Woolworths-Engen. : is a strategic alliance feasible?
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The ability to grow market share in a saturated market is often difficult if that market is stable. In a country that has an economy that is not performing, growth of a company is often vital so as to allow the prosperity of a company. One such way to grow is for the company to form strategic alliances with other companies that are strong where the other company is week and in so doing stimulate a competitive advantage. In retail store outlets and location play an important role in competitive advantage by creating" new markets" , and if these new markets could increase the companies existing market share, then this results in a win - win situation for the company. Often moving into new markets involves risks as it is the unknown. By making a move to sell product in two pilot project Woolworths-Engen forecourt stores, Woolworths are moving into a market where they can sell a product group HMR's (home meal replacements) where currently they have no close competitors, thus capitalizing. This move is heralded However as this is a totally new format of selling, Woolworths need to ascertain if brand integrity will be affected and whether such a project is more than just a good idea. It was found the NPV's and IRR's ( the way Woolworths evaluate projects and project feasibility) from a Woolworths perspective were both extremely positive. From Engen's position, this initiative brought about a substantial increase in both petroleum and food store sales for the two pilot projects, comparable with those figures prior to the pilot projects launch. Woolworths as a company were very interested in the qualitative results conducted by an independent consultant, as they were concerned about maintaining brand integrity. This fear was not founded as the survey done by actual customers shopping the pilot project stores show that customer confidence over Woolworths brand integrity was not affected. Instead customers enjoyed the convenience. The strength of this Alliance is that both members have brought to the part aspects where the other member currently does not perform. Woolworths bring their good food and strong brand name linked with market dominance and Engen bring their immense outlet network, and prime locations. i.e. the strategic fit between these two corporates is extremely strong. All parties involved in this venture namely Woolworths, Engen Head Office and the petroleum station dealer benefit financially from this initiative.