MGT302A Strategic Management and Business Environment

Being the main focus on strategic management, Porter’s five forces strategy framework allows identifying the various forces affecting the business and then make a suitable decision for gaining sustainable competitive advantage in business within the retail industry in Australia (Eden & Ackermann, 2013).

Threats of new entrants

The threats of new entrants are low due to Woolworth’s market dominance and great distribution channels, but often puts pressure through low pricing strategy, reduced products’ costs and value propositions (Rothaermel, 2015). The company must innovate its products, build economies of scale to reduce the fixed cost per unit, furthermore invest more on research and development to improve the business functions efficiency.

Threat of substitute products

The threat of substitute products is high because the competitors have provided similar kinds of products at lower prices. It has been found that the value proposition offered is different from the products delivered by Woolworths (Gamble, Thompson & Peteraf, 2013). The switching of costs for the customers and understanding the needs of customers properly can ease down the ability to handle these problems.  

Bargaining power of purchasers

The strong bargaining power of customers makes Woolworths change its prices of products often to influence their purchasing behaviors. The bargaining power is high and so one of the most effective strategies is the delivery of products at lower prices.

Bargaining power of suppliers

The bargaining power of suppliers is low, because Woolworths hold a great market share in Australia and New Zealand. The company is lesser dependent on the suppliers, though it can sometimes lower the profitability of the company (Kuratko, Hornsby & Covin, 2014).  

Competitive rivalries

The threat of competitive rivalry is lower because Woolworths has a high market share and in spite of the presence of competitors like Coles and Myer, the company has differentiated its products properly. It has created loyal customers and competitive advantage has been gained as well.  

PESTEL Analysis

Political factors

The political factors against the duopolistic nature of retail market has influenced the business management while the lower rate of return and interest rates have also contributed to the entering into new markets and reduce the chances of business failure.

Technological factors

The SAP based merchandising system is implemented to improve the effectiveness while the management of e-commerce further influenced the management of line business (Arambewela & Hall, 2013). This created convenience for the customers to place orders online and get the products delivered at their doorstep.  

Internal

Core Competencies

The core competencies of the organization are its formation of a customer led culture, empowerment of business portfolio and offering products are great prices. The prices are kept lowered and the shareholder value delivered have influenced the purchasing behaviors of customers. The extensive marketing and promotional strategies have transformed the business and resulted in increased sales revenue and higher revenue generation for Woolworths, Australia (E. Dobbs, 2014). Few of the other core competencies of the organization are the world class supply chain, branding and great market position, innovation, integration and extensive marketing and sales strategy to boost the sales and revenue generation too.

Value Chain Analysis

Woolworths’ mission statement ensures striving to provide the consumers with fresh quality products and so the value chain analysis includes various functions such as the In-bound logistics, Operations, marketing and sales.

In-bound logistics

The distribution networks are controlled properly through procurement and logistics management. The certification process allows for selecting the right suppliers and saves costs though nationalization while the logistics operations include ownership and controlling the operations (Koc & Bozdag, 2017). The use of advanced technologies ensures optimum energy usage and reduces the costs too.

Operations

The business operations include assessment of quality where the defective products are removed while the inventories are managed through EDI technologies to maintain stocks properly. The forecasting methods adopted by Woolworths allowed to increase or decrease the availability of products in the market.

Marketing and sales

The investments of research and developed helped in assessing the market conditions and delivered products based on the customers’ demands and preferences (Ayers & Odegaard, 2017). The promotions and advertisements furthermore influenced boosting the sales and achieved the business goals effectively.

Analysis of competitive advantage 

There is presence of high degree of rivalry within the Australian retail industry, because of which, there have been major players in the market, which has created high level of competition in the market. There are major competitors of Woolworths like Coles, Myer and JB Hi Fi, often the products need consistent differentiation to meet the expectations of the customers, furthermore create a sustainable place in the competitive business environment (Cohen & Roussel, 2013). The competition is actually based on the pricing strategies followed by different companies to set the costs of products and the other competitive factors are choice of products and location of stores. The major factors or drivers that have increased the presence of rivalries in the future include the entry of a new retail company in the Australian retail industry named Costco (Eden & Ackermann, 2013). The returning back of Coles and replacing the middle and senior management has created stuff competition in the marketplace and could pose serious threats to Woolworths Group in Australia.

Strategy formulation and choice

Vision

The purpose of the company as declared within the various reports declares that the main aim of the concerned company is to facilitate the better quality of the life led by the various members of the community that have been targeted at by the concerned company in discussion, Woolworths Limited. The major vision of the organization is to attain the position of the most responsible retailer that has been functioning within the concerned organization (Woolworths.com.au., 2018). The concerned company claims that the abiding by the set vision might be reflect the passion regarding the commitment of the various clients to perform better business within the concerned territorial boundaries. This might in turn help in the matters that pertain to the sustainability in the various matters that pertain to the clients of the company, the population of the world at large as well as the environment of the planet of residence.

Goals

The goals of the company in discussion, the retail magnet of Australia, Woolworths Limited, is to achieve the position of the most responsible retailer that has been functioning within the concerned organization. The concerned company aims to deal with the various factors that are related to the achievement of the concerned position of being the best retail service provider in the whole world (Woolworths.com.au., 2018). The various factors that are related to this achievement might include the various matters that pertain to the creation of a team of people who comprise of the various customers of the concern and the other members who have been related to the store, the achievement of the factors that pertain to the sustainable sales within the concerned stores within the territorial boundaries wherein the company has been functioning (Woolworths.co.za., 2018).

Initiatives – cost leadership vs differentiation

The cost-leadership initiatives within the organization might be related to the matters that pertain to the various factors that are related to the increase in the profitability of the concerned organization (Goetsch & Davis, 2014). The cost-leadership initiatives help the concerned company to deal with the various matters that pertain to the sales with either a very high profit margin or even lower than the market prices. The former ways help in the matters that pertain to the earning of a higher profit margin through the sales while the latter helps in the matters that pertain to the gaining of the market share within the concerned market (Lechner & Gudmundsson, 2014). The cost leadership technique refers to the implementation of the matters that pertain to the reliance on the various cost advantages that have been put forth within the concern.

The differentiation techniques, on the other hand refer to the various factors that pertain to the strategies that might involve the focusing over a certain group of customers who might be targeted by the concerned members of the organization thereby leading to the gaining of the better clients (Al-Sawai, 2013). The technique involves the various factors that are related to the helping in the matters that pertain to the focusing on a certain section of the society thereby helping in the formation of a client group that might be considered to be loyal to the company thereby creating an advantage of the concerned company in the given market.

The company in discussion is observed to have implemented the cost-leadership technique in the matters that pertain to the formulation of the strategies of the organization (Woolworths.com.au., 2018). This technique might have assisted the concerned organization to deal with the various factors that pertain to the increase of the market share of the concerned company.

Recommendations and conclusions 

With rationale for support of strategy

The concerned company in discussion might be advised to undertake the various strategies that are related to the cost-leadership techniques. The cost-leadership initiatives help the concerned company to deal with the various matters that pertain to the sales with either a very high profit margin or even lower than the market prices (Kaliappen & Hilman, 2013). The former ways help in the matters that pertain to the earning of a higher profit margin through the sales while the latter helps in the matters that pertain to the gaining of the market share within the concerned market (Tanwar, 2013). The cost leadership technique refers to the implementation of the matters that pertain to the reliance on the various cost advantages that have been put forth within the concern. The implementation of the cost-leadership techniques might help in the various matters that pertain to the increase of the market share of the concerned company (D. Banker, Mashruwala & Tripathy, 2014). This might also help the company to have been dealing with the matters that pertain to the increment of the client base of the concerned company.

With rationale for critique of strategy

However, on the other hand it might be suggested that the cost leadership techniques might have some disadvantages as well. The focus on the prices of the various products might lead to the conditions within the concerned company wherein there has been discrepancies that are related to the loss of the sight of the tastes and the preferences of the concerned clients (Kurt & Zehir, 2016). The cost leadership techniques might also lead to the conditions that are inclusive of the fact that there have been advancements on the various technological aspects within the concern. The technique might also lead the company to lose sight on the matters that pertain to the environment-friendly products as have been marketed by the concerned competitors of the company (Wormer et al., 2013). This might lead the company to lose on the various loyal clientele of the retail magnet of Australia, Woolworths Limited. Thus, the company might be advised to focus on the sustainability in the various matters that pertain to the clients of the company, the population of the world at large as well as the environment of the planet of residence.  

References

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