Disruptive Forces in the Australian Retail Industry

Business Background

Woolworths Group Ltd is positioned as a renowned Australian retail company. The business segments of the company encompass New Zealand supermarkets, Australian food and petrol, Endeavour drinks group and group of hotels. The major focus of Woolworths Company’s business is the retail and financial services provision to the upper as well as middle income groups in South Africa, New Zealand and Australia. The retail company is also positioned as an investment holding business and among the top 100 organizations listed within “Johannesburg Securities Exchange” (Woolworthsgroup.com.au. 2018). The business of Woolworths is focused on offering quality services and products to all its target consumers by its competitive price, human resource and fresh food strategies.

Industry Description

The retail industry of Australia in which Woolworths Company has its business operation is affected by disruptive forces like changing spending pattern of the Australian consumers along with arrival of international companies (Naidoo and Gasparatos 2018). These companies are intended to bring in a whole new approach of retailing. Consumers in the Australian retail industry have turned out to be more tech-savvy, affluent as well as busier. Moreover, their expectations are also changing and the technology is evolving their buying behavior. In the upcoming years, Australian retail industry needs agility along with multiplicity of delivery platforms which might leave behind the non-responsive retailers.

PESTEL Analysis is carried out in realizing the conditions in external business environment that can impact the retail industry performance and that of Woolworths Company.

• Political- The political situation impacts Australian retail industry and Woolworth’s performance to a great extent. For example, Australian Federal Government introduced a competition policy that prevents established independent players such as Woolworths and Coles in reducing competition (Methner, Hamann and Nilsson 2015). Moreover, increasing market dominance of such established retailers has caused small retailers to deal with struggle in industry performance.
• Economic- A drop in Australian economic situations has affected Woolworths performance drastically for there is observed a decline in Australian and New Zealand market economic conducts and that of Woolworths (Rogers, Brown, de Haan and Deletic 2015). Rather than such decline, certain economic indicators like currency exchange rate fluctuations and Australian dollar weakening has drastically impacted the global retail operations of Woolworths.
• Social- Certain social factors also impact Australian retail industry considering that the companies operating within the nation needs to attain increased societal and community development. This is for the reason that current social trends among consumers indicates that they prefer increased socially reliable company. So, through implementing societal initiatives retailers like Woolworths can generate considerable impact on consumers.
• Technological- The function of technological aspect impacting retail industry and Woolworths is significant as this can be recognized from the fact that Woolworths considered implementation of green refrigeration technology (com.au. 2018). This is in a way that perishable goods can be stored from longer time duration.
• Environmental- The environmental factor is also impacting Woolworths Company’s performance along with overall Australian retail industry. An evaluation indicates that Woolworths is impacted by environmental factors in a way that the company’s petrol as well as winemaking businesses are posing increased threats on environment conditions performance. This has further impacted the profitability performance in the companies’ business areas.
• Legal- An evaluation of Woolworths indicated that regulation by Australian Competition along with Consumer Commission has impacted the business operation of the organization all through the economy (com.au. 2018). Moreover, carbon tax in Australia is also deemed to impact retail industry and Woolworth’s business performance because of which it needs to adapt fait business policies.

For analysing the retail industry environment of Australia, Porters Five Forces Analysis is used in analysing the recent position of Woolworths within the overall industry along with ways in which distinct factors impact the company’s performance situations.

• Buyers Bargaining Power- The bargaining power of buyers within the Australian retail industry and for Woolworths is considerably high for the reason that there is rage number of retail stores and supermarkets that offers basic necessity terms to the consumers (Bailey, Price, Pyman and Parker 2015). For the reason that Woolworth’s consumers have broader options to select from, the bargaining power is deemed to be increased.
• Suppliers Bargaining Power- An evaluation of the Australian retail industry signifies that it is greatly focused and there are several huge players which have concentrated a major part of the market share. This increases the suppliers bargaining power to a considerable extent and for this reason it can also be regarded as this power is moderate for Woolworths in Australian retail industry (Phillipov 2016).
• New Entry Threats- In consideration to the new threats of entry within the Australian retail market, the new entry threat is observed to be lower. This is for the reason that the leader organizations have made it highly complex for the new players in Australian retail industry to enter. This therefore decreases the overall new entry threat within the Australian retail industry conditions.
• Rivalry in Existing Companies- The rivalry threats as evaluated to be present in Australian retail industry signifies that it is considerably higher. This is major because of the reason that there exist a few established competitors namely Woolworths, Coles supermarket, Wesfarmers and Asda those are competing against one another. Such competition exists in order to attain a large market share within the retail industry (com.au. 2018).
• Substitute Threats- The retail dairy consumable goods are increasing vital along with that their consumption on a regular basis is increasingly important. There are very less number of alternatives those are available to them and considering the same it can be said that threat of substitutes for Woolworths is observed to be lower. Consumers of Woolworths Limited is bound to consume the retail goods for they have no other choice.

The existence of certain strong competitors within Australian retail industry such as Myers and Coles are likely to decrease Woolworth Company’s market share and also contribute to increased concentration level. The intensity of such competitor strategic group is persuading Woolworths to generate competitive as well as efficient strategies for differentiating its business from its major rivals (Pederzoli and Kuppelwieser 2015). The capabilities possessed by Myers and Coles are observed to represent sustainability threat for Woolworths over the long run in case the company does not develop effective strategies to deal with them. Moreover, the competitor companies also follow highly competitive strategies that are affecting market shares of Woolworths in the industry. Myers and Coles are imposing competitive pricing strategies to grab huge consume base with offering its high-quality products. Moreover, the capabilities of these competitor companies are observed to include locating stores in the high traffic places that offers them increased opportunity to attain high consumer base (Soosay et al. 2016). Moreover, Myers and Coles have strategic capabilities with its string and established brand name with increased access to highly skilled employees that facilitates them to maintain effective corporate social responsibility by developing goodwill. Strategic capability of Coles to maintain aesthetic appeal of its departmental stores facilitates in attaining competitive edge through offering consumers with better consumer experience.

PESTEL Analysis

To deal with such fierce competition from Myers and Coles, Woolworths Company is greatly focused on developing its strategic priority. A number of in-store services are considered by the company to be offered to its target consumers. Moreover, fresh food strategy of Woolworths is also focused on expanding its new in-store sushi kitchens that can cater highly diverse tastes of consumers (Grimmer 2018). Moreover, to deal with increased competition from Myers and Coles, Woolworths is focusing on attaining international brand equity through licensing and merchandising all its products.

Opportunities and threat analysis for Woolworths is carried out for critical strategy analysis which can further facilitate in attaining increased growth level along with operations development (Wiedemann, McGahan and Murphy 2017). This can also facilitate in conducting internal analysis with an intention to evaluate the efficiency of strategies implemented by the retail organization.

Opportunities · The retail industry all through Australia indicates an increased growth potential. Such growth can also be observed in the factors namely computerization, technical advancement in supply chains and changes in consumer lifestyle (Graves and Shan 2014). These opportunities are observed to impact the capabilities of the retailers along with offering them profitable opportunities to develop their business. · Considering the same, Woolworths Company is observed to positively view towards embracing such option through implementing the strategy of multi-option retailing. This strategy is developed by this retail company in order to deal with the changing consumer needs.

Threat · The threats those can be faced by Australian retail companies including Woolworths are majorly from the increased competition level within the industry. In such scenario, Woolworths is primarily under competition with Cole’s supermarket (Ahsan and Rahman 2016). · Rather than this, increased government intervention is one more considerable factor that impacts business growth of Woolworths specifically within Australian retail sector.

The internal environmental analysis goes a long way in helping any business to understand the strengths as well as the weaknesses of the organization and understanding those areas where the firm needs to improve (Frynas and Mellahi 2015). Hence, for this purpose, the organization will be required to continuously assess its resources, capabilities as well as core competencies in order to propose a better system for future application (Woolworths.com.au. 2018). Therefore, from the analysis of the internal analysis, an organization can reposition itself and look out for its vulnerabilities.

Tangible Resources

The tangible resources can be rightfully identified as those resources which can be measured successfully and compared against the resources of another company. The different Tangible resources of Woolworths are as follows:

Large number of stores: There are more than 990 stores of the Woolworths organization in Australia which is quite large in number. With this aspect, the organization is successfully able to cover all the prime regions of the country.

Human resources: There are more than 115000 team members in all the operational departments of Australia (Gereffi and Fernandez-Stark 2016). These include employees in the stores, at the distribution centres and the support offices so that premium services can be provided to the different customers.

Technology: Woolworths has made use of advanced technology in all its operations. Moreover, its presence in the online domain has made it quite popular in the eyes of the different consumers.

Intangible resources

The intangible resources of an organization can be defined as those resources which can be measured effectively in monetary terms but they hold the utmost importance (Ginter, Duncan, and Swayne 2018). The different intangible resources of the organization have been given as follows:

Porter’s Five Forces Analysis

Intellectual property rights: The organization has an access to a large number of Intellectual rights which help the firm to conduct its operations successfully. Intellectual rights are difficult to obtain and thus having them as a resource is essential

Brand name: Woolworths has a respectable brand name in Australia as it is able to provide excellent services and products to the different customers (Hahn 2013). The brand reputation of Woolworths brings about effective footfall to the stores as well

Management efficiency: The management of the Woolworths is also very efficient in nature and they continuously assess the external environment so that they are able to successfully combat against the competition and are able to gain a sustainable competitive advantage.

Strong relationship with the different suppliers: The organization has a strong relationship base with its different suppliers which enables the organization to ensure success in providing the right products at the right price and at the right time (Rothaermel 2015).

Capabilities can be rightfully defined as the skills of the organization and the manner in which it is successfully able to align these resources for the success of the firm and to increase its productivity.

The different capabilities of Woolworths have been given as follows:

• Ability to provide efficient customer service: Due to its efficient human resources, Woolworths is able to successfully provide efficient customer services and assist them to purchase the right kind of products based on their needs (com.au 2018).
• Ability to ensure that the stores are always stocked: As the relationship off the company with its suppliers are very good, the organization will be successfully able to ensure that the stores are always stalked up to its capacity.
• Good financial returns: The firm has been performing well and has been providing good financial results for a long time (Wheelan et al.2017).
• Specialized in private labels: The organization specializes in private labels.
• Marketing capabilities: Woolworths has a good marketing strategy which thereby assists it to ensure that it is able to perform considerably well.

The given section will be conducting a core competency test based on the VRIO Analysis using which it will be understood whether the capabilities qualify for core competency or not.

Resource or capability	Valuable	Rare	Imitable or Non-substitutable	Organized to Exploit	Competitive Implication
Brand name	Yes	Yes	No	Yes	Sustained competitive advantage
Customer service	Yes	No	No	Yes	Temporary competitive advantage
Stocking capabilities	Yes	No	Yes	No	Parity
Marketing	Yes	Yes	No	Yes	Sustained competitive advantage
Financial success	Yes	Yes	No	No	Temporary competitive advantage
Private labels	Yes	Yes	Yes	No	Parity

Therefore, from the given analysis it can be stated that the core competencies of the Woolworths are as follows:

Brand name: The brand reputation of Woolworths is highly popular and hence for this purpose, it can be stated to have the good will and a sustained brand name which acts as a core competency of the firm (Stead and Stead 2013). It is based on its brand name of the organization that flocks the different customers to it.

Marketing: The marketing strategy of the firm also forms its core competency.

The proposed suitable information system which can be used by the organization for the benefit of its operations can be stated to be the use of a Retail Point of Sale (POS) System.  This information’s solutions system can be used by the organization to fulfil the demands of the customers and to provide them with their value for money (Harrison and John 2013). The system will allow Woolworths to manage the varied product mix and provide a speedy service to the different customers. This way Woolworths will be successfully able to maximize the availability of the product and speed up its service and thereby minimizing the carrying costs.

Competitive Landscape and Strategies

As Woolworths has been performing adequately well, the installation of this software can be deemed to be an additional investment which will be highly useful for the firm in the long run. It will help the firm to right against competition and ensure long term success (Slack 2015). However, the following recommendations based on the advantages of the system will be based for the system installation.

• Installing the system has several benefits and hence, it is recommended to be installed. The befits are as follows:
• Increased efficiency
• Managing coupons
• Reduced checkout lines (Hubbard, Rice and Galvin 2014).
• Complex pricing solutions
• Improves productivity
• Moreover, additional training has to be provided to the different employees which shall ensure that the different employees are successfully able to make use of the system.
• Woolworths will be required to ensure that they are aligning the business activities and the information system for the betterment of the execution (com.au. 2018).

Conclusion

Therefore, from the given analysis it can be stated that the organization has been performing considerably well with respect to its resources and capabilities. However, with respect to the changing needs and technology, it has been recommended that it implements a retail point of sale system for its grocery store which will help the organization in the long run and gain a sustainable competitive advantage. The report highlighted the external as well as the internal environmental analysis of the organization and proposed an information systems solution for the same for the concerned organization Woolworths.

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