This will be achieved through analysing the variety stores industry where Woolworth performs, the companys former, present and future progress strategies and its own current performance. Using recognized strategic tools, the various options available to the company will be advised and evaluated.
The Methodology which will be used to compile this dissertation will mainly maintain the proper execution of extra research. This is largely because the type of the project requires the co-operation of professionals at very tactical level of the business. The Managers understand and have sufficient home elevators the strategic route of the organisation. The article writer was struggling to organize interviews with the management in the company, as information they may have cannot be made public for private reasons. Because of this it is regarded as that the information gathering from other sources within the company wouldn't normally be as reliable as desired because of this topic. Informal most important research interviews will be organized to gain basic home elevators Woolworth's PLC's policies and operations with associates of Woolworth's store staff.
Secondary information will also be used to compile this dissertation because of the option of reliable and valid home elevators Woolworth's PLC and the variety retail industry. Supplementary research will be conducted through examination of annual information and accounts of the company and it's really main competitors. To evaluate these, sources such as Mintel Marketing Intellect Studies and Marketing and Business trade journals will be used. Published academic catalogs on Strategic Management may also be used to assist with the theoretical components of this dissertation.
Woolworth's is generally described as a variety store. They are organisations that focus their attempts on the retailing of a range of products in the low and popular price ranges. They provide a walk in, shop and bring facility as the major path of purchasing (home delivery and pre ordering being rare), with available display and self-service merchandising. They may be improbable to be departmentalised. Other related categories include department stores, discounters and specialist retailers (also called category killers) (Oxford English Dictionary 2001).
Woolworth's was initially set up by Frank Winfield Woolworth in 1879 with the concept of reselling products costing no more than 5 cents. This demonstrated a popular idea with the consumers and the turnover sustained to grow. The concept was of no frills shopping, with a variety of reasonably priced, non-perishable items. When F. W. Woolworth died in 1919, he had built an empire of just one 1, 081 stores with sales in excess of $118 million per 12 months (Faulkner et al 2003). The company continued to develop and developed internal competencies in areas such as marketing, finance and estates management (Faulkner et al 2003). Faulkner et al also comment that amount of Woolworth's history was characterised by the emphasis of its strategy: it was able to deepen its existing competencies and incrementally extend both its competency platform and it understanding of different market surroundings (such as suburban retailing) (Faulkner et al pp. 279 2003).
However, this is to prove inadequate when discounters and category killers became more frequent on the market. Wal-Mart had started trading on the whole products at low prices and specialist stores, such a Gadgets- R- Us provided a destination shopping location for those consumers seeking a particular product, a wider range of products or specialist knowledge about the products. Woolworth's began a decline in sales in real terms due to its lack of understanding of how to capitalise on the widespread retail preferences. They failed to take the move to broaden their business either into a wider target or a narrower one, strategies which would have given them a program from which to defend myself against their opponents.
It wasn't until the past due 1980s that Woolworth's changed their strategy in america with their diversification into specialist areas, such as Kids Mart and Little Folks, as well as joining the discount retail business with the Woolco strategy. However, they lacked the competencies and capacities to replace the time they had lost which had allowed their competition to establish a strong market business lead and in 1995, Kids Mart and Little Individuals both sealed down. This was on top of the closure of 400 stores in the USA and the sale of 122 Canadian Woolco stores to Wal-Mart (Faulkner et al 2003). Among the specialist areas that they had inserted into, footwear, have prove to be successful and led Woolworth's in the USA to open up over 7, 000 athletic footwear stores covering a range of gender and years segments by 1998. The company decided at this stage to change its operating name in america to the Venator Group (Faulkner et al 2003) and to reposition itself as a specialist sports footwear retailer.
The groups business in the united kingdom moved in a new direction and held the original company name. At present, in the united kingdom, Woolworth currently owns around 900 stores selling gadgets, confectionary, house wares, seasonal products and electric entertainment. The UK business has also migrated into specialist areas with the introduction of MVC entertainment and gadgets which presently has 85 outlets, E. UK, which is the largest distributor of home entertainment products in the UK, and the music and video posting arm VCI (Cornell night out unknown). Having turn into a general population company in 1931, Woolworth's was briefly taken over in 1982 by Kingfisher, but came back to open public ownership again in mid-2001.
Woolworth's stated target is to be at the heart of the city and the best loved store for kids, home and family leisure (www. woolworthsgroupplc. com).
As will be seen Woolworth's performance has been changing over modern times and in January 2005, they received a takeover bid from the private equity group, Apax. But the Woolworth's board turned down that offer, a higher one was received a month later and happens to be under consideration. Which means that the future for Woolworth's can be an uncertain one, with the probability of a substantial cash injection, but reduced control for the current management team. If the Apax offer be turned down again, Woolworth's is likely to acquire offers from its major competition. PORTERS FIVE Make ANALYSIS.
Threat of new entrants
Despite the lot of retailers working with general products, two areas have emerged as being especially relevant.
Currently, there are only two catalogue based shopping concepts in the united kingdom, Argos and Next. This market remains highly under-represented considering the success specifically of Argos and it could be expected that the idea will be taken up by more companies in future. These lenders provide full selection of house wares, electronic goods, playthings and items as available from Woolworth, and have a definite competitive benefit in their practice of minimal stock holdings in store allowing extra offering space to be released. They may face difficulties in finding the quantity and size of locations they would need to become a major player in the forex market, but this may be triumph over through the acquisition of an existing retailer.
Further new entrants may be seen as foreign companies make an effort to increase their market talk about. These have been seen in two main varieties. First of all the specialist stores who started from nothing in the UK and also have achieved good organic and natural growth. For example Toys-R-Us, Ikea, Difference, H&M, Beneton and Poundstretcher. The next group are those who gain a foothold in the united kingdom market through acquisition. Included in these are Wal-Mart, Brantano and Claires Stores. There is absolutely no reason to expect the level of foreign retail interest in the UK to decrease.
Bargaining electricity of suppliers
The bargaining electricity of suppliers has been much reduced with the introduction of e-commerce. Because of the vast upsurge in usage of information between potential suppliers and purchasers, the suppliers pricing strategy may be the only path to secure business. That is likely to increase as more use is constructed of the web. One recent development has been the practice of reverse auctions in which a retailer specifies what they need and competing suppliers out bet each other, with a web site, by lowering the purchase price rather than by elevating it as in the traditional public sale (www. gusplc. com).
Once suppliers have been decided, the top size of this retail sector also ensures customers can act from a strong negotiating bottom part, as they have got significant control over the future health of dedicated suppliers. Recently there has been publicity about the practice of large vendors setting what exactly are seen as unfair conditions with suppliers and of insisting on price reductions even though the supplier then functions baffled (Telegraph 2005). However, it isn't expected that any legislation will bring about changes in this situation in the foreseeable future.
On the negative area, specialist suppliers such as those providing mobile phones and video games, have an increasing amount of ability because of the demand for their products. A store would have to ensure they may have sufficient quantities of a product like the latest Playstation, for the Christmas market, but are frequently remaining in the hands of suppliers who can give preferential service to some other clients.
Threat of substitutes
Product substitutions can be utilized in two various ways. First of all, as is the strategy of several of the primary supermarkets, own brand labels have emerged as suitable substitutions for every day grocery items. The expense of substitution is low to the client i. e. they believe that you can find little risk because of the loyalty they need to the store. The other type is through presenting higher priced, luxury type items. This strategy is seen in the Marks and Spencer food sector where they market the merchandise as being superior to other brands. For the variety sellers, the concept of substitution will not seem to obtain been totally exploited which is a possible strategy for securing market show in the foreseeable future.
Bargaining ability of customers
The high level of competition between retailers has led to a posture of ability for the consumer. Having shifted from seasonally motivated sales occurrences to permanent offers, the aggressiveness of these approaches in addition has increased. Customers now expect to be able to get three for just two offers throughout the year. This places the retailer at a disadvantage, as they'll lose the benefits of concentrating on marketing campaigns and means they are continuously pressured to take the path of competitive costs. This can lead companies to over rely on the gains made from a limited selection of products whereas the rest of the amounts operate at unsustainably low income as loss leaders.
Competitive rivalry within the industry
The variety stores sector is highly competitive and there is no reason why this should not continue being the case. It is suggested by retail analysts, Peters, Elworthy and Moore, that the variety store business in the UK has become saturated and that the larger stores will probably take over or combine with the independents (cited in Potts 1996). Competition from superstores and supermarkets is expected to increase as they increase their ranges of non-food items in a bet to gain an increased share of the entire consumer market (Potts 1996).
It is also expected that the differentiation between department stores, variety stores, home shopping and supermarkets can be less distinct as retailers turn to alternate channels and increasing product amounts to increase their turnover (Potts 1996). This will make it problematic for new entrants to get into the market unless they benefit from a unique feature such as discounting, as has been seen with companies such as Wilkinson's.
Ecological/environmental issues- corporate social responsibility (csr)- The primary perception around csr thinking is usually that the practice of businesses within the capitalist market to concentrate their initiatives on providing prosperity because of its shareholders, is undesirable and that companies should take the responsibility of considering the well-being of society as a whole (The Economist, January 22nd 2005). It has been countered by Lynch that failure to produce a specific statement on ethical issues, will not mean that a firm is not fundamentally honest in the manner that it can its business (Lynch 2003).
Retailers generally are arriving under increasing pressure to ensure they cannot be recharged with poor tactics in regards to to the growing world or the surroundings. The actions of and promotion across the anti-globalisation activity, may dissuade organisations from expanding their markets in another country, although some see these as a little minority which is questionable as to whether their activities would cause a company to alter their strategy. It is more likely that they will take the issues into consideration in terms of experiencing a solid csr policy so when reporting to the marketing. Woolworth's made the following declaration on csr in their latest financial record: "During 2003/4, through the CSR Committee, Woolworth's Group has continued to work to understand the impacts, both positive and negative, in our business.
A proper understanding of the risks we must manage and the opportunities we must be a catalyst for improvement is a simple part of how we do business (www. woolworthsgroupplc. com). Woolworth has specific insurance policies on the regions of timber and chemical substance usage, a strict code of moral trading and has set up its own charity (Woolworth Kids First) to provide the opportunity for their employees to help children on a local basis (www. woolworthsgroupplc. com). Whilst Woolworth's are outwardly taking their csr critically, it is an area that has result from nowhere to heavily impact organisations in the past and Woolworth would do well to bear in mind the impacts on Nestle of the infant dairy episode and on Marks and Spencer of the perspiration shop issues.
Legislation- a new White Paper has been released that gives retailers the ability to offer legal services through their own legislation companies. Dubbed Tesco Law, it provides a further service to encourage the one stop shop strategy of the top supermarket chains (BBC D). Supermarket chains, that happen to be one of Woolworth's main resources of competition, have had a strategy of supplying a one-stop shop chance to their customers with the intro of such facilities as pharmacies, bank facilities and insurance. It isn't yet known whether Woolworth's is planning to bring in such offerings in its store.
Government regulations- in the recent budget, Gordon Dark brown declared a doubling of the threshold for stamp obligation on house purchases to 120, 000. This was done to aid particularly first-time buyers. Motivating the housing marketplace will have an advantageous effect on Woolworth's house wares, furnishings and DIY amounts, but this will obviously extend to their opponents as well.
Government term and change- whilst a General Election arrives in the united kingdom, the copy writer believes that there would be no significant impact, either positive or negative, were the politics party currently in electric power were to stay or change.
Home market situation- the current economic situation in the UK can be seen as a confident factor for Woolworth's with low rates of interest (2. 7%) and high property principles resulting in record levels of borrowing. However, there are concerns over the amount of borrowing as debt levels for have reached more than 1 trillion (BBC E). It will also be known that low interest rates would dissuade people who are living off assets from spending, although these tend to be those in old age who are not considered to be Woolworth's concentrate on consumer. They have got identified that their typical customers are moms with reliant children living at home(www. woolworthsgroupplc. com).
Home economy movements. The Government states that Council tax will go up by typically 4. 1% within the next financial year, the cheapest increase in more than ten years (BBC B). Inside the housing market, numbers for changes internal prices differ by source with the Halifax quoting a 0. 5% climb and the Nationwide a 0. 5% show up (BBC A 2005). There happens to be no solid evidence of a crash in the housing market. Should this occur, the impact on the complete retail industry would be enormous.
Overseas economies and fads- oil prices acquired risen to a high of $56. 15 per barrel in middle March (BBC F). Although they are currently falling, they remain 25% higher for the entire year (BBC F). Lasting, the situation will probably worsen as demand for oil rises from growing economies such as China, where the economy is growing at 9% and a 10% increase in oil use is expected for 2005 (BBC F 2005). High oil prices will influence both development and distribution costs for all retailers and can need to be passed onto the buyer through increased prices if choice savings can't be made in the worthiness chain.
Market and trade cycles- despite good monetary factors such as low interest rates, the united kingdom retail economy appears to be slowing down. In March Morrison, Boots and Jessops released earnings warnings and it was reported that data advises generally poor retail sales and vulnerable spending for the time since Holiday (Verdin 2005). The information point to a rise in consumer spending of only 0. 2% for the last quarter of 2004 the weakest body for almost two years (Duncan 2005). No specific cause because of this downturn has been recognized; although the writer would suggest that the promotion around degrees of personal debt and the worsening pension crisis may have some influence.
Consumer attitudes and thoughts- Mintel's annual lifestyle statement has found that consumers are shunning the bigger supermarkets and chain stores which they find impersonal, and are much more likely to regular local, independent retailers (cited in BBC C). The implications of the for Woolworth could maintain positivity or negative. To numerous people, they might be classed as a multi-site retailer and for that reason avoided by the consumer. However, the history of the business, its generally high street locations and the type of the products it sells may lead some to choose it as a shopping location over large supermarkets. In this field, the annals and reputation of Woolworth's can only just be beneficial.
Fashion and role models- the value of superstar endorsement is well understood by the retail industry and icons such as Jamie Oliver, Delia Smith and David Beckham have all become associated with particular brands. Woolworth recognized this pattern and adopted the puppet character types, Woolly and Well worth, for his or her 2004 Christmas plan. Its success has encouraged them to keep the use of the personas for future advertising campaigns (www. woolworthsgrouppls. com).
Technology- the rate of increase in use of leading edge technology founded items has given retailers a highly profitable new product range. For instance, mobile phone technology only became widely available in the early 1980s, but today, roughly one in six of the world's society owns one and in almost all of the developed countries, market penetration surpasses 70% (The Economist 2005). Aswell as the phones themselves, the associated hardware and software are very popular and unexpected markets have developed, for example, wedding ring tones. You can find no indications these products will do anything other than maintain their development and the continual advancements in technology help to keep the marketplace buoyant.
Consumer buying mechanisms/technology- the progress of e-commerce has provided two new strategic directions for stores. Firstly, there exists the chance of offering the technology itself- mobile phones, computers, software, downloads, games- and second, it provides a further channel by which to sell goods. All of the major suppliers have internet sites which customers can research products, compare prices, order and pay for goods and, therefore, there is fair competition to encourage consumers to go to particular web sites. An extra dimensions is the amount of companies who sell only through the web. This gives them with a competitive good thing about having lower overheads as premises and shop floor personnel aren't required.
A good exemplory case of this is the e book retailer Amazon. com who have diversified into clothing, attire, DVDs and cds following their success with literature. Further channels have yet to be totally utilised including purchasing goods through mobile phone technology and digital tv set shopping programs. Whilst building their e-commerce business, Woolworth's must ensure it is dependant on a stable and secure foundation. Although not by yourself in the experience, that they had to close their www. woolies. co. uk site for just two weeks in 2000, when a customer reported that they could view other people's credit card information on the site (Azeez 2002).
Maturity of technology- Radio Regularity Personality Tagging (RFID) is seen as just how forwards by many vendors who are undertaking trials of the technology. The renowned is probably Tescos who've been testing it on their high relative value, easily portable items such as razors. Woolworth had been trialing systems but has released this year that there surely is no longer financing for the task (www. woolworthsgroupplc. com). They are simply allowing the technology to reach maturity and really should then be able to capitalise on the study done by others. There are some risks with this strategy as it offers the competition the opportunity to realise the great things about such technology at an earlier level. However, it also protects Woolworth's from the higher level of risk associated with this technology and working with issues raised by the Data Protection Take action.
The rivals of Woolworth are deemed as being
Discounters- those stores that offer stock at particularly low prices and also have this as a distinctive feature. These would include: Wilkinson's, Asda-WalMart and Poundstretcher
Supermarkets- stores that historically sold mostly foods, but have now generally broadened their range to add considerable non-food categories. Instances are: Tesco, Sainsbury, Asda-WalMart and Waitrose
Department stores- a store which markets a variety of items, usually non-food, that divides its goods into distinct areas of the store. In the UK this category includes: M&S, Debenhams, House of Fraser, English Home Stores (BHS), and John Lewis
Catalogue stores- the retailer has a huge proportion of the store space dedicated to storage rather than selling space. Few, if any goods are on screen and customers select from a catalogue, usually without enjoying the merchandise first. Argos and then are the renowned in the UK.
Specialist stores- those who focus on selling a particular product, which corresponds to part of the Woolworth range. For instance, Mothercare and the Early Learning Centre for children's clothes, B&Q, Homebase and Focus DIY for DIY products.
Competition is high for any segments of the retail industry which includes business lead to a blurring of the distinctions between the categories. Many companies are diversifying into new sectors or aiming for higher market penetration in their existing products. A good example will be the supermarkets that have had many years of fierce competition with the key three, Tesco, Sainsbury and Asda, regularly changing places in the retailer category. Their strategy includes adopting a cross types approach. Cost authority to some degree by ensuring they managed competitive costs for universal products and then offering their own brands at a significantly lower price and differentiation in terms of the number of products they feature by branching out into increased ranges of non-food items. New entrants to the marketplace had to have a unique feature to charm to the buyer and found it in terms of outperforming the founded market in expense control. Aldi, Netto and Lidl have achieved some success in this, providing generally new brand named, each day products at a significantly lower price than the main supermarkets.
The supermarkets also attempted to increase their market talk about through increasing their runs of products and increasing how big is their stores to add superstores and hypermarkets. Other practices include offering an appearance to be more exclusive (such as Waitrose and Markings and Spencer), placing as a leader in corporate communal responsibility (as with the Co-Operative stores and their Fair-trade products) and seeking new selling opportunities (for example, Grades and Spencer's food retailers in service stations). The amalgamation of Asda and WalMart and Morrisons and Safeway exhibited that many of these strategies still left companies with no clear customer concentration, wanting to be all things to all or any people, and, with reducing sales and market talk about, they truly became attractive propositions to companies wishing to achieve a foothold in a fresh geographical location (the south of England in the case of Morrisons and the entire UK regarding WalMart).
The biggest threat to Woolworth's from these stores has experienced product diversification. In the beginning seeking to give you a one stop shop experience, with advertising general merchandise, they then needed on specialist stores such as Lloyd's pharmacies, and non-retailers with the offerings of financial services.
The specialist stores experienced to recognise that as well as contending between themselves where products overlap, they are actually also needing to undertake the supermarkets. Music stores, such as HMV and Virgin, are experiencing pressure from supermarkets, who area able to take them on in conditions of cost leadership credited to economies of scale and value chain efficiencies, giving the music stores with the only choice of maximising their area of interest attributes. However, the increasing popularity of e-commerce, both in terms of new sellers and impressive product formats (such as downloads), has put this strategy vulnerable as their market status is arriving under harm. The implications for Woolworth's traditional stores are that they are having to rely on appealing to customers who aren't seeking a particular item when they type in a store, as they cannot compete on grounds of price or specialism. Their charm is to the impulse purchaser or those who are buying for another person and are doubtful of what they want. This merges well with the Woolworth strategy of focusing on Kids and Celebrations. However, if they are setting themselves as a one stop shop professional for celebration happenings, they are still in competition with the supermarkets who can provide the same items and the possibility to purchase them whilst doing the standard food shopping.
In areas where Woolworth has typically been seen as a key specialist, children's clothes, again, the supermarkets are providing a cost leader alternative with a solid fashion feature, by using well-known designers to support their products (such as George at Asda). Tesco recently showed their power by offering Levis jeans at a cost point lower than the manufacturer. In conjunction with this is actually the strategy of others to go into this lines as a new product or even to increase their market talk about. Key players are Mothercare and THE FIRST Learning Centre. Seen as specialists for the child market, their risk to Woolworth is significant as is that of clothing stores identifying the market for children's clothes and exploiting it using their durability in reputation to charm to the buyer (Space Kids for example).
Whilst each one of these forms of retail store vie for the consumers business, there can be an inherent risk for all of them in conditions of being in a position to convert their sales into revenue. With competition being so fierce and arriving for several different directions, most stores have to ensure that whilst they are not necessarily the least expensive, they are really competitive. The exceptions to this are the ones that promote themselves as exclusive, such as Waitrose. Each one of these retailers would like to lessen their costs through driving a vehicle savings with the worthiness chain. This has wide reaching implications. As pressure heightens to produce the goods at a lower cost, the foundation of production moves to countries with lower wages and poorer working conditions. Aswell as affecting the UK overall economy through increased unemployment, there were cases where the obvious violation of individuals privileges has produced poor publicity for the retailer. A good example of this is the situation Grades and Spencer encountered in the late 1990s.
On the main one hand these were being accused to be too expensive, so they changed production of the clothes to developing countries. This resulted in an outcry in the advertising when companies in the united kingdom who had been supplying them for years, could no longer operate and acquired to close down.
Another strategy to reduce creation costs is by using cheaper recycleables, but again, the negative aspects of this receive attention, with the current example being the questions raised in the vitamins and minerals of cheap food products.
Within the organisations themselves, streamlining head office personnel in conditions of amounts and outsourcing support functions such as recruitment, have shown to be effective for a while, however the long-term ramifications of cutting costs in areas such as research and development and training has yet to be seen.
Many of Woolworth's advantages come from its long background. They have a accepted inner competence in supply string management and are able to utilize this both to lessen their costs and to enter into contracts with organisations that would usually be classed as their competition, such as Tesco. They are employing their competence to provide additional turnover. Their agreements with others that utilise their strengths also permit them to minimise the potential risks to themselves. Having been long established, Woolworth has a good reputation in the united kingdom and is also a recognised name on the high street. They have a strong presence in toys, house wares, confectionary and seasonal products markets and because of their size can boast a prominent position over the majority of their suppliers.
The perception of consumers is of a high level of commercial cultural responsibility, having not been put through significant poor promotion in any areas. The general economic conditions in the UK are promising although the recently reported decelerate in consumer spending must be regarded as a risk. The locations and range of stores run by Woolworth's is seen as a further durability, especially as consumer inclination moves from out of town shopping. They may have made a good move around in the adoption of advertising icons, which are considered to be always a key element of these advertising campaign. Recent advancements in their stock management systems involving the introduction of a replenishment system and the Kingstore till systems, gives them the capability to manage their stock levels more efficiently, thereby minimizing both costs and cases of stock outages.
They have been subject to a recent review of how they can improve their functional efficiency and this shows a proactive technique to take on their competition. They have got a high standard of knowledge of customer base which they have developed through their long background in the retail market. This allows them to anticipate changes in consumer requirements and provides them the actual to maintain a competitive border. Their decision to increase their use of their own brand products gives them the chance to heighten their market penetration in these areas, whilst their enlargement of electric entertainment offerings shows a want to broaden their range within a particular sector. These strategies seem to be to reach your goals at the moment. They are able and willing to look at different approaches for different product amounts, meaning that they may take on your competition in a variety of ways alternatively than depending about the same approach.
Woolworth's practice of discounting and offering discounts at high levels provides customers with vitality which can pressure the business to do things it would not normally have to consider, such as extending the number and length of three of two offers. Although, driving sales, this can have a substantial effect on their profitability. Failing to maintain to accelerate with competitors in new technology such as RFID could end up being costly as they'll be unable to appreciate the financial benefits at the early stage, lowering their capacity to compete in value string reductions. Poor decision making on the critical trading time of Xmas led to disappointing sales and possibly, a drop in self confidence of consumers and traders. Whilst it could be considered that they might have learnt for this experience, it advises poor decision making at management level that could possible be repeated in the areas. The appearance of their stores requires attention, which it receives, but arguably, not at an easy enough rate. Customer notion with their offering is of a low value product which although synonymous with value, could be observed as a poor factor if they continue using their positioning strategy in regards to to kids and festivities.
There are several opportunities open to Woolworth's. Further development of the electronic entertainment offerings would seem to be always a significant one of these. The sector continues to grow and Woolworth have established themselves at an early stage. There is certainly potential in overseas market segments for Woolworth's own brands such as Ladybird and Chad Valley and in the local market, the strength of the housing market is resulting in a high level of purchases in the main element areas of house wares, home furniture and DIY. The current consumer pattern is towards a desire for traditional retail outlets as opposed to out of town superstores and Woolworth are well situated to take advantage of this. Extending stations for consumer purchase to use the innovations in technology such as cell phones and digital shopping stations must be looked at as an integral opportunity for the future. The current Apax takeover bet may provide essential financing for development for Woolworth enabling them to start a significant strike on their competition.
However, despite the opportunities available, Woolworth's retail environment is not without its dangers. High competitors from within the variety retail sector and from other areas such as discounters, category killers and catalogue-based stores continue steadily to make the marketplace a hard one. Intense competition from supermarkets extending their non-food ranges and moving into the smaller range, convenience retailers is a further cause for concern as is the recent development of a reduction in retail sales. In conjunction with the upsurge in oil prices and demand for oil, Woolworth may find it difficult to keep up a competitive pricing strategy and the market saturation of the traditional retail market means that they can not afford to be uncompetitively listed. The increase of piracy will have an impact on their digital entertainment sales unless it could be combated and they should remain alert to security issues over e-commerce. Whilst the takeover bid from Apax as been quoted as a chance, additionally it is a hazard in terms of the loss of skill. During times of uncertainty, key employees should seek alternative occupation taking their intellectual capital with them.
Whilst on primary inspection, Woolworth would seem to truly have a larger number of strengths than weaknesses, it ought to be noted that it's the nature of these areas that is most important. Qualities such as background and reputation wouldn't normally compensate for poor product placement decisions at management level.
PAST FIVE YEARS AND RECENT GROWTH STRATEGIES.
Woolworth's underwent a radical overview of its business in 2002 and motivated that there were four main vehicles to growing profits. By simplifying the business enterprise through reconsidering the development of the Woolworth Basic Store and BigW ideas, they have been in a position to realign and merge the management buildings which were showing to be a barrier to adding to the value string and were also expensive in themselves (www. woolworthsgroupplc. com). Woolworth identified that whilst the commercial teams for these concepts were concerned with sourcing new runs, it had led to poor range development, unsatisfactory supply levels and failing to increase the buying leverage of the Mainchain (www. woolworthsgroupplc. com).
Woolworth's have fortify their infrastructure through the adoption of a new Integrated Planning and Replenishment System that allows exact management of stock levels to ensure neither too much or too little stock is organised at the primary warehouses or the stores (www. woolworthsgroupplc. com). Coupled with this, they have introduced the Kingstore till system with advantages to both stock retaining accuracy and quickness of service for customers (www. woolworthsgroupplc. com). Their sourcing and merchandising of goods has been improved upon through centralisation of shopping for to maximise leverage, a 10% reduction in the number of suppliers to reduce costs, better range architectures in Toys, Home and Clothing, increased use of own brand products such as Ladybird, Chad Valley and Colourplay, (and) changes in the clothing supply chain to reduce lead times, lower stockholding and maximise markdown, establishment of the communities own buying office located in Hong Kong (www. woolworthsgroupplc. com).
They also recognised the value of delivering a clearly known, differentiated retail offer with their customers which, relies upon developing a clear knowledge of our customer foundation (www. woolworthsgroupplc. com).
Despite these improvements in the worthiness chain, Woolworth have not been able to drive their sales characters, although they do retain market share. CURRENT MARKET POSITION.
Woolworth financial final result for 2004 revealed a sales increase of 4. 5% overall, although like-for-like sale for Woolworth's main chain were down by 1. 3% (woolworthsgroupplc. com). This is converted into 73. 1 million profit, an increase of 4. 7% on the previous yr (www. woolworthsgroupplc. com) and allowed these to provide 3. 6 pence per talk about basic income, up 2. 9% (www. woolworthsgroupplc. com). During the year, that they had made significant investment in conditions of store refurbishment and the execution of the Kingstore till system, priced at a total of 72 million. Whilst limiting new store opportunities to two, forty-eight stores were restored (www. woolworthsgroupplc. com).
2004 got seen the creation of the jv 2entertain with the BBC. However, the second half of the entire year was disappointing, with Holiday not producing the results hoped for. Woolworth made a decision to allocate extra living area to playthings and gifts as soon as October in the wish that they might take benefit of early Holiday sales. This was unsuccessful and resulted in a loss of deal of other products that had been removed to help make the extra living area (www. woolworthsgroupplc. com). Woolworth's also acquired extremely strong competition for the gadgets and gifts marketplaces with Argos retaining their market leading position for another 12 months (www. gusplc. com).
With the retail market getting saturation point and continued negative media coverage of possible house price crashes, pension shortfalls and personal credit debt, the low amount of disposable income people are willing to spend is being spread that a lot more thinly. However, some retailers have been able to buck this tendency and Woolworth's would reap the benefits of benchmarking themselves from the high performers, especially those they can be in direct competition with, such as Argos.
Woolworth's entry in to the entertainment business became more concentrated following a demerger with Kingfishers in 1991 plus they now operate E. UK, 2 Entertain, MVC and Streets Online, which the article writer believes are a key aspect to the business future performance. E. UK was established as a brand in the middle 1960s as Record Merchandisers Limited, and by 1986, with Woolworth as its major customer, it was received by Kingfisher. Video tutorial Collection International (VCI), having been main video stores, was bought by Kingfishers in 1998. MVC was founded as a jv between Kingfisher and previous directors in our Price in 1991. Kingfisher took over total control in 1996 (www. woolworthsgroupplc. com).
When Kingfisher and Woolworth's demerged, Kingfisher plc transferred its hobbies in the root general merchandise businesses to Woolworth's Group plc in satisfaction of any dividend in specie announced on Kingfishers plc's regular stocks (www. woolworthsgroupplc. com).
E. UK is the largest wholesale distributor of entertainment products in Britain. 2 Entertain operates as an audio-visual publishing group and MVC is a specialist high street shop of entertainment products with 85 stores (www. woolworthsgroupplc. com). Streets Online, one of the UK's leading specialist online entertainment suppliers, was attained in December 2000 to check the MVC traditional store chain (www. woolworthsgroupplc. com).
Entertainment UK (E. UK) exhibited a solid performance in 2004 boosting sales by 10% to 1. 2 million (www. woolworthsgroupplc. com). The idea is based on entertainment and literature distribution and has gained business in its sales to third parties. Having acquired deals with WH Smith and Tescos for booklet distribution, alternative party sales now account for 38. 4% of the business enterprise (www. woolworthsgroupplc. com). The strategy for the future would seem to be centered around building the third get together and e-commerce edges of the business enterprise whilst continuing to make efficiency personal savings in the resource chain which are crucial because of the pressure on gross margin.
As broadband gain access to is becoming more widespread over the UK, the music and training video download market has become a major route in the entertainment market. Major players include MSN, iTunes, Napster, Tiscali and Wanadoo whilst, as a result of an intense advertising campaign, Coca-Cola's site Mycokemusic. com is one of the most successful download services in European countries (Author unidentified June 2004). However, Woolworths have an alternative offering to these competition being the only real major site to market current chart music and also to do so through a Windows Advertising format rather than thrid party website (Author unknown June 2004). They also have negotiated licensing handles the five dominant record labels- EMI, Sony Music, Common Music, BMG and Warner Music- as well as many of the unbiased labels (Langford 2004). It has been suggested that Apax's bet would depend on the deal of 2Entertain valued at around 200 million (Telegraph 2005 B).
MVCs strategy is to distinguish itself from other specialist high street entertainment merchants by offering, through multi-channels, depth of product range, including an intensive back again catalogue at competitive prices (www. woolworthsgroupplc. com). They see their customer basic being the repeated high-spending buyer of entertainment products (www. woolworthsgroupplc. com). However, in the 2004 gross annual survey, it was discovered that the business was unwilling to invest in the high level of investment required for the repositioning of MVC which had exhibited a 4. 8% show up in like for like sales over the previous year and this after closing fourteen stores, the remaining sixty seven would be divested (www. woolworthsgroupplc. com).
One of Woolworths key range is toys and games. Despite publicisng the aim to be always a market leader in the UK for toy sales, Argos lead with 40% of the marketplace. Woolworths maintain second place, with Toys and games 'R' Us third (www. woolworthsgroupplc. com).
The gadgets and game titles market in the UK has seen a switch in stations with a decline in mail order because of the increased recognition of online shopping and the increased runs organised by supermarkets. This has severely affected department stores with both Debenhams and WH Smith lowering their ranges of toys and video games in a re evaluation of strategy. Category killers are becoming more dominant as well with Toys 'R' Us, The Entertainer, Green's and Toy World, proving popular with customers wishing to purchhse at a specalist electric outlet with a correspondingly wider selection of products and an increased level of competence. Further competition is expected in the region of pre institution products with companies such as Mothercare and Early Learning Centre focusing on extending their market share (Bainbridge 2004).
Woolworth's product strategy has mixed between ranges. For the Kids and Celebrations strategy, the aim was to increasing the range of products available and led to increased sales for Electrical, Marketing communications and Kids Dress Up runs. For Confectionary, Present and Events, the approach was focusing on differentiating our offer from that of the competition, whilst in the Clothing sector the traded margin was shifted frontward as suppliers were were able to have the ability to react to seasonal changes more quickly. (www. woolworthsgroupplc. com). Woolworth's long-term aim would seem to be to focus their traditional stores on the youngsters and Celebrations concept. They may have determined this as market where current levels of demand are not being stuffed.
In October 2004, Woolworth completed the spin out of the new Kingstore till system (www. woolworthsgroupplc. com). This allowed better control of store stock levels and an increase in option of items, as well as faster exchange times for customers.
Early in 2004, Woolworth analyzed its BigW strategy and chosen that the concept would be downsized both in terms of quantity of stores and store square meterage. They view the ideal quantity of out of town sites to be seventeen with the average living area of 40, 000 square feet. By the end of 2005, they intend to have four stores working which will be used to refine the proposition before any more investment is manufactured in our other sites (www. woolworthsgroupplc. com). This decision comes at the same time when research is indicating that consumers have become disillusioned with the out of town mega store notion (Spector 2005). It might be interesting to know if the management at Woolworth with the inner competence of understanding markets and customers, forecasted this shift, whether it's a response to the findings, or whether it was merely a blessed coincidence.
In the second half 2004, Woolworth's completed its purchase of Flogistics, a gift idea voucher deal and distribution company, from Kingfisher (www. woolworthsgroupplc. com). This isn't considered by the writer to be always a major change of proper course, but more of a utilisation of Woolworth's inner competencies around warehousing and distribution.
It is not merely retailer competition that presents a risk to Woolworth's business. The practice of piracy is blamed for a remarkable drop in Movie sales above the Christmas period. The CEO of Woolworth UK blamed replication plant life in China pumping out counterfeit (cited in creator unknown 2205) as the reason behind disappointing sales of Harry Potter, Shrek 2 and Spiderman 2. It would be interesting to know what, if any, activities are being considered by the major suppliers to counteract this issue, as lowering the incidents would be similarly attractive to the suppliers as the sellers.
In conditions of industry life routine, the retail business all together continues to be in the development stage. New entrants are carrying on to emerge and the supermarkets have discovered the non-food sector of these businesses as a future growth area. A couple of no obvious indications that maturity has been reached although this might become the circumstance should retail spending continue to decline. VALUE String.
Campbell et al summarise the worthiness chain examination under four areas: identification of primary activities and their relationships to main competencies and current organisational strategies; id of the effectiveness and efficiency of the average person activities; study of linkages between activities for extra added value; and id of blockages which decrease the organisation's competitive gain (Campbell et al 1999 pp. 35). Porter observed the possibilties of making use of this to startegic evaluation in conditions of linking the added value that all part of the organisation plays a part in the whole organisation; and the contribution to the competitive advantage of the whole company that each of the parts might then make (Porter cited in Lynch pp. 216 2003).
As earlier mentioned, Woolworth undertook an in depth overview of their procedure in 2002 to identify where value string improvements could be performed. The article writer considers it unlikely that Woolworth noticed this as a strategy with a specified end point and would expect these to regularly review this area as an ongoing revenue generator. The express of the support activities sometimes appears by the article writer as being the following. Having established a firm infrastructure through reintegrating the BigW and Woolworths General Stores product sourcing arm into the mainchain function, they are able to maximise their vitality over their suppliers. The procurement office is able to negotiate with suppliers with efficiencies of mass and with a strong knowledge of stockholding requirements following launch of the replenishment system and Kingstore tills.
Being in a position to accuratley forecast sales of a product reduces the cases of being still left with extra stock to be jobbed off, ensure maximisation of sales with reduced problems of stock outages, permits long range planning of warehousing and distribution requirements and a foundation that to have the ability to give the supplier confidence in the ordering levels, that allows those to take similar advantages. Recruiting management is a key section of any business. By making sure close management of areas such as training and development, recruitment and incentive policies, Woolworths are able to maintain control of costs.
The recent introduction of the subconscious contract to replace the idea of a job for life, has put pressure on employers to provide their workers more than just a days purchase a days work. Employees are seeking opportunities for development and compensation strategies that provide them the option of buying their company through show save schemes. The low unemployment rates in the UK places Woolworths and its compettors in a difficult situation having to balance the shelling out for employee benefits contrary to the pressure of seeking to atract the best candidates. Woolworth offers a graduate recruitment plan to catch the attention of what they se as the professionals into the future.
Technological development has been reduced as the result of cost saving intiatives in terms of the RFID research, and there is little eveidence of any investment in terms of the choice shopping channels. Again, whilst making cost savings in the worthiness chain, there is an associated risk of falling behind the competition and burning off market talk about as well as long term financial benefits.
Woolworths concentrates its warehousing businesses at one site in Swindon and complements this with smaller, satallite procedures on a local basis. Thus giving them some advantages in conditions of minimising opportunities in storage space facilites and minimizing dual handling between sites, but places them vulnerable to needing temporary extra facilities at peak trading times, the time when such facilites are at the best price. Having a framework of three of four large regional distribution facilites is seen as the utmost effective method as it allows for sufficient development when required and unneeded space could be sublet at quieter times. Woolworth are also increasing the practice of suppliers providing right to the stores (www. woolworthsgroupplc. com) which reduces the distribution costs significantly.
There has been little change in the region of customer support for Woolworths in the recent past, continuing to count on what are now considered to be the greater traditional systems of their traditional stores. They may have committed to the Kingstore till system, but aren't yet able to offer automated charge card systems waiting for you. Value is possibly being added through this strategy because they are not having to invest in new technology or by innovative customer support methods, however, these are often viewed by customers as a way to obtain competitive edge.
The operational framework of Woolworth has been integrated, as mentioned, by amalgamating the BigW and Woolworth Standard Stores procurement functions into themain business and also through consollidating the Local and City formats (www. woolworthsgroupplc. com). This centralised framework enables the corporation to increase value string activities within an upstream way i. e. in areas such as purchasing, distribution and customer serice, but may limit their talents to do the same in a downstream route i. e. innovation, product development and marketing (Lynch 2003).
Ghosh (1998) observed that the development of e-commerce allowed four further ways of adding value: offering extra low cost services to customers, showing customers with other businesses, utilising internal competencies in it to provide customer support and leveraging the ability to transact over the Internet to provide more value than others.
Woolworth may consider reviewing these specific regions of the value string in the future, as e-commerce becomes a far more and much more significant retailing channel. CURRENT RESOURCES OF COMPETITIVE ADVANTAGE.
Several of Woolworth's competitive advantages have been talked about, but two have emerged to be particularly significant. Woolworth's has a group of in-store brands including Ladybird, Gloss and Chad Valley, for which they may have exclusive privileges. The Ladybird brand attracts the children's clothing market for a long time 0- 9 years. It really is third in the children's wear market with a market share of 5%. Gloss is positioned to pick up the Ladybird consumers as they become elderly through offering stylish clothes at a low price point to the 7- 11 female age group. Chad Valley is a well-established selection of playthings launched in 1991, although the name have been around since 1860. Trading under the banner of safe, reasonably priced playthings for children from delivery to 8 yrs. old, it has become one of Woolworth's most recognised offerings (www. woolworthsgroupplc. com).
Woolworth is well positioned to benefit from the trend from large supermarkets. Many of the major retailers such as Tesco, are starting more small size outlets targeted at providing for the consumers who've become disillusioned with driving to out of town sites and shopping in large, active superstores which they find to be frustrating, the pattern is towards smaller outlets which as viewed as quicker and far more convenient to the shopper. Woolworth's uptake upon this has been seen through its decision to cut back on the BigW strategy and what was previously regarded as a risk to the business, maintaining traditional locations rather then move in shopping centres, should pay dividends in the future (Spector 2005).
Woolworth's were not able to counteract your competition from specialist, category killers and discounters because they lacked the number of functions and understanding of the market segments to have the ability to challenge them after they had become founded (Faulkner et al 2003). They are doing, however, have got several significant central competencies, a few of which are traditional, others which are more recent in their development.
Woolworths motivate for sales on the Christmas period led to the decision to look at an iconic approach to advertising with the launch of Wooly and Value, sheep and sheepdog puppets. This process is seen as a good one in today's advertising weather with, for example, the Jamie Oliver/Sainsburys connection. This approach provides comnsumer a recognisable icon with whom they connect a company to the stage where the relationship takes place without reference to the brand.
Woolworth say they will continue to use the puppets as they turned out successful by being remembered by the public and Woolworths have finally developed a range of merchandise based on the personas (www. woolworthsgroupplc. com).
Woolworths strengths lay mainly in its history and reputation. Having become international as soon as the 1920s, Woolworths built and preserved a high degree of knowledge around the type of marketplaces. Their position as a household name also helped them become a highly regarded employer, specifically in the mid 20th Century and the business still benefits from having a core of dedicated employees. However, the writer believes it also suffered with obsolete support systems and a worn out appearance to its stores.
Woolworths is rolling out expertise in the supply chain section of the business over the years as seen using its joint projects offering circulation experience. Among the key changes in the supply chain over another few years would be the introdution of Radio Frequncy Personal information Tagging. Marking the average person stock items (usually through the use of a barcode) allows these to be tracked from development to use allowing both better inventory control and insights into consumer habits. Woolworth started research into RFID since 2002, but in 2004 released that it could put the studies on keep. Woolworths' mind of central logistics, Geoff O'Neill, is quoted as expressing 'RFID is part of the supply chain technique for the near future. We will get around to it and the technology will be better still then. A two to three year wait might not exactly be a bad thing (cited in Watson 2004). He stated that the decision was because of the fact that our chief executive has made a decision to prioritise other things right now (cited in Watson 2004). It remains to be seen how this decision will impact Woolworths capabilites in the future as much of its competition are continung with their trials and plan to have RFID systems set up by 2007 (Watson 2004).
Woolworth's experienced three successive many years of improving the operational efficiency of the organisation. Gross margin has increased by 90 platform factors of the previous two years, achieved through better sourcing, product development and ongoing improvement to the runs (www. woolworthsgroupplc. com).
Woolworth is facing lots of the common obstacles for today's vendors. The variety store market is saturated resulting in intense inside competition as well as the risk of increasing discount stores and specialist vendors. Furthermore the strategy of the large supermarkets to increase their show of the non-food market is showing very successful and with the electric power over their suppliers and how big is their outlets, they could offer electronics, clothes and entertainment items which were recently the mainstay of the variety retailer. This has led many companies to become overextended, with inconsistent financial results and immediate transition through the retail lifecycle leading to them reaching the maturity stage previously and having to reinvent themselves more regularly.
Growth strategies are having to change course to asset intensification or creativity. Existing product amounts, stores and customers need to be maximised so methods such as footfall, spend per basket and numbers of items become key indicators. To defend myself against the dynamic industries, such as the leisure, healthcare and mobile phones, mature suppliers need to take full good thing about their economies of level to have the ability to lower prices through bettering their infrastructure, source string and marketing.
Many of the organisations which are outperforming their competitors in terms of earnings and earnings, are doing so through optimising the opportunities that are available to them. Common strategies include focussing on the home-related categories that happen to be popular at the same time when the housing marketplace is strong, demonstrating a strong determination to added value and targeting the organizations with higher levels of disposable income (those who do not yet have a home loan and those who have completed paying their mortgage loan) (Chowdhury 2000).
It has been described in the original part of the paper that the constraints on Woolworth's capability to re-establish itself as market head are it's limited capabilities and insufficient gratitude of the potentiality of new marketplaces (Faulkner et al 2003). Faulkner et al see a lack of options as a fundamental hurdle to retail success and comment that it's necessary for a corporation to keep a stock portfolio of new options for its future by building new capabilities and simultaneously expanding its knowledge of new market segments and customer behavior (Faulkner et al pp. 283). Each goes on to suggest three specific forms of options: a fresh principle that is yet untested, an idea that has undergone limited studies and, last but not least, a standalone business that has continued to be undeveloped (Faulkner et al 2003). Woolworth's has been able to exercise one of the options in the past when it had taken the pilot concept that was Foot Locker and transform it into the dominant core of these business in america. They might be tempted to get this done again, possibly in the U. K. market, with it's at the moment fledgling concepts such as 2. Entertain. You can find definite benefits to this approach, as it would not require the top investment needed to develop every option open to them, but scheduled to a strong initial foothold in the sector, it could be quickly scaled up.
Faulkner et al see a strong benefit in maintaining a range of options at differing levels of development (Faulkner et al 2003). If an organisation can react to a development in the retail market that keeps growing significantly by extending an already proven concept, the organisation will have the mandatory competencies to increase their share of this particular market before their potential rivals have had enough time and had the opportunity to help make the investment, in developing the concept from scratch. This might claim that Woolworth should continue steadily to trial new ideas to have the ability to develop them completely when the marketplace conditions are right.
Having in depth interior knowledge around market segments and consumers is not enough for an company to be successful, they also need to be in a position to utilise this knowledge by being able to apply it at some stage of the value chain. In its simplest terms, it is not sufficient for an company to have comprehensive knowledge of the actual sock market, for example, in the UK if they haven't any way of sourcing, distributing or offering them.
Woolworth's strategy in the past has been diversification around related brands i. e. specialising in products that had been available in their stores such as music and videos or shoes, and advertising them through both related and diversified stations, such as was done in america with Footlocker or, the truth of music downloads, to check compact discs. This approach requires regular research into marketplaces and consumers as well as the ability to use what they learn.
Verdict analyst Nick Gladding, quoted in Marketing magazine, highlights the actual fact that retailers such as Woolworth and WH Smith acquired previously relied on location as a distinctive Selling Point and that advantage has been lost. He shows that both companies should give attention to their regions of competence: WH Smith's should be education, and Woolworths' should focus on kids and activities (cited by Barnes 2005). Gladding also feels that price is the deciding factor for the buyer who has many choices of retailer within an aready saturated traditional market and with the ideas of Tesco to open up non-food basic stores. He suggests that Woolowrths and WH Smiths technique to counter this will be a merger between them and items to the success of the merger between Birthdays and Clintons Credit cards (cited in Barnes 2005).
Woolworth's must focus on three areas for future years.
Firstly, you have the ever before present need to identify spaces in the mar
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