of this organization ("Australian business and environment laws - Austrade", 2019).|
SWOT analysis refers to the strategic planning and analysis techniques helps in identifying various strengths, opportunities, threats and weaknesses of business firm. Thus, the main aim of conducting SWOT analysis is to evaluate various internal and external factors of business firm by evaluating various favorable and unfavorable factors for business organization ("How to Do a SWOT Analysis)", 2017).
Strengths and weakness
Factors of business firm are internal to business organization that provides advantage or disadvantage to organization over its competitors.
Opportunities and threats
Opportunities and threatsare external to business organization. Business organization can take measures to exploit various business opportunities to take advantage over competitors. However, various threats or uncertainties may create trouble for successful running of business.
Thus, it has been identified that SWOT analysis helps in evaluating both favorable and unfavorable situations for business which further helps in designing various strategies to achieve business goals and objectives.
Strengths of Woolworths:
Woolworths has achieved huge competitive advantage in the industry as a result of various strengthening factors. Following is the detailed review of various strengths of business organization:
Woolworths and Coles have achieved leading position in retail industry and holds around 80 % of market share in the industry and thus creating a monopoly in the Australian retail sector. Woolworths also has established its online portal to gain larger customer base in the industry. In addition to this, Woolworths is one of the oldest retail company that has established huge market share and reputation in the industry.
Woolworths has effectively segmented its target markets. Initially, the company targeted only the wealthier sections of society. However, in the current times, Woolworths has adopted various low pricing strategies to provide its products to lower value segments as well. Thus, Woolworths is currently targeting both upper and lower classes of people. Woolworth's marketing strategy in detail can be studied here
Employee policies and training plans:
Woolworths is a people savvy employer that has hired diverse group of people. Woolworths also has developed various training programs for its employees to ensure that all employees are well trained to provide effective services to customers.
Woolworths also has developed significant brand reputation in the industry through adoption of various brand loyalty schemes and through provision of best quality of products to customers. Woolworths also is supplying its products to consumers through green tags to gain green customers.
Marketing strategies of Woolworths also have helped in gaining huge market share in the industry. Woolworths follows aggressive strategies to promote its products and services in the industry where customers are informed about various offers every week.
Weaknesses of Woolworths:
Despite various strengthening factors, Woolworths lacks in various aspects which are discussed as follows:
Limited global presence:
Woolworths has its retail stores only in Australia and New Zealand which provides that Woolworths has limited presence in global market. Also, competitors of Woolworths have higher reputation in global market which is one of the major weakness of Woolworths.
Lack of brand awareness:
Woolworths has achieved huge brand reputation in Australia and New Zealand but still, there is lack of brand awareness among various customers.
Lower price of products:
Woolworths has adopted low pricing strategies to gain larger share of market in the industry which has resulted in huge losses to the company.
Opportunities for Woolworths:
Woolworths has achieved success in various strengthening factors which provides that Woolworths can increase its competitive advantage in industry by exploiting various opportunities. Following is the list of opportunities that can be exploited by Woolworths:
Woolworths has the opportunity to increase brand awareness among the customers about various products of company by promoting various products through advertising and sponsorship plans.
Growth of the business:
Woolworths can also achieve growth of its business by acquiring other firms In emerging economies. Woolworths can also merge with various firms to gain market share in other developing economies.
Opening up new stores:
Woolworths can also open up new stores in rural areas to create brand awareness about products of Woolworths and to meet the needs of rural people.
Increase organic produce:
There is growing demand for various organic goods in the industry which further is a good opportunity for Woolworths. Woolworths can increase its profitability in the market by increasing its product base and by selling various organic produce.
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Threats of Woolworths:
Woolworths can face various threats in the industry. some of the threats that can be faced by Woolworths are listed as follows:
Although, Woolworths has achieved lot of competitive advantage in the industry but still, Woolworths is facing various competitive threats in industry due to higher demand of Amazon products in the retail market. Also, competition from international players in retail market may further impact the operations of business organization.
Economic recession is also one of the major threats to Woolworths as economic recession may lower down demand for various products of Woolworths due to a reduction in the purchasing power of customers.
Success factors for Woolworths:
Various factors influence the success of business firm in the industry. Despite various external environment factors, various internal factors also affect the organizational operations. Internal competencies of Woolworths have helped in gaining huge market share in the industry.
Following are some of the success factors of Woolworths:
Success of Woolworths depends on the efficiency and competency of various employees working at various retail stores. Woolworths has adopted various effective HRM policies to keep its employees satisfied. Also, Woolworths ensures that employees are selected on the basis of merit and skills bases. In addition to this, Woolworths ensures that employees are engaged in various activities and decision making of the organization to increase their job satisfaction. Woolworth provides training to its employees for skill enhancement and along with this, effective performance management strategies developed by the HR department of Woolworths helps in maintaining effectiveness and efficiency in various actions of employees. Also, the quality staff hired by Woolworths helps in providing quality services to customers.
Financial resources helps in successful running up of business firm by providing funds for various innovations. Financial capability refers to the ability of business organization to invest funds in various activities and operations of business. Woolworths has strong financial capabilities. Woolworths earned by revenue of more than $59,000 million in 2017. Also, the company has earned a return of around 24 % on funds employed in business which provides that huge financial capability exist with Woolworths (Woolworths, 2019). Financial capabilities have helped in successful running of the business over the past number of years. Also, the achievement of the leading position in retail industry is the result of various financial capabilities of business.
Huge innovation capability exists with Woolworths. Woolworths has adopted a number of innovations in current times to provide convenient and best quality of services to its customers. Woolworths has adopted a number of technological innovations in its in-store operations to provide customers with readily available information. also, various innovations have been taken by Woolworths to detect various flaws in operational activities. In addition to this, the technical team of Woolworths helps in taking various initiatives at regular pace. This also helps Woolworths to succeed in the industry through the provision of a better quality of services to customers.
The number of subsidiaries of Woolworths has helped in achieving success in the industry. it also has helped in gaining larger market share in the industry. The various subsidiaries of Woolworths include a list of divisions and brands of Woolworths. The main divisions of Woolworths include liquor, supermarkets, hotels, merchandise and everyday services. Woolworths offers a diverse range of products to consumers at its retail stores and a number of subsidiaries which further have helped in gaining huge market share in the industry.
Competitive advantages enjoyed by Woolworths in Australia and New Zealand are important success factors of company. Woolworths has gained large market share for retail products in industry. Also, Woolworths has established strong brand reputation for its products and services in the industry which further has increased the competitive advantage enjoyed by Woolworths. Various sustainable actions taken by Woolworths also are key base for achieving competitive advantage. the competitive advantage also has helped in gaining huge profitability. The sustainable actions of company aim at gaining large number of green customers. Also, Woolworths had won the International Responsible Retailer award in 2008.
Thus, it has been identified that various success factors exist in the working of Woolworths that have helped in gaining a competitive advantage in the industry. Woolworths should take various initiatives to use its strengths and exploit available opportunities. Detailed Woolworths SWOT analysis and ANSOFF Analysis can be read further for more elaboration on Woolworth's capabilities.
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