Industry and competitive environment analysis

External and internal analysis of any business organisation is an important step towards understanding the core of the organisation and of the environment where it operates. The different aspects of the business is unearthed through the careful analysis of the environment speaks volumes of the weaknesses, strengths, opportunities and the different threats, of the business. In the current report, a thorough analysis of the various intricate aspects of the famous Australian retail giant Woolworths has been done. Here the internal as well as the external aspects of the company have been provided. The role of the company in the present state of the Australian retail segment has also been discussed. The different facets of the markets, the current trends, the present state of the company since its inception has been done.

Woolworths has been at the helm of retail sector for well over a period of ninety four years as a result it holds a special place in the Australian subcontinent. It had its first store opened in the year 1924, in Sydney’s Imperial Arcade. The founding CEO of the event, Percy Christmas, had claimed that every city needs a Woolworths, now Sydney has its own, where every women, children and men can purchase good products at cheap and reasonable prices (Woolworthsgroup.com.au 2018). It has imbibed this as its primary philosophy which has enabled it to become one of Australia’s major companies with extensive retail interest across the sub-continent of Australia and New Zealand. It is because of its incessant service to the people of Australia, New Zealand as well as from people all over the globe. The company majorly operates in the retail segment of the market and has done that since its inception. The major areas, which concerns the business of Woolworths is the retail chain of supermarkets which mainly includes selling of food items ranging from fresh vegetables, other kind of food items and other essential and necessary items of daily life.

Woolworths majorly operates in the Australian food industry. It is a complex network of food products related companies. It mainly includes those kinds of business organisations which are engaged in the production, processing, storing and advertisement of the food products.The Australia food industry is a major employer with 1.68 million employees in 2010 – 2011.  This is 15% of Australia’s total employment (Woolworthsgroup.com.au 2018).  The food industry also contributes heavily to Australia’s overall gross domestic product (GDP). The industry has some key players, which have developed new technologies, have successfully promoted efficient farm management, innovative packaging, effective transportation system as well as efficient processing network. Mainly the industry consists of food processing, manufacturing, agriculture, fisheries, catering and food retail. Woolworths primarily operates in the retail section of the industry.

The firm’s resources and capabilities

The most prominent parts of any organisation’s business environment are the economic, legal, social, political factors. Some of them in respect of Woolworths have been provided below:

• Economic factors:Some of the prominent economic factors which influence the working and the performance of Woolworths are the inflation rate, savings rate, interest rate, foreign exchange rate, economic cycle, aggregate demand and supply existing in the economy. Some of the most influencing factors among these are the Food & Staples Retailing industry growth rate, consumer spending which helps in forecasting important growth of the industry.
• Social factors:Some of the prominent social factors which influences any business organisations are the shared attitudes, beliefs and cultures, which are in operation in the organisation concerned. With regards to the food and retail industry of Australia, demographic structure, education level, culture, attitudes, class structure are some of the most pressing social factors.
• Technological factors:Technology has now become an effective and an indispensable part of every organisation’s success. Woolworths is no exception to this. Recent technological developments taking place in the food industry, impact of these technological innovations on the food and retail sector, rate of technological diffusion and the research and development of various kinds of innovative technologies. The rate of changes in the technological arena, has been affecting its operations.
• Legal factors:The legal framework and the institutions are some of the most important factors, which influence the working of any business organisation. Some of the most important social factors which influences the working of Woolworths consists of anti-trust law in the food & stapes retailing industry, discriminatory laws, copyrights, patents, intellectual property law, and various kinds of employment laws in operation in the Australian market, along with the health and safety laws. Moreover in the age of technological advancement requires the need for data protection.

Supplier power: Suppliers have been one of the greatest assets of Woolworths. It has been the hallmark of ensuring the success of the retail market of Woolworths. It has been competitive in this sector and has brought new suppliers along with its old ones, with the intention of ensuring best quality raw materials (Arli et al., 2013). It has defeated one of its closest rivals Coles, in securing the services of Teys Australia, a red meat and supply chain solutions providers (Low 2018). Building a network of dedicated suppliers whose business solely depends on them is a major way of limiting the supplier’s bargaining powers.

Buyer power: Buyers have been demanding a lot and will do so in the future. This puts a lot of pressure on Woolworths and impacts their profitability in the long run. The smaller, the customer base, the more powerful its position becomes in the bargaining power of the business. . Woolworths as a result of which continues to produce new and innovative products and sell them, thus targeting a larger customer base. This exercise helps in reducing the impact of the concentrated buyers and their bargaining power.

Potential entrants: New entrants in the food & staples retailing brings in an air of innovation, and creates a series of pressure on Woolworths, by using the means of lower pricing strategy, reduction of costs, and by emphasising the value of the customers. New retail chains have been on the rounds of entering the market. Woolworths prevents this by continuously innovating its products, building economies of scales, by investing on research and development which leads in producing new varieties of products, which helps in distinguish the product so Woolworths from that of its customers.

Substitute products: When a similar kind of a product enters the market, it creates a problem for the original products and its competitors. The threat of a substitute product or service is very dangerous for the business organisation, if the rival companies offers a value proposition that is exceptionallydiverse from the currentproducts of the industry. Woolworths avoids it by striving towards not only providing a products but also services, which are hard to replace, by understanding the core needs of the customers and by  increasing the switch costs for the customers.

Proposed information system solution

Woolworths have been at the helm of the retail market in the Australian sub-continent for many years. It has become one of the largest companies in the Australian market. It is said that Woolworths is miles ahead of its competitors. Till now too, it has been growing strong after the forecasts of the Australian supermarket giant’s sales had been done, where it was seen that it would continue to grow in the next two years. Citi retail analysts Bryan Raymond and Craig Woolford have analysed the situation of the food and retail sector of Australia and have drawn out some serious conclusions about the present as well as the future scenario of the business. The report presented by them have said that Woolworths would continue to lead the sales growth among its competitors namely Coles and Aldi in the coming twenty four months. Since the second quarter of 2016-17, has seen tremendous growth in the sales and the overall development of Woolworths. Its sales have been growing at a rapid pace, when compared with that of its nearest competitors such as Coles, which is a major sign in of its monopolistic powers in the case of winning of customers in the market. For this purpose, it has invested close to $1 billion, in the form of lowering prices and bolstering of the customer services. The present momentum of the Australian grocery industry remains with the Woolworths. Coles and Aldi, its closest competitors in the industry, have been estimated to generate limited sales in the coming 24 months, when compared to that of Woolworths. It has been predicted that the sales has been projected to grow to a whopping 2.7% for the year ahead, which is too high, when compared to the projection made for Coles, which is close to 1.0% (Abc.net.au 2018). Woolworths has become more aggressive in its strategies with the intention of maintaining the status quo. As a result of which it has acted timely and has now highlighted online marketing and engagement as a long-term growth strategy while Coles has tried to grow the channel lucratively. Online sales have been growing at a rapid pace, in which case, the rate of Woolworths have been higher in terms of online sales, such as 2.7%, compared to 2% of that of Coles (Coyne and Coyne 2018). Thus, in this case of the competitive environment, Woolworths have been at the front foot, in terms of its competitors such as Coles and Aldi.

Evaluation and recommendations

Opportunities	Threats
Promotion of its different brands through different mediums of advertising and sponsorships.	Rising cost of the raw materials is one of the most important factors which is acting as a strong threat for the retail giant.
Strategic acquisitions with international players and franchise models, such as Amazon.	Economic recession, international price wars and trade wars among countries.
Usage of the online form of business, for expanding its area of operation and reaching to international customers, outside Australia.	More competition is coming from the international players. Although foreign companies have not been able to enter the Australian retail market, but it would not be possible to hold them for too long. Measures must be in place.

Assets are the most important aspects of any business organisations. They are the fuels which helps the business in performing the daily functions of producing goods and services. Assets ensures the performances of the daily functions of the business. The major assets of any business organisation includes fixed, current, non-current assets, which have a particular job and a role to play in ensuring the success of the organisation. In the case of Woolworths, it is no exception (Reuters.com 2018). Some of the major assets of Woolworths are of both tangible and intangible nature. The tangible assets include cash, borrowings, trade receivables, plant and machinery, investments and other tangible long term assets. In the case of intangible assets, most prominent ones include, goodwill of the company, deferred assets. These assets are very important for the, was valued at development of the retail giant. The tangible assets for the year $5198 and the value of the intangible assets of the company have a valuation of $6532.8 in the year 2017 (Woolworthsgroup.com.au 2018).

Capabilities refers to any business organisation’s respective skills in coordinating and arranging all of its resources into effective and productive uses. It has been found out that Woolworths has been successfully operating its business since its inception, which is since 1924 (Afr.com 2018). The capabilities which has set it apart from the crowd are the following:

• Sole focus on customers:It has been the most effective strategy of Woolworths. It has always put its customers at the centre of the action, which has helped it to win over its customers in the grocery section of the market. It has strived to change and improve its customer experience, lowering of the prices, better convenience, which has helped it to recover all of its lost ground from Coles and Aldi (com 2018).
• Pricing strategies:Pricing strategies have been mainly aimed at reducing the impact of the competition provided by Aldi and Coles. Measures include lowering of its prices, better ranging of the products, targeting new range of customers, introducing a revised loyalty programme for rewarding its loyal customers, and focusing on improving the reach, potential of its own set of brands.
• Stores and refurbishments:In order to improve the overall experience for the customers, Woolworths has been paying special attention in the section of the refurbishment of its stores in the near future. It included designing the stores to suit the needs and preferences of the local customers. New varieties of products have also been included.

The primary competencies of the company have been mentioned below:

• World class supply chain:The innovation and the competitive advantage which it enjoys over its close competitors such as Coles and Aldi, has been developed substantially through the growth of its supply chain. In this case, Woolworths has specifically focused on the efficiency and the policy of cost reduction, by effectively managing its resources, thereby reducing any kind of wastage (Bailey et al., 2015). This competency has been following and adhering to the test of difficulty of imitation.
• Branding and Marketing:Woolworths has been in the fore front in terms of promoting its brand and marketing strategies. It was the pioneer in introducing the slogan of ‘Fresh food for people’. It has led the company over the years. Moreover, it was one of the first companies in harnessing the power of the online marketing and social media (com 2018). This has helped in differentiating itself from its competitors. This competency has adhered to all the requirements ofthe test of relevance.
• Innovation and Integration:The company has introduced different campaigns and strategies and projects such as‘re-fresh’, ‘new idea programme’. Moreover, it has successfully vertically integrated some of its supplies by producing some of its own inputs, for enhancing its market power. This follows the test of breadth of application and relevance.

Information systems form an integral part of ensuring the success of any business organisation. The company of Woolworths has now made the Information technology as one of their key areas, where the company has assessed that innovation is needed. The company should strive to implement the 1Cloud point of sale platform, which is very useful in making the stores independent. The old checkout technology has become slow and cumbersome for the customers. The 1Cloud system would help in providing the customers a state of the art service check out experience, which would set it apart from that of its competitors.

The 1Cloud system is the need of the hour. It is necessary for ensuring the pioneering position of the company in terms of the market of the grocery items. The system comes with a host of advantages. It focuses on end to end efficiencies, time saving features, easy print functions, and smooth refund processes, thus providing an all-round smooth experience for its customers. Moreover a series of recommendation is necessary for the betterment of the organisation in the different aspects of its functioning and overall development. The company is one of the giants of the retail sector of Australia. It should not depend solely on the retail section, it is highly recommended to diversify its business, products range and services. It would be better to explore new markets, produce new products and services, which sets it apart from the rest of its competitors. Home hardware, real estate, organic produce are some of the areas, the company should pursue.

Conclusion:

The business of retail sector of Australia has been growing at an unprecedented rate. It has been one of the greatest contributors of Australia’s GDP. The most prominent contributor from this industry is Woolworths, which is a retail giant, in this sector. Here in this report, the different aspects of the internal as well as the external environment of the company were taken into account. The company is one of the most progressive companies in this sector, with a good performance record since its inception in 1924. Right from understanding the grocery needs of the consumers, till the customer driven approach in the late twenty first century, customers have always occupied a central position in the company’s bigger scheme of things. However, the company must expand and move towards other vistas of business. The increasing international competition and the increasing cost of raw materials must also be looked into in detail, which would ensure its long term success for many years to come.

References:

Abc.net.au 2018 ABC News.. Welcome to the jungle: Woolies faces Amazon retail ‘carnage’. [online] Available at: https://www.abc.net.au/news/2017-08-23/woolworths-ceo-aware-of-amazon-retail-threat/8835810 [Accessed 27 Aug. 2018].

Arli, V., Dylke, S., Burgess, R., Campus, R. and Soldo, E., 2013. Woolworths Australia and Walmart US: Best practices in supply chain collaboration. Journal of Economics, Business & Accountancy Ventura, 16(1).

Reuters.com 2018 Australia’s Woolworths beats Coles in food sales growth for third…. Retrieved from https://www.reuters.com/article/us-woolworths-results/australias-woolworths-beats-coles-in-food-sales-growth-for-third-straight-quarter-idUSKBN1D0034

Bailey, J., Price, R., Pyman, A. and Parker, J., 2015. Union power in retail: Contrasting cases in Australia and New Zealand. New Zealand Journal of Employment Relations, 40(1), p.1.

Coyne, A. and Coyne, A. 2018. Woolworths’ next IT overhaul. [online] iTnews. Available at: https://www.itnews.com.au/news/woolworths-next-it-overhaul-472701 [Accessed 27 Aug. 2018].

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Abc.net.au. 2018 Welcome to the jungle: Woolies faces Amazon retail ‘carnage’.. Retrieved from https://www.abc.net.au/news/2017-08-23/woolworths-ceo-aware-of-amazon-retail-threat/8835810

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