Woolworths (WOW) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Grocery)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Woolworths (Australia)
Based on various researches at Oak Spring University , Woolworths is operating in a macro-environment that has been destablized by – there is backlash against globalization, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, geopolitical disruptions, technology disruption,
challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Woolworths can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Woolworths, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Woolworths operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Woolworths can be done for the following purposes –
1. Strategic planning of Woolworths
2. Improving business portfolio management of Woolworths
3. Assessing feasibility of the new initiative in Australia
4. Making a Retail (Grocery) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Woolworths
Strengths of Woolworths | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Woolworths are -
Learning organization
- Woolworths is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Woolworths is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Woolworths emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Retail (Grocery) industry
– Woolworths is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Retail (Grocery)
– Woolworths is one of the leading players in the Retail (Grocery) industry in Australia. Over the years it has not only transformed the business landscape in the Retail (Grocery) industry in Australia but also across the existing markets. The ability to lead change has enabled Woolworths in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Woolworths has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Grocery) industry. Secondly the value chain collaborators of Woolworths have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Woolworths has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Woolworths has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Operational resilience
– The operational resilience strategy of Woolworths comprises – understanding the underlying the factors in the Retail (Grocery) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Digital Transformation in Retail (Grocery) industry
- digital transformation varies from industry to industry. For Woolworths digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Woolworths has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Woolworths is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Grocery) industry. The technology infrastructure of Australia is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Effective Research and Development (R&D)
– Woolworths has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Woolworths staying ahead in the Retail (Grocery) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Woolworths is present in almost all the verticals within the Retail (Grocery) industry. This has provided Woolworths a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Organizational Resilience of Woolworths
– The covid-19 pandemic has put organizational resilience at the centre of everthing Woolworths does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Woolworths has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Woolworths to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Woolworths | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Woolworths are -
Increasing silos among functional specialists
– The organizational structure of Woolworths is dominated by functional specialists. It is not different from other players in the Retail (Grocery) industry, but Woolworths needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Woolworths to focus more on services in the Retail (Grocery) industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Woolworths is slow explore the new channels of communication. These new channels of communication can help Woolworths to provide better information regarding Retail (Grocery) products and services. It can also build an online community to further reach out to potential customers.
High dependence on Woolworths ‘s star products
– The top 2 products and services of Woolworths still accounts for major business revenue. This dependence on star products in Retail (Grocery) industry has resulted into insufficient focus on developing new products, even though Woolworths has relatively successful track record of launching new products.
Employees’ less understanding of Woolworths strategy
– From the outside it seems that the employees of Woolworths don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Products dominated business model
– Even though Woolworths has some of the most successful models in the Retail (Grocery) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Woolworths should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Woolworths products
– To increase the profitability and margins on the products, Woolworths needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– From the 10K / annual statement of Woolworths, it seems that company is thinking out the frontier risks that can impact Retail (Grocery) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Workers concerns about automation
– As automation is fast increasing in the Retail (Grocery) industry, Woolworths needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Woolworths supply chain. Even after few cautionary changes, Woolworths is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Woolworths vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Retail (Grocery) industry
– because of the regulatory requirements in Australia, Woolworths is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Grocery) industry.
Low market penetration in new markets
– Outside its home market of Australia, Woolworths needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Woolworths Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Woolworths are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Woolworths to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Woolworths can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Woolworths can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Woolworths can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Woolworths in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Grocery) industry, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Grocery) industry, but it has also influenced the consumer preferences. Woolworths can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Retail (Grocery) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Woolworths in the Retail (Grocery) industry. Now Woolworths can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Woolworths to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Buying journey improvements
– Woolworths can improve the customer journey of consumers in the Retail (Grocery) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Woolworths is facing challenges because of the dominance of functional experts in the organization. Woolworths can utilize new technology in the field of Retail (Grocery) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Woolworths to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Woolworths to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Woolworths can use these opportunities to build new business models that can help the communities that Woolworths operates in. Secondly it can use opportunities from government spending in Retail (Grocery) sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Grocery) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Woolworths can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Woolworths can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Woolworths External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Woolworths are -
Regulatory challenges
– Woolworths needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Grocery) industry regulations.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Woolworths needs to understand the core reasons impacting the Retail (Grocery) industry. This will help it in building a better workplace.
Consumer confidence and its impact on Woolworths demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Grocery) industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Grocery) industry are lowering. It can presents Woolworths with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Grocery) sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Woolworths in the Retail (Grocery) sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Woolworths may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Grocery) sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Woolworths can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Woolworths prominent markets.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Woolworths business can come under increasing regulations regarding data privacy, data security, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Woolworths.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– Woolworths high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing wage structure of Woolworths
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Woolworths.
Shortening product life cycle
– it is one of the major threat that Woolworths is facing in Retail (Grocery) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Woolworths Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Woolworths needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Woolworths is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Woolworths is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Woolworths to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Woolworths needs to make to build a sustainable competitive advantage.