The Fall of Woolworth Masters

Assignment Topic

Assignment 2 Individual or Paired Essay & Case Analysis

Students may choose to do assignment 2 as an individual or in a pair (not in groups above 2 members). Students who choose to work as a pair are expected to make an equal contribution to the assignment (both students will be awarded the same mark for the essay).  If you submit as a pair, please submit only one copy to mailbox 149 (bld. 11, level

A) and Moodle, but do include both student id numbers.

Due Date: Thursday, April 28th, 2016, 9:00pm (hard copy to mailbox 149, bld 11, Level A and electronic copy to the Moodle assignment drop box). Late assignments will be penalised.

Length:            2200 words (no leeway beyond 2200; penalties for exceeding the word limit apply).  Please use double spacing and 12 pt font.

Value: Topic:

Question

& Tasks:

40 marks

What Went Wrong at Woolworths’ Masters:   A Strategic Management

Analysis

Using current material from the internet and business press to obtain information about the Masters home improvement business  and hardware chain (owned by Woolworths), you are required to write an analytic essay evaluating the original decision by Woolworths to expand into home improvement and hardware (2009), the management of Masters between 2009 and 2015, and the decision in January, 2016 to sell or wind up Masters. Your essay should adopt a point of view and provide a critical analysis of why you have chosen that particular viewpoint. This must be justified and supported by the application of relevant key strategic management concepts and theories.

Task Details

In the introduction to your essay provide a brief synopsis of Masters. Remember, you are not writing a descriptive case study, but an evaluative essay. Your essay must identify and critically evaluate the key strategic issues for the topic. It is useful to identify the key issues in your introduction. If you do not identify the key issues upfront,  you  will struggle to undertake an analysis and assessment of them in the body of your essay.  Keep in mind the word limit and mark allocation.

The body of your essay must provide an assessment of the relevant strategic context of the key strategic management issues (e.g. external, industry-level, internal,  competitive rivalry, international, leadership, diversification, corporate governance, etc.). Essential to a quality essay and analysis is the application of relevant key strategic management  concepts and theories. This requires reading the strategic management  literature and using critical reasoning skills to identify strategic management issues in a contemporary case, understanding the environments in which they occur, and selecting options for the successful practice of obtaining sustainable competitive advantage for above average returns within societal values.

Your conclusion should provide the essential answer to the question set by the topic and be justified by the analysis in the body of the essay.

References must include a combination of academic journals and texts, as well as on-line company/industry/business news reports. You must include a minimum of 25 references, of which at least 12 must be academic journal articles (it is not sufficient to include them in an end reference list; they must be used to build your analysis and arguments). If you do not  research the essay and analysis  widely, it will not be possible to produce an acceptable essay. Be sure to start your research early in the semester, ie week 1.

The websites listed below provide a useful start to your research about Masters. Remember, your task is not to write a descriptive case study on Masters (there are no marks for doing so), but to gather information about the company in order to undertake a strategic management analysis of it.

http://www.theage.com.au/business/retail/what-went-wrong-at-  woolworths-masters-20160118-gm8fge.html

http://www.theage.com.au/business/retail/time-was-up-for-masters-  woolworths-had-to-act-20160118-gm834h.html

http://www.smh.com.au/business/retail/bunnings-growth-at-risk-as-  market-reaches-saturation-citigroup-20150309-13zpxn.html

http://www.theage.com.au/business/retail/woolworths-to-close-or-sell-  masters-and-home-timber-and-hardware-20160118-gm8dld.html

http://www.theage.com.au/business/property/masters-faces-property-  upheaval-20160118-gm8e3p.html

http://www.afr.com/brand/chanticleer/woolworths-pulls-the-pin-on-  hardware-two-years-too-late-20160118-gm80vf

http://www.theage.com.au/business/retail/woolworths-to-pull-plug-on-  masters-after-lowes-exercises-put-option-20160118-gm7ygg.html

Michael Pascoe: Masters pain not over for Woolworths

Woolworths has 161 million reasons to wind up Masters

Masters stores losing $78,000 per week

http://www.theage.com.au/business/retail/why-hardware-chain-masters-  has-it-all-wrong-20150911-gjk87q.html

http://www.theage.com.au/business/retail/is-this-masters-store-the-most-  shortlived-retail-outlet-in-history-of-shopping-20160119-gm9bef.html

http://www.theage.com.au/business/retail/woolworths-throws-in-the-  towel-on-epic-fail-20160118-gm833r.html

Assignment 2 Evaluation Criteria:

Strategic Management and Policy Development PG

  Area of evaluationMark AvailableMark Achieved  Comment (if applicable)
Introduction: Synopsis of Masters (3 marks)   Identification of critical strategic issues & problems, (3 marks)   Statement of purpose (1 mark).7  
Discussion and application of relevant key strategic management concepts and theories to support a critical analysis of the topic.           Analysis and discussion should be strongly supported by reference to refereed journal articles, texts, the business literature, current news reports, websites, etc.26  
Conclusion and recommendations No marks for listing theories that were covered in the essay; no marks for a summary. Instead, provide your overall finding and answer to the question, and a succinct presentation of the key reasons for your finding.5  
Academic integrity Sound argumentation throughout the essay, use of paragraphs, essay structure and appropriate language use.2  

Woolworth is an Australian based company, which has majored in the supermarket industry. Other firms operating in the industry are Coles, Costco and SPAR Australia, among others. Woolworth controls approximately 42.0% of the market (Friedlos, 2015). This excellent performance, made the management of Woolworth make the decision to expand into the home improvement chain which was named the Masters. The Masters was established to enable Woolworths to venture into the hardware space. It was established in partnership with Lowes, a hardware retailer from the United States. Woolworth was formed to compete with Bunnings Warehouse, which had dominated the sector for many years (Grugulis & Bozkurt, 2011). Among the products traded at the masters include the paints, kitchens, plumbing, fans, garden tools, building and other hardware equipment. However, the masters failed to perform as expected due to poor management, failure to conduct market research and poor strategic decisions (Ethiraj & Gambardella, 2002). This essay discusses the strategic management issues that were associated with the establishment and the operations of the masters, this is because the decision to establish the Masters appears to have been flawed right from the start.

The hardware chain was started in 2009, at that time the Woolworth board was certain that its exemplary performance in the supermarkets would be replicated in the $45 billion hardware business (Samaan, 2013). The assumption was that the hardware business would still outperform their main rival; the Bunnings, owned by the west farmers. The home improvement business was therefore started to put additional financial pressure on the Bunnings warehouse, which had dominated the hardware sector.

The decision to venture into the hardware sector was motivated by the desire to meet the daily home improvement requirements of the Australian shoppers. The decision was in line with the firm’s overall goal of delivering value to customers. The home improvement sector was under serviced, with Bunnings being the major player in the industry. Thus, Woolworth saw the opportunity of bringing competition and growth in the sector (Margaret, 2008). The partnership with Lowes, which is among the largest retailers in the home improvement worldwide, was aimed at sharing best practices and to create value. This is because Lowes was experienced and knowledgeable about the home improvement department.

The revenue generated from the hardware chain was far less compared to the cost incurred. During the few years of operation, the business made losses which amounted to $600 million (Knox, 2015). The huge losses could be attributed to the expenses incurred in building all the 63 stores. Labor cost was also high. This shows that at the time the decision to establish the hardware business was made, a good analysis of the risk and the returns to be generated from the business was not done accurately, to identify the high competition present at the market (Jones, 2014). Market research is an activity conducted before the launch of a new project. It helps to gain a better understanding of the customers and the competitors in the industry. An insight of the nature of customers and the competitors forms the basis of gaining a competitive advantage (Jay, 2005). It is clear that before the launch of the Oxygen project which led to the establishment of the hardware chain, no market research was conducted. Different markets have different characteristics, and precisely the Australian markets were very different from the US markets (Rumelt, 2013)…

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