Cost Leadership Strategy

In today’s highly competitive business environment, it is very important for the business owners to develop effective corporate level strategies to place their business for growth and success. Corporate level strategy is the plan to hit a particular target that is required for attaining overall business objectives. In order to attain its corporate objectives, Woolworths has formulated and implemented effective corporate level strategies (Barney, 2014). These strategies are discussed below:

Cost leadership strategy is one of the most significant corporate level strategies that are implemented by Woolworths. This strategy includes the pursuit of low input costs the company offers its products at lower prices in comparison to competing brands. It is involved in the price wars with the Coles which is also a leading retailer in Australia (Stiles, 2017). Considering the competition in the area, the Woolworths has lowered the prices of its products to similar levels of its competitors i.e. Coles. As a market leader in the country, it controls a larger chain of supermarkets which enhances its buying power thus driving lower prices from the suppliers (Bennie, 2015). Thus, it is operating its business being cost effective and it attempts to provide its customers every day lower prices via price deductions on all the products. It is making efforts to cut down its operating costs by using just-in-time technique. It is used to manage the products and processes in supply chain so that it can eliminate the costs of wastage and storage by arrival of products at stores at the time when they are needed. This is the major strategy that enables Woolworths to increase its customer base and gain more competitive advantage against other retailers like Coles, Aldi Australia, Harvey Norman etc. (Banker, Mashruwala & Tripathy, 2014).

In addition to above, Woolworths is also implementing diversification strategy as its corporate level strategy. This is the strategy which looks at the products and services of company and formulates a strategy for successful marketing and revenues (Ethiraj, Gambardella & Helfat, 2018). There are two types of diversification strategies i.e. single business strategy and dominant business diversification strategy. Under this strategy, Woolworths is using unrelated diversification that describes that this company is focused on adding new product lines in its business and penetrating in new and international markets. Looking at the needs and demands of customers, the company has diversified its business in different product lines like home improvement products, appliances, liquor and other related products (Bowen, Baker & Powell, 2015). Moreover, it is planning to tap in the financial services and establishing joint ventures with banks. This strategic option is another option that assists this company to increase its overall revenues in Australian market.

Diversification Strategy

In this way, currently Woolworths is formulating and implementing both cost leadership and diversification strategies as its corporate level strategies which assist it to achieve its overall corporate goals (Engert & Baumgartner, 2016).

Considering the competition in the market, Woolworths has implemented most appropriate corporate level strategies which are suitable for its business operations and growth in Australian retail industry (Woolworthsgroup, 2018). This company is using cost leadership as its promotional pricing strategy that assists it to implement the strategy where prices of products will be continuously low all over the world. This corporate level strategy is suitable for the growth of company it assists it to offer the products and services on more affordable prices. Additionally, it is focused on providing more persuasive offers and better innovation. The suitable strategy which is related to Woolworths is its range and pricing strategy. It has made its everyday low-price strategy as the most significant factor. The company implemented cost leadership strategy that counteracted Coles that is operating its operations as one of the primary competitors of Woolworths (Bennie, 2015). It is playing a vital role to compete with the discounted retailers. Along with the competition, it allows the organization to meet the needs and demands of Australian customers as a significant percentage of population is covered by lower and middle income people (Australian Bureau of Statistics, 2017). These people prefer to purchase their household and regular retail products on possible minimum prices.

Moreover, unrelated diversification strategy is also suitable for firm’s effectiveness. To reduce the gap of product range, this company will produce high quality and improved priced products. By diversifying its product range, the company is able to cover a larger market in Australia. It helped Woolworths to make a diverse customer base. About the effectiveness and appropriateness of diversification strategy, it can be stated that it can save the costs to company and generate synergy (Keith, 2012). It is able to set off the loss of a business with the surplus of other businesses. For example, the company has confronted huge losses in its liquor business that was covered up with the revenues of retail business.

This suitability analysis indicates that both of its corporate level strategies capitalize the core competencies and strengths of Woolworths Company. These strategies are consistent with the existing culture of Woolworths and they are aligned with the external context i.e. political, environmental, social and economic context. Both strategies offer different advantage to Woolworths Company to stay competitive in Australian retail sector.

Suitability Analysis

However, Woolworths Company has implemented effective and fruitful business level and corporate level strategies but still the company needs to make more improvements in order to enhance the effectiveness of its operations. There are two recommended strategic initiatives which this company can take in the future. These initiatives are stated below:

Under this strategic initiative, the marketing team of Woolworths should set relatively higher prices in the preliminary phase of product introduction. After that, it can reduce the process with the passage of time. The company can implement this initiative considering the needs and demands of customers towards retail products. After fulfilling the demands of first few customers and considering the increased competitiveness in the market, Woolworths can lower the prices of its products. It will help the company to entice price sensitive customers (Robson, 2015).

Additionally, this organization should emphasize on the advertising and marketing processes. Its diversification business has shifted its focus from its core business. It should make more emphasis on its supermarket business than liquor and food segments (Peppard & Ward, 2016). It should develop a marketing team which will be involved in advertising and marketing of businesses. Thus, Woolworths should make investment in the marketing and promotion activities. These strategic initiatives will help the organization to enhance its effectiveness in retail industry.

Conclusion 

In the limelight of above discussion, it can be concluded Woolworths is a major player in Australian retail industry. The major reason behind company’s growth is its business level and corporate level strategies. These strategies support this firm to achieve its objectives and a superior position in industry. The above report shows that this company is using productive corporate level strategies to get a superior place in retail sector. In order to improve its performance, Woolworths should take recommended strategic initiatives.

References 

Australian Bureau of Statistics. (2017). Household Income and Wealth, Australia, 2015-16 Retrieved from https://abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/6523.0~2015-16~Main%20Features~Characteristics%20of%20Low,%20Middle%20and%20High%20Income%20Households~8

Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision, 52(5), 872-896.

Barney, J. B. (2014). Gaining and sustaining competitive advantage. Australia: Pearson Higher Ed.

Bennie, S. (2015). Coles and Woolworths weighing up strategies. Retrieved from https://www.insideretail.com.au/news/coles-and-woolworths-weighing-up-strategies-201506 

Bowen, H. P., Baker, H. K., & Powell, G. E. (2015). Globalization and diversification strategy: A managerial perspective. Scandinavian Journal of Management, 31(1), 25-39.

Engert, S., & Baumgartner, R. J. (2016). Corporate sustainability strategy–bridging the gap between formulation and implementation. Journal of cleaner production, 113, 822-834.

Ethiraj, S.K., Gambardella, A. & Helfat, C.E., (2018). Theory in strategic management. Strategic Management Journal, 39(6), pp.1529-1529.

Keith, S. (2012). Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2(5), 47-81.

Peppard, J., & Ward, J. (2016). The strategic management of information systems: Building a digital strategy. US: John Wiley & Sons.

Robson, W. (2015). Strategic management and information systems. Australia: Pearson Higher Ed.

Stiles, J. (2017). Woolworths new price strategy is ‘psychological conditioning. Retrieved from https://thenewdaily.com.au/money/your-budget/2017/04/13/woolworths-prices-whole-numbers/

Woolworthsgroup, (2018). Woolworths supermarkets. Retrieved from https://www.woolworthsgroup.com.au/page/about-us/our-brands/supermarkets/Woolworths