Woolworths PDF

Preview

Summary

woolworths marketing strategy...

Description

Woolworths Limited PESTEL & Environment Analysis Strategic Management Essays, Term Papers & Presentations Woolworths Limited PESTEL analysis is a strategic tool to analyze the macro environment of the organization. PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal factors that impact the macro environment of Woolworths Limited. Changes in the macro-environment factors can have a direct impact on not only the Woolworths Limited but also can impact other players in the Food & Staples Retailing. The macro-environment factors can impact the Porter Five Forces that shape strategy and competitive landscape. They can impact individual firm’s competitive advantage or overall profitability levels of the Food & Staples Retailing industry. Article continues after ad PESTEL analysis provides great detail about operating challenges Woolworths Limited will face in prevalent macro environment other than competitive forces. For example an Industry may be highly profitable with a strong growth trajectory but it won't be any good for Woolworths Limited if it is situated in unstable political environment. Spanish oil giant Repsol had to face a similar instance. It started an above average profitability operations in Argentina and made strong returns in 5-7 years. But the business was later expropriated by the Left Wing government. So the decade long profits didn’t materialize in the end. Order Now - Woolworths Limited PESTEL / PEST Analysis Order Now - Woolworths Limited Porter 5 Forces Analysis & Industry Analysis

Political Factors that Impact Woolworths Limited Political factors play a significant role in determining the factors that can impact Woolworths Limited's long term profitability in a certain country or market. Woolworths Limited is operating in Food & Staples Retailing in more than dozen countries and expose itself to different types of political environment and political system risks. The achieve success in such a dynamic Food & Staples Retailing industry across various countries is to diversify the systematic risks of political environment. Woolworths Limited can closely analyze the following factors before entering or investing in a certain marketPolitical stability and importance of Food & Staples Retailing sector in the country's



economy.

Risk of military invasion Level of corruption - especially levels of regulation in Food & Staples Retailing sector. Bureaucracy and interference in Food & Staples Retailing industry by government. Legal framework for contract enforcement Intellectual property protection Trade regulations & tariffs related to Food & Staples Retailing Favored trading partners Anti-trust laws related to Food & Staples Retailing Pricing regulations – Are there any pricing regulatory mechanism for Food & Staples

        

Retailing      

Taxation - tax rates and incentives Wage legislation - minimum wage and overtime Work week regulations in Food & Staples Retailing Mandatory employee benefits Industrial safety regulations in the Food & Staples Retailing sector. Product labeling and other requirements in Food & Staples Retailing

Economic Factors that Impact Woolworths Limited The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign exchange rate and economic cycle determine the aggregate demand and aggregate investment in an economy. While micro environment factors such as competition norms impact the competitive advantage of the firm. Woolworths Limited can use country’s economic factor such as growth rate, inflation & industry’s economic indicators such as Food & Staples Retailing industry growth rate, consumer spending etc to forecast the growth trajectory of not only --sectoryname-- sector but also that of the organization. Economic factors that Woolworths Limited should consider while conducting PESTEL analysis are -

              

Type of economic system in countries of operation – what type of economic system there is and how stable it is. Government intervention in the free market and related Food & Staples Retailing Exchange rates & stability of host country currency. Efficiency of financial markets – Does Woolworths Limited needs to raise capital in local market? Infrastructure quality in Food & Staples Retailing industry Comparative advantages of host country and Food & Staples Retailing sector in the particular country. Skill level of workforce in Food & Staples Retailing industry. Education level in the economy Labor costs and productivity in the economy Business cycle stage (e.g. prosperity, recession, recovery) Economic growth rate Discretionary income Unemployment rate Inflation rate Interest rates

Social Factors that Impact Woolworths Limited Society’s culture and way of doing things impact the culture of an organization in an environment. Shared beliefs and attitudes of the population play a great role in how marketers at Woolworths Limited will understand the customers of a given market and how they design the marketing message for Food & Staples Retailing industry consumers. Social factors that leadership of Woolworths Limited should analyze for PESTEL analysis are -

      

Demographics and skill level of the population Class structure, hierarchy and power structure in the society. Education level as well as education standard in the Woolworths Limited ’s industry Culture (gender roles, social conventions etc.) Entrepreneurial spirit and broader nature of the society. Some societies encourage entrepreneurship while some don’t. Attitudes (health, environmental consciousness, etc.) Leisure interests

Technological Factors that Impact Woolworths Limited Technology is fast disrupting various industries across the board. Transportation industry is a good case to illustrate this point. Over the last 5 years the industry has been transforming really fast, not even giving chance to the established players to cope with the changes. Taxi industry is now dominated by players like Uber and Lyft. Car industry is fast moving toward automation led by technology firm such as Google & manufacturing is disrupted by Tesla, which has stated an electronic car revolution. A firm should not only do technological analysis of the industry but also the speed at which technology disrupts that industry. Slow speed will give more time while fast speed of technological disruption may give a firm little time to cope and be profitable. Technology analysis involves understanding the following impacts     

Recent technological developments by Woolworths Limited competitors Technology's impact on product offering Impact on cost structure in Food & Staples Retailing industry Impact on value chain structure in Food & Staples Retailing sector Rate of technological diffusion Article continues after ad

Environmental Factors that Impact Woolworths Limited Different markets have different norms or environmental standards which can impact the profitability of an organization in those markets. Even within a country often states can have different environmental laws and liability laws. For example in United States – Texas and Florida have different liability clauses in case of mishaps or environmental disaster. Similarly a lot of European countries give healthy tax breaks to companies that operate in the renewable sector. Before entering new markets or starting a new business in existing market the firm should carefully evaluate the environmental standards that are required to operate in those markets. Some of the environmental factors that a firm should consider beforehand are -

     

Weather Climate change Laws regulating environment pollution Air and water pollution regulations in Food & Staples Retailing industry Recycling Waste management in Food & Staples Retailing sector

  

Attitudes toward “green” or ecological products Endangered species Attitudes toward and support for renewable energy

Legal Factors that Impact Woolworths Limited In number of countries, the legal framework and institutions are not robust enough to protect the intellectual property rights of an organization. A firm should carefully evaluate before entering such markets as it can lead to theft of organization’s secret sauce thus the overall competitive edge. Some of the legal factors that Woolworths Limited leadership should consider while entering a new market are -

     

Anti-trust law in Food & Staples Retailing industry and overall in the country. Discrimination law Copyright, patents / Intellectual property law Consumer protection and e-commerce Employment law Health and safety law

Introduction The Woolworths is a company that operates the grocery and retail business. It is the largest company in Australia and has further expanded to New Zealand. Woolworths was established in 1924 and has a significant market share of about 40% in Australia and is ranked 2 nd out of 2000 retail companies in Australia (IBIS world, 2016). In 2016, the company had around 205,000 employees and the number is expected to increase as the company continues to open more branches. It has invested in many portfolios and operates supermarkets, Thomas Dux, food for less; petrol; liquor; general merchandise; home improvements and hotels and gambling. There is a fierce rivalry between Woolworths, Aldi, Coles and others where both deals in the retail business. However, the ever-changing business environment especially the external factors are a great challenge for the company. The problems are identified through the PESTLE analysis, and both the political, economic, social, and legal factors have significantly affected the company performance. It is, therefore, imperative for the management to maximize the opportunities and its strengths to remain competitively strong. However, by analysing the internal environment of Woolworths, it is quite clear that optimizing on the company’s positivity has been the primary strategy that has resulted in the significant growth. In getting a complete picture of Woolworths regarding the internal and external environment, PESTLE and the Porters Five Forces have been explored.

Industry Analysis The grocery industry has significantly created employment for many people in Australia. As the employment rate increases, unemployment level reduces. Thousands of people have hired to work in the stores, located at various points in Australia. The industry has therefore improved the Gross Domestic Product (GDP) of Australia and spurred more economic developments. The lifestyles of individuals have improved as they can meet some of their dreams from the income earned from employment (Byrne, et al. 2016). The recent reports published by the Australian Bureau of Statistics (ABS) stressed the contributions of the retail and grocery industry in building the Australian economy (ABS, 2016). For instance, in 2015, the retail and grocery industry contributed to 2.2 percent increase in the GDP (ABS, 2016). Currently, the grocery industry in Australia is a fiercely competitive since the entrance of Aldi in the market. Apparently, Aldi has posed a threat to Woolworths’ differentiation strategy by applying pricing strategy. This strategy involves the offering of quality products at a low price. This strategy, however, has affected the market share that has been enjoyed by Coles and Woolworths for a long period (Pash, 2016). However, this competition that has been posed by the German Owned Aldi through price war has not significantly affected Woolworths and Coles profit. For instance, the company projects that for the next five years, the annual returns to grow by 4.1% to reach $105.1billion and a forecasted growth of 2.9% profits in 2016-207. This data simply shows how Woolworths is competitively strong in the industry (IBIS world, 2016).

In 2015, it surfaced that Aldi is stealing some market share from Woolworths where its graph increases every year. However, Woolworths has managed to withstand the market pressure for long, though the performance of 2016 dropped s shown in the graph (Woolworths Sales report, 2016). A significant investment of $90 billion has given Woolworths the opportunity to greatly invest in technology and hire qualified staff. From the study by Roy Morgan, the market share of Woolworths has reduced to 37.3%, whereas Aldi has risen to 12.1%. For Coles, the market share slightly increased from 31.8% to 32.5%, while IGA retained its market share of 9.7%.

The External Environmental Analysis Of Woolworths The external environment can be classified into two categories: the macro- environment and the micro environment. The micro environment is those factors that directly influence the organisation performance. They include customers, suppliers, intermediaries, competitors and the public. On the other hand, the macro environments are those factors that affect Woolworths from outside. They include: economic, social, technological, legal and demographic factors. Therefore, Porter five forces and the PESTEL analytical tools can be applied in the assessment of how macro and micro surrounding (Hanan, 2016).

The Porter Five Forces This tool examines the current situation and performance of a company. The areas that are assessed include the following. Bargaining power of buyers: in the Australian retail trade, consumers have a wider variety of products and services to select. It is due to the availability of supermarkets and retail stores that provide necessity products to customers giving buyers high bargaining powers. With the entrance of new players in the market that has consequently spurred stiff competition hence giving more powers to buyers (Porter and James, 2015). Bargaining power of suppliers: the retail trade being competitive, a significant number of the market share is taken by the majority. Therefore, suppliers have high bargaining power in the industry. In addition, the supply in foods is affected by the seasonal changes. In case the supply reduces due to changes in season, the suppliers usually have more powers. Woolworths Limited will adopt an efficient supply chain management to achieve their goal of customer satisfaction. Threats of new entry: new firms which want to enter into the retail industry find it difficult because larger companies have already dominated the market. Hence, threats to new entry are considered to be lower to a company like Woolworths. This new entrance for instance Aldi has affected the profitability level of Woolworths (Mike, 2016). Perhaps, sales could have increased in the future where the market is now shared by close rivals. Rivalry among existing firms: the Woolworths main competitors include Cole supermarket, Aldi, Asda, and more (Malcolm, 2015). They usually compete for high market share, and this makes the rivalry to be higher in the Australia retail trade. This completion has affected the profitability level of Woolworths. The profitability has reduced because some of the customers that used to purchase products from Woolworths have now preferred shopping from competitors stores (ABC News, 2016).

The threat of substitute: these are products that can serve an alternative purpose as the existing one. The substitute products are always available (Low, 2015). To thwart this, Woolworths has embraced diversification and has offered consumers an opportunity to choose from the variety of products offered. Currently, it is also adopting the pricing strategy in Australia and in the international market, Woolworths is applying differentiation strategy to win consumers. These strategies will consequently result to increased sales hence profit maximization (Woolworths Limited, 2015). Therefore, Woolworths should the understand these five forces and formulate viable strategies to enhance quality, provide what customers needs, employ sophisticated marketing strategy, control suppliers to be a cost leader and above all, it should totally incorporate technology in its processes. As a result, it will manage the competition and expand further (Kotler & Keller, 2016).

Legal-Political Factors Apparently, it is imperative that all business organizations have no otherwise but to abide by legal provisions of the land fully. Woolworths has, however, instituted rules and policies in place that guides its staff to align with the constitutional imperatives of the land. They, however, understand the consequences of contravening the legal requirements and even employ law experts to advice when the management is uncertain of a particular matter. Moreover, Australia and New Zealand are countries that enjoy a long period of political stability (Tanya & David, 2015). The Economic relations inked between these two States have created a Conducive environment for the efficient operation of Woolworths. However, the Woolworths performance has been affected in various ways. The political forces had negatively impacted the retail industry in Australia received a set blow when the government recently launched a campaign that aimed to block the developed companies like Woolworths from eliminating smaller retailers through unfair competition for the market. Therefore, the fair business policy enacted by both Australia and New Zealand Competition and Consumer Commission has significantly affected the performance of Woolworths. But because of the managements’ capability in establishing effective strategic measures, the company has managed to thrive in the industry and further command a significant market share (Woolworths Limited, 2016).

Technological Factors The technological breakthrough that is currently experienced has significantly affected how most businesses conduct their operations. Today, technological harnessing and innovations is a common trend that organizations are applying to sharpen their competitive edge. Woolworths has employed the technology in most of its operations. The Woolworths has used the green refrigeration technology to store perishable products. Also, the self check-out machine utilized by the company to scan, weigh and make payments significantly assisted in reducing the costs (Stannage, 2106).

Economic Factors These factors primarily deal with the performance of the country’s economic performance. It can be regarding the consumers’ purchasing powers, the exchange rates, inflation, among others. If the customers’ purchasing powers are too weak, the performance of the company is negatively affected. Also, the existence of inflation tends to raise the price of various products hence affecting the users buying behaviour.

Social Factors These factors include the demographic patterns and individual beliefs, norms, attributes and so on. It particularly covers people religion, language, gender, sex, age, population size, norms, etc. The demographic aspects in Australia keep changing. Consumers vary their demands according to technological changes, implying that they prefer consuming current products. Also, they consider purchasing products from organization leading in corporate social responsibility practices (Michel and Kannan, 2016).

Conclusion Wrapping up, a keener analysis of Woolworths Limited internal and external environment through PES

TLE and Porters Five Forces apparently reveals that dynamic business environment has been a challenge. The growth and expansion focus have enabled it to enact strategic plans that align with both short and long term objectives. Furthermore, the unfavourable environmental metrics has also been a great challenge to the company that have affected the profitability level. Though the company still anticipate for more profits but the fact remains some of its customers have opted for cheap competitors’ products. The strong commitments towards ensuring that the customers are provided with the right products and creation of a healthy working environment to for the employees are part of the factors that have contributed to Woolworths’s success.

Recommendations It is recommendable for...