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Woolworths are selling a wide range of products; this includes food, clothing and home ware and digital products. Woolworths also have a financial service, where they are in a joint venture with Absa bank. The financial services plan provides the following services to their customers’ loans, store cards and the Woolworths Visa cards. http://www.fastmoving.co.za/retailers/woolworths-1/
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1.2 The market environment of Woolworths
Woolworths existing target market is the high income earners and the LSM (living standard measure) group 8 to 10. Woolworths is also planning to target two markets like the lower LSM groups and the growing black middle class, because in a few years’ time they will be buy food and clothes from stores. Woolworths have 637 stores that they are operating from in South Africa. They have stores in all 9 provinces, which include major cities and urban areas. Woolworths are making use of suppliers for their product, but Woolworths as have their own farms which provide most of their food products. Their suppliers are known for their quality and the reason why Woolworths have their own farms is, because they want to make sure that they provide their customers with good quality products (organic) and about their environmental awareness. Woolworths have a lot of competitors in South Africa like Shoprite, Pick and Pay etc, but they do not share the same values, vision and mission as Woolworths and that is by giving their customers value for their money.
1.3 The market size of Woolworths
The last annual report for Woolworths holding limited was in 2011. Their turnover for that financial year was R 25 582 billion, with 1% less than the previous financial year. In the 2010 financial year, their percentage change in turnover was 10% and in 2011 the last financial year it was 9%. Overall the percentage in the change in turnover has increased for the last 3 years. According to the previous annual report, Woolworths have 24 649 employees that work for them. That includes all employees, like the general workers, the till operators, the managers, the cleaning staff etc. Woolworths have an upper hand when it comes to the South African market. Woolworths have a 9-10% market share in South Africa, that is about 4 900 000 people. Woolworths have 52% shareholders on the JSE top 40 index and they are the top percentage gained retailer on the JSE. www.bizcommunity.com/Article/196/182/70991.html. On the new entry side, the Chief executive of Woolworths told the new age that he has no sleepless nights about Wal-Mart who want to enter the Africa market. http://www.thenewage.co.za/mobi/Detail.aspx?NewsID=37476&CatID=9
1.4 The vision statement of Woolworths
Woolworth’s vision is ‘to provide quality products and services to its customers all the time through price strategies, fresh food strategies and human resource strategies.’
1.5 The mission statement of Woolworths
Woolworth’s mission statement is ‘to deliver to customers the right shopping experience each and every time. ‘http://www.fastmoving.co.za/retailers/woolworths-1/
1.6 Woolworths short and long term goals.
1.6.1 Short term goals
The short term goals of Woolworths are based on their products. Woolworths want to continue offering high quality and delicious food at the best possible price for their customers. Woolworths have and still planning to open more outlets in many communities, to make shopping easier (convenience) for their customers. Woolworths are also looking at ways to improve (innovation) their existing products and their goal therefore is to create more nutritious, tastier and a wider range of products. All these goals mentioned above are the short term goals for Woolworths, because they are focusing on achieving these goals as soon as possible. http://www.thenewage.co.za/mobi/Detail.aspx?NewsID=37476&CatID=9/
1.6.2 Long term goals
Woolworth’s goals are to driver social development and to focus on environmental needs. They want to sustain the growth within the social development. With social development they want to look at poverty, the things that cause poverty in South Africa as well as what they can do to prevent or to minimize poverty in the country. The reason why they want to focus on poverty is, because they believe that if they teach the poor people to make a living for themselves or to start their own businesses one day, they will become part of their market share.
Environmental problems or needs have become a huge issue not just in South Africa but globally. Woolworths have started with their environmental awareness projects where they want to educate the nation about the environmental issues that we are facing. They have started to buy and sell organic products, but they are still planning to change their whole product range to organic products and products that do not have an impact on the environment. (Justin Smith- Woolworths cooperate, 14/08/2012)
1.7 The strategy of Woolworths
Woolworths focus on four areas which they are very important for their business. The four areas are as follow; their customers, their operations, their people (employees) and their good business journey.
1.7.1 OUR CUSTOMERS
â€¢ “To be a customer -centric business”
What Woolworths mean with a customer – centric business is to know who their customers is and what their customers want, so they that can provide or cater for their customers. There are two ways that Woolworths have identified to do this; which is by segmentation and the shopping habits of the customers.
â€¢ “To be a brand value -driven business”
Woolworth’s plans are to ensure that their brand and their values are understood by their customers.
â€¢ “To build strong profitable customer relationships”
Woolworths want to build a strong customer relationship, through their W rewards loyalty programme. The programme help the customers to save money, the customers are very happy with programme and their participation are exceptional.
â€¢ “To get our formats right”
Woolworths want to make their products available to all their customers, by making shopping convenient to their customers and their outlets or stores more visible.
â€¢ “To grow our product dominance Clothing and General merchandise”
Woolworth’s strategy for dominance in their product line is to supply their customers with all the products they need like, women footwear, accessories etc.
â€¢ “To enable a multi -channel world”
Woolworth’s plans are to optimise and further expand their online offering in terms of products, information, services and delivery options.
1.7.2 OUR OPERATIONS
â€¢ “To expand our footprint in Africa”
Woolworth’s plans are expand their footprint in Africa and to be to best retail company in Africa.
â€¢ “To lower the cost of doing business”
Woolworths want to spend less money on products like, food clothes, so that the customers can also save money while purchasing their products.
â€¢ “To simplify our business model”
Woolworths want to make their business model simpler. Their franchise model add more costs, the model is complex and there is a lack in consistency and may have an impact on their market share.
â€¢ “To improve our availability”
Woolworths plan to improve the availability of all the products so that they can obtain and gain a high market share in South Africa as well as in all the other countries that they are operating from.
â€¢ “To improve our sourcing capability”
Woolworths are planning to improve their sourcing capability from import agents to foreign manufacturers. By doing so, Woolworths will save a lot of cost and can lead to better pricing on their products.
1.7.3 OUR PEOPLE
â€¢ “Establish a non-negotiable commitment to EE”
Woolworths want to focus more on the Economic Empowerment of their employees by looking at sourcing, retention, talent identification, development and promotion of their employees.
â€¢ “Develop capability, succession and career pathways”
Woolworths want to develop their workforce and structures to support the delivery of the strategic plans and grow for their next generation of leaders from.
â€¢ “Establish a performance motivated culture”
Woolworths want to recognise and reward their employees more often for their loyalty, commitment and their hard work.
â€¢ “Enhance values -based leadership”
Woolworths want to enhance more value based leaders, employees who understand their values.
1.7.4 OUR GOOD JOURNEY BUSINESS
â€¢ “Sustainable farming”
Woolworths want to extend their farming programme to 50% by 2015, so that they can minimize cost.
Woolworths want to save more when it becomes to the use of water, especially the waste water in their food supply chain.
Woolworths want to continue to focus on energy efficiency in their own operations with a target to reduce relative energy usage of 40% from their benchmark year. http://www.fastmoving.co.za/retailers/woolworths-1/
2. Analysis of Strategy
Logically just by scrutinizing and analysing Woolworth’s strategy, we can come to the conclusion that they possess an excellent strategy and overall it has been given a lot of thought to improve the business in different aspects. But there are things that can and should be changed in their business regarding both internal and external forces. Firstly with their internal forces, it would be an easy adjustment for them to make changed within the workplace because they have full control over their environment. What should be changed is the loyalty card system which is known as the W-rewards. It’s a very beneficial system to the public whereby the customers are rewarded with W-rewards when the purchase items and they are able to gain up to 20% discount on certain items. The W-rewards accumulate and in return they’ll be able to use it in future to purchase items at Woolworth’s with their reward points. W-reward card holders are also allowed a special privilege in the first hour and a half in a Woolworth’s sale in order to get first preference. Why we think it should change is that slight altercations can be made to this system which will be of great benefit to the company because it can strengthen their consumer relationships and on a long term basis increase their clientele base. The upside about it is that Woolworths won’t even have to fork out funds to make this change and in return can lead to such benefits for them which just make the whole transformation of their loyalty card system more sensible. Another that can change would be their packaging regarding their food on certain products and variety of food necessities. As we know, Woolworths particularly for the lower income group so their food product prices are a bit steeper than Shoprite for example. Why it should change is that the can wide their target market by making these simple changes because they’ll not be only catering for middle and higher income groups, but the lower income groups as well. www.woolworthsholdings.co.za
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Coming to their external forces, Woolworths intend to expand the franchise into North Africa and establish approximately 400 stores by 2014. When a company expands, generally lots of factors have to be taken into consideration. Such things as whether there’s market for the business, competition, buying power of consumers and is the product or service what the people are looking for. Why we think it should change in a sense of will the business be a success with the expansion and will it meet the consumers’ needs elsewhere? Will they be able to afford the products? That’s where we will analyse the possible outcome of this particular Woolworths decision in Question 3
Linking Woolworths to the macro environment and certain PESTAL factors, we can analyse as well what aspects of their strategy should change in order to improve themselves in the different external factors in which they have absolutely no control over.
Technological environment- technology refers to the knowledge of how to do something. Technology constantly changes the workplace resulting in the business becoming more effective and efficient. The reason why they should make an adjustment here is in relationship to the Online shopping service. Its displays incompetence and alterations here needs to be made.
Economic environment- a country’s economic state is probably the biggest influence on all businesses. South Africa is currently in economic turmoil and the rand is getting weaker. So a change should be considered in importing to obtain the resources for manufacturing their products because it’ll work out more costly so other alternatives should be considered.
Ecological natural environment- it’s crucial of not only businesses, but as people to take care of the environment and surroundings. A major change and why Woolworths should make is regarding an effective and efficient recycling system to keep their environment and surroundings in a state of cleanliness.
3. How would we change Woolworth’s strategy?
The research has shown us that Woolworths is already using some of the generic strategies. The company has done that by not only focusing on selling clothes but selling food products as well. They are selling their own manufactured products. Woolworths has also used the differentiation strategy that distinguishedtheir products and services from those of their competitors. The company differentiated itself in terms of its environment friendly approach to doing business.
By applying the analysis, we can see that Woolworths has more internal strengths and weaknesses to face with. The company is proud that they have been giving their customers quality products at the lower prices. Applying the lower price strategy has made Woolworths to have more competitive advantage with other major competitors. In the analysis it is also given that the opportunities and threats of Woolworths in the new markets when compared with other powerful competitors. Woolworths still need more effective strategies to win the completion with these strong competitors.
Woolworths can change their pricing strategy and decision making process. Woolworth’s pricing strategy should be changed to accommodate the needs of its customers living in the townships by pricing their products at affordable prices without compromising quality.
They should also change their decision making process; by that we mean they should distinguish the root cause from symptoms to identify the right solution for the right problem for instance recently Woolworths came under fire as they opted to remove Christian magazines from their shelves and discontinue their sales. This was met with a huge outcry from the Christian community many voicing that they would boycott the chain store. They could have checked the reason behind people not buying the magazine and follow a proper investigative method before taking a decision to remove the magazines off the shelves.
They could also add internal growth strategies as part of their strategy. The internal growth strategies will maximise their strengths and minimise their weaknesses. These strategies are usually low in risk as the organisation focuses on improving what it does already.
Market development is one of the strategies that Woolworths should consider if they want to grow, but still focus on what they do currently. The market development strategy also builds on existing strengths and skills of the business. It is a strategy according to which a company can sell its present products in new markets by opening additional outlets, for instance Woolworths can also open their store s in the townships or perhaps have their own Woolworths shopping centres in the suburb areas.
A second internal growth strategy Woolworths could consider if they should compete in the arena that they know is called product development. Product development implies modification implies modifications of the existing products or additions to present products to increase market penetration within the existing market group.
A third strategy that Woolworths could consider is innovation. Innovation is more risky than other strategy organisation that choses this strategy continuously searches for original or fresh ideas. Woolworths would have to focus on creating innovative products or on creating new ways of getting their products to the market, or designing new processes or it could focus on any other area in which they can innovate.
3.1 Advantages of the Strategy
Multiple locations: that convenience to their customer both in cities and townships.
New client bases: The Company will be able to penetrate existing customers.
Marketing: By following a decision making process is almost similar to identify a target market. In a way that Woolworths will gather information (market research) about the market and customers’ current and future needs. The company will be able to make informed decisions that will allow success for the company.
Decreasing costs: Reducing the costs of production means Woolworths will be able to take an advantage of producing more products at lower costs (economies of scale) as they will be able to offer their products at affordable prices and get more customers as a result. http://smallbusiness.chron.com/advantages-disadvantages-limited-growth-strategies-41321.html/
Accommodating all income groups within the economy might be of a greater cost to Woolworths as they will need to change some of their suppliers to reduce the costs of production.
Decreasing the cost might also affect the quality of their products.
Expanding to townships will cost them huge money.
The response form the township might not respond as expected by the business.
Laws and regulations might be very strict and affect the success of the business.
Economic conditions might also be a factor like high unemployment rate within the country. http://smallbusiness.chron.com/advantages-disadvantages-limited-growth-strategies-41321.html/
Generally, Woolworths has a very good business strategy and we can analyze that many aspects of the internal and external market has been taken into account. Many options are considered in improving the businesses image towards the public and what it has to offer regarding their customers, operations, and people. Woolworths has big plans for the future. It’s not only just about improving their business, but expanding it greatly around the continent so we can see that their mindsets are wide spread and that they are setting big goals for themselves. We do believe that a few important adjustments can be made to their business internal and external forces which can either result in a positive or negative outcome for them.
Concerning internal forces building customer relationships, Woolworths has launched a W-rewards loyalty program 2 years which is great that increased their consumer spending. But there are ways in which they could increase this program by making slight adjustments to it. Taking Clicks into consideration, they have their click club card system, and they implemented special days in the program such as double points days and senior days as well. That should be an idea that Woolworths should implement to improve their image even more to the market. It will show greater loyalty to the customers on their behalf and it’s nothing better for a consumer to acknowledge that they benefitting more from a business in comparison to the next because they would be gaining more in this situation. So Woolworths should grant double point W-rewards on say public holidays for an example and they should have set dates in the year for double W-rewards. Pensioner/senior citizen days should be put into action as well whereby they’ll gain double points on these days. It would also be more courteous and prudent to give the senior citizens special privileges on these days whereby they are allowed to cut the long queue in the store and be served immediately. Imagine how that kind of gesture will improve Woolworth sense of Hospitality to their customer especially the elder. Customers would become more drawn to the company because it gives the customer the impression that it’s not all about making sales, but making a personal connection with the clientele which in return is stronger and can automatically expand their clientele base. Another implication that should fall away is that the W-reward card can only be rewarded to a person of 18 years or older. That works to a disadvantage to the company because many minors shop at the store and in return all the W-rewards are lost which could’ve been linked up to the parents and I’ll explain how. Woolworths have to create a family card system as well in which any member in the family can use with their own individual card, and in return lots of W-rewards can be accumulated on one set card number. It would be good advertising for them and people would definitely be drawn to that idea. Also only customers that are in possession of a W-reward card should be allowed access to specials in the store such as buy 2 get 1 free for example. This way people who are not in possession of it or who are not by nature regular Woolworths shoppers, will automatically be drawn to become a W-reward card holder.
Regarding the food products and services, generally it’s very well done and there quality and packaging is excellent. This perfection is the reason why they are able to charge more for their products. But one thing we think could change is the availability and accessibility of a wider range of basic household necessities and the ability to being able to cater for lower income groups as well. Maybe they can use a different packaging or change certain suppliers. But the fact that they would be able to cater for a lower income group would make a big difference. Their clientele base would increase and as I’ve mentioned by the external forces, would give them a competitive advantage to expand into the rest of Africa because they are more costly than the average clothing or food store.
Woolworths is undeniably a huge a successful company, concerning External forces, they wish to expand the company in Africa and establish about 100 stores. They should think logically about the business decision, yes they are a well-established and successful company in South Africa but would they succeed elsewhere? Taking into account that South Africa has the largest economy in Africa, so what would the buying power be from a local African neighboring country. If we think about it generally, Woolworths isn’t particular the store for an average consumer, you have to earn a decent income just to shop at Woolworths. The food sections are more costly than an average supermarket, yes there quality and packaging is better, but is that really what another African country need? Their buying power is less and they might not even be able to afford generally all of Woolworth’s products because they might have an alternative or substitute store in their country. Many African countries are suffering from starvation, famine and poverty. Where on earth are they going to afford Woolworths products which are for good income earners in South Africa, so the question still stands ‘will they be able to make it elsewhere in Africa?” In depth research has to be done. Not only are their many poor African countries, but the whole world is currently in a state of economic turmoil so is it the best decision, definitely not now in this point in time.
Technological Environment- there have been compliments to Woolworth’s online shopping service whereby the incompetence results from instances like late delivery of products to the consumer’s residence. Not by hours but days. Consumers are also allowed to direct purchases on the website with a credit card, and there has been a scenario whereby a customer has paid for certain goods with a credit card, and in return Woolworths couldn’t present the customer with the product on delivery because they didn’t have it in stock (www.Hellopeter.com). So in a nutshell, these incidents are complete disasters and there’s no way that this can happen in future. So Woolworth’s should emphasize time management on their system and upgrade the software in order to remind them about customer deliveries because the customer at home is just as important as the customer in the store. Regarding purchasing products that’s not in stock, it looks like their Internal and Inventory control measures are weak. All their stock has to be punched into the system, so that when a customer buys that particular product, it gets subtracted from the existing stock on the system. In return, it will eliminate the error of allow people to purchase products online when the product is not even in stock in the first place.
Economic environment-South African currency is weakening by the day, and this doesn’t help because some of Woolworths resources are imported so as time progresses, it’s working out to be much more costly to import. So the way in which they can solve this is by connecting with more local suppliers of material and farmers for food resources which can save them money and decrease their expenses.
Ecological/natural Environment- Woolworth’s should implement a disposal, hygiene or recycling programme whereby they can re-use the packaging for different purposes and just to implement hygiene to improve cleanliness in the environment. In return it improves their image to the public and creates more exposure because it’s for a good cause.
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