Managing The Fresh Food People

Managing the Fresh Food People
Question
Answered

Since being founded in Sydney in 1924, Woolworths Ltd had grown to be number two of the
top 2000 companies in Australia by 2015.1 It now dominates the hypercompetitive Australian
supermarket sector (worth in total 6 per cent of the nation’s gross domestic product). With its
3000 stores across Australia and New Zealand, and more than 190 000 employees, it serves
over 28 million customers each week. Operating profits exceed $60 billion.2 However,
Woolworths and its chief competitor Wesfarmers (owner of Coles Group Limited) now face
efficient and successful rivals: the German discount supermarket Aldi and the US
membership warehouse club Costco. Both Woolworths and Wesfarmers exhibit high levels of
total liabilities compared to their total tangible assets, due to goodwill and intangibles making
up a significant proportion of total assets. Although both have strong operational cash flows,
this may mean they carry higher risk in a trade downturn if they need to rely on increasing
borrowings to fund capital expenditure.3 Add to this the predictions that 2015–20 will offer
challenging conditions for the retail sector generally, and the task facing the Woolworths
management team is significant. For example, does it stick with its espoused mission
statement: ‘[Woolworths is] built on a passion for retail, attention to detail, working hard,
ensuring the safety of our customers and our people, and having fun. Our mission is to deliver
to customers the right shopping experience — each and every time’? 4
It sounds good, but is the customer really likely to prefer an explicit mission for the
employees to ‘have fun’ over an option to have lower prices? What might this ‘right shopping
experience’ be? Rivals with lower prices pose a threat. Fresh food, convenience and value for
money might not be enough. How good does Woolworths have to be to attract customers
from its competitors, or at least to retain those customers it still has?
What are the options available to the decision-makers? Does it offer a scheme to build
customer intimacy, and thus loyalty and share of the shopping basket? Does the management
team invest time and money in innovative software to extract value for the shareholders from
the digital revolution? Will mobile platforms and online shopping change everything or just
some things? Will flatter organisational structures improve internal communication and
capitalise on implicit knowledge? In short, is there a management choice between strategies
aimed at increasing customer intimacy and loyalty, those aimed at operational efficiency and
those targeting organisational integrity and brand leadership?
Woolworths is not alone in confronting such challenges. What kind of workplaces are likely
to be needed to support this new trend for innovation and flexibility, with improved
efficiency and productivity? What can managers do to create them?
QUESTION
How has the workplace changed in the past twenty years and what are the implications of the
changes? Where are the trends likely to take us in the next twenty years?