Woolworths Case Study

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Is Woolworths diluting its value proposition by dropping prices and increasing the product range?

No, Woolworths is not diluting its value proposition by dropping prices and increasing the product range. •Own-brand products bring great value and perceived quality, synonymous with the Woolworths brand. •Reduced input costs do not result in a product quality alteration and therefore I suggest that no negative impact exists. •Reduced pricing to remain competitive during tough economic conditions is a necessary move. Lost revenues due to margin erosion can be replaced via additional product lines. •Retail strategy continues to be aimed at the niche high-income market. oSuperior profits decrease.

Entry into the ‘black diamonds’ new market opportunity does not dilute the value proposition. oRepresents a shift in strategy away from the niche high-income market. oPurchasing power of the new segment is relevant and cannot be ignored. oValue proposition supports offering within the new market. When the economic conditions change for the better, should Woolworths withdraw some of the added products?

No, Woolworths must not withdraw any of the added products. •Exhibit 3 indicates a decline in performance (2007 – 2009). oNew product lines / extensions provide much needed revenue streams and consequential gains in market share. •Exhibit 2 indicates that Woolworths market share has increased year on year since 2005 (8% – 9%). oWithdrawing products will reduce market penetration, negatively impacting any gains that have been made to date. •Removing product lines will confuse the both key markets. Is Woolworths changing its strategy?

Yes, Woolworths is changing its strategy by moving into a new market. o‘Black Diamonds’ market will require a vastly different approach to the niche high-income market. oNew LSM groups present new challenges.

4-pillar system remains the core strategy however; product line expansions / extensions add depth to the...
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