MGT703 Business Strategy Report
The purpose of the assignment is to identify the current strategy of Woolworth for evaluating the performances of the company (Dos Santos, 2011). To identify the Woolworth current strategy, there is need to examine the internal and external factors, current growth strategy of the company and on that basis, certain recommendation is given to the company for achieving higher growth in future.
Mission statement of Woolworth is to provide the high quality services to the customer by offering at reasonable price. To achieve their mission, company empowers their business by investing in different portfolio and then pursue strategies to deliver value to their shareholders
Objective of Woolworth is divided into short and long-term objectives in which short-term objective describes that company wants to continue offering the high quality services in their food offering and makes shopping easier for the target customers (Klettner, et al., 2014).
On the other side, long-term objective are the social development and develop the environmental friendly business operations with the aim to sustain in the market for a longer time.
The current strategy of Woolworth: – In order to identify the current strategy of Woolworth, there is need to study the generic strategy for identifying their competitive strategy and operation strategy (Sands & Ferraro, 2010).
Generic strategy Model
In the case of generic strategy, there are four types of strategies that help the companies to attain its competitive scope and advantage of the company. The strategies that company uses to run their business are the differentiation strategy, cost focus strategy and differentiation focus strategy (Simon & Bartle, 2012).
The selection of strategy depends upon the company to company as which strategy is suited well to them.
In terms of Woolworth, company currently opt the differentiation and cost leadership strategy. As in regards to cost leadership strategy, Woolworth achieve high competitive advantage and innovation through its supply chain as it focuses on the efficiency and cost cutting for reducing its extra expenses.
Moreover Woolworth in their differentiation strategy uses the branding and market strategy in which they position its stores by using the slogan called fresh food people (Scott & Walker, 2010).
This create differentiate image of company in the local market of Australia as a regard of quality and healthy products. Besides that Woolworth for enhancing their business operations, it uses the vertical integrate process for some of its supplies through producing the own inputs so that company can increase the power in the market and able to easily respond to the private level trend.
Thus, both the strategy of the Woolworth plays a significant role in adopting the differentiation in the Australian market, and this helps them to achieve the high competitive advantage.
The cost leadership strategy assists the company for increasing their scope of operations in the local market of Australia by using their effective supply chain process. Hence with the help of both the strategy, Woolworth has achieved high competitive advantage with the properly enhance the scope of their business operation.
Business Model: According to Jie, et al., (2015), the business model of Woolworth is the meeting the changing needs of the customers through providing the wide variety of products at a lower price. For that company uses three elements and these are Woolworth profit formula, key resources, and key processes, etc.
Woolworth profit formula includes low price, cost saving through using efficient supply chain and in their key resources, company uses properly management of human resources and systematically design the logistics management.
In the case of Woolworth key processes, it follows the concept of continuously improvements, largely using of advertisements and promotional activities for aggressively promotes their product in the market.
Value curve model of Woolworth: – In their value model, Woolworth offers additional services with their basic services are one-stop-shop conflicts in which it offers combination of petrol retailing with grocery retailing (Woolworth. (2017).
The external factors analysis is a task for developing the strategy. Likewise, with the study of porter’s five forces model, Woolworth able o understand the structure and impacts of external factors into their business and accordingly they can develop their business strategy that effectively fit the external factors.
Bargaining power of buyer: The bargaining power of buyers is high in the Australian supermarket due to the offering of homogenous products into the specific market (Arli, et al., 2013).
Bargaining power of suppliers: Bargaining power of suppliers is high to moderate in the Australian market as the power of bargaining is depending on the brand name of the suppliers and the size of the supermarket.
Industry Substitutes: The availability of substitute in the local supermarket is moderate to high as there is a high number of substituent’s in which consumers are ready to pay high.
Threats of new Entrants: The barriers to entering into the industry are moderate as the profit margin in this market is quite low, and there is the high price of land, huge capital requirements, government restrictions, etc. can become the barriers to entering into the industry (Christopher, 2016).
Rivalry among the Competitors: The rivalry among the competitors in the supermarket of Australia is extreme and intense.
Evaluation the effects of competitive forces on the Woolworth
- There is the huge effect of competitive forces on the Woolworth operations. Due to the high bargaining power of the buyers, the switching get increase among the customers this will impact negatively then in that case company need to incorporate differentiation strategy (Lin, et al., 2012).
- Bargaining power of suppliers is moderate then it is difficult for the Woolworth to set a high price in the market.
- Substitutes are more in the Australian market that gives the tough competition to Woolworth to sustain in the local market.
- Due to moderate threats of the new entrant, Woolworth can get the high benefit from this as it increases the chances of becoming leader of the market.
- Due to an existence of intense rivalry among the market, then it reduces the profit margin of the Woolworth and tends to increase their investment cost.
It is required to identifying the resources, capabilities that Woolworth uses in their deliver to the customers (E. Dobbs, 2014). Thus with the internal analysis, Woolworth can reposition in the market, so there is need to analyze the internal environment of the Woolworth.
Resources: Woolworth in the Australia market operates in more than approx 3000 stores with the experience employees (Tavitiyaman, et al., 2011). This indicates that company has strong tangible and intangible resources.
At the same time, Woolworth has efficiently managed human resources, their wide product line and properly supply chain. Thus company operates their resources optimally by reducing the wastage.
Capabilities: From the repost of Woolworth 2016, it is finding that company is hiring the right people for the right position and it also follows the sustainable practices in their business operations. Besides that Woolworth knows how to use their resources effectively.
Core competencies: Woolworth includes various core competencies such as world class supply chain, branding & market, innovation and integrating, etc.
Evaluation of resources and capability of Woolworth
Thus, the current resources and capabilities of Woolworth can help in adding value in their services as Woolworth uses the innovation and differentiation tactic by using the vertical integration strategy and provide quality product at affordable price. So such capabilities could allow the Woolworth to achieve leading position in the market (Alt & Puschmann, 2012).
But at the same time company does not include the offering of eco-friendly products and from the evaluation, it is also observed that company does not diversify their portfolio so this could not provide high benefits to the company.
On the basis of above evaluation of internal (resources and capabilities), external (suppliers, buyers, competitors) and business strategy, it is recommended that Woolworth should need to include social media strategy in their business strategy in order to take advantage of low cost promotional activities as Woolworth has spend huge amount on the promotional tools.
Besides that Woolworth should offer organic and healthy food that is gem free and with that they also need to take participant on the CSR activities that can help in making improvement in their goodwill. This allow to give tough competition to its rivalry and able to regain the position in the Australian market (external factors).
For the making improvement in their resources and capabilities, it is recommended that Woolworth should need to follow the strategic alliance and work in a partnership with their key competitors in order to make more improvement in their quality and it also assist the company to increase their capacity by making an more innovation (Simon & Bartle, 2012).
Thus, all the above mention suggestion can help the Woolworth to reposition itself in the Australia market.
The strategic management in the case of Woolworths for its future growth of its retail business operations is currently employing is through product development and market development. Both these strategies come under the Ansoff matrix which also includes other growth strategies as market penetration and diversification.
Ansoff matrix provides a structure for the business managers to formulate strategies for the future growth of the organisation (Hussain et al., 2013). Thus, Ansoff matrix as a marketing tool is used to determine the growth of Woolworths existing and new products in existing and new markets.
Under the growth strategy, Woolworths is following the Lean Retail operating model for cost reductions, improving the retail process, improve the customer services process, product innovation for capturing existing customers (Zeschky et al., 2014) and to increase its investment in market expansion to capture new customer segments.
The growth strategy of the retail organisation is directed towards increasing the customer base by offering new products and gaining more market share (Kato & Kyoichi, 2012).
Ansoff matrix model
These strategies are appropriate considering for Woolworths to achieve higher sales growth in new markets while maintaining its huge customer base traffic by adding new products to its shelf.
The strategy of product development is required for the retail business to match with different business needs of its customers and to keep attracting the customers towards its stores instead of its competitors. The product development strategy is of moderate risk (Hussain et al., 2013).
The growth strategy of market development is high risk but is well suited to the business operations, the experience of management, and potential of the retail organization to meet the customer expectation and business requirements.
Considering the growth strategies of the Woolworths, it can be suggested that new market strategies should be developed for its brand recognition in new markets. Investment in marketing activities can be future drivers of growth and revenue for the retail operations to capture existing and new customer segments.
Moreover, apart from low pricing strategies, the retail organization can invest in new technologies like SAP implementation to increase the efficiency of retail operation to bring out more productivity.
From the above study, it can be concluded that Woolworth is a well-known brand in the Australian market and it always considers the quality in its offering for the customers.
From the porter’s forces model, it is evaluated that external factors influence the company operations due to the existences of high competition, the threat of substituent’s product that affects the sales of the company. In the case of internal analysis, Woolworth study about its strength and weakness in regards to resources and capabilities.
Moreover, in part second Woolworth use the product and market development strategy for enhancing their growth in the local market of Australia. By such strategy, it is suggested that Woolworth should need to focus more on strategic alliances, product diversification, Market growth and cost-leadership strategy.
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