Analysis Of Macro Environmental Factors Of Indian Supermarket Industry: Expansion Of Woolworth’s Business

Company analysis: Woolworths

This report argues about the company called Woolworth. The company needs to expand its businesses in the country of India. This report focuses on the analysis of the macro environmental factors of India and the helps in recommending the company about the strategies required to establish the business in India. These strategies are required to be adopted in order to make the decision over marketing, HR and various other fields

Company analysis: Woolworths

Woolworth is the company that deals with supermarket industry in Australia and New Zealand. The company has its operations in other industries also such as fuel industry but the major source of income for the Company is supermarket industry. As far as the industry is concerned, the supermarket industry in Australia is very much competitive and Woolworth is one of the leading companies in the same. The company along with its closest competitors Coles acquires around 80% of the total market of supermarket industry in Australia. It results in duopoly in the market by Woolworth and Coles (Luo & Tung, 2007).

The major products that the company sells are grocery products such as fruits, vegetables, packaged food, liquor etc. Woolworth has started its operations in September 1924 but become famous in December 1924 when the company has expanded the business with opening of more stores. The company has expanded its business by acquisition and mergers and the biggest amalgamation that occurred was of Woolworth and Safeway. The company has positioned itself as the company that serves the market with fresh products and the slogan is “Fresh Food People”.

International expansion of business:

It is important for the company to expand its business in more countries as it is still limited to New Zealand and Australia. There are many countries that have the potential market available in order to expand the business of Woolworth (Sakarya, Eckman & Hyllegard, 2007). This is also required in order to compete with the worldwide supermarket chains like Wal-Mart. India is identified as the potential market for the company as it is the country which is developing and can provide a wide scope for the company to grow. Further analysis will help in understanding the aspects:

MACRO analysis of Indian supermarket industry:

Market size of Indian supermarket industry: 

Indian supermarket industry is also very competitive. The growth rate of the industry in India is around 15% and it is expected that the industry business will touch the benchmark of Rs. 47 trillion in the year 2017 (Franz, 2010). The data clearly suggests that how big the industry is and has immense potential for the companies to invest in India in the industry of supermarket.

PESTLE analysis helps in analyzing the factors that affect the industry:

Political factors: As far as the political framework of the country is concerned, it has been analyzed that the nature of political environment is very stable and the country follows the concept of democracy that allows the people of the country to select their leader by fair voting processes (Hutzschenreuter, Pedersen & Volberda, 2007). There are many political parties that participates and fight to be the leading party. As far as the globalization and international business is concerned, it has been analyzed that the government supports the international companies to invest in India. This is because the company is developing and gets benefits from FDI and foreign revenue.

International expansion of business

Economic factors: India is the country with stable economy and the country is still developing so provides a market with lots of scope (Lapoule, 2010). The reforms made by the government in order to liberalize the foreign trade helped the foreign companies to enter India easily.

Social factors: India is the place with diversity in culture and the beliefs of the people. This enables the companies to target the market with differences in the products according to the culture. This acts the challenge for the foreign firms to establish the market in India (Townsend, Yeniyurt & Talay, 2009).

Technological factors: In case of technology, the country is a great platform to innovate the technological use in shopping as well as in products. This is because the inclination of the country towards technology helps the companies to attract the market.

Legal: There are many laws and legal frameworks that need to be considered before entering the market such as Commodities Act, Consumer protection Act etc.

Environmental factors: Due to increase in population, the companies finds India as the great place to invest but in terms of pollution and the environment it is difficult to set up industries as it will again ruin the environment of the country (Sengupta, 2008).

Further country analysis:

Competitiveness: 

As far as the overall competitiveness of the country is considered, it has been analyzed that the country is very much competitive in nature. The repot of 12 pillars of competitiveness suggests that it has improves its world rankings in many of the elements but the rate of corruption and similar factors are acting as obstacles for the country to grow (Pritchard, Gracy, & Godwin, 2010).

The above chart suggests that India has ranked up in all the factors except the factor of financial market development.  But according to the overall rating, India is a very competitive country.

Gross fixed capital formation of India:

Gross fixed capita formation can be defined as the net increase in the physical assets of the country without its consumption (Javalgi & Todd, 2011). As far as India is considered, the following graph provides the information regarding the same:

This graph suggests that in January 2016, India has the highest Gross Fixed Capital Formation but it has reduced in first quarter of 2017 to 8796.63. Analysis of this element suggests that India is quite good in spending over the infrastructure and buildings, roads, equipment purchases etc.

CAGE framework India:

Cultural differences: As far as the cultural difference between Australia and India is considered, it has been analyzed that India is a country with diverse culture same as Australian Indians have that feeling of division in them according to caste while Australian dies not have that feeling to that extent. Language is also one of the elements of cultural difference (Gaur & Kumar, 2009). Indian has many languages and dialects and in Australia 80% of the people speaks English.

Administration distances: India is the country with democratic government. The government interferes in the processes of private organizations in India just what happens in Australia as well (Elango & Pattnaik, 2007). As far as the supermarket industry is concerned, it has been analyzed that the code of conduct is formulated by the Australian council in order to regulate the supermarket industry.

MACRO analysis of Indian supermarket industry

Geographic distance: India is one of the largest countries in the world having a large amount of population after China. The land area of the company is around 2973,193 sq. Km and the water are of the country is 121,262 km. The country is surrounded with water bodies from there of its sides and shares its border with Pakistan, Bangladesh, Bhutan, China, etc. This country’s coast line is 4349 miles that is around 7000 km (Cateora, 2008). The country is very much approachable with airways, waterways and roadways; the country also has great railway connectivity that allow the companies to transport the products very easily. The connectivity from airways help the foreign countries to export to India and import from India.

Economic distance: In terms of revenue, Australia earns around $504.70 billion that is far more than Indian revenue that is just $172.10 billion. The overall Australian economy is experiencing growth day by day while on the other hand the Indian economic growth is very slow and steady. But the country has deregulated its policies of liberalization so as to welcome foreign trade in terms of earning revenue. This makes the country a potential market for the foreign investors.

Financial trade in India:

As far as the financial trade in India is concerned, there are many methods that can be used to make the payments such as Letter of credit, open account, advance payment, sight bill, since bill etc. It depends on the dealers of the business that which mode is used by them and it also depends on the financial pattern of the company as well as the type of products (Dunning & Lundan, 2008).

Recommendations:

Company goals in India:

Woolworth is the company that has its operations in supermarket industry in Australia. The company needs to expand its business in India and thus have some goals:

• Opening stores in metro cities of India
• Providing products that are related to Indian culture along with western touch
• Competing with the players
• Acquiring large market.

Competitive strategy:

The competitive strategy can be defined as the strategy that has been used to be unique among the competitors or to attain the competitive advantage. For Woolworth, it has been recommended that the company should use the differentiation strategy in order to cater the metro cities market in India. This is because the people in metro cities can easily get attracted by the western products that are from Australia. This differentiation makes the company unique from other companies.

International strategy: 

The international strategy that needs to be used in the company is multi domestic strategy. In this strategy, the products of the company are slightly tailored according to the requirements of the local people (Ghemawat, 2013). As India is the country with diverse culture so it needs to be considered at the time of releasing the products. The company can also release products in different range so that customers can buy whichever variation they want.

Entry strategy:

Entry strategy is dependent on many factors such as the availability of the resources, market, competitiveness etc. The recommended strategy for Woolworth in entering India is the joint venture. This is best approach to enter the Indian market (Gupta, Govindarajan & Wang, 2008). The following are the reasons why this is recommended as the best approach.

Further country analysis

Established market: AS the supermarket industry is Australia is very much competitive so, it is required for the company to enter with safe method. Joint venture is the method that helps the company to have an established market already. This helps the company to take less time in getting aware by the people.

Sharing liabilities: As India is the country with not so stable financial condition so, it is important for the foreign firm to be safe and take the step in which the liabilities and the losses can be shared. Joint venture is the strategy that provides the companies with the same facility.

Marketing strategy:

Distribution channels: As far as India is considered, it has been analyzed that the company needs to consider various legal frameworks in order to establish their market in India (Ungson & Wong, 2014). Thus, it is required for the foreign firm to involve the mediator that operates the things from them. It is requires as the local mediator understands the things better. The three level strategy needs to be applied or exceuted for distrubtion so as to maintain the balance. In this strategy there mediatorsa such as wholesalers, agents and distributors are involved.

Pricing strategy: In terms of deciding the price, there are major issues that can come in the way. The most important issue is whether to keep the prices as it is or make the modifications. Making modifications in the products is required as the Indian customers cannot buy so much of high priced products (Cartwright & Cooper, 2012). The company needs to make the price competitive according to other supermarket such as reliance and big bazar. This helps the company to cater the market with the same price as its competitors.

Promotional strategy: There ream nay factors that affect the promotional strategy of the firm. In Australia, the people does not required to be pitched again and again for buying the products as the people are loyal to the brands. Woolworth already has a brand name there so customers automatically come to buy the products in the store, but in India it is challenging to promote the products for the company (Khan, 2011). Thus, association with some other brand is helpful. Along with this the company needs to promote the products with campaigning that should be online and offline both.

Production strategy:

As far as the supply chain and the production strategy of Woolworth in India is considered, it has been analyzed that the country has a good transportation system. This depicts that the supply chain can be managed easily (Hattersley, Isaacs & Burch, 2013). It is required for the company to export some of its social products from Australia as packages and the perishable goods need to be produced in India only by collaborating with some of the farms and agents that can help the company to maintain such standards as well.

As the entry mode that has been recommended is the joint venture so that company has the opportunity to take help from the alliance company that is local in nature (Johannesson, 2011). The company needs to implement their factories and have to produce some of the products here in India because the company is using the multi domestic strategy and this requires the firm to tailor the products according o the local customers.

Issues in international HRM:

Expatriate issues: Expatriate can be defined as the process in which a person from a host country settles down in the foreign country for some time in order to handle the processes of the firm there. Expatriates from Australia need to be travelled to India in order to train the staff of India so that the consistency of the company’s processes can be maintained.

Training and hiring issues: It is very difficult for the firm to train and hire the people according to the qualifications of the foreign firm (Lehu, 2007). Thus Woolworth needs to hire the people that can help them in Indian market rather than hiring the people from outside India.

Issues in knowledge sharing: It is difficult to share knowledge of the foreign firm. As discussed that Australia has very different culture from India so the mindset of the people in Australia is very different from that of India (Mun & Yazdanifard, 2012). Thus it makes it challenging for Woolworth parent country mangers to share the knowledge with the Indian staff.

Recommendations: 

Expatriate training: It is required for the company to train the expatriate properly with the Indian culture and the mindset so that he or she can easily relate with the Indian people.

Removal of communication barriers: Several communication barriers need to be removed by implementing some of the technological tools such as video conferencing for regular meetings etc.

References:

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