Free «Strategic Plan Development and Implementation» UK Essay Paper
Table of Contents
Woolworths is a retail chain that operates in both Australia and New Zealand. The retailer was founded in 1924 in Sydney when it opened its first store as a bargain basement outlet. Since its inception, the organization has used various strategies to grow and become the largest retailer in Australia. The chain specializes in selling foodstuffs such as vegetables, packaged food, meat and household items. In 2012, it had 28 million customers, which represented a 31% market share. Woolworths operate various brands such as the Safeway Supermarkets, Tandy, Dick Smith Electronics and Powerhouse, Dan Murphy’s, BWS and Big W. In Australia alone, it has about 840 supermarkets. This paper will analyze the company’s mission and vision, its goals and objectives and conduct a situational analysis using SWOT, PESTEL and Porter’s Five Forces models. From the analysis, the paper will develop a strategic plan and document its implementation.
Vision and Mission
The retailer’s mission is to deliver the right experience to its customers at all times. Interviews with managers at its various branches indicated consistency in their beliefs about the purpose for which the company exists. Additionally, employees at Woolworth supermarkets seemed highly-motivated to assist clients in their purchases. The senior management explained how the strategy of the company aims to deliver the best experience for the customers. The décor of the supermarkets and changes in arrangements came from customer suggestions because the corporation is customer-centric.
Despite having a clear mission, Woolworth’s vision is not expressed directly but rather implied it its strategic priorities and values. However, it is imperative for the organization to have a clearly stated vision to outline where it needs to be in the future (Morrison 2011). The Strategic Committee Team developed a vision that stated, “Our vision is to become the retailer of choice by appealing to clients who value low prices, high-quality and in-store experience.” The success of any vision depends on its acceptance by the members of the organization (Cohen 2009). Since it affects prices and quality, the support of various stakeholders is critical. The Strategic Committee Team gave a proposal to the company’s Chief Executive Officer (CEO) to present to the Board of Directors for deliberation and approval. As the board represented the shareholders, their support was vital because of the resources required for implementation.
The proposal outlined the importance of the vision for the achievement of the company’s strategies and objectives. Once the board approved the vision, the Strategic Committee explained the importance of the vision to the managers of various stores and branches to ensure they supported it. The Committee elaborated on any contentious issues to the satisfaction of the leaders. The managers presented the vision and requested suggestions from employees on the best way to implement and embrace it. When employees are part of changes, they ensure it succeeds by prioritizing it (Robbins & Mary 2009). Consequently, the vision became part of the company through organization-wide endorsement.
Woolworths has organizational values that guide all its employees when carrying out their duties. The values are critical to the implementation of both the vision and the mission because they define behavior and accepted ways of doing business. The first core value is providing a safe environment for customers to shop and for staff to work. The company’s philosophy is that no task or service is so urgent to prevent its safe execution. Safety is critical to clients and contributes to excellent experience that the company’s mission aspires to provide. The second value that supports the vision of the company is the provision of valuable products at affordable prices. The company adheres to this value by working closely with its suppliers to improve quality while maintaining affordability. Thirdly, Woolworths is determined to deliver responsible service by assisting customers to make ethical, health and environmental decisions. Its sourcing of raw materials is both ethical and sustainable.
Goals and Objectives
Woolworths’ goals reflect its priorities and areas where it plans to allocate the bulk of its resources. The first goal is to extend the company’s leadership in both the liquor and food sectors (Woolworths Limited 2015). One of the objectives to operationalizing this goal is the establishment of a new division known as Woolworths FoodCo.
The second goal is to work on the portfolio to maximize shareholder value. The first objective towards the realization of this goal is to change the format of the stores to ensure they are more appealing to the clients. Woolworths has ascertained the effectiveness of the store re-designing through its first 11 stores operating in the new format. Secondly, Woolworths has started adding new global brands to maximize its stores’ potential. The plan is to have brands such as Sherwin-Williams, Honda and Loctite in the stores by the end of 2015. Additionally, Woolworths has started to convert the capabilities of the BIG W brand to translate its capabilities into results. The retailer has cleared about 80% of BIG W non-productive inventory. Finally, Woolworths has initiated an increase in the number of products available to its clients in its online stores. The overall results of these changes aim to increase profitability and consequently the shareholders’ value.
The third goal is to maintain a record of building new business. The objective to fulfill this goal is to expand the online platform. Many customers look for a convenience to shop online and collect their merchandise at a suitable location.
The final goal is to create enablers to support a new era of growth. The enablers are conditions within the company that would empower it to grow in the future. One of the objectives that Woolworths has focused on to implement this goal is to build cross-business supply chains and systems that would provide integrated merchandizing capabilities for its divisions. The move aims to gain a competitive advantage by increasing both scale and scope, which would help reduce costs and improve efficiency. Since company’s clients are concerned with affordability, the cost reduction would be beneficial to the customers through low poduct prices. The adoption of a lean retail model is another objective that the company aims to use to create enablers for future growth (Obel et al. 1998). The model’s purpose is to cut costs in the entire supply chain and use the expected cost savings to improve customer service and provide a basis for prospective growth.
The analysis of the internal and external environments of an organization is critical to its success for various reasons (Allen 2014). First, its strategies depend on its internal capabilities and the prevailing conditions in the external environment. Analyzing the environment helps a firm to create effective strategies by considering the conditions likely to affect their implementation and how to tackle competition.
PESTEL analysis considers the political, environmental, social, technological, environmental and legal factors that affect the business environment. Understanding the factors helps decision-makers to choose the attractive marketsto operate.
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The political factors include aspects such as political stability, government intervention in the market through trade tariffs, taxes and labor policies (Cavusgil, Knight & Riesenberger 2012). The political environment isessential because it determines the amount of risk to which a business is exposed (Hopkin 2014). Australia has a stable political party system that has experienced peaceful transitions over the years. Therefore, the country is an attractive market for Woolworth. Woolworths’ performance and growth reflect the stability in the country. The government has a policy that exempts imported goods with a value of less than $ 1000 from tax (Schermerhorn 2010). The policy affects the growth of the small retailers because of the cheap untaxed products from overseas. However, the policy does not affect Woolworths significantly because it has economies of scale that help it compete with the imported goods through low prices. Additionally, Woolworths controls a large proportion of the market and does not feel the effects of the policy.
The other policy that the government has created allows the small retailers to operate within the 24-hour cycle while restricting the large retailers like Woolworths from taking part in the 24-hour economy. The policy aims to provide a competitive advantage to the small retailers so that they can compete fairly with the largerivals. The limitation on the major competitors is affecting their profitability especially with the advent of the online shopping culture. The online platform has allowed foreign firms to sell their products in the Australian market and compete with the local companies. The increased competition has reduced Woolworths’ earnings and its shareholders’ value. The Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) has increased the trade cooperation between the two countries in which Woolworths operate. As a result, Woolworths can improve competitiveness by utilizing cheap resources from either of the countries.
The economic environment refers to all the factors that affect the economic performance of businesses (Lane et al.2009). Globalization hashad a tremendous effect on the retail industry in Australia. The opening of international borders to foreign investors has increased competition. In Australia, external retailers such as IKEA, Zara, and Aldi have gained access to the Australian and New Zealand markets where Woolworths is the dominant competitor. The competitors such as Aldi use market segmentation and prices to create a competitive advantage. Consequently, they erode Woolworths’ market share.
Another factor that affected the retail industry in Australia is the global economic crisis between 2008 and 2009. The economic meltdown reduced employment as people were dismissed. Despite the economic recovery, not all those retrenched were re-employed. When people are out of work, their spending power is reduced, which reduces their ability to buy products from companies like Woolworths (Paulino 2009). Inflexible wages in Australia have affected the retail industry negatively because it is unsustainable. The high cost of labor is transferred to the consumers, what makes price reduction difficult for the operators. Moreover, both Australia and New Zealand have high standards of living compared to other countries of the world. The high standards of living indicate that the purchasing power of the people in the two countries is high. The good performance of Woolworths in both nations attests to the supportive economic environment.
The socio-cultural environment concerns such aspects as ethnic/religious values, culture, demographics, education levels, consumer habits and preferences that influence the purchase behaviors of customers (Konrad & Prasad 2006). The Australian population is well-educated.. The consumer habits have shifted because the baby boomers have gained increased purchasing power. The pension plans for the old, tax benefits and delayed retirement have changed the composition of the customers for the retail industry. Although corporations such as Woolworths focus on young clients, the presence of the baby boomers and their purchase potential may require a change of the tactics to serve the market segment. Price and convenience are some of the client considerations before buying products and services from retailers. The customers look for the value that is equivalent to their money (Kinicki & Kreitner 2013). Finally, home brands are still popular among the Australian population, despite the penetration of the market by products from foreign countries.
The technological environment refers to the innovations and use of technologies in business by both Corporations and their clients. The technological advancement has impacted the retail industry in a massive way because almost all clients use mobile gadgets. The telecommunication equipment provides them with access to information and applications with which they can make purchases goods online (Lee 2009). The online shopping has challenged the traditional models of business and initiated a change by various competitors such as Woolworths to respond to the new trend. International retailers with developed Internet platforms have brought competition to both Australia and New Zealand (Kurtz & Boone 2010). The technology has also empowered consumers to compare products from competitors to identify the best offers. Consequently, companies must shift their focus, become ccustomer-centric and make products that respond to the needs of the clients.
The environmental factors relate to the impact of business practices on the physical environment. Consumers have become sensitive to the impact of organizations on the environment. The ethical obligation of companies is to observe environmental conservation laws (Lutchman 2011). Customers view companies that do no operate sustainably as unethical and may avoid their products. They prefer products of corporations that use resources sustainably and limit the negative impact on the environment. The shifting customer awareness has prompted corporations to find ways to incorporate sustainability principles in their strategies (Robertson & Athanassiou 2009). Some firms use sustainability as a differentiation strategy. The government of Australia taxes companies based on their carbon footprint. The taxes reduce corporations’ earnings and thus are unattractive. The taxes act as deterrence against pollution and encourage retailers and other companies to curb it. The retailers have complained in the past that the government’s approach to the carbon emission issue is not appropriate because it mandates companies to maintain a certain level of emission. The corporations suggest that providing incentives to businesses would be ideal and would evoke a voluntary response to environmental conservation. The National Retailers’ Association has identified the need to deal with environmental problems and has created a sustainability charter. The charter focuses on waste and recycling, water, energy, and gas emissions. It offers guidance to members on how to reduce negative environmental impact. It is reviewed every two years to ensure that it is responsive to the current needs.
The legal factors are the laws and regulations that govern business transactions. One disadvantage that organizations face in Australia is cumbersome tax laws. There are about 125 inconsistent government tax laws. The inconsistencies are costly because failure to comply with them leads to fines. Since companies must protect their financial performance, they transfer the costs to the consumers (Luftig 2012). Additionally, there are conflicting food and consumer standards, which affect the operations of retailers such as Woolworths. The legal environment is, therefore, the most unattractive aspect of the Australian market and impedes business transactions.
SWOT analysis evaluates the strengths of a corporation, its weaknesses, opportunities and threats in the market. The analysis assists managers to understand their position in the market in comparison to the competitors.
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Woolworths’ first strength is strong financial performance. The majority of the company’s business units have recorded attractive financial performance over the recent years. In the last five years, the company has achieved an average growth rate of about 7.96% (Morden 2007). The retailer has also managed to reduce costs gradually. Consequently, the organization has the capacity to generate capital, which can be used for growth. The second strength is the brand name reputation and trust. Woolworth’s brand name is well recognized in both Australia and New Zealand. In 2005, Woolworths ranked first in leadership, response to customer needs and innovation. Most retail customers in Australia are loyal to Woolworths’ brand. In 2012, Woolworths was the best sustainable retailer. The ranking was done according to customer responses to survey questions. Thirdly, Woolworths has established a cooperative venture with its suppliers and producers. The cost of maintaining the relationship is low compared to the benefits. Woolworths may assist the suppliers with expertise and finances in their production process to ensure that the products supplied are of the highest quality. Since the high quality attracts and retains customers, both Woolworths and the suppliers are assured of continuous business even when competitors experience the shortage of clients.
Woolworths undertakes due diligence to identify the suppliers with capabilities to offer consistent quality. The suppliers must be willing to form a relationship that will last for years. The relationship is long-term, which promises value creation in the long run. One of the trends in the market is the reduction of prices by private label retailers, which causes panic to their suppliers. Woolworths’ suppliers are assured of a sustained working relationship. The only cost the suppliers endure comes from supplying products to Woolworths at low prices. However, the costs are offset by the volume of supplies in the long-term. The venture is consistent with the mission and vision of the company because it ensures quality products and affordability through reduced prices resulting from the cheap raw materials.
The most significant weakness is the ballooning debt that the company has acquired since 2012. The debt may weaken its performance and cause panic in the stock market, which would dilute the company’s share prices (MacLennan 2011). The huge debt may limit the company from generating the money needed for growth and expansion. Secondly, Woolworths’ market is concentrated in Australia and New Zealand. The market share is small compared to international brands like Wal-Mart that operate in different geographic locations (Gandolfi 2009). The limited geographical coverage is a disadvantage because globalization allows the renowned brands to compete in Australia and New Zealand while Woolworths does not have a market share in the competitors’ home countries.
One of the opportunities in the market for Woolworths is the growing online retailing. Changes in consumers’ lifestyles have led to the increase in the use of the Internet for shopping because it is convenient (Hooley, Saunders & Nicoulaud 2008). Woolworths has identified the lifestyle change and has started to operate online stores. Expanding the digital shopping infrastructure is a vital opportunity because the trend on retailing indicates that the Internet will drive the industry. Taking advantage of the chance will provide Woolworths with a large market share in digital segment. Secondly, the health food sector has potential and is untapped. Consumers increasingly become conscious of their eating habits. Access to information and the emergence of lifestyles diseases have heightened people’s concerns for healthy eating. Consequently, the future will have the population demanding healthy food with fewer calories and more fiber contents.
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