General Comments

There is only a limited relevance to the requirements of the assessment.

There is a heavy dependence upon description particularly with reference to the
strategy models i.e. How the models work. There is no requirement to explain how the
models work only to apply them to the organization.
There is a lot of description of how the selected models work this is not required. The
models have been applied to the organization, quite well in some instances, and a lot of
issues have been identified, however there is no attempt to discuss and/ or synthesize
the information that emanates from them. This is a major weakness of the report.
There is no evidence of a coherent argument.
There is a lot of narrative and virtually no critical evaluation of the organization other
than a tendency to generalize issues. You need to use research to support your
arguments.
The conclusions are quite general you should have attempted to identify from your
analysis why the organization failed as this is what you state your intention is in your
introduction.
The report structure is quite weak - no page numbers are given in the contents page,
the figures and tables in some instances are not labeled and / or sourced. There is no
reference section and no bibliography. The referencing style in the text is incorrect it
should be Harvard.
Overall this is a very weak effort.
Students please note that this was graded as a fail.

Introduction page

Findings page
-

Company analysis & application of theory (Part a)

Efficiency of strategy (Part b)

Evidence
(NB annual report no longer available)

Conclusion/recommendations

Introduction

Woolworths. Once a major player in UK retail, now a mere shadow of its former self. The
question begs, just what went wrong? The purpose of this paper is to conduct strategic analysis
of Woolworths,

late-2008 onwards as to ascertain key failings protruding to Woolworths

eventual demise then extending this in to the formulation of alternate strategic decisions which if
taken may have dragged Woolworths from the path of failure.

A mere casualty of a vengeful economy or simple miss-management?

Findings
Part a

To many the economic landscape of early 2008 looked good. In fact it looked damn good.
Uninterrupted economic growth spanning 16 years heralding a new age of prosperity allowing
public spending to reach record levels. Yes we had it easy. Economies the world over had
become much the same. Predictable, docile, yielding few unwelcomed surprises. Year on year
growth had become a certainty. Gone were the days of boom and bust, or so we thought at
least.

And then it happened. KERBLAMM!

Boom became bust plunging world economies into turmoil. At its lowest ebb the UK witnessed
negative growth of over 2.5% (BBC.co.uk). Thankfully we now seem to be out of the woods after
18 months of recession. During this period Businesses inevitably faced tough trading conditions.
The Increasing cost and difficulty in obtaining credit coupled with reduced consumer spending
forced businesses to make to stark strategic decisions. Companies would ultimately live and die
by the choices they made. Remaining unresponsive would simply not be an option.

Woolworths UK began in 1909 and was founded by American Frank Woolworth. Since its
inauguration Woolworths grew to take its place as a giant among UK retailers spawning 819
stores, employing 27,000 staff nationwide at its peak. Woolworths could be found on practically
every high-street in the UK. Generally well-liked Woolworths held a kind of nostalgia/cult status
amongst the British consumer, many of whom had visited the store in their childhood. However
let it be said that brand nostalgia does not guarantee sales in the same way brand loyalty does.

In pursuit of our goal we must first understand Woolworths at a time of prosperity and apparent
success. To do this we must use numerous strategic management tools that we have at our
disposal. To conclude which tools will be appropriate we can use Kenchi Ohmae. He suggests
that any strategy must focus on 3 entities. The corporation itself, its customer and its
competitors. Only by integrating all 3 key entities into strategy formulation can sustained
competitive advantage be achieved (Ohmae). Considering the above factors as important we
can then deduce that we must use tools which allow use to analyze and asses the business, its
customer and its competitors. For our purposes, the follow should prove to be divisive enough.
Starting with the obvious we will use;

SWOT

PESTLE

BCG

Porters Five forces framework

Porters generic strategies

Porters value chain

Industrial life cycle

Each tool of course comes with inherent drawbacks and limitations to their use. This not a
criticism as we must take each tool for what it is and what it can offer, exploiting it strengths
while being aware its weaknesses.

SWOT

The process of utilizing SWOT requires an internal survey of strengths and weaknesses,
and an external survey of threats and opportunities (Balamuralikrisha, Dugger). While
SWOT can be effective, little monetary cost can be incurred, only time being the only real
input. Limitations of SWOT may be its inherent informal guise. Drawing up a SWOT is an
informal process requiring thought, ideas and opinion, which can be dangerous if not
thoroughly researched. It is of course completely subjective. A strength in ones eyes may
be a weakness in another. Some potential items may also be ambiguous, being both a
strength and a threat for example. Below find a SWOT analysis undertaken using data
relating to Woolworths late 2008.
Strengths

Weaknesses

Strong brand awareness

Low share price (potential for unwanted

Strong high-street presence

takeover)(Increased difficulty in raising

investment)

Diverse product range

27,000 staff ( large wage commitment)
Economies of scale
Ownership of 819 stores

Opportunities

Threats

Expansion of catalogue/online business

Dwindling share price

Potential sale of 120 stores

Physical music market deflation

Expansion of Wilkinson stores
Economic crisis to hit disposable income of
many

SWOT such as the one above must be used in conjunction with other strategic management
tools. As shown we have identified some factors which will influence strategic decision making
however we must now conduction further analysis.

PESTLE

Political, Economic, Sociological, Technological, Legal, Environmental. PESTLE analysis is in

effect an audit of an organizations environmental influences with the purpose of using this
information to guide strategic decision-making. The assumption is that if the organization is able
to audit its current environment and assess potential changes, it will be better placed than its
competitors to respond to changes(CIPD.COM) PESTLE can be useful in determination of the
big picture, essentially the whole environment in which the business resides. However as with
SWOT, PESTLE can only give a snapshot of the chosen business at a specific point in time. To
be effective it must be conducted on a regular basis. If the given business is situated within a
particular pacey industry such frequency would only increase. Finally and again as with SWOT,
PESTLE is based on human assumptions, ideas and opinions influencing the business, Below
find PESTLE analysis Woolworths, late 2008).

Political

Fuel duty and tax issues

leading to increased fuel costs

Economic

Social

Dwindling share value

Trend towards internet based

Destabilizing economy

shopping gathering pace

Customers demanding
increasingly low prices

Technological

Legal

Environmental

Possible security issues with

Increased insurance costs

Increasing pressure to be

POS payment systems

associated with claim culture

green

Security of internet-based

within public

Packaging issues

sales

Given inherent characteristics of SWOT and PESTLE, both should be seen as primary
investigative tools. When used in conjunction with each other they allow a business to ascertain
in general, loose terms the business and its environment. It is now that we will begin to look at
the business in greater detail

BCG/Boston consulting group matrix

Featuring cash cows, dogs, problem childs and stars some may believe the BCG matrix to be
some kind of intergalactic petting zoo. In truth the BCG matrix is a little more mundane. Used in
the allocation of resources BCG matrix uses a scatter style graph to plot a business in terms of
its bsus (segments/arms of a business) and its product lines. The position of a given item is
reliant upon set characteristics of not only the item but the environment in which it resides.
Determined characteristics are then matched against the 4 sections of the BCG matrix which in
turn gives us its final position on the graph.

Cash cow Low growth, high market share. Profit and cash generation should be high,
low growth allows for minimal investment.

Dog Low growth, low market share. Number of dogs should be kept to minimum.

Problem child High growth, low market share. High investment demands and low
market share mean low returns. If little is done to improve market share, Problem child
will become nothing more than a cash sponge.

Star High growth, high market share. Use large amounts of cash but also generate
large amounts of cash. Will become cash cow if market share is maintained.

(Valuebasedmanagement.net)
Limitations of BCG include its inability to acknowledge success factors other than a high market
share. High market growth is also however not the only feature that can make entry to a given
market attractive.
Overleaf please find BCG matrix for Woolworths, late 2008.

Star

Problem child

Online
retail
arm

Out of
town
stores

Growth

Cash cow

Dog

rate

High
street
stores

Catalogue
brand

jkjkj

Market share

A business which can successfully utilize an effective BCG matrix can gain valuable insight into
investment vs. profitability, thus in conjunction with further investigation allows for efficient
allocation of business resources which in its self is a major part of strategic planning.

Porters five forces framework (FFF)

Porters FFF uses five forces to determine the attractiveness and viability of a given market
while indicating a firms strategic position by showing the distribution of power and competitive
advantage within an industry. FFFs importance in strategic planning can be underpinned by its
dual use, allowing assessment of not only current markets but market where entry may be an
option. Originally developed as an alternative to SWOT, which Porter found to be un-rigorous
and ad-hoc (Porter), FFF perhaps presents its self as a distinctly rigid and professional business
tool whereas SWOT tends to be informal in its use.
These five forces include;

The threat of entry from new competitors Markets characterized by high returns will
attract many new firms. Resulting in an influx of new competitors eventually leading to a
drop in industry profitability. Barriers to entry often negate this threat. Barriers including,
patents, rights, investment requirements, access to distribution ect.

The intensity of competitive rivalry Intense competitive rivalry will lead to the detriment
of all included parties. Companies will fight venomously for competitive advantage citing
innovation, heightened advertising expense and price.

The threat of copycat products/services Existent of products outside of legal

boundaries increase propensity of loyal customer to switch brands. Price vs.
performance/features, perceived product differentiation, quality deprecation, switching
cost are all factors influencing potential threat.

The bargaining power of customers The ability of the customer to put the firm under
pressure. A major factor affecting this threat is customer price sensitivity.

The bargaining power of suppliers The influx of components, labor, raw materials and
there sources can have power of a business. When few alternative exists, suppliers can
hold firms to ransom, charging exorbitantly high prices. However the waning power of
unions have negated this threat to a small degree.

(Wikipedia.com)
Please find overleaf Porters FFF conducted for Woolworths late 2008.

Expensive if uncomplicated entry into

market. However due to large number of
competitors, entry not viable unless brand
already on large scale in adjacent industry
(Tesco,Asda ect)
No protection from technology or patents.
Large entry costs associated with brand
awareness and store purchase

Threat of new entry

Threat of new entry

Intensity of competitive rivalry

At present Wilkinsons looking to expand, in

doing so are now offering many of the products
and services that Woolworths do. Competition in
terms of quality and price will ensue.
Customer loyalty in question due to Woolworths
being more of a nostalgia brand which may not
be enough to entice repeat business in the face
of cheaper alternatives.

Buyer
power

Suppli
er
power

Intensity of
competitive
rivalry

Supplier power
Large number of suppliers
Generally of large size
Currently enjoy good economies of scale
Substitution possible with little cost
Power residing a little with Woolworths due
to possible substitutions

Threat of copycats

Businesses possessing similar elements

existent (Argos,Wilkinsons,Littlewoods etc.)
Primary threat from Wilkinsons

Buyer power

Threat of copycats

Many alternatives to purchase

pushing prices down
Price sensitivity an issue with
electronic
items
(Games
consoles etc.)
Orders generally made by
individuals
rather
than
groups/companies

Porters generic strategies

Where FFF looks at primary determents of a companys profitability, the attractiveness of an

industry, generic strategies looks into secondary determents. This being the position of the
company within its industry. This is generic strategies sole purpose however FFF does cover
this to a small extent. A business positions its self in a market using its strengths. Porter argues
that a firms strengths fall into one of two categories. Cost advantage and differentiation.
Application of these strengths allow for generic strategies to be applied at business level.
Namely cost leadership, differentiation and focus. Being generic theses 3 strategies or not
industry specific and do require adaptation to be effective. Some may say that this is also
generic strategies main failing. Being neither company or industry specific means such
strategies do not take into account distinct characteristics and differentiation which occurs.
In this report generic strategies cannot be used as an analytical tool. However this does not
negate its inclusion as it is still a viable strategic management consideration. A business must
be aware of all three strategies brought about by generic strategies as there implementation in
whatever form or adaptation could be crucial in the final division of any strategy.

Porters value chain

Porters value chain highlights the chain of activities which a business participates in to do what
it does. The product/service passes through each activity gaining value eventually becoming the
finished product which consumers are willing to pay for. Consisting of primary activities,
Logistics, operations, sales, marketing, services and support activities, admin, HRM, R&D,
procurement the value chain can be used in a wider scope to encapsulate supply chains and
distribution networks. As above we cannot use the value chain as an analytical tool in this
context. Where the value chain can be useful in day to day decision making, for our purposes,
little would we get for our endeavors.

Industrial lifecycle
A simple yet powerful tool, the industrial lifecycle allows a business to discover trends which
may help to formulate future strategy. Any given industry typically feature four distinct phases.
Introduction, growth, maturity and stability/decline. Dependent upon where an industry sits it can
heavily influence the direction business may take. Shown below is the standard industrial
lifecycle.

(NRI.COM)
Below please find the industrial lifecycle and position of Woolworths late 2008. (The red dot
indicates Woolworths.)
Introduction
stage

Growth stage

Maturity stage

Stability/decline
stage

Given the research we have conducted, we now known the context in which key strategic
decisions at Woolworths were made. Knowing this allows knowledgeable criticism to be applied.
Various news reports from respected sources show key strategic decisions undertaken by
Woolworths.
On 19 November 2008, The Times reported that the Woolworths' retail business was a target for
restructuring specialist Hilco, who would buy the retail arm for a nominal 1, This deal would
have left Woolworths Group with its profitable distribution and publishing businesses and a
reduced debt load.
The group's banks, GMAC and Burdale, rejected the deal and recalled their loans, forcing the
group to place the retail business and Entertainment UK into administration. On 26 November
2008, the trading of shares in Woolworths Group plc was suspended. Neville Kahn, Dan Butters
and Nick Dargan of Deloitte LLP were appointed joint administrators. When the company
entered administration it had a debt of 385 million. The administrators announced that they
were aiming to keep the company as a going concern over the crucial Christmas period,
although analysts feared that any heavy discounting would create a domino effect and drag
down other high street retailers. Deloitte later announced they had received "substantial
interest" in Woolworths.
When news about Woolworths being placed into administration became widely publicised,
National Lottery operator Camelot Group immediately suspended Woolworths from selling their
lottery tickets and scratch cards, as well as preventing claimants from redeeming prizes at the
stores.
On 19 January 2009, the parent company, Woolworths Group, announced its intention to also
enter administration, as it can no longer pay its debts. The application was heard by the High
Court on 27 January, and Woolworths Group plc entered administration. By April 2009
Woolworths Group plc's website no longer existed.
(Wikipedia.org)

Findings part b
IF any word could be used to describe the strategic decision undertaken at Woolworths it would
certainly not be efficient. Evidently any strategy which results in the business going into
administration and eventually out of business cannot be efficient.
We can argue that Woolworths had no strategic decision to make. An offer which may have
proved to save Woolworths, albeit in an incredibly altered form, was rejected by its creditors.
Forcing Woolworths hand into administration. This should be seen as the beginning of the end.
Once in administration little could be done to save the business. We can look at competitors
such as Wilkinsons can ask why they experienced no such problems during this time. Perhaps
we can point to Woolworths position in the industry during this time which was not a good one.
However profitable certain aspects of Woolworths proved to be, Woolworths had to many dogs
and too many problem children. For a business to be profitable and successful for an extended
period of time it must remain competition within its environment. Reactant to change and able to
stay in tune with its customers. After 100 years of trading perhaps Woolworths forgot these
valuable lessons.
If you ask the public what Woolworths sold, you would find vague answers encapsulating a
large scope of products. This perhaps another Achilles heel? When you want a new computer
you go to a computer shop. When you want clothes you go to a clothes shop. In essence the
modern high-street accommodates so many specialist stores and retailers that there is little
room for a jack of all trade. Consumers want quality and price. The majority of specialist highstreet retailers can offer this. Woolworths would perhaps feed on the scraps because of this.
Loyal customers in love with the whole nostalgia thing perhaps staving off the inevitable. M&S
are also a brand who suffered from this phenomena in recent times.
We can see than that there was little strategic decision making to be done. When steps were
taken it was too late. The problems apparent at Woolworths were those that had dogged the
business for a lengthy period and when the credit crunch landed. It was a blow to much. It was
not the economy. It was not miss-management. It was everything. A long list of problems which
failed to be addressed over an extended period which led to Woolworths demise.

Evidence

(http://en.wikipedia.org/wiki/File:Woolworths_Group_share_price_2006-2008.png)

Uk GDP
(http://www.property-investing.org/uk-economy-forecast.html)

Output Growth, UK, and Employee Jobs, GB, in the Retail Sector, 19992008
(http://www.lowpay.gov.uk/lowpay/lowpay2009/chapter3.shtml)

(http://www.marketoracle.co.uk/index.php?name=News&file=article&sid=69

Conclusion/recommendations
Based on my findings I can say with an unering degree of accuracy, Woolworths had to go. One
way or another Wooloworths would go bust sooner of later. Years of decline could only lead to
dissater. Perhaps after 100 years of trading Woolworths no longer appealed to the modern
consumer. It failed to adapt and remained stagnant in a constantly shifting market, the death
knell for many company. Whatever the failings at Woolworthts this much is certain. Woolworths
must serve as a stark warning for any business.

To stave from possible disaster would have required incredilble invesmnet and upheaval.
Woolworths needed listen to its customer. Perhaps consolidate its position within the
marketplace. Re-lauching itself as a brand with a purpose. A brand which you can associate
with a dedicated line of quality products. A business cannot ignore its outside environment. In
strategic mangement terms, listening and researching are the crucial factors in formulating
effective and successful strategy. We can only grow if we understand who we are and what we
are here to do.