Woolworths in Australia
Question:
Discuss about the Macro Environment Of United Kingdom.
This report will analyze the macro environment of United Kingdom to identify the issues that Woolworths might face while making an expansion into the UK market. The report will use a PESTLE analysis as a tool to analyze all the aspects of the macro environment. Woolworths is the market leader in Australia and is the one of the major Supermarkets. However, the organization has not been able to expand their business successfully in the United Kingdom market. United Kingdom is one of the strongest economies in the world where there are presence of large number of supermarket chains. The retail industry in the United Kingdom market has become highly saturated due to the presence of large number of global companies in the market. Therefore, in order to make a successful entry into the United Kingdom market it is essential for Woolworths to analyze the market environment and develop a suitable strategy.
Thee retail industry in Australia is highly competitive due to the presence of large number of global companies and growth of the retail industry. The largest super market chain in Australia is Woolworths both in terms of market share and revenue generation streams. Woolworths has been operating almost 1000 stores in all parts of Australia and consists of almost 120,000 team members across support offices, distribution centres and stores to provide customized service to the consumers in the market. The organization aims to work closely with the farmers and the growers to ensure that best products are made available to the consumers. Woolworths’ sources 100% fresh meat and 96% fresh vegetables and fruits by being constantly involved with the growers and farmers in Australia. The organization has been using innovation to identify the simplest ways for the consumers to shop their products (Woolworths, 2018). The organization has developed their own online website and mobile application which enables the consumers to access the products from anywhere and they can get the best quality of service at every touch point. Woolworth have increased the number of stores to more than 3000 where 205,000 employees serve 29 million consumers every week in an attempt to deliver the best in quality, value and convenience in products from the market. The organizational culture in Woolworths states that doing the right thing is the approach of the organization towards corporate social responsibility. Therefore, Woolworth uses sustainable measures while operating in the market so that their impacts on the corresponding environment, communities and economies are positive.
United Kingdom is one of the superpowers in the world and has been one of the strongest economy in Europe. The country has been growing rapidly until their decision of making the exit from the European Union. United Kingdom consist of England, Scotland, Wales and Northern Ireland. The economic growth of the country slowed which made UK as the slowest growing nation in the G7 which shows the degradation of the economy as it was one of the fastest growing country in G7 only second to Germany. The recovery of the country from the recession phase to the prerecession phase is slower than ever before (Koenig, 2015). Globalization has increased migration of population into the country which is an issue for the country as increase in diversity and availability of cheap labours increases the unemployment rate in the country. The retail industry in the United Kingdom consist of major players in the global market and the market is highly saturated. This is the reason that no company has clear competitive advantage in the industry so most of the companies use innovative strategies to develop new products and increase their short term sales to generate more revenue.
Overview of United Kingdom Economy
The macro environment analysis will evaluate the external environment of Woolworths and will consist of factors such as political, economic, social, technological, environmental and legal in respect to United Kingdom.
United Kingdom is a monarchy at the constitutional level and a democracy at the parliament level. There are four countries in the United Kingdom which are England, Wales, Northern Ireland and Scotland. The chief of state is the Queen and majority of her role in the country is ceremonial but exercises her rights such as right to advice, right to warn and right to be consulted. The prime minister of the country is appointed by the queen after the ending of the legislative elections (Miller & Rose, 2017). Prime minister acts as the head and conducts all the day to day affairs including development of laws in the country. The political environment of the country is stable which presents opportunities for the companies within the market and for those who wants to make an entry into the market. The public in the country has a large influence on the inner workings. The government is proactive and well developed to facilitate the growth of the economy. However, BREXIT had a deep impact on the political environment as political parties had varied opinion on BREXIT which divided the organization into their political environment. This has resulted in the decline and redistribution of the UKIP electoral votes which has resulted in the weakening of the political stability of the country (Yilmaz, 2016).
This will be problematic for Woolworths as political stability is essential for the company to enter the market. The changes in the political environment will have direct impact on the operations of the company. This will also have an impact on the rules and regulation in the market and changes in rules and regulation in the industry will have a direct impact on the company’s activities.
The legal environment in the United Kingdom has been effectively developed to facilitate smooth operation of trade and increase the market attractiveness. The government has been instrumental in developing law to protect the consumers and corresponding environment. The taxation laws and changes in the tax policies by the government will have an impact on the prices set by the companies to ensure competitive pricing. The retail industry is highly affected by the food, employment, environmental, grocery safety, health issues, competitor regulations and financial services (Bagley, 2015). The retail industry will have to strictly follow the rules and regulations regarding hygiene and maintain the quality standards prescribed by the Food Standard Agency. The Food Safety Act has been developed to guide the retailer to develop food that is consumable. These regulations have set rules about quality, distribution, transportation, maintenance, selling and advertising of food.
United Kingdom has developed the Food Hygiene regulations and HACCP (hazard analysis critical control point) which are standard protocols that will have to be followed by the retail companies (Psomas & Kafetzopoulos, 2015). Therefore, the companies not following these regulations will be heavily fined by the government and United Kingdom is one of the countries having strict regulations and has adopted their sets of regulations to protect the consumers and the domestic companies. The Office of fair trading and Competition commission are the two bodies monitoring the performances of the companies and whether the companies are complying to the prescribed laws. These regulatory bodies have been developed to maintain the balance in the market by intervening at the times of oligopoly, cartel phenomena and monopoly. The governing bodies also have to make sure that they maintain fair trading between the suppliers and the competitors in the country. This would also protect the interest of the farmers and breeders as they are major contributors to the products available in the supermarket industry. The regulations in the country are very strict and there have instances where various companies in the retail industry have been fined heavily for using anti competitive measures. The government forces the retail companies to comply to the rules and regulations so that the price of the products can be reduced slightly to benefit the consumers.
PESTLE Analysis of United Kingdom
The environmental law in United Kingdom is rigid when compared to the laws followed by European Union as they have additional laws to protect the environment. The retail companies will have to comply with the planning law before making expansions. The retail industry in United Kingdom is one of the largest employers of workers so the labour laws and employment rights are regulations which the companies have to follow (Welford, 2016). Moreover, the workplace health and safety standards are key laws applicable to operation of electrical equipments, machineries and transportation of goods. The changes in the laws increase the complexity of the sector as there may be increase in labour cost and reduction in profit margin due to protection of rights of the workers. Moreover, there are large numbers of supermarkets providing credit cards and loans to the consumers and changes in the Financial Services Authority will have an effect on the profitability of the firms. Woolworth will be subjected to all these regulations and they will have to abide by these strict regulations in the market. This will initially be tough for the company to gain competitive advantage but the organization will have to focus on maintaining their sustainability initially.
United Kingdom has been one of the fastest growing economies among G7 countries only being second to Germany. However, BREXIT has affected the economy of the country in severe way and the growth of the economy is the last among the G7 nations. This shows that economic growth of the country has slowed down in the last year. The recovery levels of the country have also been slow and the country took a long time to reach to the pre recession levels. The inflation rate in the country is increasing due to the depreciation of sterling. This will also decrease the disposable income of the general population due to the reduction in the household incomes and spending of the consumers. These key economic drivers have been affected which has slowed the growth of the economy in the year of 2017 (Jackson et al., 2018). This will result in the delay of the investment from different companies in the market. This will affect Woolworths’ plan of expansion in the market as decrease in the consumers disposable income will definitely affect the revenue generation. United Kingdom has created free market which will facilitate Woolworth to enter easily in the market. However, there are large populations that are migrating into the United Kingdom and this will present an opportunity for a cheap labour (Jonson & Wymer, 2017). This could have a positive impact for Woolworths as they can acquire cheap labours. The increase in the unemployment rate will also facilitate the organization to hire employees at lower prices. This will reduce the human resource cost for the company and agricultural industry is one of the major contributors to the productivity and Woolworths can easily derive fresh products from the market at lower cost due to the economic slowdown.
United Kingdom has a diverse culture due to the increase in the migration of population from different parts of the world. Social class is very much prevents in the society and the population are identified based on their social class. There are complex meanings attached to social class where economic, political and social dimension defines the class they belong (Muldrew, 2016). The social standards in the country are high which has provided better circumstances in the society. This has lead to high standard of living in the country and migration is the reason for availability of cheap labours. The dependency ratio in the country is high and increasing at a rapid rate which shows that a large number of populations are dependent on the rest of the population. This has increased the number of national health centres in the country resulted in public free services. These people are not contributing to the GDP of the country and people will require higher disposal income to take care of the dependents. The migration of different population having different backgrounds has resulted in social unrest in the country. This has increased the unemployment ratio in the country and the general population are protesting against migration of people from different ethnicity. The companies are hiring these migrants as cheap labour and this is a concern for the citizens with the decrease in job opportunities. The consumption and disposable income of the citizens vary with the age. The population belonging to the higher age group have a low consumption level as their disposable income is low and the disposable income of the lower age groups are high which results in the increase in their consumption level. Therefore, the population having l3oer disposable income will prefer making their purchases from the discounters in the retail industry while the population with higher income will prefer making their purchases from the high end retailers having higher quality of products. The use of digital medium has increased significantly where the shopper prefers to shop from online stores.
Political environment
Therefore, there has been sudden shift in the purchasing behaviour of the consumer in the market. The number of online users has increased and people tend to purchase products at the online platform due to convenience. The obesity level of the general population is high, which is the reason that companies are promoting health initiatives to inspire people to live a healthy life. Woolworths are presented with positives and negatives in the social environment where it will tough for the company due to the high dependency ratio (Ediev, Sanderson & Scherbov, 2016). On the other hand, the high standard of living and the diverse population is a positive for the company. The increase in the use of online media for purchase is also another factor which can be used by the organization as a strategy for gaining competitive advantage. Moreover, as the diversity of the population and culture have increased significantly which means that variety of products are required as different cultures have different tastes and choices.
The major ethical aspects of business are integrity and trust. These factors affect the success and functioning of the organizations. Integrity is the process of conducting business honestly by following all the rules, regulations and standards set by the regulatory bodies. This will also consist of treating the consumers impartially and providing the consumers with value for money. The United Kingdom retail companies have been limelight for their malpractices where the providing the consumers with fir trade products is absolutely necessary. Even though few companies are following these methods they are many retailers not following the fair trade policies. The consumers in the United Kingdom have morally conscious about the products they buy and their affect on the corresponding environment (Jones et al., 2017). They do not want to be a part of a bigger chain contributing to the harm to the environment. The carbon footprints of the retailers are due to the leakage of gases such as Hydro fluorocarbon which is the one of the green houses and contributes to depletion of the ozone layer. The industry giants in the industry have been criticized badly for their practices and companies like ALDI, Tesco, Asda and Morrison received heavy criticism for purchasing their seafood from the CP Foods who are the Thai industry giants. CP Foods have been accused on buying fish meal from the finishing boats that are slave manned. Similar scandals such as Horse shoe scandal and chicken campylobacter contamination. Therefore, the companies have been under the scrutiny for quality issues which is the main opportunity for Woolworths. Woolworths can make an expansion by focusing on their fresh food strategy and quality of their food.
United Kingdom being one of the developed countries in the world has accessed to latest technology and technologically the country has progressed a lot. The country possesses high quality innovation skills which has been used various organizations to gain competitive advantage in the global market. The country has gained expertise in information technology and science with increase in internal competition. This is the factor for stimulating growth within the country. The technological development has operation of the retail industry in the United Kingdom due to the change in the buying behaviour of the consumers (Rai & Kumar, 2015). The companies in the retail industry are able to reduce their cost of operation to provide the consumers with products at competitive prices. The use of online medium is a common behavioural change among the consumers in the market and the grocery retail companies have been using this medium to promote their products as the cost of digital market is very less when compared to the traditional form of marketing. Therefore, this has lead to the increase in intense competition among the companies in the market. The technological growth has been crucial in providing benefits to both consumers and companies. This has reduced the labour cost in the industry due to use of self checkout machines. This has also reduced the time taken by the consumers and the cost of shopping (Lee & Yoon, 2015). Moreover, this has also increased the basket size for the consumers by providing them with lucrative offers such as discounts and rewards.
The use of technology to develop innovative processes is not limited to one area of the industry and technology has been used in all the aspects of the processes. Technology has been used in the distribution and logistics to develop energy efficient devices and reduction in emission of carbon. This shows that the use of technology in improving the organizational ability is a common in the retail industry in United Kingdom. Woolworths have been focusing using technological factor in gaining competitive advantage in the Australian market. They can make use of the Technological availability to maintain their sustainability in United Kingdom.
Conclusion
The report shows that there are positives and negatives in the macro environment of United Kingdom. Woolworths have the opportunity of capitalization on the positives and developed strategies to mitigate the negative impacts. There are major controversies regarding the quality of the products supplied by the organization in the retail industry and as Woolworths has been known for their quality of the product then can use this to their advantage while making their expansion into United Kingdom.
References
Bagley, C. E. (2015). Managers and the legal environment: Strategies for the 21st century. Cengage Learning.
Ediev, D., Sanderson, W., & Scherbov, S. (2016). The formal demography of prospective age: The relationship between the old-age dependency ratio and the prospective old-age dependency ratio.
Jackson, G., Tetlow, G., Bernard, S., & Pearson, T. (2018). 44 charts that explain the UK economy. UK economy: GDP growth, interest rates and inflation statistics. Retrieved 17 April 2018, from https://ig.ft.com/sites/numbers/economies/uk
Jones, P., Bown, R., Hillier, D., & Comfort, D. (2017). Sustainability, Materiality and Independent External Assurance: An Exploratory Study of the UK’s Leading Food Retailers. Sustainability challenges in the Agrofood sector, 227-254.
Jonson, P. D., & Wymer, C. R. (2017). A Macro-Economic Policy Model of the United Kingdom 1855-2014 with Investment, Share Prices and’Animal Spirits’.
Koenig, M. (2015). Incorporating Muslim migrants in Western nation states—a comparison of the United Kingdom, France, and Germany. In After Integration (pp. 43-58). Springer VS, Wiesbaden.
Lee, J. J., & Yoon, H. (2015). A comparative study of technological learning and organizational capability development in complex products systems: Distinctive paths of three latecomers in military aircraft industry. Research Policy, 44(7), 1296-1313.
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Muldrew, C. (2016). The economy of obligation: the culture of credit and social relations in early modern England. Springer.
Psomas, E. L., & Kafetzopoulos, D. P. (2015). HACCP effectiveness between ISO 22000 certified and non-certified dairy companies. Food Control, 53, 134-139.
Rai, A. K., & Kumar, A. (2015). Continuous measurement of suspended sediment concentration: Technological advancement and future outlook. Measurement, 76, 209-227.
Welford, R. (2016). Corporate environmental management 1: Systems and strategies. Routledge.
Woolworths. (2018). Woolworths Supermarkets – Woolworths Group. Woolworthsgroup.com.au. Retrieved 17 April 2018, from https://www.woolworthsgroup.com.au/page/about-us/our-brands/supermarkets/Woolworths
Yilmaz, I. (2016). Muslim laws, politics and society in modern nation states: Dynamic legal pluralisms in England, Turkey and Pakistan. Routledge.
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