Identification of two countries selected for market entry
The international business or globalization refers to the business organizations like Woolworths, Australia shifting towards a more incorporated and independent economy while managing business properly. The company has tried to enter the new markets to attract people from the global market segments, furthermore overcome the falling trade barriers and facilitate the selling of products and services globally (Woolworths.com.au 2018). The needs and preferences of the consumers are converged on the global norms, rules and laws, which has helped in promoting various trends related to the delivery of products and making those available worldwide.
Woolworths Supermarkets is one of the major retail supermarket chains in Australia that accounts for more than 80 percent of the Australian market. The company employs over 111000 employees and has even formed a near duopoly of supermarket chain in Australia while working in partnership with Coles. The company is present at various locations all over the world and has a revenue of 3655.93 crores AUD, as it was in the year 2017.
Woolworths has selected two countries for entry into the market, which are Germany and China within the European and Asian continents correspondingly. Both these countries have been selected as market entry because of the good market conditions that can be beneficial for the Australian retail giant to start its business and furthermore control the macro environment and geo-political forces with much ease and effectiveness (Scarborough 2016).
Germany is considered as one of the leading political powers in Europe and has been a major technological leader, which has made the country the fourth largest economy in the while world. The standards of living and social security are quite high, because of which, the political conditions are quite stable. Being a democratic republic, the political systems function properly and the Constitutions have laid down the fundamental structure of the Government. The value systems are followed by the nation, which has been the major source of authority and power (Piekkari, Welch and Welch 2014). The independent federal judiciary could affect the administrative operations, financial aspects, labor conditions and social matters to ensure uniform interpretation of constitutional provision and even protect the fundamental rights of people who would come to work in the new brand to be opened by Woolworths (Ferraro and Briody 2013). The political factors are influenced by application of sales tax, service and income tax by the Government, which can enable privatization too.
Analysis of macro environmental and geo-political forces
The fifth largest economy and a major exporter of vehicles, machineries, equipments and chemicals, Germany has been benefited by modernization and thus the unemployment rate is quite low. The growth average is considerably low and one of the major challenges faced could be the financial recession. The service sector contributes 70 percent of the GDP and most of the products are engineering products, which can allow the retail giant in Australia to enter the market and make wide range of retail and grocery items available for the customers (Shenkar, Luo and Chi 2013).
The multicultural environment of Germany with the diversified culture, there are enough scopes for Woolworths to establish itself within the foreign marketplace. The organizational structures are flexible, due to which educational and working opportunities are immense, which can create convenience for the retail company to manage proper distribution of income among the workers, furthermore experience growth and development in the future too (Cavusgil et al. 2014).
The advancement in technological aspects has led to the production of numerous engineering products and services at Germany. The technological benefits obtained are reduction of costs of operations and management of traditional projects. The use of information technology system could further assist the new business to maintain a proper structure, develop and integrate the business processes with the implementation of technology for successful international business expansion. Germany’s position within the EU has facilitated the use of advanced technologies, which can also allow Woolworths to conduct research and development activities to assess the market conditions before making entry to those for attracting the customers (Papadopoulos and Heslop 2014).
There are certain laws that prevent discrimination and have affected the structures of wages paid to the workers. The environmental concerns are considered by keeping the environment clean and this has kept the pollution level under control, which has created a positive environmental impact. Woolworths need to consider several environmental factors and ensure that the pollution level is reduced and the harmful gases’ emissions are stopped largely through sustainable management activities (Preston and Windsor 2013).
The Government laws and regulations impact the way the business operates and the Government has focused on e-commerce through management of legislations related to the protection of intellectual property rights and tax. There are no other laws and rules regarding consumer rights, validation of electronic contracts and digital signature recognition.
The GDP growth rate has been good for China’s economy and with the increase, it will soon move beyond the GDP in US. The major factors contributing to the higher GDP are export businesses, urban growth, abundant skilled labor, though the cost of labor is considerably lower. The growth rate is effective though it can affect the businesses that are willing to make an entry into the marketplace due to high price of property and higher rate of inflation (Reiche et al. 2016).
Political factors
The growth in population and distribution of age and income fluctuates from time to time, which has affected the social and cultural trends. The size of family and social behaviors also affect the ways decisions are made and these are based on consumers’ lifestyles, behaviors, culture, etc. The population in China has a high literacy rate, which has made them tech savvy and there is huge scope for Woolworths to start its e-commerce business here to draw in potential customers (Hooper 2016). The customers will also be provided with physical stores opened by Woolworths to avoid the perceived risks, furthermore influence their buying behaviors and create positive mindset among them too.
The technological advancements are immense and it has influenced development of new products, innovative distribution mechanisms, mobile telecommunications, production technology and use of intranet and extranet. One of the major problems though is the lack of maintenance of a proper online payment system. Woolworths can overcome this myth by presenting the customers with ease of buying the products by visiting various stores opened at different locations.
The increased awareness of protecting environment by focusing on lesser pollution and preventing environmental damage could also make the new business aware of the promotion of e-commerce business through sustainable approaches (Brannen, Piekkari and Tietze 2017). This would reduce the pollution level and keep the environment safe through maintenance of environmental laws and regulations implemented by the Government. The Disability Discrimination and Fair Wages Act should be maintained by Woolworths to ensure that the workplace remains free from discrimination.
The bureaucratic procedures and policies and laws, rules and regulations implemented by the Government in Germany could create certain issues and complexities for the companies who want to enter the market and often need attention by the exporters in United States. The safety standards are quite complex and some discriminatory policies might complicate things and prevent the organization to gain access to the market. Woolworths must be aware of the standards applied to the products, furthermore ensure proper testing and certification to manage the import and export activities properly (Luthans and Doh 2018). The Import tariff or TARIC determines the license that is required for the specific product, furthermore obtain information about the licenses and applicable restrictions that shall be considered while making a market entry. An Authorized Economic operator or AEO program was implemented to simplify the rules and customs legislations, which could ensure maintenance of safety and security while entering the foreign markets for Woolworths, Australia. The Consumer Protection Act ensured protecting the consumers by preventing misguidance and making them know about the kinds of products and services to be delivered (Picciotto and Mayne 2016).
Economic factors
The trade surplus was to be reduced by China, which should result in stopping the flagship industrial policy, furthermore improve its intellectual property system. The business and trade policies have often motivated the public authorities to apply restrictions on the exports and increase the scopes for managing global business. According to China’s export tax policies, the Government revenue would increase, which could result in growth of the retail industry and at the same time, prevents conflict with the foreign trading partners (Cano-Kollmann et al. 2016). This would assist Woolworths in overcoming the trade barriers as well as manage successful functioning by following the trade and business policies properly and setting the right prices for the products too. The foreign trade accounts a good percentage of the GDP of both the countries, especially China. Due to this, the import and export activities are managed by the Ministry of Commerce, which has also opened new ways for the company to become sustainable in the global marketplace (Ho 2014). The combined foreign investments including the earnings from capital and reinvestments along with the inflow of equity is huge and thus with the agreement made by World Trade Organization on the management of trade, Australian retail company, i.e., Woolworths should manage the import and export activities much more easily. With the customs’ clearance and impose of Taxation Bill, the value added tax and costs would be implemented properly, thereby create convenience for the company to manage global business successfully. It could be thus believed that market entry in China would be more effective for Woolworths than entering the foreign markets of Germany (Haley and Haley 2013).
Due to the shift from subsidiaries to policies concerned with the insurance, there could be political issues and even increase the prices of products, thus create difficulties during global business expansion. The lower rate of tariffs and risks of bargaining might arise, which could also disrupt the business functions and deteriorate organizational performance. The policies could create barriers for investments made due to the EU laws and rules. The application of environmental and safety standards would also complicate things and create issues while accessing the market for various products (Woolworths.com.au 2018).
For the companies in Australia, the Chinese market could be attractive for the retail sector and this would promote export strategies though the costs of doing business would be quite high. China, with its focus on environment has opened up new opportunities for Woolworths to become sustainable and at the same time reduce the negative environment impacts largely. The agricultural products represent positive export prospects for the products from Australia and Woolworths, being a major supermarket chain, can make wide range of products available in the marketplace for access by the costumers. To make a market entry, Woolworths needs to manage experienced representation as a major asset to implement the right marketing strategies and create a strong brand presence within the competitive business environment (Scarborough 2016). The opportunities should be grabbed by the company and setting the right prices would further influence the buying behaviors of people. The risks and opportunities are considered by the company to ensure that the economic risks are overcome and the rate of inflation, fiscal discipline are kept under control for ensuring continuity of business and monitor the rates of interest and exchange too for setting the right prices and keep customers satisfied (Ferraro and Briody 2013).
Social factors
Conclusion
The report was prepared to discuss about the international and global business management considering how entry into the Chinese market could be beneficial for Woolworths when compared to market entry in Germany. Based on the geo-political forces and macro environmental factors, the various challenges associated with the market entry along with the opportunities to become successful in the global market were analyzed. The business and trade policies also depicted the entire scenario and I showed that the political condition and financial status of China could be more fruitful for Woolworths to make a market entry. The technological advancements facilitated the growth rate while the management of legal aspects and environmental awareness could allow Woolworths to manage its e-commerce business with much ease and effectiveness. The licensing strategies should be beneficial for managing the import and export activities as well as comply with the various laws, rules and regulations for ensuring successful global business expansion for Woolworths, Australia.
References
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Cano-Kollmann, M., Cantwell, J., Hannigan, T.J., Mudambi, R. and Song, J., 2016. Knowledge connectivity: An agenda for innovation research in international business.
Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.
Ferraro, G.P. and Briody, E.K., 2013. The cultural dimension of global business. Upper Saddle River: Pearson.
Haley, U.C. and Haley, G.T., 2013. Subsidies to Chinese industry: state capitalism, business strategy, and trade policy. Oxford University Press.
Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), pp.6478-6492.
Hooper, M.J., 2016. The global business handbook: The eight dimensions of international management. CRC Press.
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Picciotto, S. and Mayne, R. eds., 2016. Regulating international business: beyond liberalization. Springer.
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Preston, L.E. and Windsor, D., 2013. The rules of the game in the global economy: Policy regimes for international business. Springer Science & Business Media.
Reiche, B.S., Stahl, G.K., Mendenhall, M.E. and Oddou, G.R. eds., 2016. Readings and cases in international human resource management. Taylor & Francis.
Scarborough, N.M., 2016. Essentials of entrepreneurship and small business management. Pearson.
Shenkar, O., Luo, Y. and Chi, T., 2014. International business. Routledge.
Woolworths.com.au. (2018). {{metaController.metaData.title}}. [online] Available at: https://www.woolworths.com.au/ [Accessed 28 Aug. 2018].
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