STRATEGY OF WOOLWORTHS LTD

EXECUTIVE SUMMARY OF THE REPORT:

In this research project report we will analyze the current and future strategy of the company name as Woolworths ltd. Strategy development of Woolworths ltd includes the strategy for the coming 5 years and we cover five topics related to strategic management theory as mentioned hereunder as a part of analysis of the business strategy of Woolworths ltd.:

§  Strategic Thinking versus Strategic Planning.

§  Importance of five Ps in strategy

§  Twelve different way of business.

§  Profit sharing is more important than market share

§  Refining and extending the business model with information technology

Additionally in this report the future performance of the company being analyzed based on the current performance for next five years as the analysis of strategy also to be made for five years, so that theoretical strategy can be understood more specifically with quantitative database.

ABOUT THE ORGANIZAION:

Woolworths Ltd is an Australian based publically listed company. Main business of Woolworths Ltd is Food & Groceries, Petrol, Liquor, Retailing, Home Improvement Products and Merchandise in New Zealand and Australia. Main Revenue of the company is derived from above mentioned sources only. Labor Strength of company is very good, company employ 198000 people in total. Woolworth runs their business in 3000 location across New Zealand and Australia. Company Listed in Australia Security Exchange with security code as WOW. Headquarter of Woolworths are Placed at New South Wales and Bella Vista. Woolworth runs their business with the name of Woolworth’s super market, BWS, Celler Master, Thomas Dux Grocery and liquor Stores works as Murphy’s, Woolworths house brands, Woolworth fresh branded meat and Woolworth Home Brand etc. Woolworth sold all kind of household and daily consumption products from their stores. The company operates under supermarket of New Zealand. Woolworths operate total 600 petrol pumps with the fuel retailer Caltex and co branded as Caltex Woolworths and Safeway Caltex. Also company runs big W discount stores in Australia where they provide products at discounted price. (

OBJECTIVE OF THE COMPANY -

Currently company is at its developing stage, so all the efforts of the management are to bring the level of performance on the best position. The retailing market is too much fluctuated today, and in very shorter period of time, substantial change can be possible in the market, so the business strategy of the company must supports in all kind of environments. So, the main objective of management is to make Woolworths competitive at all the phase of growth and to cover all the opportunities. Woolworths ltd. creates new and innovative ways of shopping for their customers and providing variety of products after some interval of time. In this technological market, Woolworths ltd. provides all the facilities, so customers are able to make shopping where, how and when they desire. (woolworthslimited, Strategy and Objective)

 

 

 

 

 

 

 

 

 

 

 

 

 

ANALYSIS OF THE PAST TWO YEARS PERFORMANCE:

Observation of performance (Based on Consolidated Financial Statements-APPENDIX):

Analysis of past two year performance of company reveals that company is running their business at good position. Sales of company in year 2013 are $60.8 which is increased by 5.9% in the year 2014. As main business of company is food, liquor and petrol which reveals company has maintain their operating in this business. Gross profit of the is also have increasing trend as it is increased by 17 Basis points and reach to 27.11%. Strategy of company has positive impacts on sales mix. As strategy includes effective promotional plan, customer satisfaction, increase in exclusive brand range products and improvements in buying facility. Company is continuously try to provide products at the lower price with the maintained quality which have an impacts on price depletion of Food, Liquor and Big W products. In the same manner cost of doing business with the percentage of sales is also  have rising effects which is rise by 20 BPS from the previous year to 20.90%.  Earnings before interest and tax are also increased by 5bps and reach to 3%. Net finance cost of company is decreased as per the plan of company by 10 bps and reach to 9%.  Resulting it cost of debt is reduced. Therefore net profit after tax is also increased. (woolworthsltd, Performance of the organization)

 

 

 

 

CURRENT BUSINESS STRATEGY OF ORGANISATION:

The current business strategy of Woolworths ltd. is being planned based on certain specific goals of the business. The food and liquor market is very strong and customers response from Australia and New Zealand also helps to get up the market share of the company, the comparable sales and market share are increased compare past performance in this products, so accordingly company is looking for improved its market by providing access to the customers in 34 in-store Australian supermarkets and 11 Dan Murphy’s stores, with online facility of making order. As per the database record verified in the annual report of the company, 21.1 million customers using this facility per week in financial year 2013-14, for shopping. To achieve high returns on the investment, using of technology in business model proved successful (Example of Dell Computer: Dell’s strategy in the area of direct selling and organizing build to order production, has proved the importance of information technology, that helped to achieve momentum and flexibility in selling the new products). In this competitive environment, selling of products with this speed, required advanced usage of technology.

If we correlate this business strategy of using of technology in business model, recently Woolworths have launched its first app which provides more easy and convenient mode of shopping for customers. And company have also provides the internet online shopping option. The application also provides the information like, opening hours and place of store, distance of nearby store, etc. With the use of this app Woolworths have objective of takeover the grocery markets in next three years. As said by Mr. Brad Banducci (Food group managing director of the company) that “This strategy will result in lower prices, more compelling offers, and greater innovation”, as per the report of Sophie Langley (May 2015). There are about 14.6 million customers and 500000 customers making shopping online. Day by day more and more products being incorporated the digital technology in the business model, and maximum business being done through electronically online based on online system, so it is possible that in future also the market and industries will be grouped based on time factor. So, accordingly company is planning to increase to number of leading store in the market and also going to offer various schemes online, to capture the market.

Woolworths is being standing as Australasia’s largest online retailer in the market. The company have remarked 1.2$ billion from online selling in financial year 2014 which shows the increment of 50% comparing to previous financial year. So, another strategy of Woolworth’s exhibit to increase marketing of online shopping in the market of food and liquor in Australia as well as New Zealand. Woolworths ltd. has the track record continues building of growth, and have given performance more than expectations. (Nicholas Grove,2014)

Company is also planning to make maximum investment inbound usage of technology, and for the development of this plan looking to the future generation logistics, so enabling the customers to make online shopping along with building the supply chain capability of the company for next generation is one the major strategy of Woolworths Ltd. Development of customer loyalty helps the organization to leverage the work being performed in the light of quantum to provide customers insights and getting feedback in terms of after sale of products, enable the organization to understand the customer’s needs more specifically. So, company have developed one business model in which it offering rewards for good customer feedback and responses, and try this to continue in future also, for improvising the business strategy. Woolworths Ltd. has 7.9 million everyday rewards members within Australia and in New Zealand there are 1.9 million of onecard members. Company as a plan of expansion of business at worldwide, making strategy to extend the strength at world class retail market team.

Moreover the other strategy that has been exhibit from the analysis of the annual report of the organization is to maximize the shareholder value by making changes in investment portfolio of the organization. For wealth maximization of the shareholder, Woolworths Ltd. has sale and leaseback freehold sites for a total portfolio value of $600 million in 2014 looking to the market opportunities and also makes addition of $1.4 billion of additional property, divested from the development of property of SCA group in financial year 2013. (Paul Rickard, switzer, 2011)

FUTURE PERFORMANCE STRATEGY FOR NEXT FIVE YEARS:

The following business strategy of Woolworths being categorized based on some theoretical concepts, which are widely used in business strategy formulation and hereby try to correlate the same:

Using of information technology as part of business model for expansion of business:

In today era when we saw most of business are run with the help of technologies. We can say that technology is basic necessity of every business hence it is necessary for very organization to develop some strategic plan for development of their technology in innovative way. Other side due some technology glitch every organization feel risk on the investment in technology as investment in technology require huge amount on investment which may be not useful in the coming year  due to change in technology or updating in technology in future. Hence it is necessary for the organization to plan wisely when they think of to investment in the technology. In  Woolworth’s case  strategies for expansion of business in future have some innovative and crucial decisions, as far as usage of technology is concern, the company have following strategy in its food and grocery market, the company going to offer the level of core service so that customers make force to choose Woolworths first, looking to the customer’s needs reduction in price and innovation of new products, additionally the company is planning to execute lean retain business model, for mitigate to customer value. The main usage of information technology is to reduce the time in and providing innovative way to frame the business model. Woolworths also trying to keep their online prices and store prices same as part of its strategy. Company has one more need of technology in marketing of products. Company has invested some portion of their investment in building of next generation supply chain management which helps to reduce their time. We can say that it one kind of time management tools for the company.

Five Ps combined business strategic model:

The five Ps analysis of Mintzberg on ‘strategy’ is very famous, and establish great support on to understand the business strategy as different phase. The first P describe strategy as plan, there are essential two characteristics of strategy which exhibit strategy as plan, strategy has been made in advance for the course of action to which  it applies, and there are certain purpose or objective for which strategy being created. If we analyze the meaning of plan, we reach to the same conclusion and findings. A strategy can be considered as plan; however plan cannot meet criteria of strategy. The second P describe strategy as pattern, pattern has been defined as a series of course of action being performed with a view to accomplishment of certain objectives.

Profit Sharing as part of business strategy:

Profit sharing strategy of the Woolworth Ltd is to sharing profit for the attraction of shareholder. Profit sharing strategy of Woolworths Ltd is also like most successful company. Share price of the Woolworths are downgraded some times when company declare their dividend because company declare dividend as higher amount to attract customer towards investment in Woolworths Ltd. This strategy in short run reduce the price of share but when we look at their impacts on long run it will be more beneficial for the share price of company.  on the other side when we look at the profit growth of last 19 years growth of the profit of company is very slow. In the same manner most of the profit is company on the employee of the company as thought that employee are key to success of company. Any amount expensed on the workforce of the company help to grow company with some faster way. Share price of the company are fallen continuously due to fail from the expectation of the market. As market expects 4% to 7% growth in the profit for the year ended 2015 but company grow only by 1.8% to 6.6% in the profit. Therefore company now plan strategy for the expected profit which can be achievable as when expectation of the company and market are not fulfill it will downgrade the price of share. When we look at the current year data of the company earning and there dividend it show the growth in the earning but by slower rate are there. There are decrease the profit ratio from the previous half. One more reason behind the decrease in profit sharing ratio is decrease in overall turnover of the company as well. Now company decrease their expected profit after increase in tax rates ass it will have impacts on the profit also. Sharing of the profit of the company are on the mostly dividend includes interim dividend, tax and interest on debt. For future years company plan to share more profit with the shareholders of the company as dividend, by increasing in the capital and reducing in the debt. As company’s strategy is to increase capital by issue more share which are used to reduce debt which will indirectly help to rise in the profit of company. Other side this strategy creates strong market position of the share price of the company. Reason behind this strategy is thinking of common people as every person as an investor expect more dividend and rise in share price. When growth of the company y is not good at all in the way of turnover and other aspects of business than most of the company are shift their business or add more products into the business by investing in the some new products. In the same way for increase in turnover Woolworths also increase their number of products in to the range of product which have effects on the rise in profit.

Strategic thinking and Strategic planning how differentiate in Woolworth’s case:

To understand the difference between the differences of strategic thinking and strategic planning, let us do understand the meaning of strategy, there are many different definition given by experts, so in simple terms if we understand the term “strategy”, It is a thinking process which mainly focuses on the relevant course of action being targeted and based on that the whole strategy being developed. So, the answers of the questions, how the desired goal can be achieved, what is the way to achieve the targeted goal, all this answers can be answered based on strategic planning. And the other term strategic thinking, it is a continuous process; which mainly fulfills the requirement of the operational planning. So, the strategic thinking refers to making of planning for completion of all thy activities that are part of operational planning. 

If we analyze the strategy of Woolworth ltd, we can make conclusion that they are having an excellent strategy which helps the Woolworths Ltd. To frame the different aspects of the business planning and enable company to improvise the other functional steps of the planning. So, based on that strategic planning the company is able to make strategy for its internal as well as external works. There is w-rewards card system in Woolworths Ltd. which gives benefits to the customers to gain additional discounts up to 20%, is company thinking to make some alteration in this system which can give benefit to company also, and maintain the customer relationships. The benefit of this system will help the expansion of business without investing much and also divert the certain portion of w-rewards points system.

The 12 different ways of innovation:

Woolworths currently at its developing stage and also being famous at worldwide for its continuous growth. So, any innovative strategy would always lead business of Woolworths to a new stage. The strategic being suggested by using the 12 different ways of innovation, makes logic for growth in business performance of Woolworths. Innovation can be take place at any stage of business and always being acceptable, for future benefits of the business. Innovation refers to a stage of situation which already being not existed, so it is always being accepted. For successful business innovation strategy consideration of all the aspects which influencing the working of business require to be consider on all the stage of strategy formulation. This theory have suggested following 12 different dimensions which elaborate the meaning of business innovation, and allow the company to offer the best level of service to their customers; 1. What the company is offering as its products or service, 2. Availability of platform for selling of products or service, 3. Solution as a part of customer problem feedback, 4. Customers as main part of system, 5. Consideration of customer experience, 6. Recapturing of value they have created, 7. Process of business activities, 8. The structure of organization, 9. Supply chain management of the organization, 9. Presence of the required distribution system, 10. Consideration of level of networking and 12. Brand value consideration of the company’s products. All these dimension’s consideration helps the Woolworths to make strategy that could lead to level of performance on new stage.

 

FINDINGS OF THE STATEGY:

Looking to the strategic analysis of the company we have find that company’s strategy is somehow going to be in right direction. Strategic analysis of any company includes the business plan, profit plan, growth plan, innovation and improvement plan; currency plan etc. in case of Woolworth ltd growth plan of company is includes some strategic decision-

-          Extend their leadership in the fields of food and liquor. In this way company become market leader in the field of food and liquor products, which help to grow its turnover and reputation of the company in public, are increased which attract investor to invest in the company as well.

-          Maximize value of shareholders wealth by increase in the value of share. In this way company set their profit target at higher level which can be achieved so that more and more investor interested to invest in the company. Indirectly this strategy helps to increase capital of the company which can be invested company in some other projects of the company. Company can achieve the higher targeted profit in this way.

-          Maintain track record of the growth of business which helps to understood where company are lose their target, which area needs improvement etc.

-          Customer satisfaction is also one of the parts of Woolworth’s strategy. Customer is hart of business as whole business are driven by the customer only hence if customer are satisfied with the products of the company it will automatically generate more turnover and revenue of the company. Hence Woolworths also targeted as customer satisfaction as one of the most business part of the company. Taking feedback and improvement in the product as per the requirement of the customer helps to achieve targeted profit of company.

-          Technology improvement by entering in the online business. One more strategy of the company is to provide online shopping facility to the customer. As we know that online sales and purchase is future of business hence Woolworth also has started online shopping facilities by websites, Mobile app and some other new delivery options. (theaustralian, Woolworths Strategy)

CONCLUSION:

Company overall strategy are looking well structured.  Woolworth ranked as trusted brand in the New Zealand and Australia. As from looking to the company business and their competitor in the same business competition is very tough. Hence company targeted to satisfy customer as when there is high competition in the market it is necessary to retain customer. Current strategy and future strategy of Woolworth ltd we conclude that company main focus on the customer satisfaction as company work hard for the satisfaction of customer. By CSR Woolworths serves to the 28 Million customers in a week. Other side company set up their own mission and vision to satisfy the customer needs and provide best quality of their customer.  Woolworths have process driven method to satisfy customer. Process includes Listening, Acting on the query of the customer and learning from the past query of the customer so that same kind of problem can be nullified. Company has targeted to the food and liquor products by increasing restaurants in the city.  Company is in developing stage now hence management try to set up whole control, process and strategy according to the market requirement.  Company targeted business in the online way is also good step as some of the company in same line facing a threats of investment in technology but company taking good step by launching this facility. This step of the company as it will generate more business and add more customers in the business. In addition to the website, company own mobile app and in today’s era most of people doing shopping and use of internet by way of mobile hence it also have great impact on the improvement of turnover.

RECOMMENDATIONS FOR IMROVEMENT IN CURRENT STRATEGY:

From the strategy of company we found that company developed good strategy for future but though there is missing of some strategy in the company’s strategic plan. One of the most strategies which need to set up is cost leadership strategy. In this way company have to reduce their cost by implementing cost control and removal of non value addition thing from business. Hence company can compete with their competitor. Another way of cost leadership strategy is launching of products for the customer who cannot afford products at higher price. Another strategy is strategic alliance with the other small company with the same line of business. As it is not possible for the Woolworths to reach in every area of country hence this way company can increase their store which increase brand image of the company. Marketing by way of social website is also missing in the current strategy of the company. Therefore addition of all this strategy with current strategy can help more to company business. Current strategy of the company is customer oriented where company have to provide training to staff for nullify the query which is normally faced by the customer which helps to save time and cost both.