Market Analysis of Woolworths - Essay Example

Woolworths Internal Audit Woolworths is a major UK retailer serving millions s in 819 stores across the country. The company provides a wide range of products and services for the customers. The company operations provide a positive impact on human resources, customers, the communities, shareholders, and the local business environment. British supermarkets are stores consisting of 2,000 square feet with three or more checkout counters. These supermarkets stock merchandise comprising of food groups and regular household items. (Curth, et. al., 2002). SWOT Analysis of Woolworths Group Plc The Strengths-Weaknesses-Opportunities and Threats Framework is applied to Woolworths Group Plc. Strengths -First, Woolworths is among the most cost effective among the British food retailers. Woolworths registered a profit of 7.5 million pounds, equity of 287.4 million pounds, total assets of 442.9 million pounds and net assets of 287.4 million pounds based on the Annual Report of 2008. Second, the company has a strong corporate social responsibility program. Woolworths was a finalist in Retail Bulletin’s People in Retail Award 2007 for its Potential Group programme.The company gave training for emloyees in Woolworths Group Asia on personal development, and communication. Third, consumer spending in the UK has increased consistently thereby increasing Woolworths’ market share. Fourth, the worlwide recession makes British consumers price-sensitive favors Woolworths store operations. Weaknesses –The called up share capital is only 182.4 million pounds. There is a need for foreign investors to come in and pump fresh capital. The company faces heavy debt servicing at 126.8 million pounds. The company needs to retire a huge portion of its debt so as not to affect operations. First, Woolworths need to link up with more British food producers in regional areas in order to assure a 100% British food supply for the consumers. Second, Woolworths need to refurbish its stores in order to have a stronger local presence. Third, Woolworths need to link with international suppliers to offer a wider variety of food and grocery items. Opportunities Woolworths has a strong cash flow at 40.1 million pounds for February 2008. This high figure means that the company will meet its obligations. First, the technology solutions offered by many companies will allow Woolworths to be sensitive in meeting their customers daily shopping needs. Woolworth can create merchandise plans that optimize the range and inventory at the store level and fit it to the exact space available. Second, Woolworths has more store outlets which translates to higher revenues. Third, Woolworth has close relations with local producers who can then assist the company in offering new agricultural food products. Fourth, Woolworth can lure budget conscious consumers away from Marks & Spencer. Threats Woolworths has a 7.8 million pounds regular payments for its debts. This obligation can also hamper its activities. Woolworths has to tackle serious challenges from its major competitors. Asda poses the strongest threat due to its consistent and aggressive marketing strategies to get new customers. Asda reported that it had served 1.3 million more customers in 2008 compared to 2007. Woolworth needs to improve its customer service to deal with this threat. Second, it faces a strong threat from Tesco which is planning to add more stores and pursue regional expansion. Tescos success at selling electronic goods, clothes and financial services is phenomenal. Woolworth needs to provide a wider array of products to counter this threat. Third, Sainsburys had established an aggressive marketing campaign and has expanded its stores. Sainsbury has slashed the prices of all of its items. Woolworth needs to offer huge discounts to keep its customers. Application of the 7 s of McKinsey’s to Woolworths Group Plc Shared Value (Rasiel and Friga, 2001) The net assets of the company are at 284.1 million pounds for 2008 which translates to investments in real estate and buildings. Woolworths Group Plc aims to delight and surprise its customers through the provision of quality customer service and top quality grocery, food and non-food items in all of its store branches in the UK. Strategy- The company registered a 2008 profit of 7.5 million pounds which is a good figure for a retailer. It has increased its sales in food and drinks. However, it has also offered new on-food grocery and non-grocery sales. The non-food groceries consist of the soap, toothpaste, personal hygiene products and health and beauty products. The non-groceries items pertain to the hardware tools, fuel and furniture. Staff - A loyal and competent group of in-store personnel deal with the customers in the stores across the UK. Foresight, industriousness, commitment to excellence and patience has helped Woolworth. Structure – The company registered net gains of 21.9 million pounds hence it is poised for future growth. Investments have been poured into the refurbishing of the old stores and expansion to new locations. System Entertainment UK, a brand of Woolworths, received the International Safety Award by the British Safety Council in recognition of its commitment to Health & Safety excellence.The technology applications of this grocery business is aimed at giving greater convenience to customers, offering lower prices at better value and improving the value and freshness of the products. Style- The company’s profitable strategy is seen in the net operating profit of 11.7 million pounds for 2008. The company has an open management approach which provides venues for employee complaints and grievance system. The company also has a customer feedback system. Skill - The company provides personnel enhancement training for its supervisors and employees throughout the year. Competitor Analysis- Woolworths has a 2008 gross profit of 724.1 million pounds, hence, it is very profitable. The total shareholder’s equity is at 315.6 million pounds which demonstrates management commitment to the business. Asda is a very close competitor of Woolworths’ group. Asda has multiple branches across the UK. Woolworths’ strength over Morrissons is its affordability and freshness of its produce brought about by its intense linkages with local food producers. Sainsburys has its strengths in grocery and food items. It is less competitive than Woolworths because it is higher priced. Tesco has a penchant for adopting aggressive marketing and discounting. (Mustoe and Nesbitt, 2008) Future market and forecast trends - Sales through UK grocery outlets of £120 billion pounds represent half of all retail sales inside the country. Growth is projected to increase by 30 percent yearly. Another development for UK retailers is the provision of 100% British food for the consumers through exclusive marketing agreements. The presentation of low cost food and grocery items are another significant trend for the Woolworth business. 2. Critical analysis for non food and clothes to specific target customer segment- A specific customer segment that Woolworths can address is the segment of the young mothers (ages ranging from 22 to 30 years old) with young children. Woolworths can plan to get this customer segment effectively by getting many small suppliers to offer more toys, clothes, accessories and food products for children by facilitating supply transactions such as fast payment and information technology systems that will link small supplier systems into the supermarkets’ systems and therefore expand consumers’ choice. It helps its small suppliers keep a profitable business by giving these suppliers good payment terms and good in-store promotions. Hence, the small suppliers are able to pay their workers and suppliers on time. It give ssuppliers advice on a change volume at advanced notice. It has a transparent supply system that updates communications with its suppliers about what is stocked in the shops and what is not. It offers long term contractual relationships with its small suppliers to ensure a stable supply for this customer segment. 3. Merchandise the store mirror future trends and consumer needs. The competition among the major UK supermarket chains to garner additional market share is particularly intense. Woolworths’ closest competitors are Asda, Sainsbury, Tesco and Marks and Spencers.These supermarket chains define their respective unique and distinctive contributions within the industry. Woolworths’ efforts in outpacing its competitors require a very systematic and innovative thinking in terms of the product range. Products with the highest sales revenues are the personal hygiene and healthcare products. Woolworths must concentrate in providing excellent shampoo/conditioners, deodorants, toothbrushes and bath powder. Woolworths can also improve its range of seasonal goods for winter such as ski equipments, clothing and accessories by getting excellent suppliers to provide fresh styles. Market Assessment -Neil Borden’s Marketing Mix is applied to Woolworths Group Plc operations. Price- Woolworths offers low-priced food items compared to its competitors. Woolworths needs to highlight its price competitiveness in its advertising campaigns. Place- The store’s 807 branches are located in strategic areas where daily pedestrian traffic is very high. Product- It offers low priced quality premium products for the discerning customers. Quality products range from toys to music CDs to food and grocery items. Promotion- It planned aggressive promotions and marketing campaigns to attract new consumers. It also offers special in-store discounts and promotions aimed at young mothers. Second Part - Market testing pertains to the task of identifying opportunities and reliance on technology in implementing the company’s thrust to market more products. New products and services require extensive market testing in order to help companies understand the reaction of the public to the new product. As the marketplace evolves constantly, the company marketers try their best to keep their ranking with their closest competitors. Market testing assumes that the company emphasizes market segmentations, developing strong brands, and getting competent marketing managers. Market testing managers need to outpace the market and they need to do fast decision making on whether to introduce the product to the market. To capture opportunities, a company needs to have a continual flow of fresh ideas. This flow is enhanced with a mixture of cultural reinforcements, proper feedback loops, and explicit financial and professional incentives to make the staff discover opportunities. In conducting market testing, managers need to provide a specific product, a clear marketing channel, and a targeted customer group. The managers also get to apply brand management, customer segment management, and up-to-date research on the retail industry. For example, the incentive system recognizes the marketing managers who identify and capture instant market opportunities. They are aware that they have a strong responsibility to get customers to like their and services as quickly as possible. These managers are allowed to conduct day-to-day progress on sales. Managers are accountable for the performance of the products in the final product launch. To set performance targets, one marketer uses proprietary program management software to set clear financial targets and deadlines. A competent manager who assumes responsibility for market opportunities. (Aufreiter et. Al., 2000) 4. Patents and Intellectual property- Intellectual Property is a specific category of private property. Property is owned by one person and organisation. This intellectual property cannot be taken and adopted by other persons in the absence of a final consent of the Chairman. Intellectual property rights are the rights of an owner to exclude anyone else using, copying or distributing the information or item which is their intellectual property Patents A patent grants the owner the legal right to exclude others from using the patented item for a given duration in exchange for information and disclosure. The specified duration enables the owner to enjoy the revenues and profits due to him as the inventor of the product or service. Countries have implemented patents and intellectual property rights to business inventions. The British retailers respect and support patents and intellectual property rights. In the GATT/WTO system, the World Trade Organization (WTO) membership is linked with the strict compliance of the Member States to IPR rules. Countries are required to grant IPR protection through compliance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The developing countries follow procurement drafting rules and give higher royalty payments to developed countries for new technology applications. (Spectar, 2002) References: Aufreiter, Nora, Teri L. Lawver and Candace D. Lun. (2000). “A New Way to Market. “ The McKinsey Quarterly, page number 53. Borden, Neil. (1964). “The Concept of the Marketing Mix”, Journal of Advertising Research, June, Vol. 4, pp. 2-7. Curth, Louis Gareth Shaw and Andrew Alexander.(2002). “Streamlining Shopping: Explain How the British Supermarket Was Born.” History Today. Volume: 52. Issue: 1. Occupational Stress in the Service Professions. Contributors: Maureen F Dollard - author, Anthony H Winefield - author, Helen R Winefield - author. Publisher: Taylor & Francis. Place of Publication: New York. Publication Year: 2003. Spectar, JM. (2002). “Patent Necessity: Intellectual Property Dilemmas in the Biotech Domain & Treatment Equity for Developing Countries.” Houston Journal of International Law. Vol 24, Issue 2, page number 227. Mustoe, Howard and Louisa Nesbitt. (2008) Woolworths “MFI Stores in Administration `Watershed Bloomberg online” Available at URL http://www.bloomberg.com/apps/news?pid=20601087&sid=a.oYFf..z6rI&refer=home Rasiel, Ethan and Paul Friga. (2001). The McKinsey Mind: Understanding and Implementing Problem Solving and Management Techniques. McGraw Hill: New York. Read More