Strategic Management. The purpose of this report is to provide a strategic analysis of Woolworths in its Australian retailing and grocery industry.

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                                                             DEAKIN UNIVERSITY

                                                   MMM365- Strategic Management

                           Supermarkets and Other Grocery Stores in Australia- G5111

                                                            Woolworths Ltd

                                                         

                                                                 Group 15

                                                                 Submitted by

                                       Duong Quang Hai – ID: 900024567

                                       Henry Wee Chung Chong – ID: 210053462

                                        Yin Xue – ID: 600162112

   Due date: 17 January 2011

  Word count: 3985 words

Table of contents

2. Introduction        5

3. Industry Analysis……………………………………………………………………..6

    3.1 Threat of New Entrants.............................................................................................6

    3.2Rivalry among Established Companies...........................................................................................................................7

    3.3 The Bargaining Power of Buyers..............................................................................7

    3.4 The Bargaining Power of Supplier............................................................................8

    3.5 Threat of Substitute Products.....................................................................................8

         4.3.1.Strengths        9

         4.3.2.Weaknesses        10

         4.3.3.Opportunities        10

         4.3.4. Threats………................................................................................................11.

       

5.        Financial Analysis        12

5.1        Performance/Profitability        12

5.2        Capital structure and liquidity        15

5.3        Peer analysis        19

6.        Stakeholder Analysis        21

7.        Summary and Conclusion        24

8.        List of References:        25

9.     Appendixes…………………………………………………………………………29

  1. Executive Summary

The purpose of this report is to provide a strategic analysis of Woolworths in its Australian retailing and grocery industry. There are some external factors can be affected to Woolworths strategy. To be analyzed how these factors impact to Woolworths strategies we would use Porter forces five models as a framework for analysis. They are threats of new entrants and substitute products, rivalry among competing established competitors, threat of substitutes and bargaining power of Woolworths’ suppliers and customers.

This report also provides the company situation analysis which will be analyzed the internal environments of Woolworths. In this analysis, we will use SWOT analysis which includes the strengths, weaknesses, opportunities, and threats Woolworths possesses. Woolworths’ scope of operations, size of business is also one of the internal analysis Woolworths has to analyze in order to grab opportunities and avoid threats. Besides, it is also given a brief analysis of Woolworths current strategy in order to response their competitor’s strategies.

This report also provides some recommendations for Woolworths in order for it to stay competitive in its retailing industry, such as establishing loyalty programs for its customers and managing its efficiency in order to sustain its core competencies for its long-term success.

 Finally, analyzing the financial performance and stakeholder analysis by using graphs and quantitative data have been used to support the report. The major finding this analysis is proving the stable financial conditions of Woolworths as well as the interests of stakeholders. , It means that Woolworths have a good economy condition based on its financial position, so it caused to the benefits for its stakeholders.

 

2. Introduction

       The purpose of this report is to define how successful is Woolworths in the their current respective industry sector - Consumer Goods Retail in Australia; and to predict and analyze how Woolworths will perform in the future. Only secondary data are used in this report as there is very limited primary data in public databases. Various sources are used to provide analysis from different point of views. These include journals, news articles, and company annual report, collected from Internet databases, websites and Woolworths’ official Website.

The report also investigates the fact that the analysis conducted has limitations. Some of the limitations include:

  • Forecasting figures not provided
  • Nature and type of company unknown
  • Data limitations for current economic conditions due to insufficient information or details provided i.e. monthly details not known, results based on past performances


3. Industry Analysis

         In order to succeed in its retailing industry, Woolworths need to analyze and understand its external industry environment. Understanding enough about the external environment is very important for the success in competitive advantage of Woolworths. In this case, analyzing and understanding of Woolworths’ external environments, matched with the analysis of Woolworths’ internal environment will allow Woolworths to create and develop its strategic planning and actions to get the best result in market share battle with other rivals. Finally, external information will also allow Woolworths to adapt and change accordingly to its surrounding in order to stay competitive.

       

Porter’s Five Forces Analysis

        Michael E. Porter’s five forces analysis can be used as a framework for the industry environment analysis of Woolworths. It comprises of rivalry among competing established companies, threat of new entrants, threat of substitute products or services, bargaining power of suppliers and bargaining power of customers (Hill et al, 2007).

3.1 Threat of new entrants

        As the Australian retail industry with Woolworths and only a few other major players dominate the industry. Therefore, it is seems to be very difficult for new companies to compete on the same level. As the result, the threat of new entrants for Woolworths in the industry is seems to be low.

              There are some reasons can be explained for this reason. Firstly, Woolworths have a high market share in the industry. In addition, its business size is very big which includes Australian overall market and some other foreign markets. A lot of selling stores around Australia are good example. Moreover, the expensive start-up costs are another barrier for new competitors. Finally, the high annual profit of Woolworths is hard for others to enter the retail and grocery industry in Australia.

3.2 Rivalry among established companies

        The Australian retail and grocery industry has a high level of concentration ratio because the available of some major competitors competing in the industry such as Woolworths Ltd, Myer or Coles (Beaumont, 2004). It means Woolworths have a high concentration of market share in the Australian retail and grocery industry. In addition, the intensity of those strong competitors is boosting Woolworths Ltd have been continuously creating a competitive advantage. Using effective strategy such as low price, selling fresh food, and 24 hour delivery service, Woolworths Ltd and its subsidiaries such as Safeway, Dicksmith and so on are continuously competing with other rivals for a strong position in the industry (Porter, 1979).

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3.3 Bargaining powers of buyers

        Woolworth’s customers have a highly powerful bargaining power.  The reason is most of Woolworths selling goods are from individual customers. They can easily change to other major competitors that offer similar product but with cheaper price. According to Miranda, Konya & Avila (2005), it was found that customers are drawn towards price and convenience as special attributes of making a purchase at a store. Price is strongly connected with customers’ relationship and the store. In addition, there are a lot of substitutes to Woolworths’s goods and products, so customers of Woolworths posses a ...

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