Political Challenges in Woolworths
Business environment is defined as the surroundings in which business operates their function, and these surroundings are formed from different factors that are classified as the external business factors and internal business factors. External business factors are divided into two parts that are micro-economic environment and the macro –economic environment. It is necessary for the business organization to scan both the factors in proper manner for framing the appropriate strategies (Campbell and Craig, 2005).
This paper mainly focuses on the macro-economic factors affecting the Woolworths and how these factors result in different challenges for the organization. Further, it discusses the strategies adopted by the organization in terms of dealing with these challenges. At the end, brief conclusion is stated which concludes all the relevant points of this paper.
This part of the assignment mainly focuses on the macro-economic business factors which impose their direct effects on the business operations of the organization. In case, organization fails to evaluate these factors then it causes huge loss and severe monetary penalties for the organization. Generally, Macro-business environment includes the PESTEL analysis which stands for the political challenges, economic challenges, social challenges, technical challenges, environmental challenges, and legal challenges. All these challenges and their relevant strategies used by the Woolworths are stated below-
Political challenges- political factors play important role in the designing of the strategies adopted by the organization. These factors generally include the government regulations and other political moves which hold the potential to affect the actions of the business. Woolworths face the issue because of the sudden changes occurred in the foreign policy regulations because of which organizations from foreign countries get easy access to the retail market of Australia. For resolving this issue, Woolworths focus on developing the competitive advantage for giving tough competition to its competitors (Byrne, Fernald & Reinsdorf, 2016).
Economic challenges- Economic factors of the organization play significant role in the Australian retail industry, because these factors directly affects the operations of the organization engaged in this industry. As stated, consumer purchasing power holds the direct connection with the economy of the country, and in case economy of the nation falls down then purchasing power of the consumers also goes down. This is considered as big challenge for the Woolworths. For dealing with this issue, organization focus on the pricing strategies, which means, they cut out the prices of the products for attracting their customers and ensure their loyalty. This organization ensures that they serve their best to their customers and also focus on creating the value for the customers. Woolworths open number of stores in different areas of the Australia, and these stores are opened after determining the convenience of the customers. Website is also developed by the Woolworths in terms of giving the online services to their customers such as online order and delivery services (Woolworths, 2011/ Gillespie, 2007).
Economic Challenges in Woolworths
By reducing the price of the products, organization focus on weakens their existing competitors and also new players of the market. Many strategies are adopted by the Woolworths in this context, and some of these strategies are described in this section-
- Woolworths give different new offers to their customers such as good discounts and deals, and it also initiate new programs in terms of attracting the new customers and retaining the old customers.
- New offers and programs initiated by Woolworths increase the loyalty of the customers and make them loyal towards the Woolworths stores in case of weaken purchasing power also.
- Woolworths further focus on enhancing its service quality and also decrease the challenges faced by the customers in different areas while shopping in the stores of Woolworths (Woolworths, 2016).
One more issues in terms of economic factors faced by the Woolworths is the impact of the economic factors on their capital budgeting decision, as these decisions are directly influenced by the exchange rates and interest rates. Capital budgeting decisions relates with the financial solvency of the organization, and any mistake in these decisions will lead the organization towards the huge loss. For resolving these issues, experts are appointed by the organization in terms of evaluating all the relevant economic factors before taking any decision (Low, 2017).
Social Challenges- Social factors are other factors which need to be considered by the organization, as it includes the behaviour of the consumers and the factors which affects the purchasing behaviour of the consumers. There are number of strategies which are developed by the organizations in resolving these factor and some of these strategies are stated below-
Food Sales Momentum- in the year 2017, Woolworths food sales shows the tremendous growth and, and this growth occurred because of the implementation of this plan for the complete year. In the 4th Quarter of the FY 2017, organization shows the tremendous growth of 6.4%. Positive response of the customers to this momentum is the biggest reason behind the success of this plan. This momentum shows the high customer transactions and directly affects the sales of the organization (Woolworths, 2017b). This program also initiated in the New Zealand, and because of this organization witnessed high growth in the sales of New Zealand stores, as this growth is marked up to 2.1%.
Stores Renewal program- this program is another program which is started by the Woolworths in context of increasing the customers experience within the stores while shopping their required items. Under this plan, organization focuses on the store renewal and redesigned almost 72 stores across the Australia. It must be noted that organization also open 91 new stores across the Australia (Woolworths, 2018).
Technological challenges- Updating of technology or digitalization is the issues, which is faced by the organization in context of the technological factors. Woolworths mainly ensure the technology updating in supply chain management, and in this context various functions related to the operation management are automated by the organization (Woolworths, 2015).
Social Challenges in Woolworths
Later, most modernized and digitalized supermarket of Australia is launched by this organization, as metro stores in the Australia are launched by the organization and all these stores involve most updated technology in terms of serving best to the customers such as system of innovative water loop refrigeration. This technology offers large number of reduction to the use of refrigerant because this new technology replaces the refrigerant from waters. This technology also helps the organization in unlocking the heat recovery potential of the organization, and this ensures the high level of efficiency in the operations conducted by the organization. It must be noted that, this technology is introduced in the lieu of 2020 targets which mainly aim to prevent the leak related to the refrigerant in the stores of Woolworths (Chantadavong, 2015.
Environmental Factors- these are considered as biggest challenge for the modern business organizations, as it is expected from the organization that they focus on the environment protection while conducting their business operations, and no harm cause to the environment. Both society and government impose obligations on the organizations to take such actions which prevent the harm caused to the environment. As number of laws are passed by the governments in this context, and in case organization failed to comply with these laws then severe penalties are imposed on the organizations. In context of dealing with this challenge, Woolworths initiated number of programs and all these programs ensure the protection of environment. Woolworths further updated their technology in terms of dealing with the supply management issues which cause harm to the environment (Woolworths, 2017a/ Cheverton, 2004).
Legal factors- These types of factors mainly includes the laws and regulations introduced by the organisations in terms of the business operations conducted by the organizations. Some additional responsibilities are also imposed by the government on the organizations such as CSR, environment protection, social responsibilities. As government introduced number of legal regulations for the Australian retail industry and all the organization which conduct their business within this industry is obliged to comply with these legal regulations. Therefore, it is necessary for the Woolworths to complied with these legal regulations for avoiding the severe monetary penalties and other types of punishments for the organization.
Conclusion
External business factors are divided into two parts that are micro-economic environment and the macro –economic environment. It is necessary for the business organization to scan both the factors in proper manner for framing the appropriate strategies. This part of the assignment mainly focuses on the macro-economic business factors which impose their direct effects on the business operations of the organization. In case, organization fails to evaluate these factors then it cause huge loss and severe monetary penalties for the organization. There are number of strategies which are developed by the organizations in resolving these factors. Macro-business environment includes the PESTEL analysis which stands for the political challenges, economic challenges, social challenges, technical challenges, environmental challenges, and legal challenges.
References
Campbell, D. and Craig, T. (2005). Organizations andthe Business Environment, 2nd edn, Butterworth-Heinemann, Oxford.
Chantadavong, A. (2015. Woolworths eyes new technology for next phase of growth. Retrieved from https://www.zdnet.com/article/woolworths-eyes-new-technology-for-next-phase-of-growth/.
Cheverton, P. (2004). Key Marketing Skills, (2nd edn), Kogan Page Ltd., London.
Gillespie, A. (2007). Foundations of Economics, Oxford University Press, Oxford.
Low, C. (2017). Supermarkets to prosper from softening economy. Retrieved from https://www.smh.com.au/business/companies/supermarkets-to-prosper-from-softening-economy-20170330-gv9u9n.html.
Woolworths, (2011). Economic Structure and Performance of the Australian Retail Industry. Retrieved from https://www.pc.gov.au/inquiries/completed/retail-industry/submissions/sub110.pdf.
Woolworths, (2015). Annual Report 2015. Retrieved from
Woolworths, (2016). Annual Report 2016. Retrieved from https://www.woolworthsgroup.com.au/icms_docs/188795_annual-report-2017.pdf.
Woolworths, (2017a). Annual Report 2017. Retrieved from https://www.woolworthsgroup.com.au/icms_docs/185865_annual-report-2016.pdf.
Woolworths, (2017b). Woolworths launches new refrigerant technology. Retrieved from https://crs.woolworthsgroup.com.au/page/news/planet/woolworths-launches-new-refrigerant-technology/.
Woolworths, (2018). Annual Report 2018. Retrieved from https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf.
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