Bus302 Entrepreneurship- Bargaining Power Of Assessment Answers

Answer

Introduction

This report presents the different strategies for developing new product and services. It also evaluates the background of the company and defines the mission of developing new products. It explains the product and service offering by the Woolworths. It also discusses the porter five forces model to analysis the food retail industry. Moreover, it defines the competition between competitors in food retail market. It also illustrates the different component of marketing mix strategies such as product, price, place, and promotion. This report evaluates the financial plan for developing the services and also defines the critical risk.

Company Background

Woolworth is biggest supermarket chain in Australian. It deals with 995 across the Australia and works with 115,000 workforces in stores, and distribution centers. It supports the team members to deliver the high quality, wide range, convenience and value to its customers. It sources approximately 96% of all fresh fruits and vegetables and 100% of fresh meat from Australian farmers and growers. It feels fresh to people who live in Australia by offering organic foods products. As one of innovation retailers, Woolworths realized that Australian consumers are looking for a creative and comprehensive technique to shop. For this reason, Woolworths facilitates to customers to shop via their comfort zone such as through the computer at home and on the train using Woolworth supermarket app and the significant part is that groceries can be delivered directly in the bench of the kitchen (Woolworth group, 2017).

Background to the idea

Woolworths will develop the organic food delivery app services for organic consumers to help them to get a healthy lifestyle. This app would be beneficial for both customers and retailers point of view because it provides the easy access and meet the requirement of customers and also generate more revenue for Woolworths. This app will have different features such as location which will demonstrate the nearby supermarket, pickup order, add to cart option, return option, and the product contains. Further, through this app, the customer can get easily product at the short time period.

Mission

The mission of Woolworths is to facilitate the premium quality, health and wellness products, and fresh and natural foods. Further, workforces of the company are friendly and keen to serve and ready to respond.

Objectives

• To offer fresh, organically grown fruits and vegetables, and foods
• To deliver food without including artificial color, taste, and additives.
• To sell pure and natural supplements, cruelty-free body care product, and eco-friendly cleansers.
• To provide support to organic farms that maintains to keep pure earth and water.

Product offering

Woolworths will offer different products to its customers such as locally grown and organically produced, groceries which are free from chemical and preservatives, cruelty-free body care, and household products that are environment-friendly. There are different kinds of product which would be delivered to customers. These products are free of artificial preservatives, free of artificial colors and chemical additives, and organically grown. Moreover, these products are least processed and pure version existed (Hollensen, 2015). It is also non-irradiated and cruelty-free product as it will persuade more customers and will retain the existing customers.

Market analysis

Industry analysis

Porter five force model

Competition among rivalry (Strong force)

In the retail grocery industry, rivalry among key market player is higher. Due to organic and natural specialty of Woolworths, this part of the grocery industry tends to depend on delivery of quality, and understanding of its customer base regarding the health benefits of its services. It also emphasizing on more store location that will rely on wealth and education extent of the population. Furthermore, there are different external factors which enable the Woolworths for a strong force of rivalry. These factors are a high number of firms, high aggressiveness of company, and low switching costs. The retail industry is highly saturated due to a large number of firms and hence retail companies compete on the basis of price, service, quality and other variables. Moreover, Woolworths faces the tough force of rivalry due to low switching costs. It means the customer can easily switch from Woolworths to other retailers (Goworek, and McGoldrick, 2015). In such case, Woolworth should differentiate its products such as provide high quality as compared to its market players.

Bargaining Power of Buyers (Strong Force)

The bargaining power of buyer is strong in food retail industry. This element of five force model has an impact on the Woolworth business. In the case of Woolworths, there is a certain factor which deals with the strong bargaining power of customers. These factors are low switching cost, a few individual purchases, and high quality of data. There are large numbers of customers who can buy the small quantity of organic food from Woolworth app. It is easy for customers to move towards other retailers due to low switching cost (Armstrong et al., 2015). Moreover, Woolworth customer has the opportunity to access the information and evaluate the company product. The company should identify the customer concern otherwise customer will move towards other companies. Along with this, the company should implement new rules and regulation for product quality. For instance, to identify the consumer demand about the genetically customized organism, Woolworths should plan to meet the execution of new labeling policies for genetically customized origin products in its supermarkets (Sheth, and Sisodia, 2015).

Bargaining Power of Suppliers (Moderate Force)

Bargaining power of supplier is moderate in food retail industry. This force addresses the extent at which suppliers can force their demand on the company and food retail industry. In the case of Woolworths, there is a different external factor which contributes toward the moderate supplier power. These factors are a large number of individual suppliers, moderate level of supply and high amount of suppliers. Woolworths has different kinds of suppliers including local, national wholesalers, regional, and producers in Australia and out the nation. This force weak the power of suppliers on the companies (Keller and Kotler, 2016). But, Woolworth suppliers are large wholesalers due to their size and hence it has a moderate impact on the Woolworth business. Along with this, the narrow supply of organic and natural non-GMO food delivery indicates that suppliers can bargain with the company and can expect the moderate outcome. Therefore, Woolworths should expand its supply chain and emphasizes on producers because it will provide global scope. The diversifications of suppliers in Woolworths supply chain help to decline the bargaining power of suppliers (Weinstein, and Pohlman, 2015).

Threat of Substitutes (Strong Force)

In the retail industry, the threat of substitutes is strong. There are certain external factors that pertain to the Woolworth business and contribute with respect to the threat of substitutes. These factors are low switching cost, high availability of substitute products, and low cost of substitutes product. Woolworths compete with different substitutes that are not categorized as natural, organic and GMO-free. Furthermore, these substitutes are cheaper and simple for customers hence customers can shift away from Woolworths towards these substitutes product. Consequently, substitutes can negatively impact on the business growth (Foxall, 2014). In this way, the company should concentrate on the superior quality and facilitate discount occasionally in order to persuade the customers.

Threat of New Entrants (Strong Force)

The threat of new entry is strong in food retail industry. There is a different external factor which contributes for strong forces of the threat of new entry. These factors are low switching cost, high ease of doing business, and moderate cost of doing business. Woolworths operates in food retail industry hence it requires to spend moderate amount. Another reason for a high threat of new entrant is that small retailer can easily deal with the healthy food and grocery stores. Furthermore, new entrants have higher possibilities of success due to easily persuade customers away from Woolworths (Kotler, et al., 2014). Therefore, the threat of new entry demonstrates the strong impact on the business. In this way, the company should concentrate on delivering high quality and maintain existing customers and retain new customers.

Competition

There are certain key market players of Woolworths Ltd named ALDI Stores Supermarkets Pty Ltd, Wesfarmers Limited, and Metcash Limited. These enterprises deliver different services like footwear, groceries, beauty product, homeware, accessories and financial services. In opposed to this, Woolworth offers organic food delivery services which create unique proposition between the customers. Along with this, organic food delivery app facilitates the flexible delivery option such as cash on delivery and online payment delivery. It also provides the cost-effective organic food delivery services which differentiate its services among key market players in food retail industry (Winer, and Dhar, 2013).

(Sources: Retail world, 2017).

As per the above chart, it can be stated that Woolworths Ltd has higher market share i.e. 33.6% as compared to its key market players named Metcash Ltd, Wesfarmers Ltd, and ALDI stores.

Primary Target market

Woolworths can target different consumers such as Periphery consumers, Mid-level consumers, and Core consumers. In this way, the periphery consumer is an individual who starts to lean with respect to organics however they do not create any significant behavioral changes and do not purchase any organic product. Other target consumers are mid level consumers who purchase the bulk of organic products. These individuals not only modify their attitudes but also change their habits towards the organic products and buy the more amounts of organic products. Furthermore, it also targeted the core consumers in which small group of people have interested to invest in organic foods (Richards, et al., 2016). They purchase the organic foods via using both their behavior and attitudes. In addition to this, these individuals can think about the organics and buy the organic products regularly. From the segmented target market, the company will target the mid-level consumers as a primary target market because this group of customers will buy the bulk of products such as family (Mller and Parvinen, 2015). Another target market is selected as a secondary target market in which periphery consumer and core consumers are selected.

Marketing

Products

Woolworth has a wide range of product including grocery and healthy food product. This element of market mix illustrates what the company facilitates to its target customers. In the case of Woolworths, the following are the key product lines, which are used by a company such as organic food, Woolworth brand, and local brands. Organic food line is offered by the company in which it focuses on the price-conscious buyers. Along with this, Woolworth brands focus on the premium products and services (Larder, et al., 2014) In addition to this, company identifies the vegetarian and particular food preference through the local product line. The company also exercises the Woolworths trade label for products that come from certified suppliers together with, it uses whole trade guarantee and fair labor practices for sustainability (Bojei, et al., 2013). Further, it provides satisfaction to customers by offering fresh and quality organic foods to the customers. As a result, it increases the demand of the customers and also retains the existing customers.

Distribution

The place shows the location by which product and services would be delivered. Woolworths persistently expand its location with the distribution aspects. Woolworths delivers the organic food through different channels named Woolworths supermarket, stores, and online retail stores. Woolworth supermarket is the key place at which company can distribute its organic products. The high amount of revenue is generated through this channel. But, at the same time, the company has online stores in which people can place their orders. Furthermore, the firm facilitates delivery services for online purchases (Flint, et al., 2014). In this element, Woolworths should emphasize on the popularity of its brand to attract the customers. In this way, it should increase the number of stores in Australia and outside the nation.

Promotion

Woolworth should use different promotional activities which depend on occasion and industry circumstances. This marketing mix element contributes to business communication with the targeted consumers. There are certain activities which will be performed for delivering organic food such as public relation, advertisement and sales promotions. Woolworth advertisements are mostly regional; hence the firm should use national advertising campaigns like campaign associated with values matters which highlighted on the health and deeper intention for business. The company is engaged in the different regional public relations program associated with the societies (Hingley, et al., 2015). Moreover, Woolworths provides a discount as a form of sales promotions because company concentrates on creating the superior brand image.

Pricing

Woolworths will use the premium pricing strategy due to offering high-quality organic foods. Further, a large number of its products are available at the higher price as compared to other key competitors. Woolworths will facilitate the premium pricing strategy with high-quality standard and ensures that the product they have bought is worth it. In such case, Woolworths can use generic strategy to make differentiate the products (Buder, et al., 2014).

Financial Plan

Table 1: Start-up cost

The following table depicts the projected P L for three years:

The below table demonstrates the projected cash flow for three years:

Critical risks

There are different critical risks existed but mainly two risks affect the Woolworths such as risk related to economic conditions and competition.

Risks related to economic conditions

Woolworth has a risk of occurring unfavorable economic circumstances like economic slowdown, and future recession in Australia. These could negatively affect the affordability and consumer demand towards the products. Under the challenging economic condition, the customer may seek to decline alternative spending by reducing buying of the products and services and shifting away from the products which are lower rate and towards the other key market players. Hence, weak demand of the customers can decline the profitability position of the Woolworths and also an adverse impact on the operational and liquidity condition of the company (Brimblecombe, et al., 2015).

The Australian government plans to gain the tax consumption rate at 10% hence it is uncertain that what impact these changes will have on the revenue in Australia and whether the company would be enabled to keep existing margin levels as per the changes. In addition to this, trends on long term demographic show the aging and declining population in Australia. As it can have an adverse effect on the consumer demand (Atkins and Bowler, 2016). Moreover, if the tax will rise, and demand and price of the product will increase then it may have an adverse impact on the outcome of operation and liquidity position.

Risks related to competition

The food retail industry is competitive hence company will compete with different international food companies which deal in different geographic areas as well as compete with those companies which primarily deals in operation. Moreover, large key market players can exercise their resources and scale to quick response with respect to competitive pressure. The company has a risk of changing consumer preference as it can develop new products and services and decline the price and increase the promotional activities to create awareness among the bulk of customers. The company also competes with multiple regional and private label producers, which may have chronological force in the specific market and product range (Carey, et al., 2016). Moreover, the company has incapacity to compete effectively and it can have an impact on operating income and financial position.

Conclusion

From the above report, it can be concluded that Woolworths provided different products and services but it will invest in organic food delivery services to influence the organic consumers. Further, it can be evaluated that company assesses the food retail industry by using the Porter's five forces model. From this analysis, it is analyzed that company has tough competition in this industry. It can also be summarized that company can use the effective product, pricing, distribution, and promotion strategy to gain the competitive advantages. Further, the company has an effective financial plan to invest in food delivery services. But, at the same time, it can be concluded that there are two critical risks can be occurred while developing the new services such as economic uncertainty and competition.

References

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Brimblecombe, J., van den Boogaard, C., Wood, B., Liberato, S. C., Brown, J., Barnes, A., and Bailie, R. (2015) Development of the good food planning tool: A food system approach to food security in Indigenous Australian remote communities Health and Place, 34, pp. 54-62.

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