GSB004 A1

GSB004 Managing, Developing & Implementing Strategy Assessment Task 1 Belal Jadoon

ii Executive Summary The present report aimed at analysing the internal and external business environment of Woolworths. The chosen firm is a leading retail joint operating in Australia. The macro- environment analysis revealed that political and economic stability is beneficial for the retail industry in terms of increasing sales due to an increase in disposable income. However, the change in economies is anticipated in global economies particularly due to the COVID-19 pandemic thereby, business organisations need to proactively manage their business operations. Additionally, it has been observed while analysing the internal analysis that the firm has a strong inclination towards technology and innovation however, it lags little behind in terms of technical skills as compared to its major competitors in the industry. The in-depth analysis of both internal and external environment led to the fact that Woolworths need to revaluate its pricing strategy due to anticipated uncertainties in economic condition. Moreover, the technical skills of the staff need to be polished in order to get a competitive advantage over the major competitors.

List of Figures Figure 1: Australian retail industry market share ........................................................................... 1 Figure 2: Australian retail growth YOY ......................................................................................... 1 Figure 3: Financial performance of the company ........................................................................... 6 Figure 4: Woolworths goals ............................................................................................................ 8 Figure 5 : Australian GDP growth rate .......................................................................................... 12 Figure 6: Inflation rate in Australia .............................................................................................. 13 Figure 7 : Literacy rate in Australia ............................................................................................... 13 Figure 8: E-commerce trend in Australia ...................................................................................... 14 Figure 9: No. of social media users in Australia ........................................................................... 14 Figure 10: Preferred retail brands ................................................................................................. 17

List of Tables Table 1 : Pestel Analysis .................................................................................................................. 2 Table 2: Porter's five forces ............................................................................................................. 3 Table 3: VRIO analysis ................................................................................................................... 4

2 In this regard, leading firms like Woolworths, Coles, Aldi, etc have leverage to gain a competitive advantage over the major competitors in the industry by simply emphasising more on consumer needs. Precisely, the present report is going to deliberate the key success factors, competitive business strategy, the overall performance of the chosen organisation along with its internal and external analysis. Analytical tools would be used to present a cohesive analysis of the company. External Analysis (Macroenvironment) Pestel Analysis Table 1 : Pestel Analysis (Sources: Statista, 2020a, b, c, d; UNESCO, 2015; PWC, 2014; Rachinger et al., 2019; Alderman, 2013; Kilbride, 2014) P Political E Economic S Social T Technological E Environmental L Legal  The region has strict taxation policies and has a strong inclination towards democracy and social laws.  Foreign investments in Australia is a complex process as the government imposes high trade restrictions.  GDP growth rate reveals a steady growth since 2016.  Increasing disposable income and buying power of the consumers.  Fluctuation in the inflation rate has also been observed.  The retailing industry in Australia is likely to flourish with this stability in economic condition  People in this region are highly literate with a 99% stable literacy rate.  Multiculturalis m can be observed in Australia which eventually gives rise to discrimination.  Organisational culture adopted in business organisations are against any form of discrimination.  Business organisations are under pressure to integrate the latest technologies into their business operations.  Strong inclination towards internet technologies and e- commerce.  Digital marketing opportunities due to an increase in the number of social media users.  The federal laws of Australia regarding the natural environment emphasise more on sustainable business practices.  Business organisations need to keep an eye on green housing effects and carbon emission.  Australia has strict rules which specifically include common laws as well as statues regarding business operations.  Australian retailing industry needs to operate fairly while complying with these laws to avoid legal actions.

3 Porter Table 2: Porter's five forces (Sources: Euromonitor, 2018; White, 2015; KPMG, 2020) Buyer’s Power Supplier’s Power Rivalry Power Threat of Substitute Threat of New Entry  Consumers are demanding natural products as global health risks are increasing.  Retailing firms operating in the industry are frequently introducing the organic alternatives of most of the daily use products.  This force is high in the industry.  There are many suppliers in the industry supplying quality raw material to the companies.  Companies easily get suppliers for the supply of raw materials.  They have the leverage to switch to those who supply quality material in minimal amounts.  This force is low to medium in the industry.  The leading industry players operating in the Australian retail industry which include JB Hi- Fi, Woolworths, Coles, Aldi, Bunnnings.  JB Hi-Fi and Bunninhgs are the most preferred retail brands in Australia.  This competitive landscape led to the fact that the Australian retail market is highly competitive with high rivalry power.  People demand unique products and their demands change frequently.  Retailing faces tough competition in the industry to fulfil consumer demands.  This force is medium to high in the Australian retailing industry. s  The industry attracts many new players or investors to invest in it.  Many leading players are operating with greater consumer retention which makes it difficult for new entrants.  This force is medium in the Australian retail industry. Key Success Factors Generally, key success factors include elements that are necessary for a business organisation to get a competitive advantage in the respective industry. Some elements mainly include leadership, strategic planning, skilled employees, marketing tactics, and financial stability ( Lawrimore, 2011). Considering key success factors that dominate the Australian retail industry, it has been observed that leadership and management are the most important aspect. This is due to the fact that workers have a variety of options to work in the retail industry due to

5 Skilled Workforce  X   Pricing Strategy  X   Innovation     Considering the resource-based view, valuable, nonsubstitutable, and rare resources benefits the firm with long-term success. These resources are considered as a foundation to develop the capabilities that eventually lead the firm towards superior performance with the passage of time and also benefits with a competitive advantage in the industry (Smith and Raspin, 2011). Woolworths has a strong brand name which is an irreplaceable asset. Moreover, inclination towards innovation and lean retailing business strategy is difficult to substitute. Competitive Business Strategy It has been observed that the competitive business strategy of Woolworths revolves around three key principles that include offer, growth, and efficiency (Woolworths Group, 2020a). Offer: To improve the core offering of the firm in order to ensure that the consumers put Woolworths first. Growth: String emphasis on innovation to grab the attention of a large number of consumers and to fulfil their unique demands. Efficiency: To create customer value by ensuring exceptional customer service and by integrating the lean retail model. Woolworths is focussing more on the lean retail model which is the new trend in the retailing industry as it is based on technological benefits like barcodes, RFID, and item-level inventory management. The company revealed that they plan for three years of growth plans based on their lean retailing model (Woolworths Group, 2020b). It is estimated that the new lean retail operating model will result in up to $500 million cost reduction which will enable the firm to invest in other dimensions like employee training, improved customer services, and marketing.

6 In addition to it, the other competitive business strategy by Woolworths is its focus on low pricing strategy (Annual Report, 2019; Australian Food News, 2015). The company has revealed that a new pricing strategy is under process to be implemented. This will likely to neutralise its rivals like Aldi and Cole’s impact on the sales. The new strategic planning will mainly include low pricing and amendments in segmentation and better ranging to target the right sector of the consumers. The company succinctly aims to enhance its brand reputation through reduced prices and promotional activities. Overall Performance of the Organisation Woolworths is found to be in the list of top retailing joints in the Australian retail industry. The firm has steady growth in terms of sales and annual revenues. Overall, the financial performance of the company in the last two years is revealed in the figure below. It is evidenced that Woolworths is gaining significant attention from the buyers. The reason for this as claimed by the company is its loyalty program (Annual Report, 2019). It has been established that the company grants reward points to the consumers on every purchase which gives them a discount on future purchases. With the help of this, the company gets greater consumer retention which results in increasing annual sales and revenues. Figure 3: Financial performance of the company (Annual Report, 2019) It is to be noted that the global COVID-19 pandemic has impacted businesses across the world. Similarly, Woolworths is also affected by this sudden outbreak however, the CEO reveals that the firm is striving hard to maintain its manufacturing and business operations while complying with safety measures (Annual Report, 2019). In this critical situation, the firm is emphasising more on online sales as a large number of consumers are unable to visit the stores irrespective of their needs. Thereby, it is deduced that Woolworths is taking effective measures in

8 senior management of the company prepared a report on responsible business practices of Woolworths. According to Woolworths Group (2020c), the goals of the company revolved around people, planet, and prosperity. The stakeholders believe in an inclusive working environment. Although the company avoids discrimination on any grounds however, the goal is increasing the number of women and indigenous communities in the firm to spread positivity. Additionally, as per the stakeholder driving strategy, the firm needs to work on zero food wastage and reduced carbon emission to secure the safety of the natural environment (Woolworths Group, 2020c). Lastly, for prosperity, stakeholders support fairness and transparency with consumers as well as suppliers. Figure 4: Woolworths goals (Source: Woolworths Group, 2020c) Conclusion The aim of the present report was to analyse the business operations of the chosen firm i.e., Woolworths. The report presented internal and external analysis in a comprehensive manner. The main findings of the paper revealed that Woolworths is a renowned retail joint operating in the Australian retail industry. The firm has a strong brand image in the market and it targets the upper class however, due to global pandemic and increasing competition in the industry, the management aims to target people with low income as well. The external analysis led to the fact that Australia is a suitable region to pursue business operations specifically in the retail industry

9 however, the changing demands of consumers and the latest technological trends can be a threat to business stability. Considering the internal analysis presented in the report, it has been observed that although the firm has a strong inclination towards technology and innovation, it lags a little behind in terms of technical skills as compared to its major competitors in the industry. Conclusively, two main aspects need to be considered by the firm in order to get a competitive advantage in the industry. Firstly, in consideration of the anticipated uncertainties in economies due to the COVID-`19 outbreak, the firm needs to revaluate its pricing strategy. Secondly, the technical skills of the staff need to be enhanced in order to meet consumer demands and to beat the rivals in the industry. References Alderman, P. 2013, Doing Business in Australia. Available at: https://www.piperalderman.com.au/__files/f/5784/Guide%20to%20Business-March %202013-web.pdf Annual Report., 2019. Woolworths Group – Annual Report. Available at: https://www.woolworthsgroup.com.au/icms_docs/195582_annual-report-2019.pdf Anthony, M., 2015. How Aldi are winning the retail battle – and pressuring brands to be better. Available at: http://www.mikeanthony.me/retail/aldi-winning-the-retail-battle/ Australian Food News., 2015. Woolworths announces new strategies to win over grocery shoppers, AFN reveals full detail. Available at: https://www.ausfoodnews.com.au/2015/05/06/woolworths-announces-new-strategies-to- win-over-grocery-shoppers-afn-reveals-full-detail.html#:~:text=Woolworths%20said %20a%20new%20pricing,for%20improving%20its%20Own%20Brands. CEIC Data., 2020. Australia Retail Sales Growth. Available at: https://www.ceicdata.com/en/indicator/australia/retail-sales-growth Crozier, R., 2019. Woolworths develops skills 'GPS' for Group IT. Available at: https://www.itnews.com.au/news/woolworths-develops-skills-gps-for-group-it-534219 Euromonitor. 2018. Retailing in Australia. Available at: http://www.euromonitor.com/retailing- in-australia/report Gössling, S., Scott, D., and Hall, C.M., 2020. Pandemics, tourism, and global change: a rapid assessment of COVID-19. Journal of Sustainable Tourism , pp.1-20.

11 White, M., 2015. 6 booming Australian organics sectors – $1.7 Billion reasons to get in the market. AgInnovators. Available at: http://www.aginnovators.org.au/news/6-booming- aussie-organics-sectors-%E2%80%93-and-why-cleaner-greener-farmers-are-raking-it Woolworths Group., 2020a. Woolworths Food Group’s plan to get customers to put us first. Available at: https://www.woolworthsgroup.com.au/page/media/Latest_News/Woolworths_Food_Gro Gr%E2%80%99s_plan_to_get_customers_to_put_us_first Woolworths Group., 2020b. Lean Retail Model to drive three-year growth plans. Available at: https://www.woolworthsgroup.com.au/page/media/Latest_News/Lean_Retail_Model_to_ drive_three-year_growth_plans/ Woolworths Group., 2020c. Corporate Responsibility Strategy 2020. Available at: https://www.woolworthsgroup.com.au/icms_docs/183950_Doing_the_Right_Thing.pdf

12 Appendix Pestle Analysis Political Factor Australian reveals a stable parliamentary system. The region has strict taxation policies and has a strong inclination towards democracy and social laws. It has been established that foreign investments in Australia are a complex process as the government imposes high trade restrictions. More precisely, investments or trading against national interest is restricted in the region thereby, the firms operating globally may find it difficult to pursue their overseas business. The political litigations directly impact the retail industry as they operate with different local and foreign suppliers. Nevertheless, the stability in the political landscape is considered an opportunity for retailing firms to flourish their business across the borders with strict compliance with the laws. Economic Factor The economic stability in Australia can be deliberated by the GDP growth rate which reveals a steady growth since 2016 and is expected to grow more in upcoming years. This increasing growth rate directs towards increasing disposable income and buying power of the consumers. Figure 5 : Australian GDP growth rate (Source: Statista, 2020a) In addition to it, a fluctuation in the inflation rate has also been observed. Since 2014, the inflation rate is on its way to decline as compared to previous years which benefits the business sectors by the high buying power of the consumers and increasing sales.

14 Technological Factor In the contemporary era of globalisation and technological advancement, business organisations are under pressure to integrate the latest technologies into their business operations ( Rachinger et al., 2019). It has been observed that people living in Australia have a strong inclination towards internet technologies and e-commerce. Figure 8: E-commerce trend in Australia (Statista, 2020c) Moreover, the number of people using social media is also increasing with the passage of time. This gives a chance to business organisations to adapt to e-commerce. They can also come up with digital marketing tactics in order to grab the attention of the consumers and to minimise the gap with them. Figure 9: No. of social media users in Australia (Source: Statista, 2020)

15 Precisely, it can be deduced that the retailing industry in Australia can enhance their business growth and stability by adapting to technological trends which eventually satisfies consumers and generates greater sales. Environmental Factor The federal laws of Australia regarding the natural environment emphasise more on sustainable business practices. The region has strict policies for it and urges business organisations to keep an eye on green housing effects and carbon emission (Alderman, 2013). Environmental degradation has become a global concern thereby, it is by law illegal to involve in such activities that have a direct impact on the natural environment. In this regard, the Australian retail industry is also obliged to comply with these policies to ensure the safety of people and the environment. Woolworths needs to consider natural safety to gain a competitive edge in the industry. Legal Factor Australia has strict rules which specifically include common laws as well as statues regarding business operations. In general, intellectual property rights are usually neglected in most of the countries which ultimately results in a huge barrier for entrepreneurs and innovators (Kilbride, 2014). Australia has strict policies for legal aspects and corporate laws including safety law, consumer law, employment law, health and safety laws, anti-trust laws, taxation, etc (CEIC Data, 2020). In this regard, the firms operating in the Australian retailing industry need to operate fairly while complying with these laws in order to avoid legal actions that may hamper their market reputation. Woolworths, being a part of this industry has to train their staff and senior management regarding country laws to operate legally in the region. Porter’s Five Forces Buyer’s Power It has been established that the Australian retail industry is now focussing more on organic products that are free from chemicals causing harm to human bodies. Consumers are also demanding natural products as global health risks are increasing which is the main concern to avoid highly chemical-based products (Euromonitor, 2018). In consideration of this public demand, retailing firms operating in the industry are frequently introducing the organic alternatives of most of the daily use products. These organic products are readily available in the market giving a switching power to the buyers. Consumers can easily switch the brand in case