Entrepreneurship: Business Analysis

This report analyses the various aspects of the business of Woolworth. Woolworth is an Australia based retail multinational organization that was founded in 1904.  This report evaluates the Woolworth’s business from the various aspects like strategy, finance, marketing, and HR functions.

Analysis of Strategy of Woolworth:

Woolworths is using cost leadership and market penetration strategy to gain sustainable competitive advantage. Cost leadership strategy helps the Woolworths to win over its competitors and expansion of its business as company is able to drive this strategy effective through its value chain. The company managers it complete value chain in such a way that it could provide the best prices to its customers and could earn significant profit based on the economies of scale. It aims to lead the whole industry in terms of pricing. Along with this, it also use diversification strategy which make it able to deal in large number of products. Through this strategy, it can provide a large number of products to customer under one roof.

Financial Analysis of Woolworths:

Financially the firm is very strong. Its finance analysis can done using the information available in its annual. The current financial position of Woolworths is shown in below table:

	Year
Particulars	2015 $	2014 $M
Group sales	60,679                                   M	60,773                                   M
Total revenue	60,868.4                                M	60,952.2                                M
Net profit after tax	2453.3                                   M	2451.7                                   M
Earnings per share	195.2                                     C	196.5                                     C
Total current assets	7660.9                                   M	7106.1                                   M
Total assets	25336.8                                 M	24136.5                                 M
Net assets	11132.0                                 M	10525.4                                 M
Net cash inflow	410.8                                     M	73.4                                       M
Dividend paid	1538.6                                   M	1491.1                                   M
Share price	27.39                                      $	35.66                                      $

(Woolworths, 2015)

 Ratio of Woolworths For the year 2015 and 2014 are as below:

	Year
Type of Ratio	2015	2014
Current ratio	.83	.94
Gross profit margin	27.23%	27.11%
Assets turnover ratio	2.40	2.52
Debt ratio	.56	.56

Current ratio: Current ratio measures the ability of company to meet its short term liabilities. On the basis of above table, it can be said that in the year 2015; the ratio is low in comparison of year 2014, which is .83 and 0.94 (Woolworths, 2015). This implies in year 2015, company is less capable to pay its short-term liabilities in comparison to year 2014.

Gross Profit margin ratio: Gross profit margin ratio states the profitability of company. From the above table, it can be understood that in year 2015, gross margin ratio of Woolworths is higher in comparison of year 2014, which is 27.23% and 27.11% respectively. This higher percentage indicates that in year 2015, company improved its ability to pay its operating expenses.  

Assets turnover ratio: Assets turnover ratio measures that how effectively a company uses its assets to increases the total sales of company On the basis of above table, it can be measured that in year 2015 company was less able to increase its sales revenue in comparison of year 2014, based on asset turnover, which was 2.40 and 2.52 respectively. This lower ratio states that in year 2015 company was less able in generating sales revenue.      

Debt ratio: Debt ratio indicates the capacity of company to meet long term debts. On the basis of above table it can be concluded that in both the year 2015 and 2014 the debt ratio of company is .56 and .56 respectively that is equal.

Marketing Analysis of Woolworths:

Marketing mix: Marketing mix is a marketing tool that helps Woolworths in achieving the goals and objectives. Along with this, it provides support to marketing strategy of company to influence its customers (Kotler et al, 2015). Marketing mix includes the product, price, place and promotion.

Product: Woolworths have a wide range of products and it offer products to its customers according to their needs and wants. Company produces good quality products at low cost, which support company in attracting more customers and facing the competition. Apart from this, Woolworths uses product line extension strategy that helps company in offering different products. The main  list of products, which company offer to its customers is given below: 

No.	Products
1.	Fruit and Vegetables
2.	Bakery
3.	Meat, Seafood and Deli
4.	Eggs, Dairy and Fridge
5.	Pantry and International Food
6.	Health food
7.	Spreads, Breakfast, Baking and Desserts
8.	Confectionery and Snacks
9.	Drinks
10.	Freezer
11.	Beer, Wine and Spirits
12.	Toiletries, Beauty, Health and Wellbeing
13.	Baby
14.	Bags, Food Wraps and Cleaning
15.	Pet
16.	Entertainment Home and Outdoor
17.	Cigarettes and tobacco

Price: Woolworths decides its products prices according to competitor’s products prices. This low pricing policy of company influences the customers to buy products, which creates the customer value for the company. Along with this, ability of the company to be able to offer its customers at low prices is the core competency of Woolworths (Mitchell, 2016). This low pricing strategy supports Woolworths in its business expansion.

Place: Customers could purchase products and services at low cost, therefore; Woolworths offer products at their nearest possible and convenient locations. The effective product distribution system of Woolworths helps customers in buying the products and services conveniently (CAMERON, 2015). Furthermore, Woolworths has the long chain of distributers, which enables it to increase the profitability and market share.  

Promotion: The Woolworths use different types of advertising and promotional tools to influence customers. This marketing strategy includes advertising, sales promotion, personal selling, and corporate social responsibility strategy. Apart from this, Woolworths gives Discount coupons, rewards and other benefits to its customers that help company in attracting the more customers towards the brand.

HR Analysis of Woolworths

HR policy helps in monitoring the performance of Woolworths and its employees for achieving the organizational goals and objectives. Apart from this, the HR policy of Woolworths includes the policies related to diversity, equal opportunity, and unfair dismissal.  These policies help Woolworths in increasing the employee satisfaction and expansion of business. Furthermore, Woolworths HR department follow the recruitment, selection, training and compensation related policies.

Recruitment policies: Woolworths have an effective recruitment policy as it ensures that it follows principle of anti discrimination and provides equal employment opportunity to candidates in the recruitment process and company selects the candidates on the basis of merit solely. Furthermore, Woolworths ensures that the company follows the privacy act in which they do not misuse the personal information and company treat all the candidates professionally with respect (WOW careers, 2016).

Training and development: Woolworths provides training to its employees for the developing communication skills and increasing the work efficiency. For the training and development of employees, company arrange the individual training session. Along with this, for the development of employees, company conducts an academic training program through the Macquarie Graduate School of Management. This program offers the different career opportunity to employees (Woolworths Limited, 2012). Apart from this, Woolworths develop a Fast Track program to management and leadership for the operation employees, which help in building the skilled retailers.      

Remuneration policy: Woolworths provides the incentives to its employees on the basis of their performance, which helps company in attracting and motivating the employees. Along with this, Woolworths provides the bonus and allowances to employees that create the company’s value among employees (Woolworths Limited, 2013). This also increases the level of employee satisfaction and influence to employees towards the achieving the organizational and individual goals and objectives.

Operation Analysis of Woolworth:

Business Process

Process strategy: Woolworth identified that if it has to get success in stiff competitive retail business, it will have to change its approach and to use process-oriented approach to improve its market position in future. After this, it developed a team for process designing to achieve this motive. The team aimed to enhance the capability of business process management as well as to develop effective and efficient methodology for the company. This team developed two models, which are ARIS and EPC. ARIS was used by Woolworths in central process repository (Woolworths, 2016). It initiated some more process improvements, which include internal training to staff and guidelines to implement the new models. Along with this, a process technology strategy is used at Woolworths, which improve its operation.

Capacity planning: To improve its business process, Woolworths plans its capacity to effectively deliver the customer orders. Therefore, it developed its warehouses and supply chain management system to handle the valuable orders from customers.

MRP: It also uses a technique Material Requirement Planning. It helps Woolworths in scheduling the entire activities in operation. For this, Woolworths uses the sequence for assembling the material, review of inventory level, forecast the requirement of material for meeting the orders in future, decide the schedule for when, where, how to purchase material and when to start the manufacturing and eventually review and control the whole process. It helps Woolworth in minimizing the cost of inventory as well as fulfilling all the orders.

Lean Production system: The main work of this system is to reduce the wastage in production of products.  Through this system, Woolworth removes the unprofitable products and arranges the activities in proper sequence, which reduces the waiting time. It also reduces the inventory and reduces the material wastage in manufacturing process. Along with this, it also helps in controlling the whole production, which improves the quality of production and minimize the variation in outputs.

Quality Management

The Woolworth follows its own quality standard, which is Woolworth Quality Assurance. This standard is the benchmark in the operation of programs of the company, which assure the quality. This standard is developed as per the international standards of product safety and international best practices for retailing (The British Standards Institution, 2016). Every product goes through the principal of Woolworth auditing before it is places on its shelves to ensure the quality of its products and services. It gets quality certification from BSI, which is a team of experts from different region across the world. Apart from this, the material is entered into the organization after proper audit and approval from Woolworth Quality Assurance Standard.  Besides this, all the products are audited at Customer Sensory Panel to ensure the quality of ingredients used in the products. All the products are also tested at NATA certified laboratories, which ensure quality of product. Along with this, it uses lean manufacturing system, which helps in creating quality items. Therefore, these quality measures ensure the quality of items retailed by Woolworth.

It can be evaluated the Woolworths has effective operation management practices in its place meet its business strategy and objectives.

Conclusion:

From above report, it can be summarized that Woolworth uses cost leadership, market penetration, and diversification strategy for its business expansion. The financial ratio analysis depicts that the company has maintained its profitability but at the same time, it lost some of its financial strength on the other hand and also, it could not achieve growth in the last two years. It deals in large range of products, and use low effective marketing strategy to compete in the market. It use various tools such as advertising, sales promotion, and free coupon to promote its sales. It uses its own standard to measure the quality of product and use various tools such as lean manufacturing, MRP, and Capacity planning to reduce the wastage and cost of production.

References:

Cameron, N. (2015) Woolworths details 3-year strategy to become customer centric. [Online]. Available at: http://www.cmo.com.au/article/574302/woolworths-details-3-year-strategy-become-customer-centric/ (Accessed: 14 August 2016).

Kotler, P., Burton, S., Deans, K., Brown, K. and Armstrong, G. (2015) Marketing. New York:   Pearson Higher Education.

Mitchell, S. (2016) Woolworths committed to cutting prices in battle with Coles, Aldi. [Online]. Available at: http://www.smh.com.au/business/retail/woolworths-committed-to-cutting-prices-in-battle-with-coles-aldi-20140904-10cqir.html (Accessed: 14 August 2016).

The British Standards Institution (2016) Woolworths Quality Assurance. [Online]. Available at: http://www.bsigroup.com/en-AU/WQA/ (Accessed: 14 August 2016).

Woolworths (2015) Annual Report. [Online]. Available at: http://www.woolworthslimited.com.au/icms_docs/182381_Annual_Report_2015.pdf (Accessed: 14 August 2016).

Woolworths (2016) Food Safety. [Online]. Available at: https://www.woolworths.com.au/Shop/Discover/healthy-eating/food-safety?pageNumber=1 (Accessed: 14 August 2016).

Woolworths (2016) Product list. [Online]. Available at: https://www.woolworths.com.au/ (Accessed: 14 August 2016).

Woolworths Limited (2012) Training. [Online]. Available at: http://www.woolworthslimited.com.au/page/A_Great_Place_To_Work/Training/ (Accessed: 16 August 2016).

WOW careers (2016) Recruitment process. [Online]. Available at: http://www.wowcareers.com.au/page/Come_and_work_for_us/Our_recruitment_process/ (Accessed: 16 August 2016).

Woolworths Limited (2013) Annual report. [Online]. Available at: http://www.woolworthslimited.com.au/icms_docs/137198_Annual_Report_2013.pdf (Accessed: 16 August 2016).

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