SWOT Analysis / TOWS Matrix for Woolworths Holdings (South Africa)
Based on various researches at Oak Spring University , Woolworths Holdings is operating in a macro-environment that has been destablized by – increasing commodity prices, there is backlash against globalization, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, technology disruption, geopolitical disruptions,
digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Woolworths Holdings
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Woolworths Holdings can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Woolworths Holdings, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Woolworths Holdings 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 Holdings can be done for the following purposes –
1. Strategic planning of Woolworths Holdings
2. Improving business portfolio management of Woolworths Holdings
3. Assessing feasibility of the new initiative in South Africa
4. Making a Retail (Apparel) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Woolworths Holdings
Strengths of Woolworths Holdings | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Woolworths Holdings are -
Sustainable margins compare to other players in Retail (Apparel) industry
– Woolworths Holdings has clearly differentiated products in the market place. This has enabled Woolworths Holdings to fetch slight price premium compare to the competitors in the Retail (Apparel) industry. The sustainable margins have also helped Woolworths Holdings to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Woolworths Holdings has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Apparel) industry. Secondly the value chain collaborators of Woolworths Holdings have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Woolworths Holdings 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 Holdings is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Woolworths Holdings emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Retail (Apparel) industry
– Woolworths Holdings is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Woolworths Holdings is present in almost all the verticals within the Retail (Apparel) industry. This has provided Woolworths Holdings 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.
Ability to recruit top talent
– Woolworths Holdings is one of the leading players in the Retail (Apparel) industry in South Africa. It is in a position to attract the best talent available in South Africa. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Woolworths Holdings has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Woolworths Holdings staying ahead in the Retail (Apparel) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Retail (Apparel)
– Woolworths Holdings is one of the leading players in the Retail (Apparel) industry in South Africa. Over the years it has not only transformed the business landscape in the Retail (Apparel) industry in South Africa but also across the existing markets. The ability to lead change has enabled Woolworths Holdings in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Woolworths Holdings has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Cross disciplinary teams
– Horizontal connected teams at the Woolworths Holdings are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Woolworths Holdings is one of the most innovative firm in Retail (Apparel) sector.
Analytics focus
– Woolworths Holdings 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 (Apparel) industry. The technology infrastructure of South Africa 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.
Weaknesses of Woolworths Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Woolworths Holdings are -
Capital Spending Reduction
– Even during the low interest decade, Woolworths Holdings has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Apparel) industry using digital technology.
Need for greater diversity
– Woolworths Holdings has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Woolworths Holdings is one of the leading players in the Retail (Apparel) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Apparel) industry in last five years.
Skills based hiring in Retail (Apparel) industry
– The stress on hiring functional specialists at Woolworths Holdings has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow decision making process
– As mentioned earlier in the report, Woolworths Holdings has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Apparel) industry over the last five years. Woolworths Holdings even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
No frontier risks strategy
– From the 10K / annual statement of Woolworths Holdings, it seems that company is thinking out the frontier risks that can impact Retail (Apparel) 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.
High dependence on Woolworths Holdings ‘s star products
– The top 2 products and services of Woolworths Holdings still accounts for major business revenue. This dependence on star products in Retail (Apparel) industry has resulted into insufficient focus on developing new products, even though Woolworths Holdings has relatively successful track record of launching new products.
Products dominated business model
– Even though Woolworths Holdings has some of the most successful models in the Retail (Apparel) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Woolworths Holdings should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Woolworths Holdings has a high cash cycle compare to other players in the Retail (Apparel) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 Holdings supply chain. Even after few cautionary changes, Woolworths Holdings is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Woolworths Holdings vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the Retail (Apparel) industry, Woolworths Holdings 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.
Woolworths Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Woolworths Holdings are -
Building a culture of innovation
– managers at Woolworths Holdings can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Apparel) industry.
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 Holdings 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 Holdings can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Woolworths Holdings 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 Holdings can improve the customer journey of consumers in the Retail (Apparel) 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.
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 Holdings can use these opportunities to build new business models that can help the communities that Woolworths Holdings operates in. Secondly it can use opportunities from government spending in Retail (Apparel) sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Apparel) industry, but it has also influenced the consumer preferences. Woolworths Holdings 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 (Apparel) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Woolworths Holdings in the Retail (Apparel) industry. Now Woolworths Holdings can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Woolworths Holdings 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.
Manufacturing automation
– Woolworths Holdings can use the latest technology developments to improve its manufacturing and designing process in Retail (Apparel) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Woolworths Holdings 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 Holdings to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Woolworths Holdings has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Apparel) sector. This continuous investment in analytics has enabled Woolworths Holdings to build a competitive advantage using analytics. The analytics driven competitive advantage can help Woolworths Holdings to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Woolworths Holdings can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Woolworths Holdings to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Woolworths Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Woolworths Holdings are -
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 Holdings.
Consumer confidence and its impact on Woolworths Holdings 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 (Apparel) industry and other sectors.
Environmental challenges
– Woolworths Holdings needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Woolworths Holdings can take advantage of this fund but it will also bring new competitors in the Retail (Apparel) industry.
Stagnating economy with rate increase
– Woolworths Holdings can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Retail (Apparel) industry.
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 Holdings in the Retail (Apparel) sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Retail (Apparel) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Woolworths Holdings can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Apparel) industry are lowering. It can presents Woolworths Holdings with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Apparel) sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Woolworths Holdings in Retail (Apparel) industry. The Retail (Apparel) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– Woolworths Holdings has witnessed rapid integration of technology during Covid-19 in the Retail (Apparel) industry. As one of the leading players in the industry, Woolworths Holdings needs to keep up with the evolution of technology in the Retail (Apparel) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing wage structure of Woolworths Holdings
– 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 Holdings.
Shortening product life cycle
– it is one of the major threat that Woolworths Holdings is facing in Retail (Apparel) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Woolworths Holdings 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 Holdings prominent markets.
Weighted SWOT Analysis of Woolworths Holdings Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Woolworths Holdings 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 Holdings 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 Holdings 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 Holdings 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 Holdings needs to make to build a sustainable competitive advantage.