SWOT Analysis of Woolworths (ANSOFF matrix and value chain)

Woolworths SWOT Analysis (Value chain Analysis)

ANSOFF, Value Chain and SWOT Analysis of Woolworth


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. Woolworths, along with Coles Supermarkets, 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.

Article Summary

This report focuses on the discussion of multiple parameters that are related to various attributes of Woolworths. Industry analysis of organization with Ansoff model provided that Woolworths have the capability to use different strategies such as market penetration strategy, product development, etc. in order to increase its sales and compete at the global level. Further, the value chain analysis provided that the primary activities of the company are procuring products form manufacturing companies, farmers, etc. to be sold through its retail chain and market the same through its communication channels. The secondary activities explained that it has more than one lakh employee that supports primary activities and technology also contributed to improving activities such as procuring, marketing, etc. The competitive analysis explained that Coles and Aldi ate the major competitors which compete on the basis of lower pricing strategies. SWOT analysis presented that it has great brand value in-country and have the opportunity to expand in other markets. However, it has a major focus on the high-income class which limits its customer base and also have a threat from increasing competition.

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. But in this article, we 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 provides 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.

Ansoff Matrix

Woolworth Ansoff Matrix

The business objectives of Woolworths has 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 increase sales of current products in current marketspace. This strategy is mainly utilized by firms that have an aim of penetrating deep into the marketspace with the help of existing products. Woolworths has already established as a dominating organization in Australian supermarket domain but it could continue to do so through a number of different methods such 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 development of new products to cater needs and requirement of existing marketspace. For this purpose, the organization would have to perform extensive research for expansion in product range. As Woolworths has a strong understanding of the current marketspace, it could optimally invest to research and development (R&D) for better catering existing customers. In addition, it could also strategically partner with other leading firms to leverage their distribution channels. This strategy involves mediate degree of risks as it might lead to various consequences if the product does not comply with requirements of customers (Hussain, 2013).

  • Market Development

    Woolworths can use this strategy for entering a new marketspace with the help of 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 strong understanding of current marketspace and possession of advanced technologies that can be leveraged for entering to new marketspace. However, the organization would have to choose foreign market where the actual needs and requirement of customer segment do not differ significantly. In fact Woolworths as a company have started to expand in other countries as well. It recently expanded in Malaysia, where it is growing eventually. After doing an comprehensive study of Malaysia 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 highest level of risks as the organization would be entering a significantly new marketspace with new range of products. Although this strategy is the riskiest as significant market and product development is required, it could be mitigated with the help of related diversification. This defines existence of potential synergies between new products and markets along with existing business. However, a significant planning and core understanding is 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. 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 competitive advantage.

Value Chain Analysis

Primary Activities

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

 

  • Inbound Logistics

    Inbound logistics mainly refers to goods obtained from various supplies and using them for 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 of 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 for processing the raw material to convert it to 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 distribution of different products to distribution centers and outlets of Woolworths. Major activities involved in this process includes 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 product are directly targeted towards appropriate customer segment (Ensign, 2001). Through this process, Woolworths focuses on obtaining marketing mix through a highly effective strategy to target different customer groups. Channel selection, sales force advertising, promotion and pricing, etc. are some of the most essential activities of this process. Optimally integrated marketing activities can greatly help in development of brand equity and allowing Woolworths to stands out from competition.

  • Services

    This activity mainly refers to support services which are being provided to different customers either pre-sales or post-sales of various products. Modern customers tend to consider post-sales as 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 for avoiding any damage to brand reputation and use it as a cornerstone for 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 includes 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 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. Entire value chain is greatly dependent upon skills and competencies of employees. Hence, it is essential to retain potential employees for an extended period of time for obtaining innumerable positive benefits.

  • Technology Development

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

  • Procurement

    This process denotes various activities that involves obtainment of various inputs such as raw material, suppliers, equipment, and other essential entities. This activity is directly linked with other major activities in value chain and therefore, it is essential that Woolworths appropriately considers procurement activities for optimizing outbound, inbound, and operational activities in 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. 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 leaders 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 center. It has been able to significantly provide a 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. ..

Secondary, 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 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 hypermarket segment. The organization is primarily headquartered in Germany but has a significantly penetrated into Australian supermarket industry. It has established itself amongst most reputed and awarded retailers in 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 internal and external environment of an organization which could enhance and support decision-making abilities.

Woolworths SWOT Analysis

  • Strength

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

    In addition, Woolworths has greatly penetrated into different level of market segments by exactly catering to needs to demand for different customers. Currently, the organization has obtained a strong presence in different end of spectrum by penetrating upper level and lower level segments in a streamlined manner. Further, one the major factor that has allowed the organization to attain success is with the strategy of managing perceptions and balancing segments across different income groups. This has helped in enhancing overall business to 55% within 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 gives Woolworths a competitive edge over other organizations.

  • Weakness

    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 marketspace. In addition, Woolworths has constrained global presence in comparison to various competitors due to which it faces significant competition on 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 better quality of products and services. Due to such aspects, the organization is continuously at price wars which had led to some of major price blunders eventually resulting into 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 significant difference in context of 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 customer shopping experience. Presence of such services can lead to 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 franchise model. By leveraging the current capabilities, it could even initiate store in multiple geographical locations which can greatly boost up entire business ability extensively.

  • Threat

    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 has significantly penetrated to different market segments that renders serious and considerable threat to Woolworths. Continuously incrementing competition from international players can have an impact on overall business of the organization.

    Further, raw material costs have been continuously rising and the organization is heavily dependent upon 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

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References
  • Arli, V., Dylke, S., Burgess, R., Campus, R., & Soldo, E. (2013). WOOLWORTHS AUSTRALIA AND WALMART US: BEST PRACTICES IN SUPPLY CHAIN COLLABORATION. Journal Of Economics, Business, And Accountancy | Ventura, 16(1). doi: 10.14414/jebav.v16i1.123
  • Ensign, P. (2001). Value Chain Analysis and Competitive Advantage. Journal Of General Management, 27(1), 18-42. doi: 10.1177/030630700102700102
  • GÜREL, E. (2017). SWOT ANALYSIS: A THEORETICAL REVIEW. Journal Of International Social Research, 10(51), 994-1006. doi: 10.17719/jisr.2017.1832
  • Hussain, S. (2013). ANSOFF Matrix, Environment, and Growth- An Interactive Triangle. Management And Administrative Sciences Review, 2(2), 196-206.
  • Sammut-Bonnici, T., & Galea, D. (2015). SWOT Analysis. Wiley Encyclopedia Of Management, 1-8. doi: 10.1002/9781118785317.weom120103
  • Smith, R., Heley, J., & Stafford, I. (2011). Woolworths and Wales: A Multi-Dimensional Analysis of the Loss of a Local Brand. Sociological Research Online, 16(1), 32-42. doi: 10.5153/sro.2284
  • Yin, N. (2016). Application of AHP-Ansoff Matrix Analysis in Business Diversification: The case of Evergrande Group. MATEC Web Of Conferences, 44, 01006. doi: 10.1051/matecconf/20164401006
  • Zamora, E. (2016). Value Chain Analysis: A Brief Review. Asian Journal Of Innovation And Policy, 5(2), 116-128. doi: 10.7545/ajip.2016.5.2.116
Article By:

Micheal Brown

A financial management expert with a relative degree from the University of Melbourne, he is an expert in conceptualising and drafting assignments of management students. Alongside, he invests his valuable time working as a consultant for management firms.


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FAQ


How can SWOT analysis be used in value chain analysis?


Q

The SWOT analysis is a strategic planning and analysis method that helps to identify the strengths, weaknesses, opportunities and threats of an organization. This analysis can be used in Value chain analysis as well to review the SWOT factors in nine key activities evaluated under Value chain framework to review the strengthening and weakening factors. Further, it helps to provide various recommendations regarding the improvements that can be made in the company value chain processes.


What kind of analysis is SWOT?


Q

SWOT analysis is a popular marketing analysis framework which is utilised by the companies to analyse their competitive position in the market. It also helps to improve the competitive performance of company by defining various threats and opportunities for organization in the market.


What is a value chain example?


Q

The value chain analysis is one definitive way that helps in the identification of the internal and external business activities, which add value and profits to the business. McDonalds B value chain is one of the finest value chain examples, which has a refined value chain framework to manage the business structure.