Woolworths Case study
Woolworths Group Ltd. (Woolworths) is a diversified firm that runs destination and convenience shops, supermarkets, and online platforms. Woolworths stores may be found in a variety of locations. It buys food, beverages, general commodities, and things connected to consumer electronics from a wide variety of farmers, producers, and manufacturers and then resells these items to a wide variety of clients. In addition, it provides its consumers with leisure and hospitality services such as lodging, entertainment, and gaming, and it also delivers these items to a variety of pick-up locations inside these territories.
Vision and mission statement
The vision of WHL is to establish itself as the preeminent retail organisation in the southern hemisphere. It is their mission to be the company of first choice for clients in the southern hemisphere who are concerned about value, innovation, and environmental stewardship.
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Industry structure and economic feature
The Coles Group and the Woolworths Group are the two largest national firms in Australia, and they control the majority of the country's grocery market. Both of these scenarios result in around a thirty percent market share for the grocery store industry. The value of food retail sales at supermarkets in Australia has continued to exhibit remarkable growth over the previous decade, reaching over one hundred billion Australian dollars.
It is possible that limitations placed on shopping in stores owing to the COVID-19 pandemic contributed to the significant rise in yearly growth of online retail expenditure on groceries and booze that occurred in 2021. According to a survey that was carried out in 2021, it appears that the preference for online shopping among Australians for grocery shopping channels before and after the coronavirus pandemic is increasing in 2021. According to a survey that was carried out in 2021, it appears that the preference for online shopping among Australians for grocery shopping channels before and after the coronavirus pandemic is increasing. This indicates that the growth in online grocery spending is likely to continue. Coles and Woolworths are the most successful supermarkets in Australia when it comes to online grocery shopping. This further solidifies their dominance in the Australian supermarket business, which includes both in-store and online competition.
Corporate and business level strategies
Their strategic framework connects both divisional and functional strategies in support of the group's broad development aspirations. This helps to guarantee that there is clarity about the prioritisation of projects and the harnessing of collective efforts in the implementation of those initiatives.
The framework revolves around three overarching themes of strategic importance. The first step is to ensure that we can secure the foundation of what differentiates us from our competitors by protecting and growing our core businesses. The second overarching strategy goal is to broaden their reach and make greater use of existing infrastructure by concentrating on both untapped and established avenues of expansion. The third objective is to be the industry leader in customer experience. They've built a successful company by putting the needs of customers first in all they do and must continue to prioritise them even as we work to preserve and develop our existing operations while also exploring new opportunities.
- Rivalry among existing competitor: The number of companies that have been successfully operating in this industry has grown in recent years. But Woolworth, which is the biggest and most well-known brand in the industry, is facing competition. This cuts into the company's overall market share and forces businesses to come up with and use more competitive business strategies to set themselves apart from their competitors.
- Bargaining power of suppliers: Suppliers are able to switch from one firm to another by exerting pressure on the companies they work for to lower the quality of the items they provide or make them less readily available, as well as to raise the pricing of those products since there are so many of them. So, the negotiating power of the suppliers has an effect on the firms' earnings by making fewer people want to buy from them.
- Bargaining power of buyers: The customers exert pressure on the businesses in order to achieve higher product quality at cheaper rates and the finest services possible. The only people who have this kind of power are the customers who buy the goods produced by corporations.
- Threat of new entrants: New competitors represent a danger to established businesses since their presence might have an effect on the incumbent companies' capacity to generate profits or maintain their share of the market. As a consequence, it brings about a decrease in the overall productivity of the present organisation as well as a decline in the product quality.
- Threat of substitutes products and services: This poses the biggest risk to businesses since customers may now purchase items from firms other than their own thanks to alternatives for those goods and services, which eventually lowers their profitability. Customers sometimes choose substitute items over products from the industry because of the latter's superior qualities.
- Customers are advised of current deals each week as part of Woolworths' aggressive marketing approach. The business also emphasises its value proposition and works to maintain the lowest starting prices in the industry.
- Two major market firms, Coles and Woolworths, both of which are market leaders, have entire control over the Australian retail sector. Since Woolworths controls almost 80% of this market, competition has become much less of a threat.
- With Coles, its most aggressive and fierce peer, Woolworths is enmeshed in a continuous pricing war. The business has made some severe pricing errors that have resulted in enormous losses in an effort to compete with its competitors.
- Woolworths sells the same goods to customers in various income brackets. As a consequence, the customer receives conflicting signals and is unsure of whether the merchant really offers excellent value for money.
Every retailer has a comparable product to sell, particularly in the value category. The capacity to improve the purchasing experience holds promise. They might be personalised self-checkout services, customization, loyalty schemes, or shopping assistants powered by artificial intelligence. These kinds of encounters may aid in differentiating, and the business may charge more for patrons who desire to utilise these services.
- Coles is one of Woolworths' main rivals. Additionally, major risks come from online merchants like Amazon, which have expanded into the grocery retail market.
- Because of growing health awareness and concern, consumers are much more conscious of what they buy and how they buy it. Nowadays, there is a great market for organic and chemical-free items, and supermarkets will need to change their product lines to keep up with the new trends that might be dangerous in the long run.
- Political Factors:Due to Woolworths' popularity, several political considerations influence it. For instance, the 2019 ban on single-use plastic caused a halt, and the transition to more sustainable items turned out to be time-consuming and expensive. Additionally, other more significant political relationships actively affect the trade volumes and import-export transactions of Woolworths.
- Economic factors:All sectors face challenges from rising competition. Woolworths has recently suffered strategic losses and hasn't been able to gain the necessary level of market share. Data from 2019 shows that Aldi, Woolworths' greatest rival, has managed to take 15% of the market share, significantly endangering Woolworths' ability to compete. Threats from competitors, stock losses, and other elements affect a company's financial health and stability.
- Social Factors:The easiest strategy to keep one's story current and appealing to customers is to keep one's business informed of shifting societal trends. Woolworths has been able to protect customers and workers from the COVID-19 pandemic by putting in place good hygiene facilities, social distance standards, and other services.
- Technological factors:Keeping up with new technology developments is crucial in the technological age we live in today. Woolworths is attempting to become more technologically aware and is implementing technologies that will allow them to increase customer happiness and service quality. With the use of iPads and robotics, Woolworths has introduced "smart shops" to make its establishments safer. The business offers subscription-based pricing and home delivery services using a proprietary app.
- Legal factors:Following all legal requirements and staying current with new legislative requirements and changes pertaining to corruption, employment, safety, health, consumer protection, data privacy, and the environment are essential.
- Environmental factors:Under the Good Business Journey initiative, Woolworths has incorporated crucial CO2 systems, set up natural refrigeration units to decrease carbon footprints, and established shops that adhere to the 5-star green-star design standards.
Target market analysis
The age and gender of consumers, together with their associated values, income level, and other criteria, may be used to segment the target market of Woolworth's supermarkets in Australia. The entity has targeted individuals in the age range of 6 to 55 years old, in part because it offers everyday necessities for maintaining an active lifestyle for individuals of all ages. Additionally, it should be noted that it caters to clients who have higher income levels and seek high-quality goods at affordable prices.
- Product:The majority of food products are offered by Woolworths as part of their marketing mix. Vegetables, fruits, meat, and packaged goods are among them. Additionally, Woolworths has begun offering periodicals, DVDs, and office supplies. Woolworths offers a wide range of brands, regional products, and culinary options within each category. As a result, the buyer is not left with an unsatisfactory selection. To preserve quality, Woolworth professionals evaluate and approve the assortment of items. From bags, jewellery, furniture, bedding, and housewares to apparel and accessories, Woolworths offers a wide variety of goods.
- Price:Woolworths makes an effort to keep pricing on par with or slightly above market rates. After discovering that the food chain provides a wide range of premium brands, the costs were kept low. Woolworths caters to the market segment that prefers both low and high prices.
- Place:In Australia, Woolworths now runs 1,000 shops. The remaining 950 are convenience shops, and there are more supermarkets. In Victoria and Melbourne, several of the shops function as Safeway stores. They also use an internet platform to do business. They just created a mobile app for the purchases at the same time.
- Promotion:For Woolworths, promotion has always been of utmost significance. They have continuously improved in this area. Woolworths provides consumers with many loyalty programmes, some of which give gas station savings. A promotion called "Fresh Food People" was started in 1987 and ran until 2012. For effective marketing, they make use of publications, newsletters, and internet media. They have devoted clients because of their convenience and availability. Shoppers may take advantage of a variety of specials and offers at Woolworths. Also distributed are gift cards. They make extensive use of social media for marketing. To attract customers, they also operate online storefronts and provide discounts.
Problems and Issues in Woolworths
On-demand grocery delivery services provided by Checkers and Pick & Pay put pressure on Woolworths. Woolworths was put under pressure by the introduction of livery services provided by Checkers and Pick & Pay. The introduction of Woolworths' online delivery service has been delayed. In a declining economy, competition is becoming fiercer, and we will see more and more individuals downsizing. In South Africa, Woolworths' fashion and cosmetics division continues to produce mediocre results. The business is also having problems since it is losing some of its most devoted clients.
The Group's revenue and concession sales for the 52 weeks ended June 26, 2022, grew by 2.6% in constant currency terms and by 1.4% overall compared to the 52 weeks ended June 27, 2021. Online sales increased by 16.4%, making up 12.4% of the group's total annual revenue and concession sales. The group had a strong financial sheet and a net cash position of R229 million at the end of the year. Cash conversion exceeded 100% as a consequence of sound working capital management and a focus on prioritising capital expenditures, producing 448.3 cps of free cash flow. It also backed the resumption of the Woolworths SA and Country Road Group dividends at a 70% payout ratio throughout the months of June and July 2022.
One of the major companies in Australia's grocery business is Woolworths. Since the COVID-19 pandemic, the company has been doing well financially, which is backed by a promising outlook for the sector. However, the corporation must take into account a few recent problems that have managed to negatively impact operations.