This makes it difficult to make application of motivation to employees and finally leads to high staff turnover (UKESSAYS, 2012). * Squeezing price cut from the suppliers * To cut costs, Woolworths squeeze price cut from its suppliers taking advantage of its strong bargaining power. This potentially would destroy its relationship with suppliers (Mark & Madeleine, 2012). * Contradiction for the strategy * There’s a contradiction between cost leadership strategy (relative low costs) and fresh organic strategy (relative high costs). * Frequent recalls * Frequent recalls of variety of products will make customers query Woolworths rand image and damage its reputation. | Opportunities| Threats| * More customers with access to the products due to the development of online shopping, with the overall online selling increased in every market (IBIS, 2012). * Cheaper inputs through import, as Australian dollar has been stronger against USD since 2009 (Colonial, 2012). * Shrinking of consumer disposal income caused by the ongoing financial crisis (e. g. the European debt crisis), especially for low-income families, which would give rise to customer preference towards low price goods (Stevens, 2012).
More diversified customer group because of the soar of immigrants, making importing goods from the original country of those customers more attractive along with the benefit of relatively cheaper inputs (National Communications Branch, 2011). | * Rivalry with Coles and online shopping. Consumers who prefer to Coles and online shopping increase significantly due to lower prices, greater product range and the strong Australian dollar. * Increasing household saving rate. Australian households have been saving a larger proportion of their disposable income than the previous years, which stay around 10 percent (RBA 2012). Natural disaster. The natural disaster such as flood, earthquake and hurricane lead to financial, environmental and human losses. For instance, Queensland Flooding is Australia’s Worst Natural Disaster in 2011, which lead to Australia supermarket loss $17. 1 million (Woolworths 2011). * High Costs of Doing Business in Australia. The high cost of doing business in Australia has placed enormous pressure on retailers including increasing labour costs and import duty costs as well as collecting carbon tax. | Table 2: Key capability analysis for Woolworths Ltd
Key capability | Resources this capability utilises| Core competency assessment| The ability to serve a wide range of customers at a relatively low cost with high quality guarantees and improved efficiency| * Organizational: a variety of reporting policies and procedures to improve the efficiency along the supply chain and control quality * Physical: the function of online shopping and mobile site; stores locating in areas easily be approached by customers * Human: most of the directors have worked as leaders in retailer industry for decades either in domestic market or verseas &a variety of workshops and programs make employees skilled and experienced * Reputation:high bargaining power over suppliers for quality products and low input costs| * Valuable: the quality guarantee and well trained employees improve customer shopping experience * Rare: most small retailers do not have all the strategic components that Woolworth has * Non-substitutable: there are few other way to expand the market further * Costly to imitate: getting the favorable locations, maintaining the online platform, training employees and building networks with suppliers and customers are all costly| Ability to innovate multi-channel offer with a wider range of branded products to gain a large amount of traffic and attractiveness in highly challenging and competitive environment. | * Online transitional platform launched in most businesses and improved with, for examples, Dan Murphy’s online launched, “and Big W’s “Daily Deal” promoted (Woolworths Annual Report 2011).
* Wider range of branded products available online with featured online service provided for convenience, for example, Click & Collect” launched in Dick Smith (Woolworths Annual Report 2011). Acquisition of Cellarmasters gaining proven marketing expertise and additional customer segment in the direct marketing channel (Woolworths Annual Report 2011). * Attractive deals promoted frequently through online and social network, for example, Big W’s “Daily Deal” & “Big Catch” (Woolworths Annual Report 2011). * Wider product range of private label and exclusive brands with new products and line in speed to market, such as Woolworths Macro Wholefoods Market range, Woolworths Select and Home brand and Big W’s exclusive label toy brand, new in-store optical offer and over 70 new liquid products (Woolworths Annual Report 2011). | * Valuable: Multi-channel offer is catering for the change of customer purchasing behaviour, such as comparable, time-saving and convenience. Rare: Highly developed multi-channel offer with featured service is rare for traditional and large-size in-store retailer. * Non-substitutable: Technical support and marketing expertise are more professional and efficiently to develop and improve multi-channel offer, e. g. Dan Murphy’s online becoming the most visited liquid website in Australia (Woolworths Company Result 2012). * Costly to imitate: Well-known brand image and additional customer segment in direct marketing channel are costly to imitate, e. g. Woolworths Australian Supermarket awarded ORIA’S ‘Best Multi-Channel Retailer’ and ‘ Best Online Marketing Initiative’ (Woolworths Company Result 2012). |
Table 3: Major stakeholder analysis for Woolworths Ltd Stakeholder group| Specific interests of this group| Assessment of shareholder value alignment| Employees| * Realizing personal value (including increasing salary and developing skills and capabilities) * Improved working conditions(including safety, health and welfare)| * Wage increases and investment in employee training programs are in opposition of shareholder value. * In short term, the investment in safety, health and welfare in opposition with shareholder value. However, in long term, it is in alignment because it retains staff and improves brand reputation. * Overall, not in alignment with shareholder value. Customers| * Require fresh & quality food * Better customer service * Lowest price| * May be aligned if no declining trend of profit margin occurs with better quality. * May be aligned if these services improve brand image and thus leads to impact rising of stock price * May be aligned if company can ensure profit margin is constant and increase of total sales revenue| Suppliers| * Requirement of strong and long-term business relationship * Negotiation with higher selling price| * Intimate relationships with suppliers lead to highly efficient supply chain and help to business growth, nevertheless there are some uncertainty may affect long term contracts such as natural disaster. http://www. woolworthslimited. com. u/page/Who_We_Are/How_We_Do_Business/
* Woolworths would increase purchasing cost and reduce profit due to higher selling price for suppliers. Overall, suppliers’ interests in opposition to shareholder value| Community| * Woolworths can bring future benefit for the development of local economy, employment and society * Property projects in terms of design, traffic construction impact and heritage issues * There are a range of partnerships with local communities for the sake of raising funds and making donations| * Retailing industry and communities are mutual beneficiaries. When supermarkets brings economic development for an area and solve the employment issues, it simultaneously benefits supermarkets from a good brand image, word of mouth and sending more ustomers to the store. This increases the company’s value dramatically. | Assessment of Business Level Strategy Woolworths’ current business level generic strategy is general cost leadership. In other words, Woolworths follows this strategy aim to win a large market share by achieving the lowest cost of production and distribution to offer lower prices and better quality. The key strategies are to inspire and delight its customers by reducing cost and improving value and lowering prices. Porter defines “General Cost Leadership” as the strategy in which a company differentiates from others by having the lowest prices of the market (MichaelPorter1980).
Woolworths business model mainly focuses on economic of scale and logistics which including investing in technology, reducing the number of distribution and producing standard products. Furthermore, Woolworths are also improving their value such as the fresh guarantee, the continued development of select and home brand products as well as improvement of the exclusive brands ranges. (Woolworths 2011). In conclusion, this strategy focus on minimising costs at all levels in the value chain, and proving that a relatively low cost with 100% quality guarantees. PART B: Woolworths Ltd Strategic Review Analysis of key strategic plan elements 1. Multi-channel growth strategy
Suitability| Suitable given development and popularization of internet and wireless technology and highly competitive retailing market, multi-channel offer is suitable to enhance marketing capability through online and social network, meanwhile, frequent and attractive promotion activities are flexible and to meet the change of customer purchasing behaviour and preference such as saving on necessity and convenience of shopping. | Feasibility| Feasibility given technical support and experience of developing and operating online platform, it is feasible to efficiently grow multi-channel offer in all businesses or improve with new features. Moreover, customer segments in different channels are valuable to share in all businesses for promotion. | Consistency| Consistent with cost leadership, particular in long run as it adds additional trading platform through online network with less initial investment and continuous expenses such as rental, inventory and labour, which significantly contributes to cost saving and efficient marketing and workflow. Shareholder value implications| The successful multi-channel offer would increase sales transactions and volume and benefit net profit due to less operating expenses, also would approach more customer traffics and gain market share with growth of brand image. | 2. Cost consciousness strategy Suitability| * The relatively cheaper import goods can strengthen this strategy by further lowering the cost of inputs. But Woolworths still needs to maintain a good quality control.
* This strategy matches the trend that customer preference is currently switching towards low price products. * The global economic recession results in the unwillingness of consumers to spend money. This strategy overcomes this difficulty because Woolworths is selling daily necessities at a lower price. The cost consciousness strategy focuses on improving efficiency as well as controlling cost. The improved efficiency can effectively offset the impact of high operating cost derived by high labour cost, carbon tax, inventory, CRM and etc. | Feasibility| * This strategy aims at cutting cost through improving efficiency, which matches the strength of Woolworths in respect of high quality of training executives and employees, and its favourable store and warehouse locations. * Woolworths has a stronger bargaining power over suppliers, with the cost of inputs lower than most other retailers. Besides, because of economies of scale, input cost of Woolworths is relatively low. This matches the cost consciousness strategy. Lack of communication between part time employees and shop management is a hurdle for improving efficiency, which, in respect of cost consciousness strategy, needs to be overcome. | Consistency| Consistent with the cost leadership strategy as it puts the company in a favorable position in price war. It also protects Woolworth against powerful buyers and retains more customers which will lead to sales growth. | Shareholder value implications| The cost consciousness strategy will efficiently minimize the costs of products. Woolworths can either efficiently increase market share through relative lower price provided for customers or grows up profit margin. This strategy finally is beneficial to shareholders. |
Table 4: Stakeholder implication assessment for growing the Multi-channel strategy Woolworths’ stakeholder group| Assessment of impact on this stakeholder group| Proposal to better alignstakeholder interests withshareholder value| Employees| Neural. | Woolworths could provide knowledge training, collect employee feedback in terms of effectiveness of system and procedures and improve them accordingly to facilitate working process; They could provide bonus for creative employee initiative and good quality of customer service. Therefore, employees are driven to work efficiently. | Customers| Positive as customers can easier have access to purchase variety of products in any time. Woolworths could provide more options of promotion and redemption activities across all businesses; They should quickly response to customer inquiry, timely process and deliver order to customers; Video instruction need uploaded to demonstrate online process and 24/7 customer services might provide convenience to busy customers. Therefore, customers could have shopping experience through multi-channel offer| Suppliers | Neural as multi-channel distribution allows existing suppliers to distribute their products more quickly and promote business growth. Furthermore, it provides an opportunity to the new suppliers. Nevertheless, it may bring about fierce competition between suppliers. | | Community| Neural became there is no direct impact on community. Indirectly, the community is beneficial by decreasing in unemployment and convenience of living. |
Table 5: Stakeholder implication assessment for growing the Cost consciousness strategy Woolworths’ stakeholder group| Assessment of impact on this stakeholder group| Proposal to better alignstakeholder interests withshareholder value| Employees| Neutral as Woolworth may cut personnel inputs in order to maintain stuff expenses or hold more learning and development programs to improve their efficiency. | Woolworths may establish a Rewards System, that is, when certain targets are met, employees and managers receive rewards so that they will be more energetic and driven. | Customers| Neutral as it does not directly affect customers. Indirectly, customers may benefit from minimization of costs if Woolworths is willing to the cut prices with declining the costs. | Suppliers| Direct impact is negative, because Woolworths using cost strategy would squeeze price cuts from suppliers to help fund a price with competitors, it may also reduce the pricing power of suppliers. http://www. businessspectator. com. au/bs. nsf/Article/Suppliers-complain-of-Woolworths-price-cut-demands-pd20120705-VWPDP? OpenDocument| Suppliers will benefit from the long-term contract; building solid relationship between Woolworths and suppliers that result in financial benefits to both parties. Specifically, the long-term contact will help suppliers to increase their revenue and gaining larger market share, keeping purchasing cost as low as possible for Woolworths. http://www. businessspectator. com. au/bs. nsf/Article/Suppliers-complain-of-Woolworths-price-cut-demands-pd20120705-VWPDP?
OpenDocument| Community| Neutral as there is little impact on the community became this strategy mainly focus on supply and internal improvement. | | Strategy Map Increase NPAT Reduce Cost Increase Revenue Financial Improve Customer E-Shopping Experience Reduce Product Price Increase Product Range Maintain Product Quality Customer Internal Decreasing Purchasing cost Increase Work Efficiency Improve global sourcing Increase Cross-selling & Up-selling Learning & Growth Improve Employees & Executives Training Improve Inventory Management system Multi-channel Innovation Improve Customer Relationship Management Corporate Balanced Scorecard (BSC) for Woolworths Ltd | Objective| Measure| Target| Initiative| Financial| Reduce cost| $ amount decrease on every dollar earned| $ 0. | Using Kaizen process to continuously improve performance and efficiency among the whole value chain, including the supply chain for long-term cost reduction. | | Increase Revenue| % increase in online sales| 1% increase| | Customer| Reduce Product Price| % increase in no. of products on special among total no. of products per week| 1%| continuously working on reducing supply chain cost for the sake of lowering average inventory cost| | Increase customers satisfaction of Product Range| % of customers satisfaction of variety of choices| 90% customers are satisfied| Analyzing customer satisfaction survey to enlarge ranges of popular commodities and reduce unpopular ones. |
Maintain Product Quality| % decrease in product refunds from customers| 5% decrease| Recording every refund reason from every customer. Then, analyzing and summarizing these reasons for adjusting quality management or promptly stopping hitting shelves. | | Improving online shopping experience| % of website visitors processing checkout transactions| 60% visitors to sales conversion ratio| All SKUs available and strong search function facilitating online platform ; Video instruction demonstrating online shopping process| Internal| Decrease purchasing costs| % decrease in dollar amount of average purchase cost| 1% – 2%| based on the shared customer behavior analysis with suppliers, transfer inventory management artially to suppliers so that purchasing cost can be effectively lowered| | increase working and process efficiency| % decrease in average time for transferring stock from warehouse onto shelves| 2%| strength communications between store and warehouse management and store and warehouse employees to improve scheduling process| | Improve global sourcing | % of customers who are interested in particular products. | Above 70% customers| Regular doing investigations on what customers really need not available in Woolworths and matching this information with products which are ready to import from overseas suppliers to enhance customer’s satisfaction. | Increase cross-selling & up-selling and promotion through multi-channel offer| % increase in amount spending per online transactions| 5% increase|
Weekly newsletters promoting daily deal or recommending cross-selling and up-selling offer| Learning & Growth| Improve Inventory Management System| % increase in inventory turnover ratio| 2. 53%| Working with suppliers in regard of customer behavior for a better forecast of sales volume in order to minimize the reorder point| | Improve Customer Relationship Management| % decrease in discrepancy between sales forecast and sales result. | 50% decrease| Through promotion of everyday reward cards, the company should establish their customers’ database and regular interact with customers by email to get their overall preferences. | Improve employees and executives training to improve working and operation efficiency| examination passing rate for the training| 95%| Developing performance support system to improve efficiency and performance simultaneously reducing training cost and multi training channels which can improve flexibility of the training schedule| | Innovating multi-channel offer with exceptional features| % of online platform with features innovated transactions| 100% online and featured service innovated in all businesses| Online transactional platform and Click & Collect launched or refreshed in all businesses; Mobile app download in smartphones and tablets to further building multi-channel offer|