Analyzing Woolworths’ Macro Environment: Identifying Key Issues And Recommendations

Political factors: Favorable political environment and trade problems.

Woolworths is one of the leading retail organizations in Australia. Having a dedicated list of consumers the organization has ensured the products and services are effective enough which has helped them to have upper hand in the market. In a comparatively competitive market, it is extremely important for an organization to assess the barriers and opportunities of the business which helps in strategizing the steps to sustain. The environmental analysis is one such tool that helps organizations to make sure the internal and external environments are under control that ultimately helps the organization to move forward. It is important to assume the market conditions and trends which would help to encash on the results of the environmental analysis.  Hence, it is undeniable that macro environment analysis becomes mandatory for an organization like Woolies so that it is possible for them to have a strong market hold and competitive advantage in the market (Keith, 2012). The present study is an analytical study that will highlight key issues of the macro environment of Woolworths and suggest the possible solutions for the issues identified.

The macro environment of an organization is mainly formed with the help of the external environmental factors that affect the operation of a business. The factors which form the macro environment are political, economic, social, technological, environmental and legal. The PESTEL analysis hence is one of the key tools which shows the various external environmental aspects which needs to be analyzed and sorted for the smooth operation of an organization. Woolworths has to implement this tool to get a fair view of the macro environment of the organization. The PESTEL analysis of Woolies is as follows:

Political: The success and long sustenance of Woolworths is largely due to the political factors. The political environment of the country Australia has always been favorable for the growth of business in the country and this has helped the organization to grow and develop in the Australian market.  The Government of Australia even though changed at regular intervals all of them have provided the required support to the organizations like Woolworths and Coles to grow.  Even though the organization has had upper hand in the market in the recent past it has suffered major setbacks in terms of business not only in the domestic market but also in the foreign market. For instance, the exacerbating trade relations between Australia and South Africa have affected the growth of the organization in South Africa. It is also coming under strong threat with the changing behavior of the states and unions which definitely affect the organization (Adams, 2017). The states of Australia have made significant regulations on operations of the organization which restricts the operation to a large extent. The government regulations on the trading hours where the hourly rate has been increased have affected the organizational costs has affected the business. The organization has had a tough time coping with these changes, for instance, shift change for the employees have to be done with the consultation of the government which it says is bizarre and holds back the organization to compete with the foreign retailers. On the other hand, Australian politics was hit hard by the revelation on cases of corruption against some of the leaders which clearly shows organizations are ripped apart with stiff demands that directly affect their operations in the market. Hence Woolworths will have to cope up with the changing environment for effective operations (Ryan, 2016).

Economic factors: Battle with the government over online import charges, low income levels, and price inflation.

Economic: This is one of the major external factors that have to be effectively managed by the organization Woolworths. One of the major economic issues that Woolies has faced in recent times is the battle with the government is charges on online import that is GST. The increasing GST on online sales and even imports has been extremely steep for the organization. It is clearly draining of the profit. The organization has to pay several taxes which have been raised in the recent past. The GST on online sales has increased which means lower profit and lesser reserves. The foreign trade taxes have also increased in the recent past which has the same effect as the above. The cost of operation naturally increases with the lowering of profits which is definitely not a good sign for the organization. Woolworth’s annual profit in the last few years did not look good even in the foreign soils (King & Thobela, 2014). Price inflation has weighed down Woolworths to a large extent. It is important to note that most of the people have reduced spending more on lesser useful retail items and this has created a price war which not good in the market. Zero food inflation in the country and unstable trading conditions in the foreign market have affected Woolworths more than ever. Low inflation in the recent times has also affected the market where the organization was forced to raise its prices on certain products which means it has not yet been able to manage the economic fluctuations in the market.  Due to the change in diplomatic relations with some countries like South Africa companies like Woolworths have had to pay higher rates in the foreign exchange market which also affect the business economically. The income level of the consumers in Australia is comparatively on the higher side which doesn’t stop people from buying and is a good sign for the organization (Knox, 2015).

Social: The population of Australia is aging. The population in Australia was relatively young which has dropped by 22% by 2001 and 2002. This has further reduced in these years which put a question mark on the efficient labor graph of the country. Every organization needs strong and efficient employees to operate. This issue of an aging population has affected the organization to a large extent. On the other hand, when the organization has found young people to work governments have slapped them with higher labor charges, labor flexibility issues, shift change issues et cetera (Comyns, 2015). Woolworths is one of the leading employers in the country but with lack of proper employee availability, it has become largely troublesome for the organization to operate. In the recent past, Woolworths has faced the wrath against racial abuse claims which also makes a huge void in the image of the organization in this highly aware market. They do not have a proper marketing strategy for ethnic communities which are a huge business issue for the organization. Socially the organization has not been able to contribute to these communities. Hence it is clear that the organization needs to work on strategies which would help to socially establish it as a responsible organization. Overall it could be said that socially Woolworths is not in a favorable position even in the foreign nations as international trade policies between Australia and South Africa have suffered the organization clearly disconnected itself socially from the market which has affected its shops and stores (Spillan & Ling, 2015).

Social factors: Aging population and lack of efficient employees, racial abuse claims, and lack of marketing strategy for ethnic communities.

Technological: In the world of internet Information Technology has to be at its best to gain a competitive advantage in the market. The online market is equally big as the physical market hence it is extremely important for an organization like Woolworths to emphasize on improves technology (Arli, Dylke, Burgess, Campus & Soldo, 2013). The power outage issue in the recent past did not leave a good taste for consumers. Shops closed and consumers were stranded in the queues and self-checkout kiosks clearly exposing its technical faults. It is also important to note that the organization could work on its portals to improve the experience of shopping especially navigating it effectively. Giving proper IT facilities could pay valuably to the organization which should be the ultimate focus of the organization at the present moment (Lambert, 2012).

Environmental: The Carbon emission issue has been a long-standing issue for the organization. Even though it has pledged to eliminate carbon emission and have used electric vehicles in some places using petrol and gasoline based cars for distribution has driven criticism. The organization has been accused of taking the paper from places like Indonesia where there is large-scale illegal logging and even violation of human rights is experienced. The unknown supplier controversy has put Woolies under strong criticism which needs to be directly communicated and cleared. Apart from this, the organization has a good reputation to manage the environment and contribute to environmental development through the responsible use of resources through recycling, reuse and renew strategy. Waste management is effectively done. The organization promises to support climate change through efficient usage of materials (Hunter, Spooner, Smith, & Creighton, 2012).

Legal: The organization focuses on the following legal regulations to operate in the country. Human rights act, equality act, and discrimination legislation are properly implemented in order to make sure legal issues are strongly handled. Issues of harassments are strictly handled which shows it is ready to support the government in legal ways (Keith, 2012).

Conclusion and Recommendations

To conclude it is important that Woolworths work on the issues identified like technical development, trade problems and social connections. Even though the business performance of the organization hasn’t been affected so far, its profit has definitely reduced and in order to continue the good run, the organization should take care of these key issues. The recommendations to address them are discussed below:

• Developing a strong panel for effective social governance is required that will assist the organization on social issues like developing work tables for the aging population. It will also be responsible for promoting ethnic communities.
• Developing a strong global technological infrastructure with the assistance through professional IT support.
• Constantly analyzing employment structure and economic drawbacks of the business strategy and possible expansion strategies in foreign markets would help to improve the business condition of the market in the foreign soil (Keith, 2012).

References

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Comyns, B. (2015). Our Spoons Came from Woolworths. New York Review of Books.

Hunter, P. G., Spooner, N. A., Smith, B. W., & Creighton, D. F. (2012). Investigation of emission spectra, dose response and stability of luminescence from NaCl. Radiation Measurements, 47(9), 820-824.

Keith, S. (2012). Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, 47-81.

King, L., & Thobela, S. (2014). Woolworths farming for the future. International Food and Agribusiness Management Review, 17(B).

Knox, M. (2015). Supermarket monsters: The price of Coles and Woolworths’ dominance (Vol. 6). Black Inc..

Lambert, E. (2012). Woolworths launches first virtual Australian supermarket. Power Retail.

Ryan, P. (2016). ACCC v Woolworths: Supermarket faces lengthy court battle with regulator. ABC News, 1.

Spillan, J. E., & Ling, H. G. (2015). Woolworths: An Adizes Corporate Lifecycle Perspective. In Business History Conference. Business and Economic History On-line: Papers Presented at the BHC Annual Meeting (Vol. 13, p. 1). Business History Conference.