Exploring the Unique Success Factors of Woolworths

Author : GWG Category : Case Study June 14, 2024

Woolworths - one of the distinguished retail companies running in Australia. The main office of Woolworths is situated in Bella Vista, Sydney. This giant retail company is known for making billions of money and being the second largest retailer in New Zealand. It runs supermarkets named Big W and some beneficial loyalty programs to reward their loyal customers in everyday shopping.

The first Woolworths store was opened in Sydney in 1942. And by 1962 it expanded its presence to every state in Australia. In order to maintain its place in the highly competitive retail industry. Woolworths underwent an important transition in 2012. It was a critical turning point for the businesses. In May 2024 there were 1113 successful Woolworths stores in Australia. Fast forward to May 2024, Australia boasts a total of 113 thriving Woolworths stores. With New South Wales alone being home to 340 outlets that are up and running successful.

As of May 2024, 1113 well running stores in Australia and 340 in New South Wales.

Woolworths has been the foundation of Australian stores for almost a century. Throughout difficult circumstances, it has continuously satisfied customers, guaranteeing sustainable revenue. Woolworths managed the COVID-19 situation skillfully, always prioritizing its customers. The business pays attention to what customers have to say and meets their needs. The CEO highlights their dedication to customers by highlighting that they come first. Woolworths has succeeded because it has remained committed to its customers and has changed over time to meet their requirements.

Woolworths made $1.5 billion in profit in spite of the COVID-19 setbacks. CEO Banducci gave credit to their prior year's effort in strengthening their supply chain as the reason for this success. Additionally, the business opted to use the block trade mechanism to sell 5.5% of Endeavour Group's shares at $6.46 per share, as disclosed to the ASX on December 14, 2022. The CEO responded to this action by highlighting the benefits of Woolworths' collaboration with Endeavour Group for the company. Woolworths' interests were valued at $4.496 billion as of February 2023.

PESTEL Analysis :

P:- Political Factors

E:- Economic Factors

S:- Social Factors

T:- Technological Factors

E:- Enviormental Factors

L:- Legal Factors

Businesses trust PESTEL Analysis to figure out the bigger picture of tier business analysis in easy and simple graphs. It helps businesses to understand the role of many elements which affect the success and failure of business. It helps them to understand how multiple factors are affecting the chances of their business growth.

Political Factors :

Scott Morrison has been the prime minister of Australia since 2018 (- 2022). In his time period trade between Australia and China was very less. China stands as the largest trading partner of Australia, even though their political relations were not so good. Around $116 million USD was sent to China by Australia. This trade happened during March 2020 to March 2021. China’s action in the South China sea is not only bothering US, Japan and India but it is also a matter of concern for Australia. That’s the prime reason for the bad geopolitical relation between China and Australia. There are many businesses who depend upon the trade of these two countries and weakening geopolitical relations of these two countries is definitely a matter of concern.

Economic Factor :

Like numerous other nations, Australia was also heavily impacted by the Covid-19. From the first quarter to second quarter of 2020, GDP of Australia fell by 7%. Since 1959, this was the greatest decline in GDP. But the economy of Australia recovered very well. It was predicted that the economy will expand up to 3.1% till 2021. According to the many financial experts Australia recovered from the covid-19 pandemic better than most of the other countries.

$257 billion is already directed to the economic support committee for the recovery of the pandemic's effect. The Australian Federal Government proposed a 2020–2021 budget that included $98 billion for COVID-19 response measures (Australia, 2021). Bailout packages and other perks like tax reduction have benefited many industries including woolworths. Consumer’s purchasing power will be reduced due to higher inflation rate.

Social Factors

These are the trends in society and cultural factors that affect consumer behaviour and way businesses operate.

Demographic: Age distribution, population growth rate and ethnic composition can alter market demand.

Changes in Lifestyles: Changes in lifestyles, for instance, health awareness can bring new market opportunities.

Consumer attitude: Attitudes towards products, services brands, etc can end up in financial success and reputation.

Education Levels: The higher the level of educational achievements, the more highly trained workers are, thus propelling innovation and productivity.

Technological Factors :

No doubt Australia has world class infrastructure but there is always room for improvement. Australia contributes approximately 1.8% of its GDP on Research and Development. This is significantly less than the OECD average of 2.37% of GDP spent on Research and Development. Leading nations like Korea and Israel, in contrast, allocate about 4.5% of their GDP on research and development. Leading countries like Korea and Israel, in addition, allocate about 4.5% of their GDP on research and development.

Several emerging technologies are reshaping the groceries and other business. Woolworths are also employing high end technologies to maximize their business success. In this digital age of AI, everyone is using and blending the potential of AI in their business and taking advantage of it. So facilities and features like voice ordering, checkout free shopping, and artificial intelligence (AI). For example Amazon was the first one to open cashier free stores in Seattle and Washington. This store was almost entirely responsible for AI. Like items in store are tracked by cameras, sensors and computer algorithms. The automatic credit stores deduct their account. These stores do not have checkout counters.

Supermarkets in Australia will also need to implement these technologies in order to remain competitive. By implementing such creative concepts, businesses draw the attention of more clients and grow more over time.

Environmental Factors :

Deforestation, excessive grazing, pollution, and high carbon emissions are just a few of the serious environmental issues Australia faces. Global problems like climate change and increase of global warming. An average Australian uses 123 kilograms of plastic waste annually, according to the scheme of Do not Let Nature Go To Waste (2021) and in it only 9% of plastic is recyclable. Because of their packaging and bags, supermarkets play a major role in the plastic pollution problem.

The Department of Agriculture, Water, and Environment has established a schedule for the National Plastics Plan in order to solve these issues. Boost recycling rates, and investigate plastic substitutes. By 2030, this initiative seeks to significantly reduce plastic waste. Furthermore, Australia has pledged a 28 percent reduction in carbon emissions as part of the Paris Agreement, which aims to keep global warming below 2 degrees Celsius by 2030.

Legal Factors :

Australian Competition and Consumer Commission (ACCC) defends consumer rights in Australia. Large supermarkets and online retailers are supported by the ACCC to display unit costs, facilitating simpler product comparison for customers. Consumers in Australia are protected from companies making false representation claims about food and other products by consumer law.

The industry must also comply with the Food Standards Code. Specific goods and services tax regulations apply to retail and wholesale traders, and imports costing more than $1000 are subject to duty fees. It is legally prohibited for supermarkets to make false statements, even when it comes to packaging and plastic bags.

Woolworth Share Price History

Woolworths' share price has seen considerable fluctuations over the past decade. To understand these movements, we will examine the annual performance from 2015 to 2023.

2015-2017: Stabilization Period

2015:

Opening Price: AUD 33.60
Closing Price: AUD 24.99
Key Events: Woolworths faced intense competition and challenges in its supermarket segment. The company also announced an exit from its home improvement business, Masters Home Improvement, which negatively impacted its share price.

2016:

Opening Price: AUD 24.99
Closing Price: AUD 24.04
Key Events: Continued restructuring efforts, including the closure of Masters, resulted in short-term losses but aimed at long-term stability.

2017:

Opening Price: AUD 24.04
Closing Price: AUD 27.30
Key Events: Woolworths began to show signs of recovery with improved performance in its core supermarket business, regaining investor confidence.

2018-2020: Growth Phase

2018:

Opening Price: AUD 27.30
Closing Price: AUD 30.00
Key Events: The company's focus on enhancing customer experience and operational efficiency started to pay off, leading to a steady increase in share price.

2019:

Opening Price: AUD 30.00
Closing Price: AUD 38.22
Key Events: Woolworths' strategic initiatives, including investments in digital transformation and supply chain improvements, boosted investor sentiment.

2020:

Opening Price: AUD 38.22
Closing Price: AUD 37.20
Key Events: The COVID-19 pandemic initially caused market volatility. However, as an essential service provider, Woolworths experienced increased demand, stabilizing its share price.

2021-2023: Pandemic Recovery and Beyond

2021:

Opening Price: AUD 37.20
Closing Price: AUD 39.80
Key Events: Continued strong performance in the supermarket sector and the company's adaptability during the pandemic supported share price growth.

2022:

Opening Price: AUD 39.80
Closing Price: AUD 35.60
Key Events: Supply chain disruptions and inflationary pressures impacted the retail sector globally, causing a slight dip in Woolworths' share price.

2023:

Opening Price: AUD 35.60
Current Price (June 2023): AUD 38.50
Key Events: As the global economy begins to stabilize, Woolworths has shown resilience, with investments in technology and sustainability initiatives driving renewed investor interest.

Factors Influencing Share Price Movements

1:- Market Competition: The competitive landscape, particularly from Coles and Aldi, has historically impacted Woolworths' market share and pricing strategies.

2:- Economic Conditions: Macroeconomic factors such as inflation, consumer spending, and economic recessions have played significant roles in the company's financial performance.

3:- Strategic Initiatives: Woolworths' investments in technology, supply chain improvements, and customer experience enhancements have been critical in shaping its stock performance.

4:- Global Events: Events like the COVID-19 pandemic have caused both challenges and opportunities for Woolworths, influencing its share price volatility.

Conclusion

Woolworths' share price history reflects its strategic maneuvers and resilience in a dynamic market. Understanding these trends provides valuable insights for investors and stakeholders, highlighting the importance of adaptability and innovation in sustaining long-term growth. As Woolworths continues to evolve, its share price will likely be influenced by its ability to navigate market challenges and capitalize on emerging opportunities.