Environment Analysis Of Woolworth: Factors And Solutions
Background of Woolworth
The report highlights certain discussion on environment analysis of Woolworth. Every business operates and works in the external environment. It is important for the business to consider external environment. As elaborated in the Assignment-A, it analysis the influences of several factors such as political, economic, social and technological factors that influence business either directly or indirectly. Assignment-A describes various frameworks and theories to overcome the challenges. Moreover, this Assignment is continuation of previous assignment that includes the environment scanning of Woolworths, consumer behaviour, economic policy, government regulatory, public opinion, and competitive strategy to achieve firm`s success. Part-B critically analyse the theories to overcome various challenges and respond the solution to the environmental risks. The continuation and extension of part-A, part-B proposes the solutions to the environmental challenges confronted by the firms.
Woolworth started the business by opening its first retail store in 1924 in Sydney that was a bargain basement outlet. After a considerable time, in 2012, the company operated as one of the largest supermarket chain in New Zealand and Australia. Moreover, the company accounted where around 28 million customers accounted for 31 percent market share. Woolworths handles numerous brands such as dick smith electronics, dick smith powerhouse, BWS and Tandy. Woolworth is renowned and largest retailer in terms of revenue, sales, stores, most number of supermarkets around 840 supermarkets then retail outlets in Australia. Woolworth is a largest Australian supermarkets and retail store chain. Woolworth supermarket alongside with Coles that forms a near duopoly of supermarket accounts for 80 percent of Australian market. Woolworths operates in selling several groceries such as vegetables, magazines, health and beauty products, packaged foods, baby supplies and other stationary items. Before analysing the threats of the business operation, Woolworth has to identify the business operations of one’s own business and search for the factors that could affect the business environment. After identifying the factors, the company evaluate the influence and strive to the resolve the problems related to risks and associated problems.
The four factors of analysis such as political, economic, social and technological that can provide detail of operating challenges that Woolworths limited faces in the prevailing macro environment. There are many various factors, which affect the business. PESTLE analysis is an tool of analysis which actually defines what factors affects the business operations and how it enable people to gain information about the company`s situations. These factors revolve around political, social, legal, environment, economic and technological factors. In the world of business, the environmental factors is referred to all the external factors, which affect the business. In relation to PESTLE analysis, environmental factors refer to the variables such as ecological factors and physical factors of the environment such as climate of the earth, climate change, and direct consequences of the things, consumer health, and availability of energy (Santos, Svensson, Padin, & Høgevold, 2015).
PESTLE Analysis of Woolworth
Political factors- This factor plays a crucial role in determining the factors that can influence the sustainable and long-term profitability in a particular country. Woolworths operates in food retailing in more than dozens of countries and further expose the company`s operations to various political environment. Government regulations have direct impact on supermarket industry in regards to trading hours by monitoring the regulatory functions of ACCC (Australian Competition and consumer commissions). Some of the political factors are as follows-
New white paper has been undertaken and proclaimed which will allow retailers the capability to offer legal advice by their own companies. Moreover, another dubbed Tesco Law delivers service that can encourage a person to stop the shop approach of the supermarket chains. These chains are the main source of competition that induces the company to form strategies of offering the one stop shop opportunity to customers with the overview of several facilities such as pharmacies, insurance and banking facilities. In addition to this, Gordon brown announced a doubling of the thresholds for the stamp duty on the house purchases to $ 120000. This helps the first time buyers to encourage the housing market.
Economic factors- Several macro environmental factors such as saving rate, foreign exchange rate, economic cycle, and inflation rate that can determine the aggregate demand and investment in the economy. Woolworths limited closed its business operations in UK due to current economic recession. Woolworths is adversely affected by credit crunch, afford to continue the operation, and ultimately lost its reputation shutting down its operations in UK. Recession and high unemployment has negative impact on business entity in such a way that it lead to lower sales and cause decline in the financial performance. Woolworths faced a number of challenges especially when it closed its operation in UK that lead to unemployment of more than 30000 people who usually work in retail store. Apart from the crisis, the company still performs in the best manner even after the financial disruption. For example- Australian retail market has maintained stability in other parts of the world that have supported the Woolworths in continuing the business (The guardian, 2018).
Social factors- Changing social concerns, lifestyles, and attitudes have resulted in several changes in the supermarket industry. People around today are more concerned with health and obesity. Therefore, consumer demands more low-fat foods, cook food, and GM-free food and also has engaged women workforces in rennet times (Pickles, Barrientos, & Knorringa, 2016). Woolworth understands the importance of customer’s experiences so as a part of profitability and sales (Svensson, Ferro, Hogevold, Padin, & Varela, 2018). Moreover, the company has emphasized a notion of customers’ delightfulness to fulfil the needs of the customers. The management identifies changes that have occurred in social context and conclude that customers in recent era is increasingly strive to seek good shopping experience, which includes wide range of products (Ferro et al., 2017).
Challenges and Solutions
Technological factors- Woolworth has adopted new technology and since 1994, it is one of the major retailer to subscribe to Global Electronic Marketing and Merchandising Network (GEMMnet). The company has invested in improving distribution and supply chain system that has positive and significant impact on cost saving strategies. It increased the online shopping facilities and it was the first company that developed websites that gave Woolworths a first mover advantage. The use of self-service checkouts that enable customers to get convenient home delivery (Keller, & Weibler, 2015). The company uses RFID and it has become integral part of retail sector`s system that helps them in managing the workforce and the inventory. Woolworth has integrated service oriented architecture in the company`s operations that aims at supporting the technology in effective management of supply of different retail outlets. Moreover, the company has incorporated upcoming technologies such as self-service checkout, Google apps utilised in the cash register system, and able the customers to utilise cash, debit and cash card (Jie, Parton, & Chan, 2015).
There are several challenges identified in assignment-A is the resolution that have described in further discussion. In order to respond to various social challenges, the company started offering different items at lower prices to the store visitors to cover the wide range of customers. To overcome the problem and challenges identified in PEST analysis, the company has identified five forces model to analyse the competition and identify the treats from suppliers, buyers, substitutes, and new entrants. These five forces can determine the competitiveness and attractiveness of the company. The understanding of five forces model helps the company to identify three factors such as external resources, other two factors that are internal threats (Grimmer, 2018).
Threat of new entrants- All the supermarket industry and Australian retail shop markets generally offer a price, which is low and reasonable. Therefore, it does not attract firms to enter into low profit potential business operations but by the time when the organisation produces bulk stock, it generally reduces the per unit cost of the company (Linton, 2018). Entering in this industry is profitable especially once when the fixed cost of the company is covered. Woolworth maintained a vibrant emphasis on meeting the wants of the customers that means only companies who have large investment, has the ability to compete. The company already enjoys high level of customer loyalty with approximately 8.4 million customers and members in New Zealand and Australia and enjoys a completion of market members in countries like Australia and New Zealand (Farfarn, 2018).
Five Forces Model Analysis
Bargaining power of the suppliers- the more important the supplier is, the stronger is his position. Woolworth have low dependency on the suppliers, which means this factor weakens the bargaining power of suppliers. The reason is that the considerable amount of retailing market share with the huge number of products that is being sold in the industry (Leonidou, Christodoulides, Kyrgidou, & Palihawadana, 2017).
Bargaining power of customers-, the pricing system of majority of supermarkets is reasonable. Moreover, the pricing system of this sector is highly influenced by the customers. To meet the needs of the customers, the company manages the price attributes by decreasing it through buying it in bulks from the suppliers (Karlsson et al., 2018).
Rivalry among the competitors- the existence of other strong Australia`s retail stores industry such as Coles and Myer have limited the market share of the Woolworth and also have contributed to higher level of contribution. The intensity forces the other supermarket companies to create effective and competitive strategies in order to differentiate them form other competitors (Bailey, 2016).
Moreover, apart from the five forces model, there are some more strategies such as cost leadership culture, strategic alliance, people-focused development, and product proliferation. Woolworth should consider policies like sales-up/costs down policy to get maximum output. Company should consider cost-leadership schemes that can cut down the operating costs such as JIT strategy. The strategy enables to manage supply chain to control the wastage costs by availing and making the products at retailers place (Karpen, Bove, Lukas, & Zyphur, 2015).
Strategic alliances- Woolworths continued to develop the strategic alliances between the core businesses with the different operations. The strategy is when applied to Woolworth and Coles, the competitors also started alliancing such as Caltex and shell. To take advantage over this strategy, the company is suggested to combine the alliance with reward program. This had a short-term effect on Woolworth sales and revenue (Leitner, 2016).
Conclusion
From the above conclusion discussion, it can be concluded that every business has to handle and assess the external risk associated with the activities of the business. After identifying the challenges that influence the business negatively or adversely, company should start identifying other more strategies and models that can either avoid challenges or eliminate the challenge. Challenges have already been identified in the previous assignment where PEST factors have been identified and analysed. Moreover, in the second assignment, various PEST challenges have been identified and this assignment continues to resolve and overcome challenges. After identifying, the company has strived to apply certain model such as porters five forces model, internal marketing, and current strategies that can handle the practical advances. Woolworths have confronted with high competition as the conditions and situations of high threats of complementary and substitute services prevail. The part of the report-2 have the discussion of internal analysis such as glimpse of SWOT analysis and external analysis such as PESTLE analysis. Moreover, there were some main suggestions for Woolworths that includes strategic products, product proliferation, strategic alliances, and other product-focused development. Apart from this, the company have some important factors that can improve price strategy, customer decision process, and value chain system.
References
Bailey, M. (2016). Marketing to the Big Middle: establishing Australian discount department stores. Journal of Historical Research in Marketing, 8(3), 416-433.
Farfarn, B. (2018). The Largest Australian Retailers. Retrieved from: https://www.thebalancesmb.com/largest-australian-retailers-2892105
Ferro, C., Padin, C., Svensson, G., Sosa Varela, J. C., Wagner, B., & Høgevold, N. M. (2017). Validating a framework of stakeholders in connection to business sustainability efforts in supply chains. Journal of Business & Industrial Marketing, 32(1), 124-137.
Grimmer, L. (2018). The diminished stakeholder: Examining the relationship between suppliers and supermarkets in the Australian grocery industry. Journal of Consumer Behaviour, 17(1), 13-20.
Jie, F., Parton, K., & Chan, C. (2015). Australian beef supply chain integration: case studies of the two largest Australian supermarkets. International Journal of Supply Chain and Operations Resilience, 1(2), 121-138.
Karlsson, N. P., Laurell, H., Lindgren, J., Pehrsson, T., Andersson, S., & Svensson, G. (2018). A cross-country comparison and validation of firms’ stakeholder considerations in sustainable business practices. Corporate Governance: The International Journal of Business in Society, 18(3), 408-424.
Karpen, I. O., Bove, L. L., Lukas, B. A. & Zyphur, M. J. (2015). Service-dominant orientation: measurement and impact on performance outcomes. Journal of Retailing, 91(1), 89-108.
Keller, T., & Weibler, J. (2015). What it takes and costs to be an ambidextrous manager: Linking leadership and cognitive strain to balancing exploration and exploitation. Journal of Leadership & Organizational Studies, 22(1), 54-71.
Leitner, I. (2016). STRATEGIC DIAGNOSTIC ANALYSIS SERVICES OF WATER AND SANITATION IN ROMANIA. EXTERNAL ENVIRONMENT ANALYSIS. Scientific Bulletin Series D: Mining, Mineral Processing, Non-Ferrous Metallurgy, Geology and Environmental Engineering, 30(1), 71.
Leonidou, L. C., Christodoulides, P., Kyrgidou, L. P., & Palihawadana, D. (2017). Internal drivers and performance consequences of small firm green business strategy: The moderating role of external forces. Journal of Business Ethics, 140(3), 585-606.
Linton, L. (2018). Strategies to Overcome Marketing Threats. Retrieved from: https://smallbusiness.chron.com/strategies-overcome-marketing-threats-38186.html
Pickles, J., Barrientos, S., & Knorringa, P. (2016). New end markets, supermarket expansion and shifting social standards. Environment and Planning A, 48(7), 1284-1301.
Santos, M. D., Svensson, G., Padin, C., & Høgevold, N. M. (2015). Corporate risk exposure by implementing sustainable business practices-an African case. International Journal of Logistics Economics and Globalisation, 6(3), 223-235.
Svensson, G., Ferro, C., Hogevold, N., Padin, C., & Sosa Varela, J. C. (2018). Developing a theory of focal company business sustainability efforts in connection with supply chain stakeholders. Supply Chain Management: An International Journal, 23(1), 16-32.
The guardian, (2018). Woolworths to stop selling pesticide linked to global bee decline. Retrieved from: https://www.theguardian.com/environment/2018/jan/23/woolworths-to-stop-selling-pesticide-linked-to-global-bee-decline