About Woolworths Australia
International Business is often considered to be an essential aspect of an organization. In order to gain a competitive edge in the global business environment, the different organizations are required to expand their horizons and look out for expansion opportunities in different parts of the globe. For this purpose, the primary aim of the given report is to analyze the general factors underlying the economy of the host country, Russia. In this manner, the different governing factors can be understood and the expansion decision can be made (Bryce, 2017). The company which has been chosen for the purpose of the assignment is Woolworth`s Australia. The Woolworths Australia is an Australian Supermarket store which has business in Australia as well as certain parts of New Zealand. However, as a growth strategy, Woolworths has been looking forward to expand its operations in different parts of the globe and thus, Russia is being considered as a host country. The report will follow a structured format whereby an introduction to the organization will be given which will then be followed by the briefing on the host country. The latter half of the report will be using six aspects namely, Political, Legal, Economic, Cultural and CSR & Social Responsibility in order to understand the feasibility of the chosen expansion idea. The report will also be providing certain recommendations based on the same.
The Woolworths Supermarkets is an Australian grocery chain which is owned by Woolworths and is owned by the Woolworths Limited. The organization was found in the year 1924 and along with its competitor Coles, the organization forms a duopoly in the Australian supermarket and forms approximately 70% of the supermarket share. The primary specialization of Woolworths lies in selling grocery items like vegetables, meat, fruits, packaged foods and other items, however, the store also sells DVDs, household items, pet supplies, stationery items, beauty products and other related items. The organization has more than 1000 stores across Australia and has an e-commerce website as well. The firm also allows home shopping delivery services (Woolworths.com.au. ,2018). Woolworths is a household name in Australia and has offices in various parts of the country where they stock fresh fruits, vegetables, large range of food items, private labels as well as imported items. With time, Woolworths has adapted to the advance technology and expanded to New Zealand as well. However, in order to ensure the sustenance of the company, the firm should consider expansion to other parts of the globe. The different reasons for expansion are as follows:
- Global expansion is a driver to revenue growth: Global expansion shall assist Woolworths in achieving a higher revenue growth as this would go a long way in assisting a business to engage in economies of scale, which will allow larger sales with lower costs.
- It provides access to a wider consumer base: The consumer base of Woolworths will also increase considerably in case it plans to expand.
- Increases market share: The market share of Woolworths in Australia is already quite high. An expansion to the different parts of the globe will allow the firm to have a larger market share in the international market as well.
- Access to Raw Materials: Very often Woolworths has to import certain raw materials and hence, this increases their cost. However, in case they expand internationally they can easily have an access to these raw materials.
Russia as a Prospective Host Country
Russia can be stated to be the largest country in the globe. The country has an average rea of around 17098.242 thousand square kilometers and is located near to Eastern Europe and the northern part of Asia. The country borders to around 16 countries and runs on a Federal Republic Political system. The legislation which is followed in the country is the Bicameral Parliament. The capital of the country is Moscow. The population of the country is around 143.800 million people and the official language of the country is Russian with the primary region followed is Christianity (David-Fox, 2015). The monetary unit of the country is Ruble.
The following section will be discussing the macro environmental analysis of the Russia as a prospective host country for Woolworths who will want to expand its operations in the chosen country. Legal and Political Economical, Cultural aspects, CSR and ethical aspects of the country shall be analyzed (Hill, Cronk & Wickramasekera, 2015). Primarily this analysis is popularly known as the PESTLE Analysis. The PESTLE Analysis is a crucial strategic tool which is used to analyze the macro environment of a country and assists in examining the thorough general factors lying in the environment.
The understanding of the political environment of a business assists in understanding the freedom which a business has in the economy and their performance based in the long run. In the year 1993, Russia turned out to be the Federation of Russia and runs with a semi presidential republic system. The country runs under the same system even today (Hubbard, Rice & Galvin, 2014). This is because, stability is an important aspect of the country and a stable regime and a policy goes a long way in assisting the country to gain higher investments. The current president of the country is Mr. Dmitri Medvev and the Prime minister is Mr. Vladimir Putin. Although Russia is considered to be a Federation, it tends to run on the involvement of the primary government and even with the interference of the local government. There exists a lack of freedom in the economy and although there exists a strong judicial system, the prisoner rate is quite high (Wolterskluwer.com., 2018). The Russians follow an open foreign relationship strategy and hence, the trade and economy of the country is considered to be viable for any organization which aims to expand to the chosen country. Moreover, the military base of the country is also good and it has a well-developed as well as home grown arms industry (Danilevskii & Woodburn, 2013). The government tends to support the development of the technology and hence, the foreign relationship policy tends to play a major role in the stability of the country as well as the growth of the economy. As the country shares a favorable relationship with other countries, the sense of safety and security of the business operations in Russia is quite strong and persuades other companies to invest in the economy of the country (Harrison & John, 2013). Given below is the political stability indicator of Russia for a period of 1996-2016. The average value was -1.01 and the minimum was -1.51 with a maximum of -0.72.
PESTLE Analysis
When the country was transforming from a communism to a capitalistic regime, Russia changed its laws so that it could match with the new regime and the present law is more in association with the Western approach and is systematic in nature. The corruption rates of the country have been quite high in the past few years and in the index as measured in the year 2017, Russia ranked around 135 out of the 176 considered companies which is very poor and portrays an image about the lack of transparency in the economy. The Russian law of trade is the law which Woolworths would be required to take into consideration and as stated in the previous section, the country does not discriminate between he foreign investors and the national investors which thereby ensures ease of operations. With respect to the laws related to the to the retail grocery industry, the government has strict antimonopoly laws and other related Law on Trade.
The economic freedom in Russia is 58.2 and hence, it can be stated to be the 107th in the 2018 index. The higher score is a reason of the trade freedom and tax burden indicators on the chosen economy (Stone, 2013). The transition of the country from a centrally planned economy to a market based regime, has stalled the growth of the economy. Moreover, in relation to this, there have been various economic reforms.
The economy is being largely dominated by the state owned government and other inefficient institutions. The jurisdiction is corrupt and there are weak protection of the property rights. Trade is crucial and the value of imports as well as the exports equal to around 46% of the GDP (The World Bank., 2018). The tariff which is applied is 2.8% and the restrictions which are sectoral in nature tend to limit the foreign investments, however conducive the economy might seem.
The country primarily relies on its natural resources and moreover, the GDP of the country can be stated to be the 10th largest around the globe. Moreover, it has an upper middle income mixed economy and the domestic consumption has increased considerably. The average nominal salary in Russia is around $1090 per month and the unemployment rate is around 6%.
The Russian culture as a long history and the country is divided into various aspects of the economy like arts, folk dancing, philosophy, ballet, cinema, animations and politics. The culture of Russia has grown from East Slavas and was influenced by the tribes (Bettis, Gambardella, Helfat & Mitchell, 2014). The country ranks 7 in the National Brands Index and for this reason, various aspects of the culture are not known to many foreigners which then causes problems to them in various expansion aspects. The country is one of the global leaders in energy export and moreover, the country due to its limited approach has a mass level of potential unfulfilled (Hofstede, 2018). Hence, when conducting business in the country, the complex nature of the country needs to be considered effectively.
Political Analysis
Russia as observed scores relatively high in this domain as compared to Australia and hence, it can be stated to be highly centralized and the power is concentrated unlike in Australia.
The individualism in Russia is low as compared to that of Australia and hence, they are concerned about the society and family (Johnson, 2016).
The low score in Australia reflects that they value quality of life and success. Moreover, they understate their personal achievements, capacities as well as contributions.
They are not willing to take risks and have developed complex bureaucracies around the globe. Moreover, Australia is quite the opposite in this case (Barney, 2014).
With a high score, the country seems to have developed a pragmatic mindset.
The Russians are restrained in their actions and are mostly pessimism.
The business ethics in Russia has been improving and more local companies now seek to apply western standards and their ethical codes as well so that they can function easily in the corrupt environment and foster a sense of trustworthiness (Hill, Jones & Schilling, 2014). These codes which are formed by the different companies state various aspects regarding daily operations and employee life. Earlier, the processes were not clear but now the government has planned to increase the transparency and formed specific guidelines which may take a few years to deploy.
With respect to the corporate social responsibility, in Russia this is highly taken into consideration with the different charity projects and the businesses have begun to realize that they need to give it back to the society (Jarzabkowsk & Kaplan, 2015). The different companies in Russia carry out social responsibility in the form of helping various schools, hospitals and other funds. However, there exists certain restrictions to the development of the CSR in Russia is that the environment has been depleting. Moreover, there exists no support from the government’s side to encourage the companies to make them invest in CSR.
Conclusions and Recommendations
Therefore from the given analysis, it can be stated that Russia, which has been taken as a host country is quite unique in nature. Moreover, the economy has been recently developing and there have been various legislative reforms which allow the foreign businesses to make considerable investment in the long term. With respect to the given analysis, it can be stated that Woolworths in Australia can look ahead to investing in Russia because of its emergence as a global economic power. Although after the analysis of the economic and political environment, it can be understood that the overall scenario seems uncertain, but the consumer purchasing aspect of the economy has improved considerably and the customers look out for better products. Understanding of the economic culture will be a major barrier for Woolworths but in the overall context, it can be stated that Russia has obscured its static past and now is marching towards development. Hence, this development and growth pace needs to be captured by Woolworths and can be used as a source of its expansion and increase in market share.
References
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Wolterskluwer.com.., (2018). Top drivers for International expansion. [online] Available at :https://ct.wolterskluwer.com/sites/default/files/Top_Drivers_for_International_Expansion.pdf. Accessed on 06. Sept. 2018
Woolworths.com.au. (2018). Woolworths Supermarkets- Buy Groceries Online. Available at : https://woolworths.com.au. Accessed on 06. Sept. 2018
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