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, 1990) as their guide in the precepts of creative planning. 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 / quality dimension — factors reflecting consumer characteristics. An innovative idea, by the way, might be to include clips of customer interviews where customers themselves describe product benefits. In this way, not only are customers being involved in the business, but also psychology of social decisions illustrates that they would be more likely to purchase product since they have invested time encouraging others to buy it (Ohme, 1982).

By hiring a team of researchers and conducting a composite of qualitative field studies, survey reports, and observations, Woolworth can gain some idea about its customers unmet needs.

There would be free sampling and a weekly lecture by a professional on the merits of its food, its benefits in cooking, and so forth. Again, if this were conducted by a member of the local community this could be advantageous since it would involve the community into feeling a loyalty for its local Supermarket.

Woolworth has already obtained a sustainable competitive advantage; it has also achieved product market expansion and diversification. It now needs to consider reducing prices, or presenting cheaper products.

3. Implementation and the Planning Process

The first logical step is to analyze the needs and unmet needs of its customers.

These 3 sets of strategic questions will need to be answered (Aaker, 1984):

1. Segmentation

Whoa’re the buyers and users of the product or service?

Who are the largest buyers?

What positional customers can be identified who are not now buying from us?

How does the market segment?

How should the market be segmented.

2. Customer motivation

What motivates customers to buy and use the products or services?

What attributes of the offering are important?

What objectives do the customers seek?

What changes in customer motivation are occurring or are likely to occur?

3. Unmet needs

Are the customers satisfied with the product and services they are now buying?

Do the customers experience problems?

Are there unmet needs of which customers may not be aware?

This first step can be conducted within the following 2 years (namely January 2011- January 2013) and assessment then conducted to decided where to proceed from there. The second step, taken simultaneously, would be an analysis of Woolworth Limited itself in order to help estimate the cost and feasibility of implementing the various ideas and particular strategies. This analysis will be more feasible if the organization is broken into the four components of (1) structure, (2) systems, (3) people, and (4) culture.

(Aaker, 1984):

Structure

What is the organizations’ structure? How decentralized is it?

What are the lines of authority and communication?

What is the role of task forces, committees, or similar mechanisms?

Systems

How are budgets set?

What is the nature of the planning system?

What are the key measures used to evaluate performance?

How does the accounting system work?

How do product and information flow?

People

What are their skills, knowledge, and experience?

What is their depth and quality?

What are their expectations?

What are their attitudes towards the firm and their jobs?

Culture

Are there shared values that are visible and accepted?

What are their shared values and how are thy communicated?

What are the norms of behavior?

What are the significant symbols and symbolic activities?

What is the dominant management style?

How is conflict resolved?

Strategy

Where would the new strategy (ies) fit into the organization?

Would the new strategy fit in the strategic plan and be adequately funded?

Would the systems and culture support the new strategy?

What organizational changes would be required for the new strategy to succeed?

What impact would those changes have? Are they feasible

All these organizational composites must slot in with each other for the intended strategies to work.

The various proposals — such as leaflets printed; audio shows fashioned; competitions and demonstrations structured, and finally the Supermarkets restructured with gradual — not immediate — eliminating of former product could be worked through according to the organizations findings regarding conclusion of their organizational components.

All of this would necessarily have to be flexible and open-ended with theoretical deadline ranging from 3 to 5 years, starting from January 2011.

Conclusions

Woolworth limited has surmounted its most difficult period in the past, by using creativity and by diverging in various directions. Its current primary problems seem to be inflation of costs. Using its same innovative and flexible mindset with a focus on internal and external analysis, this report recommends that Woolworth work in two stages: a) by market research that investigates customers needs, b) by inventory of organizational resources in implementing suggested strategies.

The first ad which appeared in 1924 for the department store that opened in Sydney, described the fledgling Woolworth in the following manner

A handy place where good things are CHEAP. Really CHEAP. The CGHEAPEST possible. Come and see. You’ll want to live at Woolworths! From 9 in the morning till 9 at night. Woolworth’s will sell what you want and sell it CHEAP. (Plunkett-Powell, 1999, p.126)

Given that we currently experience a recession, which is contributing to Woolworth’s problems, it might be advisable for Woolworth to reconsider that ad.

Sources

Aaker, D. 1984, Developing Business Strategies, New York: John Wiley & Sons.

Aaker, D., & Day, G., 1986, Marketing Research. NY: Wiley & Sons.

Abrams, R., 2003, The successful business plan: Secrets & strategies Palo Alto, Calif.:

ThePlanningshop.

Hann, M., 1974, ‘Reorganize your company round its market’, Harvard Business Review, vol. 16., no. 2. pp.63-74.

Harvard Business Review on Corporate Strategy, 1999. Boston, Mass.: Harvard Business School Press

von Hippel, E., 1982, ‘Get new products from customers,’ Harvard Business Review, 13, 6, pp.117-122.

Hollingsworth, T., 1990, “Woolworth Corporation.: a case of creativity in action.” Review of Business, Retrieved on October 22, 2010 www.entrepreneur.com/tradejournals/article/9154912.html

IRIS Tasmania, November 2007. “Woolworths Limited Group” “http://www.iris.tas.gov.au/major_comp/woolworths. Retrieved October 22, 2010. Department of Infrastructure, Energy and Resources, State of Tasmania.

Johnson-Laird, P.N., 2006. How we Reason. U.K: Oxford University Press.

Manas, T., 2003, Creating a total rewards strategy: a toolkit for designing business-based plans. New York: AMACOM

Moore, A., 5 March 2006. “Man of the Moment (Interview with Woolworths’ boss Roger Corbett).” Business Sunday (Ninemsn). http://businesssunday.ninemsn.com.au/article.aspx?id=89566. Retrieved October 22, 2010

Myers, J., & Forgey, E.W., 1975, ‘Getting more information from customer surveys,’ California Management Review, 78, pp. 66-72.

Norris, E., 1975, ‘Seek out the consumer’s problems,’ Advertising Age, 22, 3, pp.43-44.

Ohmae, K., 1982, The Mind of the Strategist, NY: Penguin Books.

Pascale, A., 1981, The Art of Japanese Management, NY: Warner Books.

Peters, T.J. & Waterman, R.H., 1982, In Search of Excellence: Lessons from America’s Best-run Companies. NY: Harper & Row.

Plunkett-Powell, K, 1999, Remembering Woolworths’s, NY: St. Martin’s Press

Rogoff, E., 2007, Bankable business plans New York, NY: Rowhouse Pub.,

Stonich, P., 1982, Implementing Strategy, MA: Balenger.

“Woolworth Limited” www.woolworthslimited.com.au. Retrieved October 22, 2010

“Woolworths online.” 2010-06-11. http://www.homeshop.com.au/. Retrieved 2010-06-11.

“Woolworths Limited – Half Year Presentation HY10” (PDF). 2010-01-28. http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01041760. Retrieved October 22, 2010

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