Woolworth LIMITED
Business Strategy Reprot
Background to Company
Woolworth Limited is the food and takeaway liquor retailer in Australia, often colloquially known as "Woolies' and going by the slogan 'The fresh food people'. It operates in every Australian state and territory. Offshoots are Woolworth's online (Homeshop) which allows uses to purchase food over the Internet and Woolworth's Liquor a department of Woolworth's supermarket stores (IRIS Tasmania, November 2007).
Challenges
Woolworth Limited has to follow government rules and regulations. The political factor involved in this situation is creating both opportunities and a threat for Woolworth Limited. It is an advantage in that it affords Woolworth a diverse work crew since the Australian government applies the Fair Work system that requires that employees and other staff receive maximum weekly hours, protections from unfair dismissal of employee, flexible working roaster, balance between work and family life, and advance notice of termination and redundancy pay. All these facilities are motivating employees towards Woolworth, encouraging responsible employees so that Woolworth is better able to increase its sales margin with increased customer satisfaction. Recently, however, the government has announced its Stimulus Package 2010 that has affected a rise in interest rate that paused customers to spend in retailing. The credit is tight, sales are flat, and that is leading to a threat for Woolworth Limited. Economic factor such as taxation, government spending levels, interest rate, inflation rate, and import/export ratios are elements that related to organization profitability, and that affect both capital availability, cost, and demand. Woolworth itself has acknowledged the rising prices in food ("Woolworth Limited," web). Recently family budget has been hurt due to a high interest rate and rise in fuel prices that have risen from $1.20 to $1.30 (per liter) which is making it more risky for Woolworth's to meet their expected sales.
Social challenges include the demand that varies with the population size, and the earning capacity of people that provides both opportunities and threat for particular organizations (Thompson, 2002: Pearce and Robinson, 2005). The recession has caused a slump in spending capacity. Woolworth has always provides fresh and organic food keeping in mind the customer's health ("Woolworth Limited," web). And the strategy of selling fresh organic food and displaying concern towards the customer's health offers the opportunity to sell their products among the customers.
Technology is another key factor that helps make a business successful and Woolworth has employed this to the utmost. The Woolworth strategy of providing online shopping has increased Woolworth sales rate to 59% for the year 2010. Everyday rewards program provide customers to register their membership and receive discount on fuel, which also provides opportunities for Woolworth to increase their sales. Woolworth also offers Qanta Frequent Flyer points and personalized shipping offers. As of February 2010, 4.6 million Everyday Reward cards were issued with, with 2.1 million issued associated with Qanta Frequent Flyer points membership ("Woolworths Limited - Half Year Presentation HY10" (PDF)). There is the Everyday Money credit Card where points are earned for punches made at a Woolworth's Limited and these points are then converted to shopping vouchers. The Everyday Money Prepaid Master Card was recently issued in June 2010 ("Woolworths Limited - Half Year Presentation HY10" (PDF)) Finally, there is a pre-paid Mobil service where $2 SIM cars are purchased in stores and recharges are available both online and in stores. One future objective, planned in association with Lowe's (America's major home retailer business) is to enter the home improvement market. Woolworth's first step in that direction will be to open its first home improvement business in Coolaroo, Victoria in 2011. All of these factors are facilitating Woolworth's opportunities to increase its sales margin. And Woolworth expect of net profit of 8-11% in 2010-2011.
2. Prospective Business Strategies
The first step would be to conduct an internal self-analysis of Woolworth's profitability and its experience curve (Aaker, & Day, 1986) Particularly in Woolworth's case, regarding Woolworth's history can help us generate solutions for its future. This is not the first time that Woolworth is struggling with difficulties (Hollingsworth, 1990). How did Woolworth overcome its past difficulties and acquire its present prodigious profile?
It reacted by becoming more innovative and more creative and decentralizing. Using a bottoms-up approach, creativity was sought from the lowest level of the hierarchy -- the store manager, since it is the store manager that is most closely associated with the trends in the market.
Woolworth Limited also used Boone and Hollingsworth (Hollingsworth,...
They analyzed their present resources to determine the capabilities of the organization, launched a forecast of potential threats and opportunities, set themselves goals and strategies for reaching their goals, and pointed out that planners must familiarize thimbles more with future trends and predictions. Traditional forecasting, Woolworth also realized must be merged with rational reasoning and gut, instinctive feeling ('intuition'). Woolworth also ensured that it retained and maintained its system of internal and external communication so that all levels of employees shared an environment of trust and openness, and that all were fully aware of its needs and goals. There must be a variety of racial types in lines with the Equal rights law and present day preferences; and also a variety of personality types for the vibrancy and benefit of the organization. This diversity of personality types should be dispersed throughout the organization also represented on its planning teams -- since these are attuned with the market and well aware of the diversity in market needs.
Finally, the fact that Woolworth regularly assesses its organization's creative climate based on the number of new ideas being generated and the percentage of new proposals being implemented is very much for its benefit. Indeed, perceiving Woolworth's latest ventures (it has diverged far from its emphasis on food) (Moore, 2003), Woolworth seems to excel in creativity and flexibility. It is this very flexibility with its structure and image that, by playing with new approaches, will enable it to survive. Its originality is displayed in its originality of approaches to old problems and to new opportunities and this originality should be encouraged to continue.
In sum, conducting an external analysis of the current situation assures us that Woolworth is continuing and thriving in its tend of creativity. There is diversity of production (Moore, 2003). The corporation practices flexibility and creativity even gearing towards the home development venture in an effort to expand its market.
What Woolworth needs to do is conduct a customer analysis, particularly of the customer motivations and of unmet needs. Market research can approach the issue from three vantage points:
1. Querying motivations, namely what lies behind customer's purchase decisions? Some customers have a different set of needs and objectives than others. It would be useful to see what the norms are, and where divergences or the segments (different buyers that require different purchases / attributes) lie.
2. Seeking the attributes that are important to the various segments -- for instance, parents might insist that they target health, yet closer evaluation reveals that they inevitably buy "what the child likes"
3. Asking trade-off questions - have customers state preferences between the attributes. For instance: which product would you prefer -- a brand that is healthier or cheaper?
Identifying other unmet needs can be done through three different venues:
1. Semi-structured interviews with product users in which their experience with the product is discussed. These can be held in a focus group seeing, or in an informal setting, perhaps in the supermarket itself.
2. Via questionnaire through a "problem research" approach where the team develops a list of potential problems with questionable products. The problems are prioritized and respondents are then asked to rate each problem as to whether (a) the problem is important, (b) the problem occurs frequently, (c) a problem solution exists.
3. Benefit structure analysis -- customers state which products and which kind) they wish Woolworth to acquire; they identify the desired benefits, and the extent to which existent shelf-products deliver those benefits.
The primary challenge right now is recession and rising prices, so Woolworth needs to address this by seeking a way to reduce its prices without losing its profit. This can be done either by low cost leadership and firing -- although I would hesitate with that -- since one wants to maintain the current environment of cordiality and good will. It may be done by conducting research on the products that Woolworth's average customer tends to buy during these pressing times and seek then, to acquire more of that food sample whilst reducing, or entirely eliminating the other. Woolworth might in fact be making a profit by so doing, since it might be cutting its more expensive -- and non-profitable -- products out of its system. Adapting an idea that I have seen used by a supermarket branch in Hungary, Woolworth could sell it consumers on its decided chain of products by running entertaining visual clips on a TV screen about the health factors and other advantageous elements of the product. Furthermore, these products can be presented from the vantage point of consumer benefit and price /…
