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Woolworths SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by Woolworths managers to do a situational analysis of the company . It is a handy technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Woolworths is facing in its current business environment.
The Woolworths is one of the leading firms in its industry. Woolworths maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Woolworths to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The core purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Woolworths strengths, and eradicate its weaknesses.
Step by Step Guide to Woolworths SWOT Analysis
Strengths of Woolworths – Internal Strategic Factors
As one of the leading companies in its industry, Woolworths has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Woolworths are –
- Strong Brand Portfolio – Over the years Woolworths has invested in building a strong brand portfolio. The SWOT analysis of Woolworths just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Automation of activities brought consistency of quality to Woolworths products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Good Returns on Capital Expenditure – Woolworths is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Strong distribution network – Over the years Woolworths has built a reliable distribution network that can reach majority of its potential market.
- Superb Performance in New Markets – Woolworths has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Highly skilled workforce through successful training and learning programs. Woolworths is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
Weakness of Woolworths – Internal Strategic Factors
Weakness are the areas where Woolworths can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Woolworths is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Woolworths
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Woolworths has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Limited success outside core business – Even though Woolworths is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
Opportunities for Woolworths – External Strategic Factors
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Woolworths an opportunity to enter a new emerging market.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Woolworths to increase its profitability.
- Government green drive also opens an opportunity for procurement of Woolworths products by the state as well as federal government contractors.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Woolworths. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- New trends in the consumer behavior can open up new market for the Woolworths . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Woolworths’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Woolworths to capture new customers and increase its market share.
- The market development will lead to dilution of competitor’s advantage and enable Woolworths to increase its competitiveness compare to the other competitors.
Threats Woolworths Facing - External Strategic Factors
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Rising raw material can pose a threat to the Woolworths profitability.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Woolworths in those markets.
- Imitation of the counterfeit and low quality product is also a threat to Woolworths’s product especially in the emerging markets and low income markets.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Limitations of SWOT Analysis for Woolworths
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Woolworths
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Woolworths
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Woolworths managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Woolworths
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)