Introduction

Business organizations are influenced by different internal and external factors and simultaneously they impact different external environmental factors. The interplay between such influences, impacts, and factors eventually shapes a business organization and its internal and external environment. Quite obviously such influence, impacts, and factors shape the structure of an organization, compelling the organization to adopt unique business management strategies. Hence, it can be said that the business management strategies of a business organization are initiated by the organizational structure and the different other strategic factors that are essential to justify the existence of the organization, to continue the successful run, to remain profitable, and to survive the adversities constituting the markets of operation. Business management processes and strategies that a business organization adopt must attain a perfect fit between the internal and external environmental influences and the core business strategies meant for sustaining the business and accomplishing the organizational goals and objectives (Seo & Lee, 2019). To understand if a business is going to succeed in the long run it is essential to analyze such factors that are determinants of the profitability and agility of a particular business. Hence, for better understanding the management business context, this report focuses on Woolworths Holdings Limited so that the drivers of strategic decisions and the strength and risk factors of the business could be ascertained effectively.

Company Background

Having its inception in 1924, Woolworths Holdings Limited (Woolworths) began its journey as a small company under the name of Woolworths Stupendous Bargain Basement and gradually it emerged into one of the most successful businesses in Australia which got transformed into Woolworths Holdings Limited in 2016 (“The Woolworths Story”, 2021). Leading the retail chain industry, holding a key position, Woolworths has succeeded in diversifying its product portfolio that has allowed the company the scope of becoming more profitable through the acquisition of potential customer bases and through catering to the needs of different customer demographics (“Woolworths Group Ltd”, 2021). Presently, the company conducts business with product lines that encompass merchandise, food items, liquors, electronic items, furniture, home appliances, clothing items, hotels, and financial services (“Woolworths Group Ltd”, 2021).

Organizational Structure

The company’s success should not only be attributed to its agile operational strategies but also to its effective market penetration and expansion strategies that included the strategy of acquisition. In this respect, the acquisition of Dan Murphy, Dick Smith Electronics, 126 Australian Safeway Stores, etc proved to be strategically significant for Woolworths (Annual Report 2016: We bring a little good to everyone, every day, 2016). It has also to be noted that the expansion and differentiation of the business and the product lines respectively, eventually influenced, shaped, and reshaped the organizational structure of Woolworths, gradually transforming it into a conglomerate structure (Annual Report 2016: We bring a little good to everyone, every day, 2016). The conglomerate structure of the company is specifically constituted of some major divisions including Australia-based David Jones, South Africa-based Woolworths South Africa, and Australia-, New Zealand-, and South Africa-based Country Road Group (Annual Report 2016: We bring a little good to everyone, every day, 2016). It is for managing the business strategy of diversification and differentiation effectively that the company has resorted to the conglomerate structure that provides flexibility, agility, pace, and adaptability to the company in a thorough and effective manner (Kenton & Berry-Johnson, 2021). Moreover, the conglomerate structure of the company also has made the company capable of overcoming the challenges posed by the changing environmental contexts in which Woolworths has to operate (Kenton & Berry-Johnson, 2021).

Business Strategy

It is noteworthy that Woolworths has continued to resort to the strategies of acquisitions and diversification to expand its businesses, its customer base, and to eventually increase and enhance its operational and process efficiency (“Woolworths Limited – Mergers & Acquisitions (M&A), Partnerships & Alliances and Investment Report”, 2021). In this respect, one has to take into account the fact that such business strategy of Woolworths has helped the company to mitigate, overcome, and even, in some circumstances, alleviate the risk of losses, and thus the company has done primarily through effectively implementing the strategy of diversification (Kenton & Berry-Johnson, 2021). It is the strategy of diversification that has allowed the company to remain its profit buoyancy that has helped the company to sustain its success run in adverse economic situations, including market price fluctuations and recessions. The company has been able to do so pivotally because of its organizational design and its strategic approaches that ensure that if one business sector performs poorly, the other businesses that are performing better can compensate the losses, thereby sustaining the profitability of the company through ensuring steady inflow of revenue (Kenton & Berry-Johnson, 2021).

SWOT Analysis

To understand the prospects of Woolworth’s business and its management strategies it is essential to conduct the strength, weakness, opportunity, and threat (SWOT) analysis of the company. In this respect, it can be said that the primary strength of Woolworths is its market hold and leadership. The company has, for long, succeeded in sustaining its strong market hold in the Australian retail market context and to date the Australian retail chain is controlled and dominated by Woolworths and its primary rival, Coles (Bhasin, 2019). But holding about 80% of the market has provided Woolworth with a market leadership position which it has been capitalizing in terms of remaining profitable (Bhasin, 2019). This strength of Woolworths has helped the company in enjoying reduced threat of competition in the Australian retail market (Bhasin, 2019). But one of the primary weaknesses of Woolworths is its confusing market positioning which has quite often baffled customers (Bhasin, 2019). In this respect, it has to be noted that Woolworths has continued to target multiple income segments but it has kept on doing so using the same products, which has resulted in sending confusing signals to customers who sometimes get skeptical about the value proposition of the prices of goods offered by the supermarket (Bhasin, 2019). Moreover, the greatest opportunity for Woolworths is to enhance the in-store experience of the customers through the integration of business intelligence systems and through the incorporation of artificial intelligence (AI), which can enhance customers’ shopping experiences in the long run, ensuring more inflow of customers and steady revenue growth (Bhasin, 2019). But the greatest threat for Woolworths is the changing trend of consumption that relies largely on the increase in health consciousness among customers (Bhasin, 2019). In this respect, the primary threat for Woolworths is customers’ apathy towards the consumption of products sold by Woolworths that are high in calories and rich in chemicals (Bhasin, 2019).

Porter’s Five Forces Analysis

Analyzing Woolworths’ business from Porter’s Five Forces perspective it can be seen that the bargaining power of the customers is extremely high and this characterizes the retail industry as a whole (Bruijl, 2018). But as the bargaining power of the suppliers within the retail industry depends largely on the size and brand image of the retail chain; Woolworths’ suppliers have low to moderate bargaining power (Bhaskar, Pawar & Hole, 2019). Moreover, the availability of substitutes that are less expensive on many occasions can be considered as a barrier to Woolworths’ competitive advantage. But it has been observed that a strong relationship between Woolworths and its suppliers and the high cost of establishment of its own distribution centers can act as effective barriers to new entrants, providing Woolworths with the competitive advantage over the rivals even though the rivalry between Woolworths and its competitors is intense (Bhaskar, Pawar & Hole, 2019).

Conclusion

The success of Woolworths should not only be attributed to its agile operational strategies but also to its effective market penetration and expansion strategies that include the strategy of acquisition and diversification. The company has, for long, succeeded in sustaining its strong market hold in the Australian retail market context and this has been among its primary strengths. Moreover, a strong relationship between Woolworths and its suppliers and the high cost of establishment of its own distribution centers (acting as a barrier to new entrants) provide the company with a competitive advantage over its rivals.

References

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Bhaskar, M., Pawar, S., & Hole, Y. (2019). Porter’s Five Forces Model: Gives You A Competitive Advantage. Jour of Adv Research in Dynamical & Control Systems, 11 (04-Special Issue), 1436-1448.
Bruijl, G. (2018). The Relevance of Porter’s Five Forces in Today’s Innovative and Changing Business Environment. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3192207
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