Disruption Caused by Amazon in Supermarket of Australia Expert Answer

1           Situational Analysis of Woolworth

1.1         Internal Analysis of Woolworth

The internal assessment of Woolworth shows that company has maintained strong position within market over the years, based on its brand recognition and customer equity. However, there are numerous issues as well, which require immediate attention. Such as, the online customer service is poor and social networking sites of Woolworth are unengaging, which leaves customers unsatisfied with the online purchasing experience with Woolworth. Additionally, staff is not trained well to deal with online order processing system of grocery. The lack of staff training and their incompetency affects their ability to satisfy concerns of customers and thus online selling of Woolworth is substantially affected. The staff is also not able to support order processing of suppliers, which might cause them trouble in maintaining effective and quality relationship with suppliers. The significance of this issue is justified by the fact that experience and competence of staff is considered as critical success factor in Supermarket and grocery industry of Australia (Azeem et al., 2019; IBIS, 2018). Finally, one significant issue is linked with existing pricing approaches of Woolworth, which makes it difficult for company to compete with Amazon on prices. However, the strength of company pertains to its mass scale operations, which might support change of pricing strategies of Woolworth.

The issues that will be addressed in underlying plan are;

• Inability of Woolworth to compete with Amazon on prices
• Untrained corporate staff of Woolworth

1.2         External Analysis of Woolworth

1.2.1        PESTEL Framework

Woolworth is operating in highly volatile business environment and changing external environmental forces are posing greater threat on long run competitiveness of business (Xu and Lee, 2020). The changing Governmental regulations and economic instability based on COVID-19 crisis are relevant with existing functions of business. Likewise, shift of consumers to online shopping and enhanced engagement with technology pose pressure on business to focus on its digital selling platforms and online communication channels, such as website and social media platforms respectively (Vogel et al., 2020). The effect of environmental and legal forces is also relevant to operations of Woolworth.

1.2.2        Porter’s Analysis

The summary of Porter’s analysis can be seen in figure 1 mentioned below. Most of the forces have changed to pose threat to competitive position of Woolworth, based on entrance of Amazon into the market. For instance, suppliers are inclined to offer better terms to Amazon than Woolworth, showing the bargaining power of suppliers is high (Grimmer, 2019). The buyers are likely to switch to Amazon based on better online features of Amazon, which declines loyalty with Woolworth and thus bargaining power of buyers is high. Competition has got intense for Woolworth as, Amazon has managed to capture substantial shares in the market, by growing from 1% to 37.9% over the past year. On the other hand, the Porter’s analysis show that the threat of new entrants is low based on high entry barriers. While, the substitutes are easily available in the market, posing high threat to Woolworth.

1.3         SWOT Analysis

Strengths

• Strong brand image
• Long history of operating in Australia
• Capability to maintain large stock
• Numerous supermarket chains in Australia

Weaknesses

• Unengaging and ineffective online customer service
• Limited communication with customers
• User unfriendly website
• Insufficiently trained employees

Opportunities

• Focus on enhancement of online selling
• Creation of brand loyalty through accessing all consumer touch points
• Reliance on low cost strategy to compete
• Offering better terms to brands for maintaining supply relationship
• Maintaining better customer service through well trained staff

Threats

• Threat to the share prices of Woolworth
• Exposure to pricing war with Amazon (Mercer, 2019)
• Weakening relationships with suppliers
• Enhanced competition from Amazon (Mercer, 2019)

2. Objectives

• To increase market share by 5% within the time duration of 1 year, by offering lower prices to customers.
• To offer sufficient training to staff, such that they become able to enhance 90% efficiency of online order grocery system, within the time duration of 1 year.
• To lower the complaints of customers and suppliers regarding online ordering system to 5% within the time duration of 1 year.

3. Plan (Solution)

3.1 Low Price Leadership Strategy

In order to deal with price war with Amazon, Woolworth can make reliance on low cost leadership strategy. It is notable that sale of grocery items is mainly in bulk and low cost strategy is likely to generate substantial revenue (O’Kane et al., 2019). For instance, when customers’ brands will be provided better prices based on low cost leadership strategy, then suppliers are more likely to offer better terms to Woolworth and thus good relationship with suppliers can be maintained along with lowered bargaining power of suppliers. Additionally, in order to compete with low prices offered by Amazon, it is important for Woolworth to lower its prices further (Azeem et al., 2019). Moreover, the threat to share value of Woolworth of intense competition from Amazon can also be dealt through this strategy, as it will enable the company to enhance the level of sales revenue. By viewing this strategy through the lens of purchasing decision making process of consumers, it is notable that positive purchasing intentions of consumers can be generated when they are offered lower prices than competitors (Yudha and Liem, 2019).

3.2 Human Resource Management Strategy – Training of staff

The issue of insufficiently trained staff members can be catered well by adopting human resource management (HRM) strategy which will allow to carry out assessment of human resource needs, along with offering them continual training (Sparrow, Brewster and Chung, 2016). The adoption of HR strategy is necessary as staff members of Woolworth do not have sufficient skills and knowledge to deal with online ordering system, which leaves customers and suppliers unsatisfied. Additionally, it is notable that based on unengaging aspect of online selling of Woolworth, it is expected to lag behind Amazon in terms of performance. Therefore, the HR strategy implementation will allow Woolworth to train its employees, by realizing the strategic role of its human resources.

Further, the relevance is witnessed with resource based view and theory of strategic HRM, which state that employees are inimitable resource of the organization and long run competitiveness of organization is highly dependent on realizing the strategic role of staff (Steiner et al., 2017).  Therefore, the staff will be trained as key competitive resource of Woolworth.

4. Steps to implement strategy

4.1 Implementation of Low Price leadership strategy

In order to implement this strategy, the reliance will be maintained on “price testing method” of price setting. Through this method, the price of items will be tested by modifying it and then recording the total number of items sold (Ellickson and Misra, 2008). The price reduction will be done by offering discount on the items, such that if any impact of lowered price is not witnessed on specific items, then it can be sold back on previous price. This will be done for premium brands, such that effect of lowering prices can be noted and suitable prices can be set. For the items, which show increasing sale patterns based on reduced prices, the prices will be modified under the umbrella of low price leadership strategy. On the other hand, if no impact of pricing will be witnessed then changes can be made in pricing of products to fulfil the revenue requirements of Woolworth to cope up with competition laid by Amazon.

4.2 Implementation of training program as part of HR strategy

The extensive assessment of staff needs will be carried out with respect to online ordering system, whereby identifying the training requirements for the staff. Followed by need assessment, training program will be devised. The two methods of training will be chosen, including; interactive training and on the job training. Interactive training and on the job training will both be aligned for the purpose of assuring that staff of Woolworth is trained effectively. The interactive training will be carried out to enhance basic skills and knowledge of staff regarding the online order processing system, whereby they will be allowed to enter into two way discussion about the usage of the system. Followed by enhancement of basic knowledge and skills of staff, the ongoing on the job training will be arranged to assure that any difficulty experienced by staff is dealt in immediate manner and their efficiency is enhanced.

5 Justification for strategy adoption

The adoption of this strategy is highly suitable for Woolworth, as it is identified from the analysis that Amazon is offering low prices to customers and it is enabling the company to enjoy better terms from suppliers. If Woolworth will not respond to the pricing war from Amazon, then market shares can decline substantially (Merrett, 2019). Thus, reliance on low price strategy will help Woolworth to maintain its market shares against Amazon and it will also help company to encourage positive purchasing decision of customers (Bolton and Shankar, 2003).

The alignment of staff training as part of HR strategy of organization is based on the notion that in order to address the issues of unhappy and dissatisfied customers, ineffective communication with customers and ineptitude of social interactions with customers, the competitiveness of staff is important (Sparrow, Brewster and Chung, 2016). Additionally, the ability of staff to deal with issues related to online order processing system, training of staff is crucial. It will not only enable them to deal with customers issues but will also help them to collaborate with suppliers.

6 Control Measure

The monitoring and controlling of underlying strategic plans (low price leadership strategy and HR strategy for staff training) of Woolworth will be carried out on continual basis. In order to measure pricing strategy, the sales of goods will be tracked and measured on monthly basis. The increase in monthly sale revenue will show the success of strategy. Additionally, the market share will also be measured by the end of financial year and increase in market share will show that plan has worked effectively. In case of any deviation from the plan, the pricing strategy will be revised. The revised strategy use differentiated pricing for premium products, while it will continue to use low pricing strategy for all other products.

On the other hand, in order to measure performance of staff training, the survey from staff will be conducted to ask that whether they still face issues to operate online grocery ordering system. The results will help to recognize the skills level of employees. Additionally, the number of complaints by customers and suppliers will also serve as performance indicator for assessing the training plan. The gaps in effectiveness of training program will be addressed by offering supplement training to staff.

7 Role

The table below shows the detail of the steps which will be used for controlling and monitoring the plan with respect to roles and responsibilities of Woolworth management and personnel.

Table 1. Detail of activities and roles

8 Timeline

9 Budget

References

Azeem, M.M., Baker, D., Villano, R.A., Mounter, S. and Griffith, G., 2019. Response to stockout in grocery stores: A small city case in a changing competitive environment. Journal of Retailing and Consumer Services, 49, pp.242-252.

Bolton, R.N. and Shankar, V., 2003. An empirically derived taxonomy of retailer pricing and promotion strategies. Journal of Retailing, 79(4), pp.213-224.

Ellickson, P.B. and Misra, S., 2008. Supermarket pricing strategies. Marketing science, 27(5), pp.811-828.

Grimmer, L., 2019. Disrupting the giants: How independent grocers respond to the supermarket duopoly in Tasmania, Australia. In Case Studies in Food Retailing and Distribution (pp. 13-24). Woodhead Publishing.

IBIS, 2018. Supermarkets and grocery stores in Australia. [Online], Available at; https://www.ibisworld.com/au/industry/supermarkets-grocery-stores/1834/. [Accessed; 20 May, 2020]

Merrett, D.T., 2019. The Making of Australia’s Supermarket Duopoly, 1958–2000. Australian Economic History Review.

Mercer, B., 2019. How Amazon will change the Australian retail landscape in Australia. [Online], Available at; https://www.adnews.com.au/opinion/how-amazon-will-change-the-australian-retail-landscape-in-2019. [Accessed; 20 May, 2020]

O’Kane, G.M. and Pamphilon, B., 2019. ‘My Lifestyle Kind of Locks Me into Supermarket Shopping’: Narratives of Reflexivity and Routines from Supermarket Shoppers in Australia. Journal of Hunger & Environmental Nutrition, pp.1-16.

Sparrow, P., Brewster, C. and Chung, C., 2016. Globalizing human resource management. Routledge.

Steiner, B., Lan, K., Unterschultz, J. and Boxall, P., 2017. Applying the resource-based view to alliance formation in specialized supply chains. Journal of Strategy and Management.

Vogel, C., Crozier, S., Dhuria, P., Shand, C., Lawrence, W., Cade, J., Moon, G., Lord, J., Ball, K., Cooper, C. and Baird, J., 2020. Protocol of a natural experiment to evaluate a supermarket intervention to improve food purchasing and dietary behaviours of women (WRAPPED study) in England: a prospective matched controlled cluster design. BMJ open, 10(2).

Xu, E. and Lee, T., 2020. Supermarket magazines and foodscape mediation in Australia. Communication Research and Practice, 6(2), pp.111-124.

Yudha, B.M.S.H. and Liem, G.S., 2019, April. Analysis of The Differences of Purchasing Decision making style between male and female customers in Food Supplements products in Malang. In Journal of International Conference Proceedings (Vol. 2, No. 1, p. 152).