Contents

Macroeconomic factors.......................................................................................... 2
Global economy.................................................................................................. 2
Australian economy............................................................................................ 2
Retail industry analysis- Porters five forces.......................................................2
Bargaining power of consumers Very High...................................................2
Bargaining power of suppliers lower.............................................................2
Rivalry among competitors Moderate...........................................................3
Threat of new entrants - Moderate..................................................................3
Threat of substitute - Low................................................................................ 3
Business strategy analysis..................................................................................... 3
Success Factors..................................................................................................... 3
Getting momentum in food and liquor segment.................................................3
Focus on innovations on online selling...............................................................4
Restructuring of business units..........................................................................4
Risk Factors............................................................................................................ 4
High Competition................................................................................................ 4
Offline sellers vs. online retailers........................................................................5
Rising cost of input materials.............................................................................5
References............................................................................................................. 5
Appendix................................................................................................................ 6
Movement of world GDP..................................................................................... 6
Employment rate in Australia............................................................................. 7
Australian GDP and Export................................................................................. 7
Top Industries in Australia................................................................................... 8
Inflation rate....................................................................................................... 9
Relative postion of Woolworths liquor division....................................................9

Macroeconomic factors
Global economy
The global economy has shown a downward trend since the global financial crisis
of year 2008. Since then the major economies of the world are trying to improve
their positions. However the global economy is affected by one or other problems
(Tucker, 2010). The recent issues is the crisis of Greece and Euro Zone, where
Greece was not able to repay its debts. The global economy affects the economy
of the countries and which in turn affects the local business. The developed
economy as well as the developing countries are trying to recover from this
phase (Marthinsen, 2014). However it is not an easy task and even the
developed nations are facing problems of unemployment and slow growth rate.
After the global financial crisis the recovery of global economy is in progress and
the economic recovery is an ongoing process (Hein & Stockhammer, 2011).

Australian economy
Australian economy was affected by the global financial crisis of year 2008 along
with the other economies of the world (TC, 2015). There was decline in the
growth rate and recently the value of the Australian dollar is declining as
compared with the value of USD (CCE, 2014). This means that the business
based upon the exports are more likely to benefit and the business based upon
import will get a hit. The Australian industry is based upon the mining industry
and the exports of the almonds and dry fruits. The mining industry has seen a
slowdown in the recent times though the export of dry fruits is helping the
country. The Reserve Bank of Australia is gone for rate cut in order to boost the
economy. This will release money in the local business and will help the
Australian economy.
Australia was lucky as it was not much affected by the global financial crisis and
was able to recover from this in a quick manner as compared to other countries
(Arli, V., 2013). On the top of that the retail industry was much supported by the
individual customers and it was least affected by the recession. Thus the global
financial crisis affected the Australian economy but the effect on the retail
industry was minimal and the retail industry was able to recover.

Retail industry analysis- Porters five forces

Bargaining power of consumers Very High
Woolworths operates in retail department industry. The unique fact of this
industry is that the most of the products sold are of similar brand and similar
nature. Thus the differentiation strategy does not work for the retail industry.
Hence the company which can sell the product at lower price will be able to
attract the customers. The bargaining power of the customers in retail industry is
very high as the customer are looking for lower price products. Company cannot
compromise on the quality front and the only option to attract the customers is
to provide a lower price. Thus the customer is driving the company strategy.
None of the company can boast a reliable customer base as the customer is
driven by the low price quotes. Thus the retail industry is really a customers
paradise. The bargaining power of the customer is very high for retail industry.

Bargaining power of suppliers lower

Suppliers in the retails industry are the small and medium sized business. These
provides goods to the big retailers and departmental stores. As the retail industry
is price driven suppliers are under pressure to provide the goods at lower price,
besides meeting the high quality standards. Thus the suppliers work for their
survival all the time (Dikson, 2013). If suppliers provide low quality goods than
they are sure to be blacklisted by the big retailers. Also the suppliers has to
provide the goods at the lowest quote all the time. Thus the bargaining power of
the suppliers is really on the lower side as compared to the other stakeholders.
The interesting fact is that the retail industry cannot work without the
contribution of the suppliers, still the bargaining power of the supplier is on the
lower side. In the retail industry the suppliers works for their survival and nothing
more than that.

Rivalry among competitors Moderate

There are a number of players in the retail industry still the number of major
players is limited. There are only five to six major players in the department
retail industry. Besides these players there are small retail shops and online
retailers. It may be noted that though there only limited number of players in the
retail industry, still the competition in the retail industry in on the higher side.
The small online retailers are giving competition to the big players.

Threat of new entrants - Moderate

The entry in the retail and departmental store industry is not any easy task. First
of all a high amount of capital is required in order to enter in this industry. Thus a
company with a huge investment power can only enter in this industry. Besides
the big initial investment a huge working capital is also required in order to
operate the departmental stores. It is true that the small players can also enter
in this industry but they also need to expand in order to survive and for this a
huge capital is required. The number of established players in limited and this
creates problem for new entrants as the most of the customers are already
attached with the existing big players. It may not be possible for a new player to
attract these customers. Thus the threat of new entrants can be considered as
moderate.

Threat of substitute - Low

Liquor and grocery are two items which are purchased by a number of persons.
Grocery is a daily need and liquor is a sort of habit for most of the persons. Thus
there is no point to argue that the customers may find alternative products to the
liquor and grocery items. Even the recession was not able to stop the customers
to stop spending the money on these items. Thus the threat for substitute is on
the lower side. The traditional channel for sales was the departmental stores.
Now the sale of these products are supported by the online sales. Thus the
chance that the customers will substitute the retail industry are on the lower
side.

Business strategy analysis

Success Factors
Getting momentum in food and liquor segment
Company has focused on the liquor segment and the sales in this segment has
increased in past years. The market share of the liquor segment of the company
has also increased. Company has opened 11 new liquor stores which has helped
in sales. Besides that the company is also selling liquor through online. Company
has also launched liquor low price campaign in New Zealand. Focusing on the
liquor business segment has helped the company in increasing the sales revenue
and this strategy has worked for the company in short run.
Though the company have a diversified business, still it focused on the liquor
business in order to increase its sales revenue and profit. This strategy proved
successful and company saw a huge rise in its sales revenue (Woolsworth ,
2011). Company is selling liquor off line as well as online. It has a dedicated
online portal for the sale of liquor. There is need to appreciate the strategy of the
company not only company is able to increase its sales revenue but also it has
created customer base. Once the customers are loyal to one business segment
of the company they are more likely to purchase products from another business
segment of the company. Focusing on the liquor business also helped the
company to increase its customer base for other segments without spending
much amount on the
advertisement and sales promotion.

Focus on innovations on online selling

With the help of innovative technologies company was able to increase its online
sales by 50% in the year 2014. Company has introduced several new features in
online selling such as Track my orders feature which helps the customer by
GPS tracking. Another feature was Click & Collect (Woolworths, 2014).
Company has made investment in the technology and logistics to provide
customers a great user experience. In todays era it is necessary for the
company to move along with the fast pace of the technology. Companies which
are not able to move along with the fast pace of the technology are bound to fail.
Woolworths realized the importance of the technology and thus invested amount
on the implementation of technology and this move proved fruitful for the
company.
The recession of year 2008, reduced the purchasing power of the individuals and
this in turn reduced the turnover of the corporates. However retail industry was
able to survive the recession and was able to get back on the track. Besides that
the emergence of the online selling of goods has helped the retail industry in
increase its business. There are several companies which are doing only online
sales of the products. Now the big retailers such as Woolworths has also shown
their online presence and their online portals are generating good revenue.

Restructuring of business units

During the year company has sold several business units and also acquired some
business units. Company has acquired EziBuy and Hudson Building Supplies.
During the past years company also sold its freehold business sites amounting to
$ 600 million.
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Company is working well with its business strategy, at one had it is focusing on
the liquor business at the same time it has come up with the restructuring of the
existing business. It has sold some of the old business and has started some new
business segments. Thus the company is going well with the diversification
aspect and this strategy will help the company in long term.

Risk Factors
High Competition
Though the number of big players in the retail industry is limited, yet this
industry has witnessed high level of competition. The bargaining power of the
customers are on the higher side in this industry and it is the customer who
decides the fate of the companies. Most of the customers in the retail industry
are price conscious and tend to shift to the retailer which offers the lowest price.
Today the information for the price of a particular product is available online and
this helps the consumer to identify the retailer who is offering the lowest price.
Thus the customer is tend to purchase the product from that retailer only. It is
not possible for the company to provide lowest price for each and every product.
Thus some of the products of the company will be lower than the competitors.
For these products company will be able to get customers without much effort.
However for the products which have price at par with the competitor companies
Woolworths need to create goodwill for the services it provide to the customer. If
the company is able to attract the customer for at par price than it can survive in
the competition. Selling products at lower price all the time is not going to help
the companies in long term.
In retail segment the companies which can create value for the customer at the
lowest price will survive. Woolworths has tried to provide value to its customers
especially the liquor purchasing customers. However Woolworths is still lacking in
certain areas. It does not run any acclaimed membership program in order to
enhance its customer base. Such techniques are used by its competitors such as
Myer Holdings. Woolworths need to pay attention to these aspects as such
membership program. These programs can help the company increasing the
customer base.

Offline sellers vs. online retailers

Woolworths is basically an offline retailer though it has showed its online
presence in the recent years. The company was facing high competition from the
online retail sites. In order to counter attack those sites company has opened its
own online trading portals. This move has helped the company in intensifying its
sales revenue. However still company needs to be alert of the online
competitors. There are a lot of online competitors as well as the offline retailers.
Thus the company needs to make a backup strategy to counter these
competitors. It is obvious that a single strategy will not work in this case.
Company need to make strategies for each competitor individually. This is a
daunting task but it is necessary for the survival of the company.
Woolworths not only face competition from the Australian companies but also
from the international online retailers such as Amazon. In todays global most of
the customers prefer to purchase goods from global overseas online retailers if

the cost of the product is on the lower side. Thus Woolworths has also to take
care of such competition.

Rising cost of input materials

As the rate of inflation increasing the cost of the various grocery items has
increased. Thus it is very difficult for the company to maintain the low price level.
The retail industry is very sensitive to the price. Thus the company has to keep
special attention to price and cost management. It has to keep a constant watch
on the price offered by the competitors.
In order to the cost of the inputs on the lower side company need to put pressure
on the vendors. At the same time company need to ensure that the goods it
purchase follow the quality guidelines of the company. Thus an effort has to be
put on this front as this aspect is directly related to the survival of the company.
At all the companies in the retail industry need to keep the cost on the lower side
and this creates pressure on the vendors. If vendors deny to reduce the price this
will affect the company. Hence it is necessary for the company to develop its own
brand products. Woolworths has some well-established products which belongs
to its own brand and produced by the company itself.

References
Arli, V., 2013. Woolworths Australia and Walmart us: best practices in supply
chain collaboration. Journal of Economics, Business, and Accountancy| Ventura,
16(1), pp. 233-337.
CCE, 2014. ECONOMIC FACTORS AFFECTING EXCHANGE RATES. [Online]
Available at:
http://www.consensuseconomics.com/Foreign_Exchange_Consensus_Forecasts/Ec
onomic_Factors_Affecting_Exchange_Rates.htm
[Accessed 15 August 2015].
Dikson, L., 2013. Woolworths Australia and Walmart US: Best Practices in supply
chain collaboration. Journal of Economics, Business and Accountancy, 16(1), pp.
233-337.
Hein, E. & Stockhammer, E., 2011. A Modern Guide to Keynesian
Macroeconomics and Economic Policies. Sydney: Edward Elgar Publishing.
Marthinsen, J., 2014. Managing in a Global Economy: Demystifying International
Macroeconomics. NY: Cengage Learning.
TC, 2015. Australias five pillar economy: mining. [Online]
Available at: http://theconversation.com/australias-five-pillar-economy-mining40701
[Accessed 19 August 2015].
Tucker, I., 2010. Macroeconomics for Today. UK: Cengage Learning.
Woolsworth , 2011. Annual Report 2011, Australia: Woolsworth.
Woolworths, 2014. Investors Relations. [Online]
Available at:
http://www.woolworthslimited.com.au/page/Invest_In_Us/Reports/Reports/
[Accessed 18 August 2015].
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Appendix
Movement of world GDP

Employment rate in Australia

Australian GDP and Export

Top Industries in Australia

Inflation rate

10

Relative postion of Woolworths liquor division

11