WOOLWORTHS’MASTERS STORES 1
Woolworths is in the course of seeking a buyer for their hardware Masterschain stores or closing this business in the hardware market completely. This comes as a failure to Woolworths as it was once a reputable retailer all around the world (Beveridge, 2013). The interest in the Masters’ chain began in 2009 when the former chief executive decided to venture into the fast growing hardware sector worth $24 billion at the time, and the project sunk millions of the shareholder funds in capital. The main issues leading to the decision by the Woolworths’ board are the $600 million worth of losses incurred in the course of six years of operation. As well as therecent sales conducted in 2015 showing that Masters Stores were losing close to $78,000 every week(Beveridge, 2013).This is precisely why the company decided not to carry the losses much further confirmed by a comment made by Mr. Chains, a member of the board.
Among the main reasons that attributed to the failure of the masters chains include; a poorly thought out strategy whereby the board was only interested in capturing the home improvement market and yet had other business in progress. The Westfarmers on the other hand were well equipped with handling each business as its own. The second issue is that Woolworths chose all the wrong locations, contrary to Bunnings which has existed long enough to establish the main areas (Stewart, 2016). Thirdly, Masters sold the wrong stuff at the wrong time of the year due to lack of sufficient research and the handling of too many operations at a time as compared to Bunnings. The fourth issue was the Workplace culture which was largely flawed in the sense that Bunnings treated their employees better in the human resource department compared to Woolworths (Stewart, 2016). Lastly, the shopping experience with Bunnings enabled the customers to have a sense of belonging compared to that of Masters hence yet another way they were able to draw more customers their way.
From this analysis, it is evident that the looking at their rival competitors in Australia, the Bunnings under the ownership of Westfarmers continues to perform well such that they have the capability of purchasing the British Hardware group Homebase for $705 million. In terms of shares, Masters 4.4 per cent at $23.65 is incomparable to Bunnings 2 percent at $40.12 (Zacks, 2016). This therefore shows that any intentions that Woolworths’ had in beating Bunnings is futile even with attempts by the Woolworth’s partner, USA giants Lowe’s.
Overall, the Woolworths’ board members claim that the decision was not made on the basis of losing or winning in the home improvement market, but rather in the view of what was best for the shareholders. Dissolving the partnership with Lowe’s will be the first step towards Woolworths owning Masters independently, and they may then agree to whether sell or shut down (Woker, 2008).Other issues will be dealing with the 7000 and more jobs that will be lost as well as satisfying the shareholders’ interests in the long run. This topic is important to investigatebecause is highlights the numerous effects that poor decision making has in business and in particular, entry into a new market. In addition, it shows that proper advice and research is crucial in identifying key parts of a business such as customer preferences, culture, location, marketing and exit strategies in the event of failure.
Beveridge, J.(July 22, 2013). Masters home improvement chain debt a blow for Woolworth, http://www.heraldsun.com.au/news/masters-home-improvement-chain-debt-a-blow-for-woolworths/story-fni0d787-1226682786265
Stewart, Emily.(January 18, 2016). Masters: Five reasons Woolworths is pulling the plug on struggling hardware chainhttp://www.abc.net.au/news/2015-05-06/five-reasons-woolworths-is-being-hammered-on-hardware/6450364
Woker, T. (January 01, 2008). The franchise relationship and the problem of encroachment: Silent Pond Investments CC v Woolworths (Pty) Ltd: case comments. Sa Mercantile Law Journal = Sa Tydskrif Vir Handelsreg, 20, 3, 402-413.
Zacks, I. R. (January 19, 2016). Lowe’s (LOW) to Exit Woolworths Joint Venture in Australia. Zacks Investment Research, 2016-1.