The intent of this study is to supply a strategic analysis of Woolworths in its Australian retailing and food market industry. There are some external factors can be affected to Woolworths scheme. To be analyzed how these factors impact to Woolworths schemes we would utilize Porter forces five theoretical accounts as a model for analysis. They are menaces of new entrants and replacement merchandises. competition among viing established rivals. menace of replacements and dickering power of Woolworths’ providers and clients.
This study besides provides the company state of affairs analysis which will be analyzed the internal environments of Woolworths. In this analysis. we will utilize SWOT analysis which includes the strengths. failings. chances. and menaces Woolworths possesses. Woolworths’ range of operations. size of concern is besides one of the internal analysis Woolworths has to analyse in order to catch chances and avoid menaces. Besides. it is besides given a brief analysis of Woolworths current scheme in order to response their competitor’s schemes.
This study besides provides some recommendations for Woolworths in order for it to remain competitory in its retailing industry. such as set uping trueness plans for its clients and pull offing its efficiency in order to prolong its nucleus competences for its long-run success. Finally. analysing the fiscal public presentation and stakeholder analysis by utilizing graphs and quantitative informations have been used to back up the study. The major determination this analysis is turn outing the stable fiscal conditions of Woolworths every bit good as the involvements of stakeholders. . It means that Woolworths have a good economic system status based on its fiscal place. so it caused to the benefits for its stakeholders.
2. Introduction
The intent of this study is to specify how successful is Woolworths in the their current several industry sector – Consumer Goods Retail in Australia ; and to foretell and analyse how Woolworths will execute in the hereafter. Merely secondary informations are used in this study as there is really limited primary informations in public databases. Assorted beginnings are used to supply analysis from different point of positions. These include diaries. intelligence articles. and company one-year study. collected from Internet databases. web sites and Woolworths’ functionary Website. The study besides investigates the fact that the analysis conducted has restrictions. Some of the restrictions include: •Forecasting figures non provided
•Nature and type of company unknown
•Data restrictions for current economic conditions due to deficient information or inside informations provided i. e. monthly inside informations non known. consequences based on past public presentations
3. Industry Analysis
In order to win in its retailing industry. Woolworths need to analyse and understand its external industry environment. Understanding adequate about the external environment is really of import for the success in competitory advantage of Woolworths. In this instance. analysing and apprehension of Woolworths’ external environments. matched with the analysis of Woolworths’ internal environment will let Woolworths to make and develop its strategic planning and actions to acquire the best consequence in market portion conflict with other challengers. Finally. external information will besides let Woolworths to accommodate and alter consequently to its environing in order to remain competitory.
Porter’s Five Forces Analysis
Michael E. Porter’s five forces analysis can be used as a model for the industry environment analysis of Woolworths. It comprises of competition among viing established companies. menace of new entrants. menace of replacement merchandises or services. dickering power of providers and dickering power of clients ( Hill et al. 2007 ) .
3. 1 Menace of new entrants
As the Australian retail industry with Woolworths and merely a few other major participants dominate the industry. Therefore. it is seems to be really hard for new companies to vie on the same degree. As the consequence. the menace of new entrants for Woolworths in the industry is seems to be low. There are some grounds can be explained for this ground. First. Frank winfield woolworths have a high market portion in the industry. In add-on. its concern size is really large which includes Australian overall market and some other foreign markets. A batch of selling shops around Australia are good illustration. Furthermore. the expensive start-up costs are another barrier for new rivals. Finally. the high one-year net income of Woolworths is difficult for others to come in the retail and grocery industry in Australia.
3. 2 Competition among established companies
The Australian retail and food market industry has a high degree of concentration ratio because the available of some major rivals viing in the industry such as Woolworths Ltd. Myer or Coles ( Beaumont. 2004 ) . It means Frank winfield woolworths have a high concentration of market portion in the Australian retail and food market industry. In add-on. the strength of those strong rivals is hiking Woolworths Ltd have been continuously making a competitory advantage. Using effectual scheme such as low monetary value. selling fresh nutrient. and 24 hr bringing service. Woolworths Ltd and its subordinates such as Safeway. Dicksmith and so on are continuously viing with other challengers for a strong place in the industry ( Porter. 1979 ) .
3. 3 Dickering powers of purchasers
Woolworth’s clients have a extremely powerful dickering power. The ground is most of Woolworths selling goods are from single clients. They can easy alter to other major rivals that offer similar merchandise but with cheaper monetary value. Harmonizing to Miranda. Konya & A ; Avila ( 2005 ) . it was found that clients are drawn towards monetary value and convenience as particular properties of doing a purchase at a shop. Price is strongly connected with customers’ relationship and the shop. In add-on. there are a batch of replacements to Woolworths’s goods and merchandises. so clients of Woolworths posses a strong bargaining power.
3. 4 Dickering power of providers
Safeway Supermarket’s providers have a weak bargaining power. Harmonizing to Porter ( cited in Hill et Al. 2007 ) . one of the features of strong and powerful providers is that if the purchaser in the industry is non an of import client to providers. As in the retail and grocery industry. Woolworths’s concern like Safeway Supermarket holds a large size of market portion. so it is an of import client to its providers. Safeway Supermarket is besides a dominant participant in the retail industry. which means that providing goods to Safeway Supermarket is one of the suppliers’ of import net incomes. Therefore. the providers of Safeway Supermarket do non hold a strong bargaining power.
3. 5 Menace of replacement merchandises or services
There is a high menace of replacement merchandises for Woolworths Ltd’s concerns like Safeway supermarket or Dicksmith. Let’s make an illustration with Safeway in supermarket industry. All of the major supermarkets in Australia offer replacement merchandises. Therefore. Safeway need to make effectual schemes to maintain their clients and construct trade name trueness. Harmonizing to Hill et Al. ( 2007 ) . the most of import thing in the supermarket industry is monetary value competition. In order to maximise the net incomes. Safeway have been purchasing goods from its providers and selling to clients. As the consequence. replacement merchandises of Safeway will hold less attending or attraction from its clients ( Porter. 1979 ) . For illustration. the merchandise is providing at Safeway are nutrient which can be bought easy at other rivals In add-on. Safeway’s challengers can be applied low monetary value schemes in order to response with Safeway pricing scheme For case. Alde offers imported trade names at really low monetary values 4. Company Situation Analysis
4. 1Size and Scope of Operation
Frank winfield woolworths limited is the 2nd largest retail merchant in Australia which have primary activities in Supermarkets and Liquor. Grocery represents 85. 6 per centum of Woolworth’s concern. Woolworths Ltd has one-year gross revenues of $ 38 billion. Woolworths’s major trade names are as follows: Woolworth’s supermarket. Safeway. Metro. Big W. Dick Smiths Electronics and Dan Murphy’s. Besides. supermarkets are besides operated in New Zealand
4. 2Objective and Strategy
Woolworth’s chief schemes are to increase efficiency and be cost effectual. To accomplish this Woolworths has been utilizing an every-day low monetary value scheme
Woolworths’ scheme is to offer clients really low monetary values all the clip. non merely sale specials. The every-day low monetary values scheme addresses this. and efforts to offer clients mundane lower monetary values through monetary value decreases on all merchandises. For Woolworths Every-day lower monetary values scheme to present as it promises to client. while besides doing a significant net income from monetary value film editing. an mundane lower cost scheme must be in topographic point.
4. 3SWOT analysis
4. 3. 1 Strengths
Woolworths has the advantage of holding the largest per centum of market portion in the Australian retail and fresh nutrient food market industry. Woolworths is a powerful retail trade name and has a repute of low monetary values. convenience. quality of service. broad scope of merchandises every bit good as fresh nutrient Harmonizing to the Woolworths 2010 one-year study. Woolworths has over 3000 shops supermarkets and serve million clients in Australia and New Zealand. Woolworths is available in about every major metropolitan shopping Centre in Australia. In add-on. a immense figure of supermarkets create a mobility. convenience and handiness for clients.
4. 3. 2 Failings
Woolworths Ltd is really popular in Australia and New Zealand. It creates a high competitory advantage for Woolworths when compared with other rivals in Australian and New Zealand market ( Datamonitor. 2007. p. 15 ) . If Woolworths want to hold more success. they have to open more shops in other new markets like Asiatic states. However. this is one of Woolworths’ failings. When compared Woolworths with other powerful international rivals such as Wal-Mart. which are available in Asia. Europe. US. Canada and so on. Woolworths does non hold any opportunity to vie unless it besides expand internationally. With the rapid growing of engineering. particularly is the Internet. Frank winfield woolworths have introduced the Woolworths’s Internet shop. ( e-business ) . However. it instantly caused to the diminution of gross revenues in shops. particularly at Christmas.
Besides. Woolworths offers many similar merchandises under one roof which may do it harder for Woolworths to distinguish its “fresh” or “select” trade names. Woolworth’s size may show possible failings due to the immense span of control. 4. 3. 3 Opportunities
Frank winfield woolworths is turning quickly in the Australian retail and food market industry. They are traveling into new markets sections within Australia every bit good as international markets such as New Zealand and Asia. Frank winfield woolworths are ever looking at unifying or organizing confederations with other planetary organisations for illustration belly laugh joint venture with the Tata group in India ( Datamonitor. 2007. p. 16 ) . 4. 4. 4 Menaces
Woolworths experiences ongoing competition menaces from other major retail merchants such as Myer or Coles. In order to response to Woolworths‘s everyday low monetary value scheme. Kales have introduced the monetary value rewind scheme. In add-on. with the aim to spread out its concern to other new markets like India. Woolworths will be faced with the high competition with already turning rivals such as Wal-Mart ( Datamonitor. 2007. p. 17 ) . Selling goods widely utilizing the Internet have a high competition. Frank winfield woolworths have an online shop. but it doesn’t sell everything in the stores. In add-on. the merchandises are rather expensive and postage and packaging is far higher priced over other shops. Therefore. clients prefer to buy at other cheaper shops.
5. Fiscal analysis
5. 1 Performance/ Profitability
Profitability ratios measure the efficiency in which the company its
resources to bring forth net income ( Hill et al. 2007 ) . The undermentioned uses the profitableness ratios of Gross net income border. Net net income border. Return on Assetss and Return on Equity as indexs on the steps of the company’s profitableness capablenesss.
This tabular array shows the assorted one-year net income ratios of Woolworth Limited
20102009200820072006
Profitability ( % )
Gross Profit Margin25. 9125. 6625. 3025. 3225. 03
Net Net income Margin3. 893. 693. 443. 042. 68
Tax return on Asset11. 9911. 8811. 5910. 429. 16
Tax return on Equity26. 6926. 9527. 1524. 5225. 19
Gross net income border shows us the per centum of gross revenues to cover general disbursals and operating costs ( Hill et al. 2007 ) . Harmonizing to this chart. the Gross Profit Margin of Woolworth Limited holds an addition tendency. With little lessening between 2007 and 2008. this could be the consequence of many factors. Such as the Global Financial Crisis ( GFC ) that was in gesture since 2007 and eventually erupted in late 2008. However. concern non. as the undermentioned old ages showed Woolworth Limited adjusted to the GFC and steadily grew into an addition tendency. This suggests that Woolworth limited recuperated from the GFC to keep a strong market portion and beef up their defences against the GFC.
Net net income border shows us the per centum of which net incomes are earned through gross revenues ( Hill et al. 2007 ) . Similar to the Gross net income border ratio. we see that the profitableness public presentation in relation to this ratio besides on an addition. A worthy reference is that the addition is really smooth and really stable. From this we can see that Woolworth Limited is able to keep a really steady growing rate even throughout the Global Financial Crisis. Assorted factors on how Woolworth limited can accomplish such effort can be that their Budget direction is improbably accurate. Merely with a plausible prognosis can a company that large to keep their position throughout the GFC.
Tax return on assets measures the net income generated before revenue enhancement by the available assets to the company ( Hill et al. 2007 ) . Harmonizing to this chart we see another addition in tendency. Nothing truly stood out in this ROA chart. merely really steady growing of net income generated every bit good as remained in a positive growing tendency
Tax return on equity measures the per centum of net income earned utilizing the shareholder’s equity in the company ( Hill et al. 2007 ) . Harmonizing to this chart. the recent three old ages spike compared to the earlier old ages shows that more is returned to the stockholders. That the investors were able to have better returns for the old ages 2008 to 2010. And this show that Woolworth Limited is able to be more efficient and able to better on their earlier old ages on productiveness degrees.
Overall the company’s net income bring forthing capablenesss have increased non merely swimmingly but besides dramatically. Particularly during the last few fiscal old ages. Woolworth limited truly recuperated from the GFC to still demo marks of growing injected with assurance to spread out farther.
5. 2 Liquidity and Capital Structure ( Leverage )
Liquidity ratios step a company’s ability to run into short-run duties such as debt. Liquidity is determined by how easy an plus is able to be converted into hard currency ( Hill et al. 2007 ) .
20102009200820072006
Liquid
Current Ratio0. 730. 760. 700. 760. 85
Quick Ratio0. 250. 240. 230. 260. 37
The current ratio measures the extent in which the short-run are covered by liquidated assets ( Hill et al. 2007 ) . Unlike Quick Ratio merely measures the liquid assets. Current ratio includes all the current company assets. Harmonizing to this chart the Current Ratio largely at 0. 7 to 0. 8. the bench grade in Australia is at 2. 0. Therefore. it is seen that these company current assets can non cover their current debt. Besides if any sudden downswing in the company investing sector such as a failed concern venture so the company will be plunged into bankruptcy.
Quick ratio is similar to current ratio. It is the liquid plus that can be instantly converted for hard currency on a short order. The current benchmark for speedy ratio among Australian companies is at 1. With that in head. the speedy ratio of Woolworth Limited show that dramatically below the benchmark. This means that at the best it is merely at 0. 85 and the worst period is at 0. 23. Woolworth Limited’s ability to rapidly refund is really hapless. And at the slightest downswing investing will confront bankruptcy.
Overall. Woolworth Limited does non look to demo a strong liquidness ratio to expeditiously cover their debt if the worse came to the worst.
Leverage
A company is said to be extremely leverage if it uses more debt than equity. ( Hill et. Al. 2007 )
20102009200820072006
Leverage
Debt to Asset0. 580. 590. 600. 620. 68
Debt to Equity1. 361. 421. 511. 612. 14
Debt-to-Assets ratio measures the extent to which borrowed financess hav been used to finance a company’s investings ( Hill et al. 2007 ) . Harmonizing to this chart. the debt to plus ratio declines annuanlly intending that Woolworth Limited’s debts is acquiring less of all time twelvemonth.
Taking into history the antecedently mentioned profitableness ratios. we can find that the company has a heavy trust on outside support such as loaners. creditors and loans to finance and generate company gross revenues and net incomes. As antecedently mentioned. the company’s profitableness ratio per centums have decreased over the last few fiscal old ages. which can be said to be contributed to the addition in the sum of disbursals within the
company. 5. 3 Peer Analysis
Woolworth Limited compared to other industry leaders through equal analysis consequence in a healthy and prospect able hereafter. After comparing Return on Equity of Woolworth norm to the industry norm ; Woolworth limited is by far the leader in returning net income to their stockholders and investors likewise. At 11. 99 per centum Woolworth Limited has genuinely lead the battalion with an norm of merely 4. 96 per centum. Further on with Return of assets. the industry norm is at 1. 23 per centum compared to the Woolworth limited 0. 73 per centum depression. This reflects on Woolworth’s committedness to better use their assets better and more expeditiously in the hereafter. And urge a better resource direction motion for Woolworth limited. As seen antecedently sing an highly low current ratio with Woolworth limited is besides seen averaged throughout the industry with an norm of 7. 34 per centum suggest that low liquidness is cosmopolitan in this industry. Last. through peer analysis we focused on Woolworth Limited’s at hand challenger in Australia Wesfarmers Limited to finalise this sum-up.
This chart shows the difference between industry leaders Woolworth and Westfarmers Limited compared to the industry norm. This proves that Woolworth Limited is so taking the industry with strong investor return and above mean use of assets. However. demand to better on ability to neutralize assets to hard currency. But that seems to be a cosmopolitan industry risky zone.
6. Stakeholder analysis
Hanson ( 2010 ) defines Stakeholders as ‘the persons and groups who can impact and are affected by the strategic results achieved and who have enforceable claims on firms’ public presentation. ’ Primary Stakeholders ( Refer Appendix 1 ) are employees. clients. investors. and stockholders. whose uninterrupted association are indispensable to the firm’s endurance ( Ferrell. Fraedrich & A ; Ferrell 2009 ) . All intelligence articles are dated within fiscal twelvemonth 2010. to reflect better analysis of the stakeholder satisfaction with the company consistent with their Corporate Responsibility Report 2010 ( Refer Appendix 2 ) .
In 2010. Frank winfield woolworths conducted market research surveies ( including in-store. helpline and website feedbacks ) . client focal point groups and client submergence plans to better understand the demands of clients. The result identified involvement of Customers in quality. pick. good service. value for money and healthy options. Centripetal Kitchen ( Refer Appendix 3 ) was besides created in command of farther fulfilling customer’s quality outlooks. Woolworths besides reported in the Green Shopper Survey that 84 % of consumers are environment-conscious with shopping determinations ( Woolworths Limited. 2010 ) . It was reported that Woolworths no longer supply plastic bags for purchases of three points or less to cut down impact on the environment ( Fineran. 2010 ) . However. a market research conducted by Colmar Brunton reported that Woolworths ( 12 % ) is behind other supermarkets such as Aldi ( 9 % ) and Coles ( 9 % ) in footings of client satisfaction but clients were by and large satisfied with pre-packed fresh nutrient and shop entree ( Burton. 2010 ) . Investors for Woolworths are interested in competitory returns. administration. transparence and long-run concern sustainability. Woolworths responded with quarterly investor briefings and AGM for all stockholders and participated in the Carbon Disclosure Project for transparence.
The company besides provides call centre service. written contact with senior direction and e-mail contact with the Investor Center to reassure investors of their administration ( Woolworths. 2010 ) . As for returns. NamNews reported a 5. 5 % portion rise tardily February 2010. entering the biggest portion rise in 15 months with a A $ 1. 1bn net net income in 6 months prior 3 January 2010 ( NamNews. 2010 ) . However. looking deeper. it was besides found that this is largely due to governmental support and investors are disquieted about the company’s fiscal public presentation without governmental aid ( Hyam & A ; Janda. 2010 ) .
Frank winfield woolworths found that employees desired occupation security. preparation. safe and healthy working environment. and leading for battle ( Woolworths. 2010 ) . Although the company claims to take work safety earnestly. a late settled compensation instance with a meatman who had back hurt in 2003 raised uncertainties of the cogency of that statement ( Hurst. 2009 ) . Employees besides wish to lend to the environment and the community during work. in which the company responded with Eco Ambassadors where preparation is provided and pay rise with active battle ( Woolworths. 2010 ; Oglivy. 2008 ) . Woolworths besides reported engagement norm degrees over the Australian CLC benchmark. covering discretional attempt. rational committedness and emotional committedness along with debut of leading qualities for improved squad public presentation ( Woolworths. 2010 ) . Woolworths’ Suppliers expected just intervention and long-run relationship chances.
As to such. Frank winfield woolworths drew up Annual Shared Objective plans for chief providers. keep supplier briefings. and supply quarterly newssheets and seller web site for information entree. They besides hold one-year awards dinners to admit invention and supplier relationships with a $ 100. 000 Fresh Food Grant for companies with sustainable patterns ( Woolworths. 2010 ) . However. several intelligence articles reported dissatisfaction from providers on ethical audits early 2010. happening them enforcing and their involvement is in obtaining higher borders and less in ethical results ( Ockenden. 2010 ; Hall. 2010 ) . Early 2010 besides saw Woolworths having probe on allegations for java and tea supply corruptness with the bagging of their national java purchaser ( Speedy. 2010 ) . Woolworths’ determination to no longer beginning milk from National Food but from Parmalat and Murray Gouldburn raises inquiries with respects to long-run relationship chances seeing as National Food has been their sole provider since 2002 ( NamNews. 2010 ) .
Business Spectator besides reported rumours of Woolworths sourcing spirits from Independent Liquor to travel off from Foster’s Group Ltd and Lion Nathan Ltd ( Business Spectator. 2010 ) . As for Community. it is expected that Woolworths contribute to the community and take into consideration the demands of the community in footings of new shops and bing shop alterations ( Woolworths. 2010 ) . Woolworths had continued to spread out its on-line supermarkets in Northern Queensland and in South Australia ( Adelaide ) to function more families ( concern. newsarticles. gold ; insideretailing. com 2010 ) . The company’s Dan Murphy’s liquor label was besides eventually brought online to ease easier shopping ( Stafford. 2010 ) . Besides. Woolworths announced it will now spread out into the extremely moneymaking $ 24 billion hardware sector by doing a coup d’etat command for listed hardware concatenation Danks Holdings ( Refer Appendix 4 ) . the 2nd biggest hardware distributer in Australia. supplying a larger scope of merchandises for the community ( Business. com. au 2009 ) .
Furthermore. with the plan launching by Woolworths Gungahlin to change over excess nutrient from the shop into repasts for the needy. Woolworths is imparting a assisting manus with the societal job state of affairs in Australia ( katelundy. com. gold. 2010 ) . The Government’s involvement in Woolworths is that they are jurisprudence and ordinance abiding and active engagement in supplying valuable sentiments in public policy treatments. To that. Woolworths reported that they consult authorities and regulative organic structures for advice before policy execution ( Woolworths. 2010 ) . Yet. in late 2009 the Government was reported to endanger to take action against Woolworths and Coles for the fast-rising food market monetary values. worried that the duopoly may do consumers to lose out ( Ja & A ; Godfrey. 2009 ) . Woolworths CRR besides reported their battle in Australian Government’s Food and Health Dialogue where it was agreed that salt degrees in breakfast cereals and staff of lifes will be reduced ( Woolworths. 2010 ; Ausfoodnews. com. gold. 2010 ) .
7. Drumhead and decision
The study is an analysis about the factors making success for Woolworths in the Australia retail and grocery industry. It shows that Woolworths is one of the top trade name names in the Australia. and now is more popular in other states. The first parts of study are given a brief analysis about the competitory state of affairs of Woolworths in the industry. Using Porter’s five forces theoretical account as the model of the analysis have showed that Frank winfield woolworths have more competitory advantages than other rivals in the industry. Another subdivision is coming with the current state of affairs analysis of Woolworths. By using the SWOT analysis. we can see that Woolworths have more internal strengths and failings to face. Woolworths is proud that they have been giving to the clients more choice merchandises at the lowest monetary value it. Using the mundane lowest monetary value scheme has made Woolworths or its subordinates like Safeway have more competitory advantage to vie with other major rivals. Besides. in the analysis. it is besides given the chances and menaces of Woolworths in the new markets when compared with other powerful international rivals like Wal-Mart.
Frank winfield woolworths still need more effectual schemes to win the completion with these strong rivals. Following. coming to fiscal analysis. the study specifically examine and analyse the current fiscal state of affairs analysis of Woolworths based profitableness ratio. capital construction and liquidness. and peer analysis when compared to other rivals such as West husbandmans. It showed that Woolworth Ltd is so taking the industry with strong investor return and acquire more fiscal advantages than others in order to obtain a good repute. Finally. stoping with stakeholder analysis is given to us what the stakeholder elements such as clients. investors or providers need and want from Woolworths Ltd. Although they have different places. but there are some common values that they can acquire from the Woolworths.
They are all desires for more benefits which raising their values. In short. confronting with more challenges from other rivals in the industry. Woolworths should go on with the current shop image as it meets the current customer’s tendency. It should go on to provide more choice goods with the best monetary value in order to make more clients attractiveness. In add-on. invention and development of shop construction should be focused. Besides. apprehension of competitor’s schemes and anticipate moves of revenge in order to response their schemes is really of import for Woolworths.
