The Success Factors Behind Woolworths’ Success

Woolworths is regarded as one of the retail giants in Australia. It has its headquarters in Bella Vista in Sydney. The company is regarded as a mammoth retail company as it earns huge revenues and is regarded as the second largest in New Zealand. In Australia, Woolworths won the Woolworths supermarkets, Big W, the department store, and the everyday rewards, the customer loyalty program. The retail organisation was founded in 1942 in Sydney, and since 1960, Woolworth has traded in almost every Australian state. The company encountered important changes in 2012 due to its concern for the retail supermarket sector. There are about 1086 Woolworth stores as of August 2022. Of these, there are Wolworth in Sydney and 329 in South Wales.
For 98 years, Woolworth has been at the core of the Australian supermarkets. It has gone through difficult times; however, it has always succeeded in catering to the needs of its customers. Thus it has always been able to earn revenue. For instance, the company was capable enough to deal with the COVID-19 crisis and has always committed to prioritising the customers. Besides this, the company has always responded properly to the demands and expectations of the customers. In the words of the company’s CEO, customers are always ahead of everything, and this aptly shows dedication towards the customers.

Despite the outbreak of COVID, the company has made a profit of $1.5 billion. In the words of CEO Banducci, the profit mainly resulted from the investment they made in the previous year in supply chain resilience. According to the announcement by the ASX that was made on 14th December 2022, Woolworths decided to sell 5.5 per cent of the capital that the Endeavour Group issues and this has happened using the block trade for a share of $6.46 (Aclei.gov.au, 2022). In response, the CEO stated that Woolworth’s partnership with the Endeavour Group had taken the organisation to new heights. As of February 2023, the net worth holdings of Woolworths is $4.496 B.

PESTEL analysis for Woolworths

The macro-environment analysis studies the external forces which play a major role in influencing the performance of the giant retail industry, Woolworths. In addition, the macro environment analysis also studies the performance of the retail industry in general.

• Political environment

Australia has closer relations with New Zealand that have benefitted the performance of Woolworths for a long time. The presence of the two countries has built Australia and New Zealand closer economic relations and Trade Agreements. This has combined the two economies and has offered the chance for Woolworths to function in the enlarged economy.
Both countries enjoy political stability that induces a perfect environment for conducting business. In addition, it provides suitable assistance for the shareholders in the domestic and foreign markets, making their investments safe. Besides this, there exists no fear of political wars that might affect business and organisation functions.

Figure 1: Corruption Index rate of Australia
(Source: tradingeconomics.com, 2023)

Australia has political stability, which has enabled Woolworths to expand its market and earn significant revenue in return. In 2022 on 30th November, the Australian Parliament passed the National Anti-Corruption Commission Act and the National Anti-Corruption Commission. In addition, Australia scored 75 out of 100 on the Corruption Perception Index; however, in 2014, the corruption Index rate was 81 (tradingeconomics.com, 2023). This implies that corruption in Australia is gradually declining, which is a good sign for all the retail stores to expand, especially Woolworths.

• Economic factors

In 2022 the GDP rate in Australia has grown by 3.66 per cent compared to 2021. Moreover, the GDP rate is expected to rise in the forthcoming years, a positive sign for the business to expand. Besides this, the purchasing power parity of the people of Australia is also rising over the years. As per the 2021 report, the purchasing power parity of the people of Australia was reported at 55949 USD in 2021 (tradingeconomics.com, 2023).

Figure 2: PPP rate of Australia
(Source: Leggatt, 2023)

New Zealand and Australia prefer an economically sound environment, and compared to the nations, both New Zealand and Australia possess a high standard of living. Besides this, the country scores low on the inflation rate. Presently the inflation rate of Australia is 7 per cent, which is lower than compared to the inflation rate from December 2022 (Leggatt, 2023). In addition, the crime rates in Australia are the lowest in the world, and this has been certified by the World Health Organisation. The economy of Australia comprises the manufacturing industry, which implies a positive sign for the expansion of Woolworths.

• Social factors

Australia is a multiracial and multicultural nation with a smaller population than other countries. Presently the population of Australia is 26 million. Upper-class and middle-class people mostly prefer buying their necessities from Woolworths. As per the reports of the Australian Bureau of Statistics, in 2022, $11 billion was spent by Australians at supermarkets (SophieWallis, 2023). In addition, as per the record of April 2021, Australians spend about $10.2 billion on groceries. In other words, it implies that per consumer, $464 per person is spent.

Figure 3: Preference of Woolsworth by Australians over the other retail stores
(Source: Leggatt, 2023)

This has acted as the success factor for the expansion of Woolworths. Generation Y pays more for grocery shopping than Generation X. People from New South Wales pay more for grocery shopping. Moreover, it has also been founded that Australians prefer to spend more on buying groceries. These preferences have remained unchanged since 2021 (Leggatt, 2023). As a result, Woolworth is regarded as one of the best choices for Australians regarding grocery shopping.

Figure 4: Monthly supermarket retail trade in Australia
(Source: finder.com.au, 2023)

• Technological factors

Australia is a technologically advanced country. Being a tech-powered economy, the country has been capable of outsizing the technology sector by A$167 billion (finder.com.au, 2023). The country takes pride in declaring its proficiency in technological skills and acquiring a position in the global rankings. Australia is regarded as one of the top 10 contributors in the world for its contribution towards technology. As a result of this, Woolworths has succeeded in investing heavily in information communication and technology by which it has been able to improve customer satisfaction and service delivery. The self-checkout AI of Woolworths has been expanded, which can scan the customers’ items. In addition, AI technology is expanding to most stores of Woolworths.

• Legal factors

As per the Fair Work Act 2009, Australian workers are offered basic rights such as compensation, paid leave periods, and safe working environments. Moreover, the employees can work up to 38 hours a week. The employees are entitled to take paid holidays for annual and personal leave. They are also entitled to healthcare and the pension system. Similarly, at Woolworth, there exists a diverse employment system, and the employment in the organisation varies from part-time to full-time jobs. As per the Fair Act 2009 norms, Woolworths pays their employees. In addition, the company aims to protect the employees’ welfare, health and safety. Due to all these reasons, Woolworths can expand successfully in Australia and New Zealand.

• Environmental factors

Woolworths is making significant progress towards its climatic ambitions. In other words, the retail company has committed to transforming the operations and the retail network to green electricity in the forthcoming years. This comprises almost 11000 metro stores and the Woolworths market, 180c countdown supermarkets, distribution centres and the 176 BIG W stores that are transforming to the adoption of green electricity in the forthcoming years (Hendy, 2022). In addition, the transformation of the Woolworths group to the adoption of renewable energy by 2025 will lead to an influx in green electricity.

Porters Five Forces Analysis of Woolworths

• The threat of new entrants

Woolworths is one of the giant chains of Australian supermarkets that offer shopping for fashion, beauty, homeware and food. The company is operating in a sector where the costs involved in entering by the new firms are very high as they are fighting against a giant already existing company. Besides this, the new firms’ time and cost to enter the market are also high. This acts as a benefit for Woolworths to expand in Australia and earn enough revenue. Also, the new companies willing to enter the market must come up with differentiated products and new ways of doing things that will make them stand apart from Woolworths. As the products the company sells are highly differentiated, the new entrants need to introduce a unique value proposition in the market. Another issue that the new entrants will face is the huge capital required for establishing the operations.

• The threat of the substitutes

As the products manufactured by Woolworth are capable enough to meet the customers’ needs, there is almost no scope for the threats by the substitutes. However, if any of the players have to stand ahead of Woolworths, in that case, it has to introduce a distinct value proposition that will be non-identical from what is being manufactured by the company. Hence, the threat of substitutes is a moderate force regarding Woolworths’ functioning.

• Bargaining power of customers

The bargaining powers of the customers act as a weak force, and this implies that the consumers need control over the prices of the products that Woolworths manufacture. Also, the company sells highly differentiated products that are unique to what other brands manufacture. The customers who purchase their products from Woolworths are sensitive about the price of the products. However, if the company decides to raise the price of the products, in that case, the consumer may switch to other companies for purchasing their products. When it comes to the bargaining price of the consumers to Woolworths, it is moderate. As a result, the company has continued to succeed over the years.

• Bargaining power of the suppliers

Woolworths have a lot of suppliers in its operations. All the suppliers compete against one another so that they are capable enough of offering the best quote to the company. In addition, the suppliers always want to have a good association with the company as Woolworths is a reputed brand. The bargaining power of the suppliers is less than that of the bargaining power of the consumers.

• Competitive rivalry

Woolworths faces high competition from rivalries such as Walmart, Amazon, Tesco, Lidl and Carrefour. However, the company’s marketing strategy makes it stand out from the rivalry. One of the important aspects of Woolworths is its unique promotional strategy. They have always indulged themselves in innovation when introducing promotional strategies. Different types of loyalty schemes are offered to customers by Woolworths. For instance 1987, a Fresh Food People campaign was launched that continued till 2012. In addition, using newspapers, magazines, and online media also enables the company to effectively promote. The availability of the products and easy access to the company has enabled the company to retain loyal customers. Woolworths give extensive deals and offer for shoppers. In addition, the company also gives gift cards to the shoppers to retain them.

Another significant aspect is that Woolworths always focus on customer-friendly process; thus, their only forte is customer satisfaction. In addition, the company ensures that the feedback taken from the customers is always taken care of and they are constantly included in the manufacturing and delivery process. This helps them maintain the competition in the market and stay ahead of others.

References

• aclei.gov.au (2023) Available at: https://www.aclei.gov.au/information-about-national-anti-corruption-commission#:~:text=On%2030%20November%202022%2C%20the,Assent%20on%2012%20December%202022 (Accessed: 31 May 2023).
• Australia corruption INDEX2022 data – 2023 forecast – 1995-2021 Historical – Chart (no date) Australia Corruption Index – 2022 Data – 2023 Forecast – 1995-2021 Historical – Chart. Available at: https://tradingeconomics.com/australia/corruption-index (Accessed: 31 May 2023).
• Hendy, N. (2022) How Woolworths Group plans to be 100 per cent powered by Green Electricity by 2025, The Sydney Morning Herald. Available at: https://www.smh.com.au/environment/sustainability/how-woolworths-group-plans-to-be-100-per-cent-powered-by-green-electricity-by-2025-20220913-p5bhoy.html (Accessed: 31 May 2023).
• Leggatt, J. (2023) Australian inflation rate: CPI rises to 6.8%, Forbes. Available at: https://www.forbes.com/advisor/au/personal-finance/inflation-rate-australia/#:~:text=What%20is%20the%20inflation%20rate,7.8%25%20in%20the%20previous%20quarter (Accessed: 31 May 2023).
• SophieWallis (2023) Supermarket statistics 2023: Finder, finder.com.au. Available at:https://www.finder.com.au/supermarket-statistics-2023 (Accessed: 31 May 2023).

FAQS

Q1. What is the revenue earned by Woolworths as of February 2023?

Ans: As of February 2023, the total worth holdings of Woolworths is $4.496 B.

Q2. How many stores does Woolworths have?

Ans: There are about 1086 Woolworth stores as of August 2022.

Q3. Name a few competitors of Woolworths.

Ans: A few competitors of Woolworths are Walmart, Amazon, Tesco, Lidl and Carrefour.

Q4. Name a campaign launched by Woolworths.

Ans: Fresh Food People campaign is a popular campaign launched by Woolworths.

Q5. State two reasons that act as the success factor of Woolworths.

Ans: Firstly, the corruption rate in Australia is declining, which has enabled Woolworths to expand its market. Secondly, Australia’s GDP and PPP are high, which has enabled Woolworths to earn significant revenues.

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