Strategic Management

Porter's 5 Forces

Industry Attractiveness

• Diversification
• Unbiased board of Directors
• Alliances and partnerships with other Australian companies such as Caltex, and International Companies such as Tata in India
• Immense product offering across many industries
• Offering is typically low cost value for money in supermarkets
• Various key competencies

• Economies of Scale & Scope:
• Large quantities - lower cost per unit
• Related nature of goods

• Through advertising they have been successful at marketing 'the fresh food people'
• ‘value for money’ translated through programs and promotions including Red Spot sales, petrol discounting, Reward programs and banking facilities

• Fierce competition between Woolworths and Coles: Woolworths constantly have to defend position
• Strategies and moves of new players such as ALDI and Costco need to be watched
• Supplier relationships need to be managed

Woolworths' Supply Chain

Effective use of Branding

Key competence

• Woolworths use branding to differentiate themselves in an industry where it is difficult to do so
• Named Australias most valuable brand in 2011 - worth over 7 billion
• 'the fresh food people' conveys an image of suerior freshness and quality

A key competence is a distinctive skill

that a company possesses,

which serves as a source of advantage

over its rivals (Bradmore, 2005).

Woolworths Key competencies are:

• supply chain
• branding and subsequent market position
• Innovation
• Integration
• marketing and sales

Innovation

• Project refresh
• Woolworths petrol sites - 'convenience sites'

Integration

• Looking to the future...

• Woolworths have backward integrated and started producing a range of products under the 'Woolworths Select' brand

Marketing and Sales

A Business model is...

... the way in which a business captures,

creates and delivers value.

The key features of a business model include:

• infrastructure (including key activities, key resources and key partnerships)
• the offering
• customers
• competencies.

Woolworths' Business model

The Australian Supermarket Industry

• Australia has one of the most concentrated Supermarket industries in the world
• Woolworths has a market share of 40%
• Industry is over a 70% Duopoly
• The industry is mature, and grew

approximately 3.4% in the 2007 - 2012 period

Political/Legal

Threat of New Entrants

Very Low Threat

• Government has a direct impact on the supermarket industry

-Trading hours are legislated

-Industry is monitored and regulated through the Australian Competition and consumer commission, the commonwealth government,

the trade practices act and other regulatory bodies

• Very little movement within the industry.

•Supplier contracts hard to obtain.

•Vertical channel nature, easier for chain stores.

•Land and locations hard to obtain.

Natural

Economic

•The global financial crisis that hit

in the December quarter of 2008

caused all sectors to suffer financial

losses, with the effects still being felt

• Increase in the frequency of natural disasters in recent years has affected

the availability and price of certain produce

•Environmental issues such as pollution, global warming and deforestation are causing growing environmental awareness.

Bargaining Power of Suppliers

Bargaining Power of Buyers

Rivalry Among Existing firms

Low Bargaining Power

Moderate Bargaining power

High Rivalry

Macro-Environmental

Analysis

• Production margins are decreasing.

•Size and power of large supermarkets means stringent requirements must be met in order to retain large and lucrative supplying contracts

•Vertical Integration - In house brands growing popularity.

•Creates a decrease in supplier power.

•Decreasing conditions for suppliers within the channel.

• Low loyalty means Consumers have moderate amounts of buying power and can drive prices down.

•Price points are the most important differentiation.

•The commodity nature of many supermarket goods does not allow for much differentiation

•Low switching costs add to buyer power

•Duopoly - Strong rivalry between 2

large chains.

•Low Consumer loyalty

•Competitors to 2 major chains are

small but growing at a strong pace.

Technological

Socio-Cultural

Threat of Substitutes

High threat

• Introduction of new technologies have

increased check-out speed

•The percentage of Australian households with

internet access continues to rise year after year

• Increasing trend towards health and well-being, as well as organic products

• Increased research into alcohol-related diseases could have an effect on how responsible alcohol retailers are

• Increased demand for convenience. The demand for one-stop shops and ready-made meals is increasing worldwide, with people having to fit in shopping and cooking with busy lifestyles

• Threat of specialty stores

gaining business.

•Purchasing technology and

packaging design can give

products a competitive advantage.

•Little/no cost to consumers

switching brands.