Woolworths market strategy analysis
Table of Content
Woolworths is a famous retail outlet in Australia founded in the year 1924 there having its major business chains in Australia and New Zealand. Woolworths has more than one thousand locations in Australia alone which include supermarkets as well as convince stores. The product line of Woolworths includes fresh products such as fruits and vegetables, stationery products, DVDs, pet care products which includes food, shampoo, soap, etc., baby care products and products used in routine life such as hair accessories, footwear, sleepwear, household things, liquor, and drinks etc. Further, Coles is the biggest competitor of Woolworths supermarket and with its intensive market strategy, covers 37% of the retail market sector. In the present, report there will be an analysis of the marketing strategy of Woolworths. Under this, there will be a discussion on the STP approach, competitive analysis, customer analysis of Woolworths.
Woolworths Marketing Strategy:
Introduction of Woolworths Supermarkets was an initiative of 5 five Australian entrepreneurs – Ernest Williams, George Creed, Cecil Scott Waine, Stanley Chatterton, and Percy Christmas. Woolworths is now the most famous supermarket in Australia and has highest market share as compared to any other supermarket. It is the result of an active marketing strategy of the organization. In the year 1987, the company has launched a “fresh food people” marketing campaign that started by Leo Burnett (CEO of Woolworths supermarket at that time) in Sydney. This marketing technique was a multi-pronged strategy of the business to attract more customers. This campaign remained active till 2012 and proved very successful for Woolworths. Further, the current marketing strategies of Woolworths are explained as:
The article provides the detailed information regarding Woolworths market strategy analysis. The main concepts discussed in this article involve the STP approach, competitive analysis, customer analysis of Woolworths organization etc. In addition to this, the discussion on BCG matrix is also given in this article, which is a major tools used for getting the information about the value provided by product lines.
STP is a three-step approach under which the company took decision-related to the target market of the company (mpk732t22016clustera, 2019). These steps are explained as:
Under this, the total market is divided into small markets based on different criteria. These may be “demographical, geographical, psychographic and behavioral” segmentation. Segmentation in case of Woolworths is given as:
Under this, the market is divided on the basis of age of customers, gender, values or income level etc. Woolworths have targeted all age groups from 6 to 55 years specifically as it provides all the products of daily use to its customers. Further, it covers customers with generally higher income levels and prefers quality over price of products.
It covers the location of the business and Woolworths have selected all regions of Australia and New Zealand as its target market and has more than one thousand stores in Australia and approximately 180 stores in New Zealand in different cities and suburbs.
Under this, the company targets people who prefer quality over the prices of the products as Woolworths has many competitors in the market such a Coles and Aldi etc. that provide products at lower prices. However, with this strategy the company maintain its position among the customers.
This is the second step under which the segmentation in the first step is simplified and the final target market is selected. From the above analysis, it can be predicted that the target market of the company is based on geographical segmentation under which people with every age group who are ready to pay a premium price of the goods in return of quality products.
The figure given below provided the position of Woolworths as a comparison to its competitors. It can be analysed that Woolworths have a higher position in the market as a comparison among its competitors in terms of the quality of the products. However, its pricing is also high as compared to Coles, Aldi which has the almost same quality.
Competitive Advantage: Vrio Analysis
In order to know the competitive advantage of the Woolworths, VRIO analysis is the best tool. It evaluated the business competitiveness on the basis of four parameters and these parameters are Valuable, Rare, Imitable and Organisation. In the case of Woolworths, it has a sustainable competitive advantage. It is the most valued brand in the retail industry which is a permanent competitive advantage to the business. Further, the company has partial advantage local sourcing plan as it is valuable but they are neither rare nor imitable. In the case of online presence of the company, it has a temporary competitive advantage (Case48, 2019). There is a race of going digital among the grocery stores and Woolworths is also in this race with its online app of “Woolworths online”. However, this is not a rare element for competitive advantage as all the retail companies are using online platform these days. Further, there is sustained competitive advantage in the case of Woolworths it has a value of worth $8 million which is highest among the brands in Australia.
BCG matrix is a major tool used to know the value provided by different products lines and the cash or revenues generated by each product line. Under this, the products are divided into four categories namely Question marks, stars, dogs and Cash cows (Case48, 2019). In case of Woolworths, there are household commodities that generate greater cash for the business and these commodities need to be developed so as to let them enter into star category ad most profitable products. Further, the company has its own private label products that are under the category of stars such as fruits and vegetables. This will help the company to create a competitive advantage. This strategic business unit will help to enhance the revenues of the business. Further, there are some commodities in the question mark which includes the local food that may have the potential to help the business grow and Woolworths needs to invest in such commodities (studocu.com, 2019). Further, the confectionery business unit of the company is in the grey zone (Question Mark) but the business has potential, all the company needs to do is to invest and put this unit in the right direction. and might provide more growth to the business if invested in this area. In addition to it, there are plastic bags commodity of Woolworths that come underdogs’ area and do not provide any kind of benefit to the business.
Competitive Analysis: Porter Five Force Model
In order to do the competitive analysis of the company, Porter Five Force Model is the best example of the competitive analysis. Following is the competitive analysis of Woolworths that would help to the know the competitive position of the business:
Rivalry among existing competitor
The number of businesses has increased which has been functioning in this sector. However, Woolworth which is the largest and most popular brand is also undergoing rivalry in the industry and this results in the limitation of market share as well as forces the firms to adopt effective strategies in context to differentiate from competitors (studocu.com, 2019).
Bargaining power of suppliers
Suppliers can turn over from one company to another by putting pressure over the companies by reducing the quality or availability of the products and by increasing the prices as they are large in number. Hence, the bargaining power of the suppliers affects the profits of the companies by reducing the buyers.
Bargaining power of buyers
The consumers put pressure upon the companies in order to get high quality of products at lower prices as well as the best services demand. This power only belongs to the consumers who utilize the products of the companies.
Threat of new entrants
New entrants pose the threat over the existing companies as it influences the capability of the existing firms in terms of profits or market share. Therefore, it results in the existing company's low productivity or quality of the products.
Threat of substitutes products and services
This is the greatest threat for the companies as substitutes of the products and services enable the consumers to buy the products outside the company which ultimately results in loss of profitability of the company. Sometimes consumers buy the substitute products because of their better features as compared to the industry products.
Customer analysis is the foremost need of every business for taking any kind of business decision. Further, the marketing strategies of the business will be effective only if there would be proper knowledge of existing as well as potential business customers. There is a need to know the wants and desires of the customers so that the products of the company can be made according to business expectations. The customers’ analysis of Woolworths’ customers are given as:
- The Woolworths supermarkets provide services to more than 29 million customers a week through its stores in Australia. The organisation has geographical segmentation under which it covers target customers in many locations with more than 1000 stores over the country and approximately 200 stores in New Zealand.
- Woolworths have loyal customers as most of them prefer quality over price and Woolworths is known for its quality. Thus, they have less concerns about the pricing strategy of the organisation.
- In the retail sector industry of Australia, there is a high investment in innovation. Thus, customers are fond of new innovations and quick services at the supermarket stores.
Woolworths have a strong marketing strategy under which it retains its customers. It has geographical segmentation under which it covers all the customers in the country with its stores in difficult situations. However, there is Coles and Aldi that provides tough competition to Woolworths in terms of price. In order of saving its self from tough competition, it needs to focus on innovation so that it could maintain differentiation in its services.
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- mpk732t22016clustera. (2019). Topic 4: Segmentation, Targeting and Positioning – Page 2 – T2 2016 MPK732 MARKETING MANAGEMENT (CLUSTER A). Retrieved 30 December 2019, from https://mpk732t22016clustera.wordpress.com/category/topic-4-segmentation-targeting-and-positioning/page/2/
- Case48. (2019). BCG Matrix and VRIO Framework for Woolworths Limited. Retrieved 30 December 2019, from https://www.case48.com/bcg-matrix/627-Woolworths-Limited
- studocu.com. (2019). Retrieved 30 December 2019, from https://www.studocu.com/en/document/curtin-university-of-technology/strategic-management/other/group-assignment-sample/1744814/view