Managing a Value Chain Woolworths
Supermarkets are business entities that act as arbitrators between manufacturers and consumers through retail chains that avail innumerable goods to consumers. Woolworths is among the leading supermarkets in Australia playing such a role in a sector that has witnessed incredible growth. However, there are other competing firms in the industry, for instance, Woolworths Foodland, Coles, CostCo, Franklins, IGA, and Foodworks. Woolworths controls over 800 supermarket stores in Australia. The organization was started in Australia in 1924. The firstshop, Woolworths Stupendous Bargain Basement, was opened in Arcade, Sydney (Palmer np). The organization further opened several other stores between the late 1920s and early 1930s in Western Australia, Queensland, and New Zealand. The growth and development of Woolworths is ascribed to acquisitions and mergers, for instance, the purchase of Northern Territory Business in the 1960. The organization has also opened other joint ventures in India besides New Zealand and Australia (Fenner and Raja np). The employee capacity of Woolworths is approximately 190,000 people (Fenner and Raja np). Currently, the organization controls 45% of the retail industry, thus, placing it ahead of its closest competitor, Coles, which has 23%. Nevertheless, uncertainties face the organization’s aptitude to uphold this share ahead due to the growing competition in the market.
Woolworths’ mission statement reads, “We, as passionate committed retailers, understand and lead our customers through excellence and a deep knowledge of our products and services and the world we live in.” The main strategic primacy for Woolworths is to create a multi-selection vending through low prices, virtuous quality products, and services, in supplies involvement to meet the needs of the consumer. In Australia and New Zealand, the organization has been ranked as the leading in sales. It targets to reach a goal of AUD$1 million sales in online channel by 2020.
Woolworths’ main strategy difference that has seen its success is grounded on its mission of conveying clients with the accurate shopping experience at all times. The firm’s strategy is also based in its vision, which is to offer superiority products and services to its clients via prices strategies, fresh food strategies, and human resource strategies “To enhance cost effectiveness and adeptness, the organization has incorporated and instigated strategies, such asevery-day low prices strategy and project refresh strategy. The firm premeditated and incorporated the every-day low prices strategy with an intention to offer decreased prices to clients on particular products. Regarding the customer focus, every-day low prices policy, also referred to as value pricing, assures consumers of decreased prices minus waiting for voucher clipping, discounts or promotions. Under this approach, the organization established consumer loyalty. This strategy is applied on fast moving goods, such as dairy products as well as other consumables.
Another strategy applied by Woolworths is the Project Refresh that was deliberate to reduce the operation costs. This was first applied in 1999 and since that time, several tactics have been applied by the organization to augment its efficiency. Projects refresh as an approach facilitated the absorption of buying and promotion functions from the preliminary framework where they were designated in different places (Coriolis Research). This approach substituted the earlier corporate processes empowering the organization to compact the source of its products. This policy was significant in eradicating doubling and refining the supplier affiliations to enhance the supplier chain proficiencies.
Furthermore, through the centralized services strategy, organizational services were stretched to other tasks, such as Finance and Human Resource among others. This undertaking has been effective in the supply of wine in the organization. Initially, there was an excess supply of wine as a result of too much manufacture from a fragmented supply base (Coriolis Research).
In addition, through its leading supermarkets chains like Big W and Dan Murphy, Woolworths has been able to persuade for decreased prices from its supplier, therefore, passing the same to the consumers. Consequently, the organization has benefited from an above average market share as well as amplified sales. Nevertheless, this strategy did not have a positive impact on the suppliers since their returns on investment declined. For this reason, most of the suppliers did not welcome the design (Coriolis Research). Woolworths has established the project refresh approach to synchronize the day to day prices strategy. The project refresh strategy has enhanced the supply chain through perfecting the low price retailing.
Value Chain Analysis
Value chain analysis refers to the methodical strategy in analyzing the devilment of competitiveness in an organization. These entails a series of diverse activities, for instance, logistics, operations, marketing and sales, service, procurement, technology and development among others. Value chain is an ongoing concept that changes with regard to the changing nature of humanity. In Australia, the shopping habits of consumers are ever changing. This is because of the contributing factors, such as changes in the population, households, and lifestyles. Furthermore, one core factor to note is that consumers are becoming more health conscious. Therefore, this has necessitated organizations to promote healthy foods through extending the fresh and health section of supermarkets and other retailing chains (Bird 266). Consequently, the Australian supermarkets have designed a way of ensuring customers’ convenience, speed as well as freshness to create value.
The three largest supermarkets in Australia are Woolworths, Coles, and Aldi. In New Zealand and Australia, Woolworths is the largest with a high market share in food, liquor retailers, as well as the largest Hotel and Poker Machine operator in Australia. The led to the organization to be categorized into several sections, for instance, non-trade services, long life variety, Liquor, and Fuel. Value chain analysis is significant because it ensures the organization’s products and services are effective since they represent the basic needs of consumers. Through value chain analysis, Woolworths organization has been able to separate good and bad procurements and the outstanding ones in the shelves. The value chain in Woolworths enabled the organization to adopt a management philosophy to apply on the day to day operations of the organization (Arli). This decision has enabled the organizational leaders to come up with new ideas and tests that are productive. This process entails human as part of the important factors, thereby enabling it to give outstanding performance. Woolworths is preparing to devote $ 1 billion in restoration supply chain, which decrease the cost of conveyance and goods across the nation, providing production achievements.
In Australia, Cole is considered the second largest supermarket. It has several sectors, for instance, bake house, dairy, fresh produce, liquor and general merchandise among others. The consequence of the organization value chain analysis is for the firm to be more competitive in the same manner it merged with shell Oil Company to produce low priced gas. This influenced competing organization to enter into similar agreements with the oil production companies. The value chain analysis of the organization also resulted in concepts that allowed low pricing strategies that were different from competing firms. Coles has 24 supply centers in Australia with more than 2,200 openings to service the products frequently. The organization has also initiated performance indicators aimed at identifying sectors that lack of proficiency and improve time and operation cycle.
Aldi is a universal discount supermarket chain with headquarters in Germany. The organization is categorized into two; Aldo Nord and Aldi Sud. The organization specializes in products that are consumed by clients, such as food and beverages. The organization produces its own products thereby leaving a very limited shelf for external products. Value chain has enabled the organization to offer products to consumers at a cheaper price. Due to the effects of lowered prices the organization offered, its competing firms Woolworths and Coles were greatly impacted. This process necessitated the organization to come up with counter strategies like everyday low pricing and save everyday strategies. Therefore, value chain analysis enabled the organizations to enhance its competition rate thereby delivering high quality goods and services.
Generally, as a result of the differences in stores and prices, Woolworths, Coles, and Aldi have achieved an upsurge in sales. The organizations have also concentrated on increasing the space stage products and other exceptional features like Wi-Fi services, pizzas, and takeaway. Woolworths, Coles, and Aldi have grounded their devilment prospects with regard to the aptitude to take advantage of the innovation in stores.
Enterprise Value for Woolworths
Enterprise value is an organization’s approximation proxy that estimates the present market value of a firm. The enterprise value is used to define takeover or merger price of an organization. It incorporates the entire liquid asset, outstanding debt, and exotic equity instruments that an organization has on the balance sheet. In case of a merger, the parent organization assumes the target organizations’ liabilities but it takes possession of all cash and cash equivalents.
Woolworths Limited Enterprise Value = Market Cap + Debt – Cash = 31.66 B
Woolworths is one of the biggest organizations in the Australian and New Zealand retailing industry. From the discussion, Woolworths is faced with the high competition in the industry. This is because of the presence of similar products and services. However, its distinct strategy has seen it continue succeeding in its operations. Woolworths, Coles, and Aldicustomers are largely individual consumers, which mean that customer influence is great in their operations. Through value chain analysis, each organization has directed its strategic planning to compete in different ways, thus, upholding its position in the market.
Arli, Verdi, et al. “Woolworths Australia and Walmart US: Best practices in supply chain collaboration.” Journal of Economics, Business, and Accountancy| Ventura 16.1 (2013).
Bird, Jo. “The retail dominance of supermarkets in Australia: a growing geography of pseudo-foods and its implications for obesity.” International Journal of Liability and Scientific Enquiry 4.3 (2011): 265-280.
Coriolis Research. Overview of Woolworths Australia. 2005.Accessed 07 May 2016.http://www.coriolisresearch.com/pdfs/coriolis_overview_woolworths_australia_200502.pdf#sthash.mxxT8lBD.dpuf
Fenner, Robert. Woolworths’ sales rise on Australia supermarket growth. 2009. accessed07 May 2016.http://www.bloomberg.com/news/articles/2009-07-23/australias-woolworths-facing-costco-takes-tips-from-walmart