Swot analysis woolworths essay sample

Woolworths Limited (Woolworths or ‘ the company’) owns and operates retail stores that sell food, liquor, fuel, general merchandise and home improvement products in Australia and New Zealand. It is headquartered in Bella Vista, Australia, and employs more than 197, 000 people. The company recorded revenues (excluding financial income) of A$58, 921. 7 million (approximately $60, 506. 7 million) during financial year ended June 2013 (FY2013), an increase of 6. 9% over FY2012. The operating profit of the company was A$3, 594. 6 million (approximately $3, 691. 3 million) during FY2013, an increase of 7. 4% over FY2012. The net profit was A$2, 259. 4 million (approximately $2, 320. 2 million) in FY2013, an increase of 24. 4% over FY2012.

SWOT ANALYSIS
Woolworths Limited (Woolworths or ‘ the company’) owns and operates retail stores that sell food, liquor, fuel, general merchandise and home improvement products. The company’s strong focus on Australian food and liquor business drives its top-line growth. However, low consumer confidence in Australia may have a negative impact on the company’s retail business. Strengths

Weaknesses

Strong focus on Australian food and liquor business boosting the company’s top-line growth
Multiple retail formats and banners
Efficient supply chain management
Extensive private label portfolio offering

Significant reliance on the Australian market

Opportunities

Threats

Increasing focus on retail data and big data analytics could help Woolworths strengthen its Australian supermarkets business
Strategic initiatives may strengthen the company’s online retail presence and enhance customer base
Launching new home improvement stores in Australia

Intense competition in Australia and New Zealand
Low consumer confidence in Australia may have a negative impact on the company’s retail business

Strengths

Strong focus on Australian food and liquor business boosting the company’s top-line growth Woolworths has been keeping a strong focus on its Australian food and liquor business by launching new products, opening new stores and introducing marketing campaigns. In its Australian supermarkets business, the company introduced a number of new products including sweet Solanato tomatoes, sweet crunch lettuce and ripe stone fruit (peaches and nectarines). In FY2013, the company opened 11 meat serveries providing specialty fresh meat cuts and specialist advice; and 91 new bakeries to broaden its range in artisan style breads, patisserie and premium cakes. During the reporting period, the company had bakeries in 78% of its supermarkets. Woolworths is also trialling a new premium deli counter concept and has added 38 speciality cheese counters with the potential to roll this out to 250 stores. During the reporting period, the company opened 34 Australian Supermarkets, a net increase of 25 stores, bringing the total to 897 stores.

In its liquor business, the company opened 16 (15 net) Dan Murphy and 38 (14 net) BWS stores during the reporting period. In FY2013, there were 1, 355 liquor outlets. During FY2013, to strengthen its presence online, the company implemented ‘ click and collect’ in all Dan Murphy’s stores in Australia. The company has been introducing marketing campaigns to enhance its customer base. For instance, in May 2013, it launched ‘ More Savings Every Day’ marketing campaign with several prices reduced on branded and own brand products. Wolworths launched ‘ Extra Special’ offers in June 2013 which, according to the company, provides savings of up to 50% on more than 1, 000 lines exclusively to its Everyday Rewards loyalty program customers. The company has also reinvigorated its specials program targeted at families including buy one get one free, half price specials and ‘ Big Family Special’.

The company’s strong focus on Australian food and liquor business has helped increasing its comparable store sales by 2. 7% in FY2013 on a year-to-year basis. Also, it helps the company in deriving the majority of its revenues (which was about 68% in FY2013) from its largest business segment, Australian food and liquor.

Multiple retail formats and banners
Woolworths operates its retail business under various banners. Its supermarkets chain operates under Woolworths brand and operates 897 stores in Australia; and under the name of Thomas Dux, a specialty grocer, operating 11 supermarkets in the country. Woolworths offers liquor to its customers under different brand names such as Dan Murphy, BWS, Cellarmasters and Langtons. The company’s BIG W segment, which provides its customers with everyday low prices, offers a range of well known brands in Australia, including Apple, Bonds, Peter Morrissey and Mambo. BIG W also stocks a range of house brands including, Smart Value, AWA, Dymples, Emerson and Avella. Masters Home Improvement is the company’s home improvement big box retail offer, whose each store stocks more than 35, 000 different product lines from outdoor furniture to a new bathroom with all the accessories.

During the year in analysis, Woolworths’ petrol retailing division had 613 canopies in Australia of which 131 were co-branded as Woolworths/Caltex. Multiple store formats enable Woolworths to cater to specific needs of a large audience. Also, the multi-format strategy ensures relative resilience. For instance, when consumers are trading down, discounters are the preferred choice and as the economy recovers, specialty retailers are expected to benefit. Therefore, a wide variety of store formats coupled with retail banners strengthen the company’s brand image by addressing customer specific needs. Efficient supply chain management

Woolworths had transformed its supermarket supply chain through the implementation of various systems including StockSmart (distribution center forecast based replenishment), AutoStockR (store forecast based replenishment), warehouse management and transport management. The company has been actively transferring this intellectual property across the Woolworths Group. AutoStockR has also been implemented across BIG W stores, New Zealand Supermarkets and the company’s liquor stores. Additionally, the company is continuing to develop the next generation replenishment solution which will reduce day’s inventory as well as save costs in stores, distribution centers and transportation. Woolworths completed the re-engineering of its National Distribution Centre (NDC) located in Mulgrave. This enabled the NDC to increase the order processing capacity and reduce costs.

The company implemented various initiatives to strengthen its supply chain management and gain financial benefits. The company is applying its Project Refresh expertise across other businesses to improve operating efficiencies and generate cost savings. Project Refresh was launched in 1999 to improve business efficiency processes and business restructuring programs. The company is also working on the Hoxton Park distribution center, a shared service model for BIG W, Dick Smith and Home Improvement. Woolworths is also expanding its global sourcing and international logistics capabilities.

Thus, Woolworths’ efficient business processes enable it to strengthen its profitability. This is a key advantage in the current economic conditions when revenue growth cannot be assumed and is tough.

Extensive private label portfolio offering
Woolworths has built a strong portfolio of private labels. The demand for private label product range is increasing. The growth in private label products exceeds the company’s overall sales growth, and endorses the quality and value for money that customers are able to associate with these brands. The private label products have also recorded good levels of repeat purchase. Sales of Home Brand continue to increase as customers opt for more budget-friendly products. Other brands such as Select, Freefrom, Naytura and Organics have also gained strong customer acceptance. The launch of the Macro Wholefood Market range in Supermarkets in FY2010 also led to strong sales and positive customer feedback. In FY2010, Woolworths purchased a 25% stake in Gage Roads Brewery; this move improved the company’s presence in the private label market for beer. The company expanded its Macro Wholefoods Market range and continued the development of its Select and Home Brand products.

Consumers increasingly prefer to shop private label brands as they are cheaper than the national brands and they are looking for value. This behavior has been observed in Australia with shoppers increasing their store repertoire. Woolworths has an established presence in the private label market Therefore, Woolworths is well-positioned with a strong portfolio of private label brands to increase revenues and profitability.

Weaknesses

Significant reliance on the Australian market
Woolworths is significantly dependent on its domestic market, Australia, for most of its revenues. In FY2013, the company generated 92. 1% of its total revenues from Australia. Although the company has its presence in New Zealand, it generated a meager 7. 9% of its total revenues from the country during the year in analysis.

Dependency on Australia could make the company’s business and operations vulnerable to country-specific trends. Such geographic concentration increases the risk that, should any adverse economic, regulatory, environmental or other developments occur in Australia, the company’s business and financial condition will be affected. Woolworths may be substantially affected by the political or cultural changes that occur due to the geographical concentration in Australia.

Opportunities

Increasing focus on retail data and big data analytics could help Woolworths strengthen its Australian supermarkets business
Woolworths has been concentrating on taking customers’ insights which may likely help it in strengthening its Australian supermarkets business. For instance, in April 2013, the company acquired a 50% stake in Quantium, Australia’s data-driven strategy business with capabilities in retail data and big data analytics. Woolworths plans to increase its customer analytics team size and will use Quantium’s data, analytical, media and software services to leverage its ‘ Everyday Rewards’ data to deliver insights and better decisions across pricing, ranging and promotions.

The company’s ‘ Everyday Rewards’ has already reinforced its position as Australia’s leading retail loyalty program with membership up by 11% to more than seven million members and card scan rates increasing following the introduction of ‘ Extra Special’ offers. Also, in FY2013, Wooloworhts rolled out the ‘ Net Promoter Score’ customer satisfaction program to stores, which involves asking customers for feedback on their most recent shopping experience. Strategic initiatives may strengthen the company’s online retail presence and enhance customer base

Online retailing in Australia is under-penetrated and has a huge potential for growth. Woolworths has been focusing on the online retailing to increase its sales. It has been investing in development of divisional websites to enhance customer usability. For instance, it launched BIG W online site in 2010. As of FY2013, the BIG W transactional app was downloaded more than 500, 000 times and used monthly by more than 80, 000 customers. In January 2013, Big W introduced apparel online with its ‘ Back to School range’ and in May 2013, it added industrial wear. Going further, more than 13% of the company’s online sales come from mobile devices. To further strengthen this business, in September 2013, BIG W launched a new website to enable its customers to download eBooks to their mobile devices.

Such strategic initiatives are likely to strengthen the company’s online retail presence and enhance customer base. Launching new home improvement stores in Australia

Masters Home Improvement (Masters), a joint venture between Woolworths and Lowes (a US-based home improvement retailer), has opened 45 stores in Australia in just over two years, representing an investment of over A$1. 5 billion (approximately $1. 5 billion). Most recently in April 2014, Masters announced its plans to build 11 stores in South Australia over the next six years. Masters opened its seventh store in Western Australia at Brighton in April 2014. The new store offers a range of more than 35, 000 products in Australia at ‘ Best Price Guarantee’. Masters store at Brighton will offer a variety of big brand appliances, kitchens, paints, and garden range. Masters also provides ‘ click and collect’ home delivery services on a range of products to its customers. New home improvement stores are likely to help Woolworths in strengthening its business in Australia.

Threats

Intense competition in Australia and New Zealand
In its domestic market, Woolworths faces an intense competition from its arch rival, Coles, a subsidiary of Wesfarmers. Woolworths offers little differentiation compared to Coles, which makes it very difficult to sustain a competitive advantage. Both the companies enjoy similar quality store locations, with neither having better/worse store locations. Also, both Woolworths and Coles have been engaged in a price war since a long time. Woolworths’ ‘ More Savings Every Day’ marketing campaign faces stiff competition from Coles’ marketing programs such as ‘ Down Down’. In January 2013, Coles introduced another 100 ‘ Down Down’ price cuts, including lowering the price of milk and bread at Coles Express stores.

In New Zealand, Woolworths experiences competitive pressures from Foodstuffs, New Zealand’s largest retail grocery organization. Foodstuffs has more than 700 owner-operated full service supermarkets, retail food warehouses, grocery and small convenience stores, large and small format liquor stores and fuel sites operating under several key banner groups such as New World, Write Price and Pak’nSave. Foodstuffs follows owner operator business model and these retailers enjoy relationships with the local community and on average are more likely to be passionate and heavily involved in the business compared to a salaried store manager in case of Woolworths. Intense competition in Australia and New Zealand could affect Woolworths’ market share.

Low consumer confidence in Australia may have a negative impact on the company’s retail business Australia has been witnessing low consumer confidence. According to industry sources, consumer confidence in Australia averaged 101. 92 from 1974 until 2014. In May 2014, Australian government disclosed a spending cuts and new taxes in a 2014/15 federal budget. As a result, Australian households were perturbed about their finances. This resulted in consumer confidence in Australia falling by 6. 8% to 92. 9 in May 2014 from the previous month.

As Australian consumers would tend to save more, there would be downward pressure on their discretionary spending. This, in turn, may have a negative impact on company’s retail business.