Market Analysis of Woolworths

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Introduction:

Woolworths is a chain of grocery stores and supermarkets in Australia. It was founded in 1924 and is owned by Woolworths group. Woolworths and Cole Supermarket Australia, or simply known as Coles, together forge a near-duopoly of Australian supermarkets. They dominate the market with almost 80% of the Australian market. They deal in the provision of household groceries such as vegetables, fruits, meat, packaged foods, etc. and other household products like DVDs, magazines, pet foods, baby products, stationery and so on. According to calculations on August 2019, 981 Woolworths supermarkets and 43 Woolworths convenience stores. They also run an online home delivery service by the name of Woolworths online. (Roy Morgan 2019).

Background:

Woolworths Limited (currently Woolworths Group) was founded by five Australian entrepreneurs – Percy Christman, Stanley Chatterton, Cecil Scott Waine, George Creed, and Ernest Williams. It was founded on 24 September 1924 but its first store was inaugurated on 5 December 1924 in Pitt street of Sydney’s Imperial Arcade, named “Woolworths Stupendous Bargain Basement”. At the spearhead of innovation in the Australian market, Woolworths stores became the first variety store in the world to install receipt printing cash register in 1926. Since then, they have never looked back and grown at a rapid pace while adopting newer technologies every year. (mpk732t22016clustera. 2019).

Market Analysis of Woolworths

Acquisitions:

American supermarket giant Safeway Inc. arrived in Australia in 1982 as Australian Safeway Inc. They were bought and acquired by Woolworths in 1985. Before this acquisition, Australian Safeway Inc. had 126 stores across Victoria, Queensland and New South Wales. All these stores were rebranded as Woolworths stores by 2017. (Woolworths Corporate Website 2017)

Entry to India

Their entry into one of the largest consumer-based market in the world, India, will lead to further expansion of Woolworths supermarkets and will provide a much needed wider variety of household products. This will also result in stronger international trade relations between the two nations. (Mishra, 2009)

The PESTLE Analysis:

Political Analysis – The company possesses an organized performance-driven political atmosphere in Australia and New Zealand. A strong political base and background ensure smoother present and future operation of the company while meeting and fulfilling the political factors as they greatly influence the performance of the firm. Woolworths has always followed the policy of political analysis to fortify its business stably with an optimum platform for future growth. This also ensures that there are no major unexpected losses that will greatly impact the company. Woolworths will follow the same approach in India, comply with all legal requirements and building a strong foundation that will last forever. Case48. (2019).

Economic Factors:

Every economy suffers from ups and downs with time. A recession hit economy is sure to result in lower sales and financial plummet. During the global recession, Woolworths also suffered from this unfortunate event. It led to shutting down of its retail stores in the UK. This also led to the unemployment of over 30,000 people. Overall sales took a severe hit and it was a financial nosedive for the company. But this where the visionary Economic analysis came in handy. The company was doing well in other markets, like Australia. This helped in saving the company from a major and possibly permanent downfall. India, being one of the fastest-growing economies in the world, is the right platform for the Woolworths group. Their entry in the Indian market will not only expand their business but also help the people of India as well. The provision of a wider variety of products that are best in the class is just the primary objective. But the second secondary objectives are to employ the people, which is a huge problem faced by the Indian economy currently.  (Nandonde, 09 April 2019)

Woolworths Store in Australia

Social Factors:

Social factors include all those factors of the society that influence the performance of a business. The most crucial aspect of society is the customer, who is the major source of revenue for the company. Customer is the aspect that keeps the business running. A business must identify and focus on the target market and the demands of its customers. This requires a futureproof planning process as per the needs and demands of the target market. This ensures sustainable profitability in the long run as well as everlasting customer satisfaction.

For Woolworths Group, the Customer is always the king. They have always been adapting to the ever-evolving social context and provided different products at the lowest prices. They have also established loyalty programs and other ways to keep up with social trends. Such valuable and smart schemes have helped earn the organization over 900000 members. Next is to ensure an effective yet efficient approach to management. Woolworths aims to replicate this model of methodical and structured management in India as well. Since the Indian market is greatly influenced by the socio-economic factors, the long-sighted vision of the company will serve them as well as the customers well. (Suresh Kasanagottu, 2018)

Technological Factors:

These factors refer to innovations in technology that may positively affect the company. This is a very crucial analysis, it includes the following terms-

  • Technological incentives
  • Automation of operations
  • Research and Development
  • Technological innovations
  • Market-specific technological awareness

Deployment of RFID (Radio-frequency identification) has resulted in quick, constant and clear communication among the retail stores. It also ensures that sufficient stock is available for the customers (Orhun, 2012). Woolworths did not stop at this, they went one step further with the incorporation of integrated SOA (Service Oriented Architecture) to aid the technology effectively. The company always strives to adopt modern ways to follow an effective yet efficient approach to management. Indian market is no stranger to technology. The passion to innovate of the company and the technological prowess of the Indian market will go hand in hand. (studocu.com. 2019).

Legal Factors:

Legal factors are a very crucial topic to be addressed for the establishment of a successful business. India has one of the most comprehensive legal infrastructures in the world. These factors act as an extension to the Political factors. Legal factors are more specific to the various laws and judicial requirements for the establishment and operation of the company. The major requirements that are thoroughly studied and met by the Woolworths group are:

Discrimination Laws

  • Anti-trust Laws
  • Consumer Protection Laws
  • Copyright and Patent Laws
  • Health and Safety Laws  

Fulfilment of legal requirements will result in a legal and safe experience for both the company and the customers. (Colla, 2003)

Environmental Factors:

Woolworths consider our natural environment to be the most valuable asset. Environmental factors are very important for a successful business. The unfortunate degradation of our environment over the past decades has led to the following roadblocks for the operation of a company-

  • Scarcity of raw materials
  • Pollution emission targets
  • Carbon footprints set by governments
  • Unhygienic environment for the employees and customers (Joseph Pancras, 2018)

Ecological factors also greatly influence the operation of a company. Weather, climate, environmental offsets and climate change affect the production of goods. This is why these factors are to be taken seriously.

Woolworths Group has always thrived to help our environment on whatever basis possible. In 2018, they made a historic decision to ban single-use plastic bags during checkout. Within the first three months of this initiative, their plastic bag usage dropped by 80%, leading to 1.5 billion fewer bags going to landfill. They also committed to axe out over 180 tonnes of plastic packaging from their products by the year 2018. This shows us their commitment to the benefit of nature. India, being a very naturally gifted country, will greatly benefit from such responsible operators. (Woolworths Annual Report, 2017)

STP Analysis:

This model consists of three steps:

  1. Segment your market
  2. Target your customers
  3. Position your products

Segment: One business cannot meet the requirements of all customers. This is why we need to conduct market segmentation. It is a process of division and categorization of customers. Woolworths apply market segmentation on the following basis-

Demographic basis: This covers personal attributes such as age, income, gender, marital status, education, occupation, etc. Woolworths provides high-quality products for people ageing from 6-65. They provide baby products as well as life easing products. They aim for high-quality product provision without burning a hole in the customer’s pocket. This will be the perfect recipe for Indian markets as it is very vast and diverse.

Geographic: This refers to the geographical location of the business. Woolworths aims to establish its stores accessible to people from different locations, from suburbs to metropolitans. Corporate Finance Institute. (2019).

Psychographic: This refers to categorization based on personality, lifestyle and personal values. As India is blessed with a rich culture, Woolworths will provide satisfactory services to all its customers leading different lifestyles.

Behavioral: This refers to the usage of the product and customer loyalty. Indian consumers are known to be brand loyal. Tata, Maruti Suzuki are two major examples of it. Woolworths aims to form not only a business relationship but also a personal bond with the customers.  (Das Nair, 2018)

Target: In this step, the target market is identified. It is very important to analyze the potential growth and expansion of business in a certain market. Woolworths aims toward a thorough analysis of the Indian market and carefully planting its products to maximize sales while maintaining a pleasant consumer experience. (mpk732t22016clustera. 2019)

Position: In the last step of this process, the goal is to identify the position of the product to target the most valuable customer segments. Creating a value proposition is essential to attract maximum customers. Woolworths aims towards providing unique, high quality and value for money products in the Indian market. This will benefit the business as well as the large Indian market. Bloomberg.com. (2019)

Porter’s Five Forces:

It is a simple yet powerful tool for analyzing and understanding the competitiveness and identifying the potential profitability of a business. These five forces are –

Competitive Rivalry: Estimation and analysis of rivals help in outlining the required strategy to attract the maximum number of customers and form a strong base that is built to last. It is also beneficial for the customers as competitive rivalry pushes the players in the game to provide as better products as possible for as little as possible. E. Dobbs, M. (2014).

Supplier Power: This includes potential suppliers, their frequency of increasing price of supplies, and how will they deal with the firm in the long run.

Buyer power: Production is worthless if there’s no customer for it. Analyzing the buyer power is necessary to establish a healthy exchange of power between the producer and customer. Competition, H. (2019).

The Threat of Substitution: This refers to the likeliness of substitutions for a service. An easily replaceable product will not hold a strong position in the market.

The threat of  New Entry: To run a successful business, it is essential to establish a futureproof business that will not sink once the new players enter the market. Cdn2.hubspot.net.(2019) Regular research and analysis of the target market and it’s varying demands are paramount here. The downfall of smartphone giant Nokia is a classic example of how to manufacture rigidity can be fatal.

Woolworths group follows through all these theories and guidelines thoroughly to establish a successful business in the Indian market. Bruijl, (2018).

Executive Summary:

Woolworths Group is aiming to establish an empire in one of the most potent economies in the world, India. Their business plan is to provide the highest quality of daily usage products at reasonable prices among all types of customers. They aim for not only initial product quality but also a pleasant after-sales experience to leave an impression that will last forever. They aim to provide:

  • The highest quality of products
  • Reasonable pricing that justifies the quality
  • A pleasant post-sales service
  • The rapid expansion of stores across the country to reach as many people as possible

After all, their supermarket slogan is “Fresh Food People”.

A very encouraging financial report of 2019 is given below:

After a challenging first half, the Woolworths group delivered a commendable growth of 3.4% and 5.0% for the whole year.

These statistics highlight the financial planning, strength and potential of the Woolworths group that will expand its business in the Indian market not solely from a business point of view, but also to establish a long term bond with the country and its people. (Target Corporation Website, 2017).

 References

  1. Bruijl, (2018). The Relevance of Porter’s Five Forces in Today’s Innovative and Changing Business Environment. SSRN Electronic Journal. 10.2139/ssrn.3192207.
  2. Bloomberg.com. (2019). Bloomberg – Are you a robot?. Retrieved 26 December 2019, from https://www.bloomberg.com/profile/company/WOW:AU
  3. Competition, H. (2019). Analyzing the Competition with Porter’s Five Forces. Retrieved 26 December 2019, from https://www.businessnewsdaily.com/5446-porters-five-forces.html
  4. E. Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45. doi.org/10.1108/CR-06-2013-0059
  5. Corporate Finance Institute. (2019). Industry Analysis – Top 3 Methods to Assess and Analyze an Industry. Retrieved 26 December 2019, from https://corporatefinanceinstitute.com/resources/knowledge/strategy/industry-analysis-methods/
  6. Roy Morgan. (2019). Woolworths and Aldi grow grocery market share in 2018. Retrieved 26 December 2019, from http://www.roymorgan.com/findings/7936-australian-grocery-market-december-2018-201904050426
  7. Cdn2.hubspot.net.(2019).Retrieved26 December 2019, from http://cdn2.hubspot.net/hubfs/125770/Michael_E._Porters_Five_Forces_Model_E-Book_From_Wikipedia.pdf?t=1446668543121
  8. Case48. (2019). BCG Matrix and VRIO Framework for Woolworths Limited. Retrieved 30 December 2019, from https://www.case48.com/bcg-matrix/627-Woolworths-Limited
  9. 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
  10. 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/
  11. Mishra, S. (2009). GIS in Indian retail industry-a strategic tool. International Journal of Marketing Studies1(1), 50. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1007.9579&rep=rep1&type=pdf
  12. Nandonde, F. A. (2019). A PESTLE analysis of international retailing in the East African Community. Global Business and Organizational Excellence38(4), 54-61. https://doi.org/10.1002/joe.21935
  13. das Nair, R. (2018). The internationalisation of supermarkets and the nature of competitive rivalry in retailing in southern Africa. Development Southern Africa35(3), 315-333.https://doi.org/10.1080/0376835X.2017.1390440
  14. Kasanagottu, S., & Bhattacharya, S. A REVIEW OF METRO, TARGET, & WOOLWORTHS GLOBAL BUSINESS STRATEGY. https://www.researchgate.net/publication/326928843
  15. Colla, E. (2003). International expansion and strategies of discount grocery retailers: the winning models. International Journal of Retail & Distribution Management, 31(1), 55-66.https://doi.org/10.1108/09590550310457845
  16. Woolworths Corporate Website – About US”, Retrieved from http://www.woolworthsgroup.com.au/page/about-us/ (Accessed 15August 2017)
  17. Woolworths Annual Report, (2017), pp. 4, 54, 65,Retrieved from https://www.woolworthsgroup.com.au/icms_docs/188795_annual-report-2017.pdf (Accessed 28August 2017)
  18. Target Corporation Website – Culture”. Available at https://corporate.target.com/careers/culture (Accessed 9August 2017)
  19. Pancras, J., Sriram, S., & Kumar, V. (2012). Empirical investigation of retail expansion and cannibalization in a dynamic environment. Management Science58(11), 2001-2018. https://doi.org/10.1287/mnsc.1120.1540
  20. Orhun, A. Y. (2013). Spatial differentiation in the supermarket industry: The role of common information. Quantitative Marketing and Economics11(1), 3-37.

Market Analysis of Woolworths by Subject Academy

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