Woolworths SWOT Analysis (Value chain Analysis)

Introduction

Woolworths, colloquially known by the term “woolies,” is a leading chain of supermarket and grocery stores in Australia. Founded in 1924, the organization has been owned by Woolworths Group and has eventually emerged as a leader in the Australian domain. Along with Coles Supermarkets, Woolworths formulates a duopoly in the Australian supermarket domain by accounting for more than 80% of the entire market segment. The organization has 1024 stores across Australia and employs over 100,000 individuals. Woolworths has obtained a significant position in the market space primarily due to high-quality services and a wide range of products for an extended period of time. A detailed industry analysis has been performed, followed by Ansoff matrix, value chain analysis, competitor analysis, and SWOT analysis. Such analysis and evaluation will help in obtaining clear and concise information regarding the internal and external parameters of the organization.

Woolworths Industry Analysis

This report focuses on performing a detailed industry analysis for Woolworths using different models and frameworks. ANSOFF Matrix and Porter 5 forces model can be used for the identification of growth opportunities for Woolworths using different product and marketing strategies. This article will go ahead with ANSOFF Matrix as Woolworths Porter 5 forces model analysis has been done earlier. This helps in analyzing appropriate growth opportunities that Woolworths can leverage. Further, value chain analysis has been performed that helps in the identification of competitive advantage sources, interdependencies and inter-relationship amongst different activities, and the flow of activities. It is followed by a detailed competitor analysis where the prominent rival organizations that provide significant competition to Woolworth have been discussed. The last section of this report mainly focuses on the discussion of SWOT (Strength, Weakness, Opportunities, Threats) Analysis in the context of Woolworths. All such models and frameworks help in supporting the entire process of industry analysis in an optimal manner.

Ansoff Matrix

Ansoff Matrix is also known by the term Market/Product Expansion Grid, which is an effective tool that is utilized by various organizations for analyzing different parameters and planning effective strategies for continuous growth (Yin, 2016). The matrix provides four different strategies – Market Penetration, Product Development, Market Development, and Diversification - that can be utilized by a firm to grow and simultaneously analyze risks that are associated with each strategy.

Woolworth Ansoff Matrix

The business objectives of Woolworths have been focused on increasing overall stock returns and optimization of the entire network in an efficient manner. The major objective of the organization has been to develop a customer-centric business and establish itself as a brand value-driven organization. Additionally, it could also be analyzed that the organization has focused on maintaining a profitable relationship with the consumer while simultaneously decrementing cost structure. Woolworths has been able to attain such objectives with the help of efficient sourcing capability. Ansoff Matrix helps in understanding different strategies that could be opted by Woolworth Supermarket.

• Market Penetration

  Using this strategy, Woolworths can look forward to increasing sales of current products in the current market space. This strategy is mainly utilized by firms that have an aim of penetrating deep into the market space with the help of existing products. Woolworths has already established itself as a dominating organization in the Australian supermarket domain, but it could continue to do so through a number of different methods such as decrementing prices to attract potential customers, enhancing distribution and promotion efforts, or acquiring a dominant competitor. Risks of such strategies are significantly low, which is a positive factor for Woolworths.

• Product Development

  This strategy could be used by Woolworths for the development of new products to cater needs and requirements of the existing market space. For this purpose, the organization would have to perform extensive research for expansion in the product range. As Woolworths has a strong understanding of the current market space, it could optimally invest in research and development (R&D) for better catering to existing customers. In addition, it could also strategically partner with other leading firms to leverage from their distribution channels. This strategy involves an intermediate degree of risks as it might lead to various consequences if the product does not comply with the requirements of customers (Hussain, 2013).

• Market Development

  Woolworths can use this strategy for entering a new market space with the help of the existing product range. Expansion in new market segments could be understood as expansion into new geographies, regions, and customer segments. This strategy could be optimal for Woolworth because of its strong understanding of the current market space and possession of advanced technologies that can be leveraged for entering to new market space. However, the organization would have to choose a foreign market where the actual needs and requirements of the customer segment do not differ significantly. In fact, Woolworths as a company has started to expand in other countries as well. It recently expanded in Malaysia, where it is growing eventually. After doing a comprehensive study of Malaysia’s e-commerce consumer and industry analysis, it can be summarised that the company can have a bright future in the area.

• Diversification

  This strategy involves the highest level of risks as the organization would be entering a considerably new market space with a new range of products. Although this strategy is the riskiest as a significant market and product development is required, it could be mitigated with the help of related diversification. This defines the existence of potential synergies between new products and markets along with the existing business. However, significant planning and core understanding are required for successfully leveraging this strategy for expansion.

Value Chain Analysis

Value Chain Analysis could be understood as a strategic tool that is most commonly utilized by different originations for analyzing internal activities. The sole objective of this analysis is to optimally recognize the activities which are most valuable to the firm and the ones that could be significantly improved to obtain a competitive advantage.

Primary Activities

The primary activities of Woolworths are mainly associated with producing and selling a wide range of products to potential target customers. A detailed explanation regarding different primary activities has been given below.

• Inbound Logistics

  Inbound logistics mainly refers to goods obtained from various supplies and using them for the production of end products (Zamora, 2016). For Woolworths, it is necessary to develop effective relationships with suppliers, which is essential for receiving, storing, and distributing various products. Activities such as procuring raw material, storing the inputs, and distribution of raw materials are considered under inbound logistics.

• Operations

  During this process, raw materials are converted to processed goods and products. At this stage, Woolworths is ready to process the raw material to convert it to the end product and deliver it to different outlets. Operational activities mainly include producing, packing, testing, and assembling different products. Analysis of operational activities will help in incorporating necessary changes for enhancing productivity and overall efficiency for ensuring competitive success.

• Outbound Logistics

  This process deals with the distribution of different products to distribution centers and outlets of Woolworths. Major activities involved in this process include material handling, scheduling, warehousing, order processing, and delivering. Analysis of such process help in optimization of outbound logistics for exploring sources of competitive advantage and attainment of business growth objectives.

• Marketing & Sales

  This process directly ensures that different categories of products are directly targeted towards the appropriate customer segment (Ensign, 2001). Through this process, Woolworths focuses on obtaining a marketing mix through a highly effective strategy to target different customer groups. Channel selection, salesforce advertising, promotion, and pricing, etc., are some of the essential activities of this process. Optimally integrated marketing activities can greatly help in the development of brand equity and allowing Woolworths to stands out from the competition.

• Services

  This activity mainly refers to support services that are being provided to different customers, either pre-sales or post-sales of various products. Modern customers tend to consider post-sales as a highly important attribute. Poor customer support could lead to a number of consequences in terms of damaging brand reputation. Woolworths needs to constantly analyze support activities to avoid any damage to its brand reputation and use it as a cornerstone for a competitive edge.

• Secondary Activities

  These support activities have a significant role in facilitating and coordinating different primary activities that have been mentioned above. A concise explanation of different activities has been given below.

• Firm Infrastructure

  Firm infrastructure refers to a number of activities that include quality management, accounting, financing, planning, strategic management within the premises of Woolworths. Effective and efficient firm management allows Woolworths to appropriately optimize the entire value that is obtained from the value chain. For strengthening competitive position, it is necessary for Woolworths to manage firm infrastructure seamlessly.

• Human Resource Management

  For appropriately progressing different key operations of the project, highly skilled individuals need to be hired, trained, and retained with the organization (Zamora, 2016). This reflects on the importance of taking care of the training needs at Woolworths. Further, based upon internal motivation, skills, and seamless commitment of the workforce, Woolworths can significantly reduce competitive pressures. The entire value chain is greatly dependent upon the skills and competencies of employees. Hence, it is essential to retain potential employees for an extended period of time to obtain innumerable positive benefits.

• Technology Development

  In a modern competitive environment, different activities of the value chain directly depend upon technological support (Ensign, 2001). The overall integration of technological attributes in different activities ranging from production, marketing, and distribution. Continuous research and development are required so as to enhance technological development and support critical business operations seamlessly.

• Procurement

  This process denotes various activities that involve the obtainment of various inputs such as raw material, suppliers, equipment, and other essential entities. This activity is directly linked with other major activities in the value chain, and therefore, it is essential that Woolworths appropriately considers procurement activities for optimizing outbound, inbound, and operational activities in the value chain.

Woolworths Competitor Analysis

As Woolworths operate in a highly dynamic supermarket industry, it suffers significant competition from a number of prominent competitors to a great extent. The top three competitors or alternatives to Woolworths are Coles, IGA, and ALDI Einkauf.

In the first place, Coles Supermarkets has established itself as a significant market leader and emerged as a significant competition to Woolworths. It can be gained from Coles business strategy analysis that coles mainly operates in supermarkets and hypermarket centers. It has been able to significantly provide considerable competition to Woolworths. Comparatively, Coles Supermarket has been capable of generating $852.3 Million more revenue in comparison to Woolworths, which is an effective result of Coles marketing strategies.

Second, IGA (Independent Grocery Alliance) has been able to strongly compete with Woolworths mainly due to consistency in high-quality products and services. Found in 1988, the organization has shortly emerged as a prominent, reputed brand in the supermarket industry in Australia.

Further, ALDI Supermarkets in Australia have penetrated deep into the market segment mainly because of a considerably wide range of product categories in the hypermarket segment. The organization is primarily headquartered in Germany but has significantly penetrated into the Australian supermarket industry. It has established itself amongst the most reputed and awarded retailers in an international business domain.

SWOT Analysis

SWOT analysis could be understood as a study which is undertaken with a primary aim of identification of internal strength and weaknesses along with external opportunities and threats (GÜREL, 2017). A detailed SWOT analysis helps in understanding the internal and external environment of an organization which could enhance and support decision-making abilities.

Woolworths SWOT Analysis

• Strength

  One of the major strengths possessed by Woolworths is that it governs that entire supermarket segment of Australia with Coles. In such a context, it has attained significant market leadership with a total of eighty percent market share, which considerably decrements the threat of competition.

  In addition, Woolworths has greatly penetrated into a different level of market segments by exactly catering to needs to demand different customers. Currently, the organization has obtained a strong presence in a different end of the spectrum by penetrating upper-level and lower-level segments in a streamlined manner. Further, one of the major factors that have allowed the organization to attain success is the strategy of managing perceptions and balancing segments across different income groups. This has helped in enhancing overall business to 55% within a middle-class segment (Arli, Dylke, Burgess, Campus & Soldo, 2013).

  Above all, strong employee retention policies and customer tracking abilities using business analytics are some other strengths that give Woolworths a competitive edge over other organizations.

• Weakness

  The primary major weakness is confused positioning because the organization targets a number of income segments with the help of similar products. This eventually leads to ineffective and confused positioning in the market space. In addition, Woolworths has constrained global presence in comparison to various competitors due to which it faces significant competition on a global level. Simultaneously, growing competition from online market players due to Globalisation is also a significant aspect for the organization.

  Another major weakness is that company is known to be partial with higher income segment by providing them more attention along with the better quality of products and services. Due to such aspects, the organization is continuously at price wars which had led to some of the major price blunders, eventually resulting in losses (Smith, Heley & Stafford, 2011).

• Opportunities

  Every prominent retail chain organization has the same products and services to offer, particularly to the value segment. For Woolworths, the actual opportunity lies in the ability to create a significant difference in the context of the in-store experience. This will help in obtaining a significant edge over other rival organizations with the help of service differentiation. By including self-checkouts, personalized offers, customer loyalty schemes, or incorporating smart stores, shopping assistants, etc., the organization can significantly reimagine the customer shopping experience. The presence of such services can lead to the creation of significant opportunities for Woolworth to grow and expand in the current market segment.

  In addition, the organization can seek business growth with the help of strategic acquisition and a franchise model. By leveraging the current capabilities, it could even initiate stores in multiple geographical locations, which can greatly boost up entire business ability extensively.

• Threat

  The biggest threat to Woolworths is mainly due to continuously incrementing competition from a wide range of existing key players and new entrants (Sammut-Bonnici & Galea, 2015). Online retailers such as Amazon have significantly penetrated to different market segments that render serious and considerable threat to Woolworths. Continuously incrementing competition from international players can have an impact on the overall business of the organization.

  Further, raw material costs have been continuously rising, and the organization is heavily dependent upon the obtainment of products from a wide range of suppliers. Such aspects could have an impact on overall profit margins, which could be detrimental for the organization. In addition, such attributes could even suppress the growth of the entire business in an optimal manner.

Further suggested reading on Woolworths - External factors Impacting Woolworths

Further readings

• Industry analysis through porter 5 forces Tool
• PESTLE Analysis of Woolworths
• Fitbit SWOT Analysis

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