Category: Woolworths

Introduction

Non-financial and overview:

Woolworths Ltd

Woolworths Ltd is an 87-year-old company listed on the Australian Security Exchange and engaged in the retail industry. Its operations include food and grocery, liquor, petrol, general merchandise, and consumer electronics. Its customers which are in millions are spread across Australia and New Zealand. It employs more than 191,000 people thus remaining as one of the largest private-sector employers in Australia.

Out of more than 420,000 shareholders, 40,000 are their employees. The company’s policy is to purchase goods from domestic sources so that meat, fruits, vegetables, and seafood procured are fresh. As a major investor in Australia and New Zealand., the company helps the country economically through job creation, infrastructure development. Socially, the company helps in the advancement of quality standards in the food industry, safety standards in the workplaces, improvement in retail technology, and aiding charities by direct donations. From the environment perspective, the company has launched a sustainable strategy 2007-15 for making positive environmental impacts by setting targets (WoolworthsLtd, n.d)

Wesfarmers Ltd

This company is nearly 97 years old having been started in 1914 as a Western Australian farmers’ cooperative. This is also a listed company with the Australian Stock Exchange engaged in diverse operations in supermarkets, department stores, home improvement, and office supplies, coal mining, energy, insurance, chemicals and fertilizers, and industrial safety products with the primary objective of ensuring a reasonable return to its shareholders. The company’s economical, social, and environmental objectives are the same as that of Woolworths Ltd as outline above (Wesfarmers, n.d ).

Profitability

Profitability is indicated by the company’s profit margin, return on assets, and return on equity. It shows the overall efficiency and performance of the company.

Gross Profit Margin

Woolworths’ gross profit margin for the year 2011 has improved by 0.05 %. For Wesfarmers, it has reduced by 0.03%. But, Wesfarmers Ltd’s gross profit is higher than that of Woolworths Ltd i.e 30.96 % for the former and 25.78 % for the latter.

This ratio is an indication of the cost of goods sold. It reveals how well, a company can control its inventory and manufacturing costs. The company’s ability to purchase raw materials at a competitive price and hold an optimum level of inventory consisting of raw materials, semi-finished goods, and finished goods and selling price of the finished goods determine the volume and percentage of its gross profit.

It follows therefore that the higher the gross profit margin, the better for the company. Thus, Woolworth’s lesser percentage of gross profit margin may be due to its un-remunerative selling price, excessive purchase costs, or inventory holding costs. Woolworth may remedy the situation by increasing its selling price if possible or reduce their purchase costs or inventory costs. Similarly, Wesfarmer’s higher percentage of gross profit margin by 4.18 % for the year 2011 may be due to their lower purchase costs, lower inventory costs, or higher selling price or combination of all these.

Further, they have additional products line consisting of home improvement and office supplies, coal mining, energy, insurance, chemicals and fertilizers, and industrial safety products which Woolworths does not have. These items may help in their competitiveness.

These products being of high value and high volume barring insurance may be by nature fetching more returns in volume. Their presence in the insurance industry is an advantage of being able to service their customers under one roof. Their customers need not go to another service provider and waste their time and energy. It would be possible to find the actual reasons for the high profitability or lower profitability if details sales revenue product-wise and purchase details are available.

Operating profit margin: Otherwise known as EBIT (Earnings Before Interest and Taxes) is calculated as a percentage of sales. It is a measure of overall operating efficiency. As interest and tax figures are not available, the calculation of EBIT is not possible.

Net Profit Margin

Net profit margins have increased for both companies. For Woolworths, it is 0.09% and for Wesfarmers, it is 0.35%. Wesfarmers have earned a higher net profit of 6.11 % than Woolworths with a net profit of 6.05 % for the year 2011.

It shows that Wesfarmers command better selling price and/or lower selling, administrative, interest, and depreciation costs.

• Return on equity (ROE) also has increased for both companies. For Woolworths, ROE has increased by 0.21 %, and Wesfarmers, it is 1.25 %. Return on Equity is higher in respect of Woolworths. This ratio helps investors decide to invest or not to invest in a company.
• Return on Assets (ROA). For Woolworths, there is a reduction of 1. 14 % and for Wesfarmers, there is an increase of 0.63 %. However, Woolworths’s ROA is higher than Wesfarmers, the percentages being 16.68 % and 7.94 for 2011 respectively.

With the above ratios, Woolworths stands in a better position than Wesfarmers in terms of ROE and ROA.

References

Wesfarmers. n.d. About Us. Wesfarmers. Web.

WoolworthsLtd. n.d. Our Company, Passionate about retail. Woolworths Ltd. Web.

Introduction

Woolworths is an Australian Mega chain of supermarkets and stores of groceries that the Woolworths Group mainly owns. The Company was founded in the early 20th century in 1924 and is currently regarded as Australia’s greatest and biggest chain that contributes to a market of over 33% shares as of 2020. Among the services that Woolworth specializes in are groceries consisting of fruits, packaged foods, meat, and vegetables. Besides, it sells magazines, beauty products, DVDs, and health products, making it a great supply of basic products to the Australian citizens and foreigners’ inclusion of tourists. Stationeries and baby and pet supplies are other exceptional products offered by the Company. Its services have been improved as it has a Woolworths Online, formerly called HomeShop, in which customers can easily click on their website, collect what they require, and get free home delivery.

Cost of the Guide

The capital and Asset Pricing Model (CAPM) refers to an idealized portrayal of how financial markets price securities and determine the expected returns on capital investments. It is regarded as a better cost of equity calculation method than the established Dividend Growth Model (DGM). The mentioned CAPM assumes that investors of the Woolworths Companies hold fully diversified portfolios. From research, the information implies that the CAPM assumes the shareholders to require a reliable return on their investment based on any systematized risk rather than the total risks…

CAPM = E(Ri) Capital Asset expected return

E (Ri) = Rf + Bi

Where:

• Rf = risk free rate of interest
• Bi= sensitivity
• E (Rm) = Expected return of the market

CAPM is significant because it determines the fairest price for an investment based on risk potential return and other perforated factors. Its usage in calculation aids in ensuring that there is a fair value of the stock.

Table 1: CAPM Scale

Re Calculation

Re = D1/Po+g

• Risk free rate – 1.99%
• Market return – 7.08%
• Equity risk premium-(7.8 – 1.99)

Re = 1.99 + 0.70

(7.8 – 1.99)Re = 6.057%

Rm = (RF + credit risk rate) (1 – T)

RF -289300000

Credit risk rate – 7,14,38,90,000

Tax – 30%Rd = (289300000 / 7143890000)

(1 – 30%)

Rm = 2.83%

Beta is the exact measure of stick risk volatility of returns reflected by measuring the fluctuations of its price changes relative to the overall market. From the information that has been shared, Beta is equivalent to 0.70

DGM Calculations

DGM = G1 + G2 +… +Gn/n

Where D1, D2 …Dn are dividends realized from the Company.

For example, in 2020 and 2021, it can be calculated as shown ¹

Table 2: DGM

D1=13

D2= 4

N= 2

13+4/2

= 8.5

Calculation of Rd

Credit risk rate – 7,14,38,90,000

Tax – 30%Rd = (289300000 / 7143890000)

(1 – 30%)

Rm = 2.83%

Calculating WACC

The weighted average cost of capital for the Woolworths Company will be calculated by;

Calculating the cost of debt is determined by the interest rates that lenders pay on existing debt and the inclusion of bonds and mortgages. It is calculated by multiplying the debt’s interest expense by the inverse tax rate percentage. The resulting solution is then divided by the outstanding debt of the Company. Secondly, the Company’s equity is calculated using the capital asset pricing model. The difference between the risk-free return and the market rate return is calculated. Then the resulting solution is multiplied by the difference between market volatility and Beta measures. The initial solution is added to the product with a risk-free interest rate. The sum gives the cost of equity.²

Table 3: WACC Calculation

From the table, the final weighted average cost of capital has been calculated as 5.25%

Financial Statement Analysis

The Return on Assets (ROA) is a ratio developed by the DuPont Company for its use, but other companies across the world have utilized it. The ratio measures the combined effects of assets turnover and profit margins of a company. The Woolworths Company has utilized the ratio in which its profits have been well entailed displaying the deprecation rates across the real outcomes of the business. The total assets of the Company have been; increasing daily with a proportion of more than 5%. The ratio between the Company’s assets daily is almost half of the earnings among the employees. It implies that the ratio across the months and years of the comparable products is more. The Return on Equity (ROE) measures the returns of the business.

The returns of Woolworths are more as displayed by the assets. The depreciation of the products is less, implying that it has slow but steady growth. The gross profits of a single day may seem to have reduced, but the operating profits and profits after all deductions have been made are relatively higher. The other ratio used in the calculation analysis of the Company is SaaS quick ratio. It measures the efficiency of a company’s growth by comparing the bookings and upgrades of a customer and their downgrades. From the data given about Woolworths Company, SaaS quick ratio is higher because many customers books and update their bookings. The final ratio discussed in the paper is Net Revenue Retention, which informs individuals whether their products are valuable at the current pricing. Woolworths Company has a great foundation, and the customers get themselves attached to it because of its quality products.³ As a result, the Company has retained increased amounts of revenue as discussed.

The table below summarizes group cash flows for 52 weeks, which ended in Australia on the 27^th of June 2021. It displays the return on assets and returns on equity for the commodities of Woolworths Company.

Table 4: Group cash flow. Group cash flows for the 52 weeks ended 27 June 2021

Time series analysis

Over the past three years, the Company has had a different display than the current one. In 2019, Woolworths Supermarket had an average revenue turnover of 68, 290 which increased as per the 2020 results to 72,208. In 2021, the revenue turnover was 78,763, implying that it will be more than that in the next year. The ratios have greatly changed in which the Company has had increased investments compared to its liabilities. It has saved more money in the current year (2022) than in the past, implying objective achievement as a nation. The number of money individuals carried from the end of 2020 to the beginning of 2021 implied that the Company had made more profits and had great progress. The table below represents an analysis of the times series over 52 weeks for the mentioned Company.

Table 5: F21 Sales Summary

The following table represents the Woolworths Company in both New Zealand and Australia.

Table 6: EBIT Summary

Cross-sectional Analysis

The area selected for comparison with Woolworths is a size which it’s regarded as helpful in the mentioned regard. The Company is multinational business merchandise operating under 1067 stores across Australia. Woolworths Company has a more advanced foundation, implying its future is greater than its current state. Its continuous profitability will sustain, and the fact that it is linked to the farmers of Australia (origin) identifies it as stronger and more advanced in the coming future. There are other stores across New Zealand, making the entire Company ranked among the largest in the country.

Besides, the Company is a great source of employment for over 115,000 people who work in the stores, support offices, and distribution centers. It mainly ensures that its members have superior services, value, convenience, and range. As per the three discussed sizes of the Company, it is larger than many supermarkets globally, implying that its contribution to the economy is more pronounced. However, a failure to turnaround may impact the group’s profitability because of the rate fluctuations in the world market and foreign exchange. The mentioned risk of the Company can be classified as an individual risk since researchers can average it in a large portfolio.

The table below represents a profit and loss analysis of the Woolworths Companies.

Table 7: Profit and Loss Analysis

Du Pont Analysis

The Company underwent substantial interchanges to achieve its desired decisions. The group leased various properties from the data, including warehouses, vehicles, equipment, and distribution centers, which increased its net income.⁴ The idea of leasing has proceeded in the Company to ensure that the net income received flows monthly. The group organized for more receivables and trade, which consisted of the amounts of money owed to the group by debtors. Economists collected the amount at the beginning of each month to develop the company.⁵. The group’s management was great because it took time to identify the different business units that the Board regularly viewed to allocate resources and assess performance. The units in charge of the company business offered various products and services managed separately, presenting each subgroup’s financial performance. As a result, the sub-group members worked towards achieving the best and becoming the perfect ones.

Final Comments on Woolworths

Woolworths is a great company owned by various managers who tirelessly work towards ensuring that their goals of improving people’s lives are achieved. It is the largest Company in Australia and New Zealand with the most recognizable and trusted brands in retailing, which serve millions of customers daily. Concerning the size, Woolworths covers a larger area having over 1070 stores in Australia serving the citizens. It has independent and common risks that sometimes drag it behind in its visionary advancement. The Woolworths chairman’s message is mainly linked to its slogan, displaying its concern for the Australian Citizens. The independent risks may result from the firm specified news or uncertainty, while the common risks may exist due to the market-wide news. There exist various capital projects included in the annual report displaying all the details required. Some of the projects have shown announcements of investments in the entire Company, like acquiring new premises and machinery in the business.

The independent risk can also be referred to as a unique risk, commonly called systematic risk. The first risk of the great Woolworths Company is financial constraints impacting its market sustainability and profitability. It is a developed company that systematically addresses its shortcomings or risks consistently. Its services have been improved as it has a Woolworths Online, formerly called HomeShop, in which customers can easily click on their website, collect what they require, and get free home delivery. The assets of the business returns are more than the liability, implying that it makes profits with ease. The Company’s future is bright and will become more advanced because it utilizes all the chances it access to develop across New Zealand and Australia. However, the company management should make it a continental business organization by opening other stores in Africa and Asia to earn more profit.

Conclusion

In conclusion, Woolworths Company has a more advanced foundation, implying its future is greater than its current state. Its continuous profitability will sustain, and the fact that it is linked to the farmers of Australia (origin) identifies it as stronger and more advanced in the coming future. The Company relies on CAPM because it is much clearer and does not necessarily focus on the dividends growth but also discusses the risks associated with the investments. The percentage of non-marginal investors is higher as compared to the marginal ones. The non-marginal investors can be considered the main individuals who contribute to the Company’s advancement. The founders came up with the Company, and it has been put into place by the directors who receive goods from suppliers. The Woolworths group is subject to regulations, contractual arrangements, and laws that expose them to adverse legislative changes. The mentioned changes may result in the group’s negative reputation, affecting its profits. The risk is common to the Company because it is associated with more than one product, unlike other multinational companies with a single product. However, the risks are mitigated by the neutral collaboration of the key shareholders and the management team.

References

Liu, Ke. “Financial Analysis of an Australian Department Company Based on 3 Financial Models.” Open Journal of Business and Management 9, no. 2 (2021): 858-865. Web.

Van Kampen, Toine, and Ross Kirkham. “Assessment of the Supermarkets and Grocery Stores Sector in Australia: A Case Study of Woolworths and Coles using DEA and VAIC™.” Journal of New Business Ideas & Trends 18, no. 1 (2020): 1-11. Web.

Van Niekerk, Henk Johannes. “Evaluating and allocating outbound logistics cost in the fast-moving consumer goods (FMCG) industry.” Ph.D. diss., University of Pretoria, 2018. Web.

Woolworths Annual Report 2021. Web.

Footnotes

• 1 – Woolworths Annual Report 2021
• 2 – Liu, Ke. “Financial Analysis of an Australian Department Company Based on 3 Financial Models.” Open Journal of Business and Management 9, no. 2 (2021): 858-865.
• 3 – Liu, Ke. “Financial Analysis of an Australian Department Company Based on 3 Financial Models.” Open Journal of Business and Management 9, no. 2 (2021): 858-865.
• 4 – Van Kampen, Toine, and Ross Kirkham. “Assessment of the Supermarkets and Grocery Stores Sector in Australia: A Case Study of Woolworths and Coles using DEA and VAIC™.” Journal of New Business Ideas & Trends 18, no. 1 (2020): 1-11.
• 5 – Van Niekerk, Henk Johannes. “Evaluating and allocating outbound logistics cost in the fast-moving consumer goods (FMCG) industry.” Ph.D. diss., University of Pretoria, 2018.

Introduction

The modern business environment is very competitive as many factors affect the performance of an organization. Technology has advanced with globalization taking the center stage in increasing the dynamism of the business environment. Therefore, in order to improve the performance of an organization, there is need to increase the competitive advantage that could be established in areas such as human resources, innovation and information technology among other factors. Firms are of great interest to many stakeholders including investors, owners, the state, suppliers and consumers. Basing on the performance of an organization, every stakeholder is interested in a specific section of the firm. While consumers are interested in the quality of products and services provided by the firm, investors are interested in the financial performance an organization especially in terms of its returns on invested capital. However, before investing, it is necessary for investors to determine the profitability of the firm and the ability of the investors to reap higher returns on their investments. This paper compares two companies in order to determine the ability of investors to invest in the companies. The comparisons made are in terms of the financial performance of the companies, which are indicated inform of financial ratios. The two companies are Woolworths Ltd and Wesfarmers Ltd.

Company Profiles

Woolworths Ltd

This organization operates in Australia within the retail industry as it sells various products at retail prices directly to consumers. The company operates in other countries too such as New Zealand and India. It currently has about 996 supermarket outlets that are located in different regions in Australia while operating under the company’s brand name, Woolworths. However, not all stores operate under the brand name as others operate under other brand names such as Foodtown and Countdown. The company operates other outlets of liquor that sell products under the brand name of BWS. Other products are petrol and BIG W general merchandises that are operated in Australia. In addition to sell of products in other industries, Woolworths operates 282 restaurants and hotels that include bars, accommodation and gaming among other services and products (Bloomberg Businessweek 2012, p. 1). The performance of the firm has been stable since its establishment in 1924. The firm is headquartered in Bella Vista in Australia although it operates in other multinational markets such as India and New Zealand.

Wesfarmers Ltd

This corporation was established in 1914, operates in Australia and is headquartered in Perth. Since its establishment, the company has been able to grow and diversify its operations. It operates in various industries including the competitive retail, mining processing and distribution industries. Consequently, Wesfarmers is involved in mining of coal, processing of gas together with its distribution, processing of other industrial chemicals such as fertilizes and provision of insurance. According to Bloomberg Businessweek (2012, p. 1), Wesfarmers has many outlets for its varied products sold out to individual consumers and organizations. For instance, the company has about 742 supermarkets that operate under the brand name Coles and BI-LO, liquor selling outlets amount to about 766 operating under different brand names of Vintage, Cellars and Liquorland. Other products offered by the firm include textiles products and outdoor living products. As noted by Bloomberg Businessweek (2012, p. 1), the firm targets country stores and outlets, Kmart stores and mining in which it operates open-cut mining enterprises. In spite of its humble beginning in Australia, the firm has diversified to operate in New Zealand apart from the domestic country of Australia. The internationalization of Wesfarmers ensures d that its financial performance improves as it was able to realize increased revenue.

Financial Analysis and Comparison

The financial analysis of these two companies involves the analysis of the financial records of the companies in form of ratios. The study conducts a two-year analysis of the profits of the companies, their efficiency and stability. Metrics such as ROI and ROA will be used to measure the performance of the organization.

Profitability Ratios

Every organization aims at maximizing its profitability hence minimizing all costs. The comparison of the profitability of Woolworths Ltd and Wesfarmers Ltd was through examination of the profitability ratios such as net profit margin, gross profit and return on assets among others of the two companies.

Gross Profit

Gross profit is the profit that an organization receives net of the cost incurred in the production of goods sold but before deduction of other expenses and tax. The gross profit is found through the deduction of the cost of sales from the total revenue. The gross profit realized by Woolworths Ltd as measured by the ratios for the financial period that ended in 2010 and 2011 was 25.73% and 25.78 respectively. On the contrary, the net profit realized by Wesfarmers for the same period was 30.99% and 30.965 respectively. Therefore, it is evident that Wesfarmers had a higher gross profit as compared to Woolworths Ltd.

Net profit Margin

This ratio indicates the net income of an organization after all deductions including taxes have been made. In this case, the net profit realized by the two firms would be measured using the net profit margin. The ratios for Woolworths Ltd for the 2010 and 2010 financial periods were 5.96% and 6.05% respectively. On the contrary, the net profit margins for Wesfarmers Ltd for a similar period were 5.67% and 6.115 respectively (Chava & Michael 2008, p. 2096). The ratios indicate that the two firms realized increased net incomes for the 2011 financial periods. However, Wesfarmers Ltd realized the highest increase of 0.35% thereby ending up having the highest net profit margin.

ROA

ROA measure the income that an organization realizes on its assets. As an efficiency ratio, ROA indicates effectiveness of the management of Elder Ltd and Goodman Fielder Ltd in managing the company assets to generate revenue. The ratio provides the earnings generated from the capital that was invested by the firm. The ROA of Woolworths for the 2010 and 2011 financial period was 16.67% and 15.53% respectively as compared to that of Wesfarmers Ltd that had a ROA of 7.31% and 7.92% for the similar period respectively. It is clear that Woolworths has a high return on assets and its investors are happy for this (DeAngeleo & Douglas 1992, p. 299).

ROE

Funding of activities of the organization usually involves the owner’s equity and shareholder’s equity. This ratio indicates the level of income generated on the shareholder’s funding. Thus, it reveals the profit realized by an organization from the investment made by the company’s shareholders. The ROE of the two firms for the 2010 and 2011 periods were 26.07% and 27.28% respectively while that for Wesfarmers Ltd were 6.34% and 7.59% respectively. The outcomes indicate that Woolworths Corporation generates higher income on owner’s equity as compared to Wesfarmers’ Corporation.

Efficiency Ratios Comparison

Inventory Turnover

This ratio indicates the period taken to convert the company’s inventory into revenue. The inventory turnover for the two financial periods 2010 and 2011 for Woolworths was 33 days and 34 days respectively as compared to that of Wesfarmers Corporation that was 49 days and 50 days respectively for a similar period. It is clear that Woolworths has a better inventory turnover compared Wesfarmers and is therefore able to collected its debts in time (Altman 1968, p. 594).

Asset Turnover

Assets turnover as a ratio provides a relationship that exists between the assets of an organization and the revenue realized by the organization. The ratio indicates the sales generated from each dollar of assets. The asset turnover of Woolworths for the 2010 and 2011 financial periods were 2.8 and 2.57 respectively thereby indicating a reduction. On the contrary, Wesfarmers Ltd had an asset turnover of 1.27 and 1.3, which is lower than that of Woolworths Ltd. This implies that Woolworths is in a better position of sales generated as compared to Wesfarmers Ltd.

Debtors’ Turnover

This ratio indicates the amounts of funds received from the debtors of the firm. The ratio indicates the how fast an organization is able to collect debts. From the financial performance of the two firms, Woolworths Ltd had a debtors’ turnover of 1.5 days and 2 days for the 2010 and 2011 financial periods respectively. On the contrary, Wesfarmers Ltd had a debtors’ turnover of 10 days and 11 days for similar periods respectively. It is evident that Woolworths Corporation is the best firm as it has a low debtor’s turnover as compared to Wesfarmers Corporation (Camelia & Laura 2008, p. 9).

Creditor’s Turnover

The ratio indicates the speed at which an organization is able to pay of its creditors and debts. The creditors’ turnover for Woolworths was 40 days for the 2010 and 2011 financial periods while that of Wesfarmers Corporation was 49 and 50 days respectively for a similar period. Therefore, Woolworths Corporation had the best creditor’s turnover as compared to Wesfarmers, thereby becoming the best option for investors (Giroud & Holger 2010, p. 319).

Liquidity ratios

Current ratio measures the ability of the two firms to meet their short-term obligations as they fall due. Three ratios were used to measure the ability of Elder Ltd and Goodman Fielder Ltd to meet their short-term obligations as discussed below.

Current Ratio

The current ratio indicates the speed at which an organization can meet its obligations in the short term. A higher current ratio is usually preferred to a lower ratio because a higher ratio indicates a higher capability of the firm to meet its short-term obligations using its current assets. The current ratios of Woolworths Ltd for the 2010 and 2011 financial periods were 0.73 and 0.8 respectively. On the contrary, the current ratio for Wesfarmers Ltd was 1.23 and 1.17 respectively for similar periods. It is clear that Woolworths Corporation is liquid compared to Wesfarmers and therefore able to meet its obligations as they fall due in the short run.

Acid Test Ratio (quick ratio)

The Acid Test ratio is almost similar to the current ratio. However, it does not include the inventory of the firm in its calculation although they both serve a similar purpose. The quick ratio for Woolworths Ltd was 0.21 and 0.32 for the 2010 and 2011 financial periods respectively. However, the quick ratio for Wesfarmers was 0.64 and 0.59. Given that a smaller quick ratio is more preferable, Woolworths is the most preferred company for investors.

Debt Asset Ratio

The ratio is significant in financial management as it determines the level of activities in the firm financed through debt. The ratios for Woolworths for the 2010 and 2011 financial periods were 57.71% and 62.81% respectively. On the contrary, the debt to asset ratio for Wesfarmers was 37.06% and 37.94% for similar financial periods. Therefore, it is clear that Woolworths Ltd finances most of its activities using debt as compared to Wesfarmers Corporation.

Debt to Equity Ratio

The ratios measures the leverage of an organization and it is significant in financial management of the assets of an organization as it indicates the proportion of an organization’s equity used to finance the company’s operations (Amihud 2002, p. 33). The debt to equity ratio of Woolworths Ltd for the 2010 and 2011 financial periods were 136.485 and 168.86% respectively. On the contrary, the debts to equity ratio of Wesfarmers Corporation for the two financial periods were 58.89% and 61.14% respectively. Therefore, it is evident that Woolworths uses a small section of its equity to finance its activities as compared to Wesfarmers Ltd.

Limitations and Recommendations

Financial measures have been for a long time been used as the basic performance measures of business enterprises. However, financial measures like profit margins, mark-ups, and earnings per share have been criticized for not incorporating non-financial elements like customer and employee satisfaction, production efficiency in its evaluation of company performance. The balanced scorecard is widely used to link a company’s actions to its strategic goals in strategic planning. As such, the balanced scorecard is used to “improve both the organization’s internal and external communication and monitor its strategic performance” (Kaplan &Norton 2002, p. 56). As a bottom line, the balanced scorecard goes beyond the traditional financial measures to incorporate strategic non-financial measures in evaluating a company performance. The balanced scorecard has four diverse viewpoint from which an institute must be assessed, i.e. financial or monetary, client; in-house business; and education & development viewpoints.

Financial Perspective

The balanced scorecard emphasizes that managers should always aim at providing adequate and accurate financial data. Proper financial data will help the management evaluate how the company has been able to generate value over a certain period. Several financial measures that Woolworths Ltd can use to evaluate its performance exist. Firstly, the company can evaluate how much Return on Investment (ROI) it has been able to earn. ROI is a percentage of what the company has earned as profit on the invested funds. The company will be deemed to have performed well if it earns ROI higher than the cost of capital. Secondly, the company can use Return on Equity (ROE). ROE is a percentage measure of how much profit has been earned on the funds contributed by common shareholders. The company will have performed better if the ROE is greater than the cost of obtaining the equity funds. Finally, the company can use Economic Value Added (EVA). The EVA is the difference between profit after but before interest and the capital charges of invested capital, i.e. EVA = PBIT (1-T) – WACC* CE. The EVA should always be a positive for a company to be considered as having a better financial performance (Kaplan & Norton 2002, p. 102).

Customer Perspective

This perspective holds that companies should focus on customer satisfaction. Better-satisfied customer means a much larger customer following which increases revenue hence higher financial performance. Woolworths can use measure such as Customer Satisfaction, Customer Retention, and Market Share to evaluate this perspective. Higher customer satisfaction, retention and a large market share will highlight better performance.

Internal Business Process Perspective

Internal business process ensures that products produced and services by the company are of high quality. The management should make sure that the company is managed efficiently and effectively and that its output meets customer needs. The company should use measures such as Process Improvement, which assesses how well the company is run; Suppliers Retention, which evaluates the confidence of suppliers in the company’s processes and Customer Product Approval, which examines the quality of products the firm, produces (Merton 1985, p. 120).

Learning and Growth Perspective

Focuses on the ability of people in the organization to learn and grow for managing and sustaining change and improvement. It emphasizes training and building. The various performance measures the company can use to assess this perspective are employee satisfaction, employee retention and employee productivity.

Conclusion

This paper has compared the financial performance of two Australian companies, Woolworths Ltd and Wesfarmers Ltd using financial ratios. The outcomes of financial ratio analysis indicate that Woolworths Ltd is the better firm for investors to invest in. This is because the firm has a better position in terms of liquidity to manage its short-term liquidity, performs better than Wesfarmers Ltd in terms of profitability and is more efficient.

List of References

Altman, I 1968, Financial ratios, discriminate analysis and prediction of corporate bankruptcy, Journal of Finance, no. 23, pp.589-609.

Amihud, Y 2002, Illiquidity and stock returns: cross section and time-series effects. Journal of Financial Markets, vol. 5, no. 2, pp. 31-56.

Bloomberg Businessweek, 2012, ‘Wesfarmers Ltd: Company profile’, Web.

Bloomberg Businessweek, 2012, ‘Woolworths Ltd: Company profile’, Web.

Camelia, S & Laura, P 2008, Managerial communication, Romain Journals, vol. 7172, no. 23, pp. 1-12.

Chava, S & Michael, R 2008, How does financing impact investment: the role of debt covenants, Journal of Finance, vol. 63, pp. 2085-2121

DeAngeleo, H & Douglas, J 1992, Dividends and losses, Journal of finance, vol. 47, pp. 183-863

Giroud, X & Holger, M 2010, Does corporate governance matter in competitive industries, Journal of Financial Economics, vol. 95, pp. 312-331

Kaplan, S & Norton, D 2002, The balanced scorecard, Harvard Business School Press, New York.

Merton, H 1985, Dividend policy under asymmetric information, Journal of finance, vol. 40, pp. 1031-1051.

Outline

• Introduction
• Marketing Strategy
• Customer targets
• Marketing plan for the next 3-5- years
• 3 years projections
• 4 years projections
• 5 years projections
• Conclusion

Introduction

Woolworths’ hardware/white goods require effective marketing strategy to sustain a strong market position and market share. Different types of strategies allow companies to select the best approach to marketing and management. If the planning process has been faithfully followed, the strategies are obvious. They have been gradually realized by the intense and open discussions of all the other components of the plan.

Marketing Strategy

The proposed marketing strategy for Woolworths’ hardware/white goods is cost leadership. Cost leaders must maintain an acceptable level of satisfaction of buyer needs. Cost leadership is often in conflict with differentiation i.e. to achieve differentiation adds cost thereby removing the potential cost leadership advantage. Low cost is where the business manages its cost base to ensure that it is the lowest cost producer — thereby either winning a greater volume of business through lower prices than competitors can sustain and continue to be profitable, or charging comparable prices and therefore achieving a higher level of profitability.

Customer targets

Woolworths’ hardware/white goods will be based its strategy on a differentiation criterion. This allows Woolworths’ hardware/white goods to shift its focus to brand image and price reduction measures. This strategy will help Woolworths’ hardware/white goods to maintained high-speed growth through continuous optimization of its product mix. Degree of differentiation is not large, and home repair service should represent a market where competitors can differentiate their products and that is why have less rivalry. Rivalry will be reduced where customers have high switching costs – i.e. there is a significant cost associated with the decision to receive products from an alternative competitor. The majority of customers are people from 18-45+ years old who value personal relations and comfort. The majority of customers belong to middle and upper social classes with stable income. The family status will not have a great impact on the target audience characteristics. Woolworths should propose to its customers’ competitive prices to ensure customer satisfaction. Woolworths can use parity pricing or going rate strategy. This strategy will help the company to attract buyers and create a core of loyal brand support. Nevertheless, penetrating pricing strategy can also be used at the initial stage of marketing campaign. It allows demonstrating product benefits for potential customers.

Marketing plan for the next 3-5- years

During the next 3 years, the company should expend its product line and add one new product. The product line refers to the total company or division offering in a related area, and is more than the sum of individual products. For Woolworths, new product lines are significant because they reflect the corporate image. They are important for distributor relationships, and have an impact on the consumer’s image and acceptance of a company⁵. Product planning requires considerable lead time for change, for the addition or deletion of products. It is not uncommon to spend two to four years in developing new products, and this requires advanced market intelligence.

During the next 4 years, t6he company should open new locations in Asia. The reasons for these strategies are

to counteract competitive activity and assure that loss will not occur because someone else introduces the product first;

• to realize potential profitability;
• to guard against shifts in consumer tastes;
• to gain complementary relationships;
• to gain an additional share of market;
• to complete a product line;
• to use common raw materials as well as production and marketing facilities.

In 5 years, the company should open 2 locations in Africa. This expansion is important for Woolworths, because marketing depends and relies on strategic initiatives and customers. It is possible to say that global expansion, a critical management activity, cannot logically be separated from assessment of opportunity. It brings a coordinated effort to the enterprise, adjusting and balancing its resources, and producing programs of logical action. Since marketing executives are faced with the necessity of utilizing scarce capabilities and resources in limited periods of time, allocation is a major problem. In Woolworths, effective allocation can only be achieved, however, through planned behavior.

Programmed innovation is an extremely important process that involves great amounts of resources and effort in promoting and accelerating economic change. At the other extreme, they can build a solid market position by accepting modest immediate returns and taking a longer period of time to cover their outlays, thus making it more difficult for new entries, as with a pricing policy of market penetration. Between these extremes, they may choose to be reimbursed for their original outlays while still holding a competitive advantage, and then use the advantage to increase volume and build a stronger market position. In particular, the emphasis on price that stems from past economic situations is, today, often misplaced.

Conclusion

These projections predict customer and competitor reactions; attempt to gauge acceptance for new products; and highlight economic, social, demographic, technological, psychological, and political changes, all of which are difficult tasks to perform -nor can they be performed with the degree of precision available in other more concrete situations. It is a major means of creating a differential advantage, albeit sometimes short-lived. In adjusting to change, and in attempting to meet the demands of the marketplace, it must be managed, and programmed innovation is becoming one of the foundations of business strategy.

Reference

Bearden, W. O., Ingram, Th. N., LaForge, L.W. Marketing, Prentice Hall, 2004.

Boone, L.E., Kurtz, D.L. Management, McGraw-Hill, New York. 2002.

Crawford C. Merle. New Products Management. Irwin-McGraw Hill. 7th edition, 2006.

Fill, C. Marketing Communication: Contexts, Contents, and Strategies 2 edn. Upper Saddle River, NJ: Prentice Hall, 1999.

Hollensen, S. Global Marketing: A Decision-Oriented Approach. Financial Times/ Prentice Hall; 4 edition, 2007.

Jain, S. Marketing Planning and Strategy (7th ed), Thomson Learning, Cincinnati, Ohio, 2004.

Kotler, Ph., Armstrong, G. Principles of Marketing. Prentice Hall; 11th edition, 2007.

Pittengrew, A. M., Thomas, H. Whittington, R. Handbook of Strategy and Management. Sage Publications, 2006.

The internal environment of an organization consists of its available resources, inherent capabilities and competencies, and the structure of its inner systems and processes (The Internal Environment 2006, p. 126). It is absolutely necessary for business managers to commence organizational internal analysis as it assists them to understand the firm’s strengths and weaknesses.

This in turn helps the company to devise suitable strategies aimed at leveraging its strength to achieve sustainable competitive advantage in the area of investment (Stahl & Grigsby 1997, p. 31). This paper evaluates the internal environment of Woolworths Safeway, Australia.

Resources can be described as fundamental inputs that enable a business entity to carry out its activities (The Internal Environment 2006, p. 127). In formulating a proper internal analysis, resources are divided into two – tangible and intangible. Tangible resources refer to the physical assets under the possession of a business entity.

Woolworths Limited have greatly diversified its business interests into 5 broad segments that includes the supermarket division, general merchandize, consumer electronics, hotels, and wholesale division (Corporate Information 2009, para. 1).

To maintain a competitive advantage, Woolworths operate under several brand names such as Safeway, Dick Smith Electronics, Tandy, Woolworths, Foodtown, among others. It has a strong physical presence in the whole of Australia and New Zealand as it operates 3,030 supermarket stores, petrol stations and hotels. The organization is sufficiently strong, having posted $37 billion in revenue in the first half of the 2009 fiscal year (Money 2009).

Its intangible resources include loyalty schemes such as petrol subsidies at Caltex Woolworths, everyday rewards, credit cards, and frequent shopper club. In human resources, Woolworths had over 180,000 employees as of 2008, a 38% increase in human capital since 1993 (Australia’s Leading 2009, para. 1). Its reputation has been greatly boosted by its logo, ‘The Fresh Food People’, which has been used for over 20 years.

An internal analysis can also be done by evaluating the organization’s capabilities and core competencies. Capabilities can be defined as the organization’s capacity to deploy deliberately integrated resources aimed at achieving a desired end result (Lachowicz 2006, p. 20). Woolworths is known to offer its employees many opportunities to develop their careers, considerably reducing employee turnover (MGSM 2008, para. 2).

Furthermore, Woolworths motivates and empower employees through an expansive workers credit union known as Employees of Woolworths Association. Recently, Woolworths took measures to streamline their supply chain by contracting Kuehne + Nagel as the sole provider for the organization’s worldwide order management and freight management from crucial export regions such as Europe, North America, Asia and Africa (Kuehne 2009, para. 1 & 2). The contracted company has a global representation.

Taking pride for its use of sophisticated business management techniques, Woolworths have also introduced latest webMethods Optimize technologies to evaluate its supply chain processes and identify grey areas in need of improvement. Earlier this year, the company implemented Workforce Optimization Software technology to improve customer service and satisfaction (James 2009, para 1). What’s more, its logo has been utilized by the company as an effective marketing strategy for over 20 years.

Competences encompass all the characteristics that an organization may require in order to compete favourably in the marketplace (The Internal Environment 2006, p. 129). Core competencies are the organization’s most critical sources of competitive advantage. Woolworths have several activities that it performs exemplary well in comparison to its competitors.

For instance, the organization is known for its insatiable appetite of developing and nurturing nationally recognized brands. Woolworths Australia is also known for its low prices, not mentioning the fact that it offers quality products and services at major cost savings. Its home brand is the all-time largest-selling grocery brand in Australia. The company is also known for its timely delivery, quality assurance, and customer service.

The SWOT analysis is a technique used to evaluate an organization and its environment. It stands for strengths, weaknesses, opportunities, and threats (SWOT Analysis 2009, para. 1). Based on the above discussion, Woolworth’s strengths includes powerful retail brand in Australia and beyond, outstanding reputation and brand name, value for money, diversification, committed and dedicated workforce, convenience, and high uptake of information and communication technology.

Its Weaknesses includes the huge number of employees and confusion arising from trading names. Woolworths opportunities includes venturing into new markets due to the partnership between the organization and Kuehne + Nagel, more customers brought by the 360® Workforce Optimization software, and focus on specific markets such as hotels, liquor, petrol, and grocery stores. Being a leading organization in Australia, Woolworths will continually face the threat of stiff competition, both locally and globally.

List of References

Australia’s Leading Retailer Woolworths Retail Operations 2009. Web.

Corporate Information 2009. Woolworths Limited. Web.

James, B. T. 2009. Woolworths Limited Implements Workforce Optimization Software from Verint Witness Actionable Solutions to Support First-Class Customer Service. Web.

Kuehne + Nagel Manages Inbound Supply Chain for Woolworths Limited 2009. Web.

Lachowicz, P. 2006. The Internal Environment: Resources, Capabilities & Core Competencies. Web.

Money 2009. Lowe’s Taps Australia Growth with Woolworths Venture. Web.

MGSM 2008. Woolworths Limited. Web.

Stahl, M. J., & Grigsby, D. W 1997. Strategic Management: Total Quality and Global Competition. Wiley-Blackwell. Web.

SWOT Analysis 2009. Web.

The Internal Environment: A Resource-Based View of Strategy 2006. Web.

Market Segment Profile

Market segmentation is always very important, especially when a firm’s product faces a huge competition in the market. By segmenting the market, Anderson (2011, p. 78) notes that it would be possible for an individual firm to come up with products that would best meet the targeted market. The firm would find it easy to specialize in this segment and provide products that best meet the expectation of the market (Evans 2010, p. 56).

With the improved quality of the products due to specialization, it would be much easier to have a pool of loyal customers who would be able to act as evangelists of the firm’s products. These firms have adopted segmentation as a method through which they can best meet the demands of their customers. Grunig (2002 p. 121) observes that other large firms however, have specialized in a broader lines of products. Woolworths is one such firm.

Woolworths has managed to edge out all other supermarkets to emerge as the leading supermarket in this country. This supermarket has managed to segment the Australian market into different segments, each with specific characteristics, which makes it differ from others (Klein, H 2009, p. 51). It deals with various lines of products, each with a different target market. One of the main lines of products in this giant supermarket is the green (vegetables and fruits). This product has been associated with the poor, especially due to its price. However, a new market segment for this product has come up.

This product is currently very popular among the middle class and the rich. This new market segment is keen to maintain a healthy lifestyle, and with the fact that the green are considered healthy foods, most of them have increased their consumption of this product (Sharma 2008, p. 114). This has seen many supermarkets in this country; including Woolworths stock this product for this particular target market. In this study, the researcher would focus on the greens sold in this giant supermarket.

Preliminary Profile of Consumers in That Segment

Barthe (2010 p. 131) observes that the world is increasingly getting knowledgeable. The emerging technologies in the form of mass and social media have rendered most consumers very knowledgeable. People have becoming conscious of their health. They are very keen on what they eat, as they want to maintain a healthy lifestyle (Charantimath 2006 p. 19). They are therefore very keen to avoid foods that have been known to be rich in calories.

Some popular fast foods the humbuggers have been criticized of the effect they have on people. As such, consumers have been avoiding them and in their place taking healthy foods. The greens have gained favor in the face of these health sensitive individuals.

Consumers in this segment are mostly in the middle-class and high-class members of the society. Consumers in this market are mostly married individuals who are of middle age. According to Daft (2009, p. 41), most of these individuals are young families who are out to ensure that they avoid junk food that may have risks on their health. They stay in middle and high-class suburbs of the cities, as most of them prefer staying in the urban centers than in rural set-ups (Huber & William 1993, p. 89). The few who stay in rural areas have well-organized families and staying in established houses.

One special characteristic of this category of customers is that they are quality sensitive of the products they buy. They are do not give so much thought about the price of the products they buy, and therefore care should be taken to ensure that products targeted at them are of quality, irrespective of the price. These individual would easily switch from one firm to another to another if they feel that they have not been satisfied with the product of the firm. However, they can also turn out to be very loyal customers if they get somewhere where their interest is well taken into consideration.

Giddens (2009, p. 48) argue that the size of this market is relatively big.

Product Profile

Vegetables and the fruits, herein referred to as the greens, are becoming very popular across many families in Australia. People have come to appreciate the importance of the vitamins gotten from the greens and have therefore turned to its consumption in place of such means as the red meat. This product is highly perishable and therefore it should be handled with a lot of care. The greens would require cool storage, and above all, it should be consumed as soon as it is taken from the firm (Gorchels, Marien & West 2004, p. 17). This means that it should have a ready market. it does cases where the market is unpredictable. Because of the fact that it is perishable, the product requires as minimal handling as would be possible to ensure that it remains fresh and with good shape. It would also require handling equipments.

The Alignment between the Product and the Consumer Profile

It is always very important to align the product and consumer profile. Kurtz (2008, p. 141) says that for a product to succeed in the market, it should be aligned to the target market as they will make the product popular among the target consumers. There is a perfect alignment between the green and the target consumers. The greens have not only been considered as healthy, but also medicinal.

The target group includes individuals who are health conscious and they would always avoid meals that may jeopardize their health. They therefore find the vegetable and the fruits very appropriate. Because majority of this class are the middle class, they find the price of this product very attractive in this supermarket. In Page (2010, p. 72) words, the consumers of this product find total satisfaction from this product not only from the quality they get, but also psychologically, given the fact that they have internalized the fact that this product is medicinal.

A validated consumer profile

Australian is a considerable developed nation. However, the social class exists and there are the classes discussed above. The consumers targeted in this profile are those who are aged 18 years and above. Kabani (2009, p. 45) reports that the biggest subsector in this market segment are those aged 25-39 years who make about 48 percent of the market. Those aged 40-54 years make 27 percent of the market, while those aged 55-65 make 11 percent. The least groups are those aged 18-24 at nine percent and those above 65 years at 3 percent.

Most of the consumers in this segment are married. They account for 61 percent of the market. Those who are living with partners make 23 percent, single and never married are 5 percent while the divorced make 4 percent. These families also have children. Kotler (2003, p. 97) observes that most of the families have two children. In this target market, majority (66 percent) are employed, while others are in self or informal employment. Majority of the target market stay in urban centers. The few who stay in rural areas are practicing agriculture and therefore they are the source of the vegetables and fruits. They therefore do not make up the target market.

A detailed analysis of the buying trends influencing their market segment

The emerging technologies have changed the buying trends of customers in the market. It is through advanced technologies that health experts have come to confirm that vegetables and fruits are healthy for the body. They are therefore encouraged for consumption. McGriff (2012, p. 36) this has changed the buying trend of consumers, from people who heavily relied on meat and oily foods to people who prefer the greens. The improved technologies have also had positive impact on the volume of purchase of these products. Consumers can now afford to buy foodstuffs in large quantities and keep them under refrigeration (Harvard Business School Press 2009, p. 59).

This has seen such retail stores like Woolworth make huge profits from the sale of vegetables and fruits in the Australian market. The emerging technologies have also made marketing a lot much easier. Marketers can easily reach out for the customers through the social media with proper adverts, besides using the conventional mass media advertising. This way, it becomes easier for a firm to develop a pool of loyal customers.

A detailed analysis of consumer behavior

Understanding consumer behavior is one of the most important tasks of a marketer. Through this, it becomes easy for a marketer to predict how a product would perform in the market. Consumer behavior, as Shelley and Maria (2011, p. 34) affirm, also makes it possible for a firm to come up with products that would be able to meet market expectations. In this market, customers are not highly price sensitive.

Although they would definitely prefer relatively cheaper products, they do not give price precedence to quality. They highly value quality products from every item they purchase. From a research done by Proulx (2011, p. 45), the scholar reports that in the interview conducted from a sample of consumers, quality of the products was given a priority. The respondents clearly stated that they highly value products with unquestionable qualities. Given price and quality to choose from, this scholar notes that most respondents preferred quality to price, meaning that they would be willing to pay more for a product, which is of high quality.

Another important behavior of the consumers in this market segment is that they are not easily convinced by firms to become loyal customers. However, once they become loyal customers of a particular brand of products, they would most definitely stay with the product or the brand for a long time. Oppenheim (1992, p. 38) observes that they may only change their loyalty when convinced that the product or the brand no longer offer products that are able to meet their needs.

Given these factors therefore, a marketer would have to understand this target market and ensure that they are consistently provided with desirable products and in the right manner that would help retain their trust.

An evaluation of the influence of previous marketing activities

Marketing activities would always affect business ether positively or negatively, depending on the approach taken by the firm. Marketing of a product is always meant to help ensure that this particular products gains positive image in the market in order to ensure that its sale is increased. Marketing activities of this firm has ensured that this product is very popular among the customers within this country.

Woolworths has particularly been keen on marketing the greens both in the social media and in the conventional mass media. In the social media, majority of the visitors are the youths. This is a very attractive market segment, but they are not easily attracted to the greens. The population of the youths who visit the social media in this country is about thirty percent of the population of Australia.

Being able to capture this market can be very beneficial and various firms have made efforts to ensure that they capture this market. The problem is that the youths are attracted to the fast foods like the humbuggers, and not vegetables. Moreover, most of them are not responsible for budgeting in their respective families and therefore may not be attractive segment for the vegetables (Doorley & Garcia 2011, p. 28).

However, they have the capacity to consume many fruits, especially for leisure. Woolworths have therefore been keen to attract them for this product. The move by this firm to advertise the fruits as products that can be taken for leisure has greatly attracted the youths who like leisure products. This has greatly influenced the youths who currently prefer fruits to other carbonated drinks that many health experts have criticized as being hazardous health wise. In essence, the market for fruits has greatly increased among the youths. The vegetables are also getting increasingly popular in the market.

A statement that identifies the legal and ethical standards that applies to the organization and their marketing place

In every industry, and for every firm, some forms of ethics that have to be followed for the firm to be considered legally operating (Cummings & Worley 2008, p 64). Genetically modified products are considered controversial and therefore it is required of the retailers that they avoid stocking this product, and if they have to, it should be indicated clearly on the product

A situational analysis of their organization’s capabilities and ability to respond to any changes in the marketplace or in consumer demands

Woolworths is the leading supermarket in Australia. It has managed to maintain the market lead for a number of years due to its strategy in the market. In order to be in a position to analyze critically the organization’s capabilities and ability to respond to changes in the marketplace, a SWOT analysis would be very useful.

Strength of this company comes from the fact that it has a very strong brand in the market. The brand Woolworth is very strong in the retail market, as many people have come to trust this firm to deliver value to its customers. This trust makes it very easy to win trust of the market, and this enhances the ability of the firm to meet the demand of the market (Armstrong, Harker, Kotler & Brannan 2009, p. 80). The financial base of this firm is also relatively big. As such, it has the ability to meet the various projects of the firm. It can also sponsor various research meant for improving the services of the firm. The workforce of this firm are also dedicated to their task. They have work hard to ensure that the customers are served in the best way possible.

Despite the above strengths of this firm, it has some weaknesses that have made it face a number of challenges in meeting customer needs. One such weakness is the flexibility of the firm. This retail outlet is very large, and this has posed a challenge when it comes to changing from one strategy to another. This is very dangerous as it may render the strategies of this firm irrelevant in the current competitive market.

Opportunities in this market come in a number of ways. Australian as a country has most of its population living well above the poverty line. This therefore means that they have the capacity to buy these products. The emerging technologies are also bringing new products into the market, thereby expanding the product lines of the supermarket. Technological improvements have also made management of the outlets much easy, as the management can easily track down operations of the firm, and detect shoplifters, hence reduce such incidents.

Threats within the market cannot be avoided. The main threat in the market is competition. Many other firms in this country stock this particular product. The product in Woolworths is therefore perfectly similar to products of other firms. For this reason, the competition is very stiff (Blackwell, Miniard, Engel 2006, p. 21). Another threat also comes from the emerging technologies. The emerging technologies have left this firm guessing what tomorrow would look like. This forces the firm to increase its expenditure in research and development.

A report on the recommendations for a focused marketing strategy for the product or service

Woolworths as a retailer would therefore have the obligation to estimate the level of consumption per day, and supply an amount of this product that would all be consumed within that particular date. Care should also be taken to ensure that these products are kept under refrigeration to avoid cases where they get perish within the stores as this may result in massive loss to the firm.

The products are generally cheap as compared to other alternative products like meat, in place of vegetables, and quencher drinks, in place of the fruits. They do not have complex processing but require close care to avoid damage.

Although there are no exact, statistics that can clearly state the size of this market, on average it accounts for about one third of the Australian market. With the growth of the economy of this nation, this market is expected to expand, as more people are getting concerned of their health. If the current trend is anything to go by, then this market is expected to reach up to half the total market for this product in this country. It is important to note though, that the low class individuals, who make another very attractive market segment for this product, is not analyzed in this study

Woolworths stands a better chance of winning this market if it implements proper strategies in the market. The market is increasingly competitive and it would require this giant firm to implement some strategic programs that would help ensure that the market remains favorable to it. The following are some of the recommendations that this firm should observe in order to remain competitive.

• Understanding the market is the key to success of any firm in the current competitive market. An outward-in approach to marketing must be employed in the market in order for this firm to be sustainable. The firm must first start by understanding the forces in the market and then provide products, which would meat market demands.
• It is important for this firm to realize that other firms within this same market stock this product. However, there must be differentiation in this market in order to convince consumers that this firm offers a superior value to other firms. This may demand that this firm develops different ways packaging to make their products look superior to those stocked in other retail stores.
• Strict laws and regulations that every firm must observe guide the industry. Ethics must also be maintained in order to operate successfully in this market. The management of this firm therefore has a responsibility to ensure that it works within the code of conduct. This retail outlet should particularly avoid stocking genetically modified food contrary to the law. This would help maintain good reputation in the market.
• In its competitive strategy, this firm should avoid taking the pricing strategy. It would be better for this firm to add more value to the products and make them appear unique so that they may attract premium prices, than reduce their prices below the market value.

List of References

Anderson, M 2011, Bottom-Line Organization Development: Implementing and Evaluating Strategic Change for Lasting Value, Elsevier, Burlington.

Armstrong, G Harker, M Kotler, P & Brannan, R 2009, Marketing: An introduction, Financial Times Prentice Hall, New Jersey.

Barthe, G 2010, Verification, Model Checking, and Abstract Interpretation, Springer, New York.

Blackwell, D Miniard, W & Engel, F 2006, Consumer Behavior, Thompsons, South Western.

Charantimath, 2006, Total Quality Management, Pearson Education, New Delhi.

Cummings, G & Worley, G 2008, Organization Development & Change, Cengage, Manson.

Daft, R 2009, Organization Theory and Design, Cengage Learning, New York.

Doorley, J & Garcia, F 2011, Reputation Management: The Key to Successful Public Relations and Corporate Communication, Routledge, New York.

Evans, D 2010, Social Media Marketing An Hour a Day, Wiley Publishing, Inc. Indianapolis.

Giddens, A 2009, The consequences of modernity, Blackwell Publishers, Malden.

Gorchels, L Marien, E & West, C 2004, The Manager’s Guide to Distribution Channels, Mc Graw-Hill, New York.

Grunig, E 2002, Excellence in Public Relations and Communication Management, Lawrence Erlbaum, New Jersey.

Harvard Business School Press, 2009, Executing Innovation: Expert Solutions to Everyday Challenges, Harvard Business School Press, New York.

Huber, P & William, G 1993, Organizational Change and Redesign: Ideas and Insights for Improving Performance, Oxford University Press, New York.

Kabani, S 2009, the Zen of social media: An Easier Way to Build Credibility, Generate Buzz, and Increase Revenue, BenBella Books, Inc. Dallas.

Klein, H 2009, Customer Engagement Strategies: The three keys to engaging C-suite executives, Graw-Hill, New York.

Kotler, P 2003, Marketing Insights from A-Z: 80 Concepts for every manager, John Wiley and Sons.

Kurtz, D 2008, Contemporary Marketing: Designing Customer Oriented marketing Strategy, Cengage Learning.

McGriff, J 2012, ‘A Conceptual Topic in Marketing Management: The Emerging Need for Protecting and Managing Brand Equity: The Case of Online Consumer Brand Boycotts’, International Management Review, Vol. 8 no. 1, pp. 49-54.

Oppenheim, N 1992, Questionnaire Design, Interviewing and Attitude Measurement, Pinter, London.

Page, S 2010, The Power of Business Process Improvement: 10 Simple Steps to Increase Effectiveness, Efficiency and Adaptability, AMACOM, New York.

Proulx, T 2011, Modal Analysis Topics, Volume 3: Proceedings of the 29th IMac, a Conference, Springer, New York.

Sharma, R 2008, Change Management, Tata McGraw-Hill Education, New Delhi.

Shelley, W & Maria, F 2011, ‘The Giffords shootings in Tucson: Exploring citizen-generated versus news media content in crisis management’, Public Relations Review, Vol. 37 no.4, pp.337-344.

Shelley, W & Maria, F 2011, ‘The Giffords shootings in Tucson: Exploring citizen-generated versus news media content in crisis management’, Public Relations Review, Vol. 37 no.4, pp.337-344.

The purpose of the review

The review was done for the purposes of identifying actions required for improvement of risk management within the company. The report also helps the company to know the rate of progress whether it is moving forward or stagnating.

The review enables easier creation of management standards and procedures that makes it easier for every employee to understand and define their roles within the company. The other aim for conducting departmental review was to understand the general view of the company concerning external and internal threats. Each department is exposed these threats hence should be prepared for appropriate action using effective devices.

Methodology and limitations

Structured interviews were conducted in a number of departments. Each departmental head was required to respond to some questions concerning risk management within Woolworth. Structured interview was used because it provides some level of flexibility and easy understanding.

Generally the interviews were open-ended, neutral, sensitive and clear to the respondents. The structure provided by the method allowed for open conversations that provided detailed information about the Company (Whyte, 1982). However, there was not enough time to gather all departmental heads together for the completion of group interviews. Amongst those interviewed were the Director of Group risk, head of finance and the ICT manager.

Summary of the organizational context

Woolworth is one of the largest company’s dealing with food and grocery, liquor, petrol, general merchandise and electronics. The firm is very much committed to supplying consumers with adequate and satisfactory shopping experiences. The company manages its risks through making of self-assessment questionnaires that assists the board in overseeing the available system of managing risks.

These are drafted and sent to all departmental heads and staff. The questionnaires are usually used for various purposes by the heads of department one of them being evaluation of the level of risks in each business unit and ways of controlling the identified risks.

The questionnaires are also used for monitoring purposes so as to reveal level of progress on certain action plans. They are also used in calculating risk management premiums levied on business units that are in operation. This enables the business-unit executives to prioritize on the costs for managing certain risks (Mintzberg and Quinn, 1988).

The company has got the intention of building and improving its position so as to become the best food supplying companies. Woolworth has managed to secure different contracts that have proved to be more profitable. It has placed strategies on how to leverage consumer relationship and focus on technology improvement with aims of sustaining its good image. The company wishes to increase its production so as to enable sufficient supplies to the global market.

In the recent year the currency check for the company realised high performance due to existence of high demand and quality production. Woolworth has made lots of investments to enable expansion of its capability in dealing with discrepancies within the global markets. Despite groceries attracting increased sales, cash processing solution within the company encounters difficulties within the market. This is because of the prevention of purchases done on sorters (Porter, 1979).

The management focuses on improving key segments such as increasing number of equity holders. They did this by improving the level of off-market buy-back to stabilize capital management and also making supply of quality products; this has lowered production costs by a very big margin.

The business on security products realizes positive performance which ensures that the company is sustained even in difficult economic times. Improved productivity, excellent exchange rates and low cost of production ensures that the company experiences growth in operating profit. Workable strategies have been implemented to ensure that the effect of the company is felt within every market segment.

Reviewing material business risks and internal component sales has enabled the company to mitigate some risks in collaboration with other companies. Its expansion on exclusive brands within the grocery categories commands strong value for money and quality products. This evidence can be seen within the Macro Whole food Market launched within the supermarkets (Woolworth ltd, 2010). The sales growth for the year 2010 exceeded market growth in Australian market recording 5.1% increase.

In the IT department there are both external and internal threats that affect efficient operation of the company. Main external threats include viruses affecting computer systems and misuse of data stored within the company systems. There are also cases of disclosing company’s private and confidential information not forgetting internet thieves.

Crucial risks emanate from physical and natural disasters which are sometimes very hard to control. Internal threats include human errors and theft of data by fired employees. Woolworth finds itself vulnerable in the non-electronic theft of passwords and fraudulent activities from within the company (StrategicRISK, 2006).

The process of risk management in Woolworth is done on a frequent basis by the group risk function auditors. They scrutinize all programs within the company and gives report to every management level.

The company has business units all over the world and one of the risks facing oversee companies is the ability to apply the same approaches in managing risks while at the same time assisting local managers in solving their shortcomings. The managers should have the capability of handling any type of risk irrespective of their location of operation.

Key findings and recommendations

Financial risks

Woolworth Company faces a number of financial management risks. These risks emerge from the constant use of financial instruments and they include; credit risk, liquidity risk, risks associated with marketing, currency and risks from interest rate charged. The group has policies used in managing, identifying and controlling the risks emerging from different departments. Review is always required for better reflection on changes that might occur in the market environment or various groups (Woolworth ltd, 2010).

The business strength has enabled Woolworth to take the lead in the profitable reduction of shelf prices. This has enabled the company to attract more customers since their prices seem affordable to the majority. This has in turn produced a lot of returns for the full benefit of shareholders. Woolworth has devised appropriate financial strategies to counter the predicted economic upturn (HB 141-2004, 2010).

Credit risk

This occurs when there is some financial loss linked to a customer who fails to adhere a financial debt. The exposure to risks associated with credit depends on the nature of customer being dealt with. The records showing customer base do not have much influence on the credit risk, the risks do not only apply to one region but from customers all over who are contributors to sales revenue. In this case it is appropriate to write credit letters to customers as a reminder for incomplete transaction.

The group dealing with credit identifies credit policies used in whole sale transactions that ensures dealing with honest consumers. One of the policies used here is that which enables advance payment procurement in the process of transacting an order. Large credit transactions are only done with big institutions that are credit worthy. The group uses policies that regulates on the amount of credit given to government institutions (Woolworth ltd, 2010).

Liquidity risk

This risk puts the group at a position where they are unable to meet company’s current financial obligations. This should be managed in a way that ensures the company has got enough liquidity to meet the payment of its liabilities without incurring any losses.

Liquidity risk within the company is managed through maintenance of sufficient cash and adequate financial securities supported by adequate credit facilities and strong market base. This issue is handled by treasury group who ensures availability of credit channels ensuring financial flexibility (Woolworth ltd, 2010).

Risk associated with the Market

This exposes the company to foreign exchange risks which emanates from net investments in foreign firms, long-term commercial transactions, firm operations both recognized and unrecognized. The foreign exchange risk is managed by the use of forward contracts managed by the group security. The risk arises when the company’s functional currency is weaker than the currency in which future commercial transactions are conducted.

The risk management policies are used to control firm transactions and commitments by exposing them to major world currencies within a year. Woolworth owns some investments in the international market whose values are vulnerable to foreign exchange. To avoid risk emanating from currency exchange, the company concentrates on borrowings converted to relevant currencies (Woolworth ltd, 2010).

Principal risk

Risk register is maintained by every business unit within the company, this register exposes risks within every department. The risks are reviewed by the risk committee and grouped according to their impact. Principal risks can lead to loss of key manufacturing sites within the premises, contract issues and the security of products. Losses of key operating sites within the company have major financial impact therefore necessary precaution measures taken to avoid fire break out.

There are also risks involved in the area of contracts. There are various obligations and conditions that are associated with customer contracts, negative happenings and failures could bring about liability claims. These risks are managed and reviewed by the internal legal team and material exposures who organizes for quality recruitment as well as checking the performances of various suppliers (Woolworth Ltd, 2010).

Concerning security of products, regular checks are done to avoid reputational damage brought by either negligence or robbery. The products, risk getting lost while being transported to various destinations. It can be as a result of accidents or natural disaster. This calls for tight security which is provided around the premises and the production units.

Delivering goods and services around Woolworth calls for the application of stringent operational procedures using laid down procedures and trusted personnel, the company also monitors movement of goods on a daily basis in all its business units across the world (Dye and Sibony, 2007).

Methods of assessing risks

The risks are identified through various groups which includes the overall financial risk management programme. This program aims at identifying the unpredictable matters within the financial markets and how to counteract their effects on financial performance. These matters are solved through the use of derivative financial instruments.

Then there is the treasury group which analyzes and scrutinizes financial performance within the business units. The group provides the principles and policies upon which overall risks are managed; these policies cover risks that deal with foreign exchange, extra liquidity investment, and risks related to interest rates amongst other risks.

The risks can further be assessed by group audit committee which monitors the relationship between the management and the implementation of policies within the various groups. This group work closely with the internal audit function which does regular reviews of management procedures. Staff behaviours are monitored and all employees informed of the company’s sanctions on the wrong use of information systems (EFQM, 2002; Wall and Martin, 2003).

In the IT department there is need for new ways on technological defence, application of the back-up procedures and right policies. Dealing with viruses requires intruder detection systems and secondary defence mechanisms. There is need to install anti-virus in all the PDAs and phones used within the company. Intrusion detection systems need installation and also the use of ISPs. Concerning electronic banking the company had put in place some measures to deal with third party fraudulent activities.

Careful checks need to be done in the process of awarding contract to customers and suppliers (StrategicRISK, 2006). The use of audit controls and tough policies on employees was seen as necessary measure to prevent unnecessary interactions and exchange of information between employees and outsiders. It was agreed by the managers that one of the measures they take to prevent fraud is by advising employees against sharing information to third parties (Bryson, 1995; BDO, 2006).

The company uses three-factor authentication system to minimise the risks of password theft. The company need to check on the level of outsourced services since it is very crucial for business operations. These can be utilized to perform same operations as those done within company’s premises. It also necessary to balance the need for information protection and process of sharing it, the barriers to communication between companies are becoming less and less (Porter, 1979).

Concerning the internal risks, various measures should be undertaken to reduce carelessness and incompetency amongst employees. The overall security of the Company depends more on those inside than outsiders. One of the managers in the IT department confessed that they have strong procedures and internal checks that control every activity within the company. The employees’ daily duties and performance are screened by the use of computers (Bryson, 1988).

Reference List

BDO, 2006. Managing international risk. International business briefings. Web.

Bryson, J. M., 1988. A Strategic Planning Process for Public and Non-Profit Organizations. LongRange Planning, 21(1), pp.73-81.

Bryson, J. M., 1995. Strategic Planning for public and non-profit organization. A guide to strengthening and sustaining organizational achievement. San Francisco: Jossey-Bass.

Dye R. & Sibony, O. (2007). How to improve strategic planning, The McKinsey Quarterly (3), pp.40-48.

EFQM, 2002. The fundamental concepts of excellence. Brussel: EFQM.

HB 141-2004, 2010. Risk financing guidelines. Web.

Mintzberg, H. & Quinn, J., 1988. The strategy process. Prentice-Hall, Harlow.

Woolworth Ltd, 2010. Woolworth annual report announcement. Web.

Porter, M.E., 1979. How Competitive Forces Shape Strategy. Harvard business Review, (4), pp. 5-30.

StrategicRISK, 2006. Cyber risks in European business today. Specialist media Business Intelligence (8), pp3-16.

Wall, A. & Martin, G., 2003. The disclosure of key performance indicators in the Public sector. How Irish organizations are performing. Public management Review, 5(4), pp.491-509.

Whyte, W. F., 1982. Interviewing in field research. In: R. G. Burgess (Ed.), Field Research: A sourcebook and field manual. London.