MGT501 | Business | The Analysis of External Environment in Woolworths

Introduction

The report brings about the discussion on the business environment or environmental analysis of the firms operating in the market. Every business organisation operates or functions in the society or environment surrounding; therefore, they are accountable for their actions to the environment. It is a known fact for every business organisation, it is important to interact and respond to the environment, because they have direct relationship with external environment. Some of the factors that are economic, social, legal, political, and environmental affect business environment. These factors have direct or indirect influence on the environment of business, and their operations. The report is based on the analysis of external environment of the company, Woolworths Supermarkets Australia. The company is assessed with the impact of external environmental factors, and devising strategies or frameworks to meet those challenges. Therefore, the report includes the environmental scanning of Woolworths, and the frameworks to be used to overcome those challenges faced by the firm (Bailey, 2016).    

Company Overview

Woolworths Supermarket is an Australian based company, a supermarket/grocery store chain that is owned and managed by Woolworths limited. The company was established in the year 1924, and captures about 80% of the market of Australia. Woolworths deal in selling groceries specially fruits, vegetables, and packaged foods; but has expanded their operations into other items also. It includes magazines, selling DVDs, pet & baby supplies, health, beauty, stationery items and household products. Woolworths Limited is known as the largest retailers in New Zealand and Australia, as they recognise trust and delivering values is the core of attaining maximum customer satisfaction (Sutton-Brady, Kamvounias & Taylor, 2015).

Woolworths is a company with strong ethical base, and moral values and practices through efficient strategy and objectives. These strategies and objectives are based on increasing shareholder value, building new growth business, and expanding to a bigger market size. The company is very vigilant about the changing environment, and consumer needs and focus on ways to bring people to their supermarkets, and enhance their customer base. Woolworths attract large number of customers, also play a key role in satisfying the interests and expectations of their shareholders; the company has 450,000 shareholders and is a trusted company in the eyes of investors (Farfarn, 2018).

Influence of External environment/PESTLE ANALYSIS

An organisation operating in an environment needs environmental scanning which results into assessing the impact of external factors on the firm and their operations. The external environment comprises of the factors, which affect an organisation includes micro and macro environmental factors affecting businesses directly and indirectly. Suppliers, customers, marketing intermediaries, financial institutions, and public perceptions are micro factors, and the macro-level includes economic, social, political, legal, technological, and environmental factors (Karpen et al., 2015). In context to the Woolworths, the report leads to the discussion of the external factors i.e. Pestle analysis of the company to devise strategies to overcome issues faced by firm. Discussing about the Woolworths relation with suppliers and investors Woolworths has found to be committed into partnerships and believes in establishing long-term relationships with them. As for their business or supermarkets their dealings with suppliers is important, thus the company ensures in maintaining good terms with these people. Woolworths established strong collaboration with farmers of Australia to ensure delivery fresh and high quality food to the people (Grimmer, 2018).

Customers are the focus of any organisation, and determine the way they run their businesses, and become successful. Woolworths has been remarkable in satisfying their customers largely, as they serve the needs and expectations of their customers across all their brands. It has found through researches that Woolworths establishes their customer base of 24 million every week. In addition, the company runs a program everyday called as reward program, designed to study the behavioural patterns of the consumers and assess their loyalty. In addition, the company responds to the feedbacks of their customers, fulfils their needs, and resorts to their issues or complaints. However, an initiative program conducted by the company known as ‘Customer talkback’ through which they have established customer focus groups across the country. Thus, the above-mentioned initiatives describes that the customers behaviour is found to be positive or favourable which exerts a positive influence on Woolworths (Paasovaara & Luomala, 2017).

Political, legal: corporate governance, it has been stated that every business requires a strong political or legal framework to conduct their operations. Woolworths has a proper constitution, which lays policies and rules followed in compliance to the laws. Australia and New Zealand are the countries, found with the political stability from a long period. However, performance of Woolworths affected by the political forces on the retail business in Australia in a number of ways. Woolworths has been restricted from eliminating small retailers to enter the retail market in Australia. In addition, political disturbances to the company discourage other businesses and investors to enter the market due to the risk of low rate of interest and returns. Nevertheless, the company has achieved sustainability that ensures that it is operating in a stable market, and does not result into any significant loss (Underhill & Rimmer, 2017).

Discussing about economic factors such as recession and higher unemployment exerts a major influence on the financial performance of any business. Especially Australia’s economic factors play a great role in retail sector thus, for the Woolworths business. In earlier years, the company has suffered a major loss due to the global financial crisis, which led to the problems of unemployment in those years. However, the country has achieved economic sustainability, which supported the operations of Woolworths leading to a bigger success (Schaltegger & Wagner, 2017). 

Competitors’ strategy- Every organisation faces the situation or issues of rivalry among existing firms Woolworths main competitors includes Aldi, Coles, and many others. These competitors pose major threat creating rivalry among the retailers in Australia, as they compete for higher market share affecting the profitability of Woolworths. This situation had major influence on their customers, as due to decreased profitability, but Woolworths has gained market share in recent years, which has reduced the negative impact on their growth (Knox, 2015).  

Public opinion- The era in which modern businesses operate, is referred to as reputation era which mentions that the corporate reputation of any firm can either make or break the brand/company. Public opinion, in context to an organisation, defines about the collective opinion of the society towards an issue, subject, or the organisation. As Woolworths is the value-driven business, identifies, and communicates their values well internally as well as to the society/consumers leading to a good image in public. It has found that the company has been successful in establishing a good image. The company has focused on the customers who belong to the long-income group in Australia, by taking initiatives through the ‘For Less for Families” and ‘Australia Favourite Lamb Cuts for less everyday’ programs. Hence, there has been a little impact or no impact on the smooth functioning and reputation of the company Woolworths (Woolworths, 2018).

Thus, a number of issues or challenges affecting the operations of Woolworths include the impact of recession, i.e. economic environment that can be resolved with the effective business strategies and frameworks applicable in Woolworths. Some other issues such as stiff competition, due to the presence of competitors pose major threats in the supermarket, as a big challenge for Woolworth’s expansion and success in the future. Moreover, close down of several stores of Woolworths in the country and UK, has affected the profitability and success of the company (Methner, Hamann & Nilsson, 2015).

Frameworks or theories to overcome challenges

Woolworths has been at the leading position in the Supermarkets, in Australia; however, there are some issues or challenges, which influence the profitability and success of the company. Therefore, some of the management concepts and frameworks designed to resolve the challenges faced by the firm. Woolworths devised some strategies to improve their customer service, enhance their capabilities to cater the needs and desires of every section of the society. First, the implementation of low price strategy by Woolworths will help the company gain competitive advantage over their competitors. Secondly, they can focus on product or market development to enhance the effectiveness of their products in other markets. Here, product development implies that Woolworths can take an initiative to modify their products too increase market penetration with the existing market group. Other strategy can be use of innovation, in their operations that will help them overcome the trade barriers and considering the environmental concerns for the better experience of their customers worldwide (Methner, Hamann & Nilsson, 2015).

(Source: Woolworths Group, 2018)

The above diagram represents that by putting customers first, and catering to their needs and expectations, any business can attain sustainable advantage over other competitors. Focusing on their basic needs, providing value-driven products, and services with a good price and right range is the strategy, which can be used by Woolworths to satisfy their customers and become successful. Effective supply management can improve the system and supplier relationships at Woolworths, which will help the firm, resolve the problems of supply, and bulk delivery of the goods to the customers (The new daily, 2018).    

Conclusion

To conclude the above discussion it has been analysed that the grocery or retail industry in Australia, has significantly created employment for many people across the world. It has been found through the research that there are many disruptive forces, such as changing patterns of the consumers. Woolworths has established a leading position in the Australian retail market, and catered to the needs and expectations of the customers. There has been significant impact of the environmental factors on the working of the company, which influenced the profitability of the business. However, company has achieved sustainability through their operations, and large customer base and management concepts and strategies. Hence, an organisation must focus on overcoming their issues and challenges related to external factors and improve their functioning in the market.

References

Bailey, M. (2016). Marketing to the Big Middle: establishing Australian discount department stores. Journal of Historical Research in Marketing, 8(3), 416-433.

Farfarn, B. (2018). The Largest Australian Retailers. Retrieved from: https://www.thebalancesmb.com/largest-australian-retailers-2892105

Grimmer, L. (2018). The diminished stakeholder: Examining the relationship between suppliers and supermarkets in the Australian grocery industry. Journal of Consumer Behaviour, 17(1), 13-20.

Karpen, I. O., Bove, L. L., Lukas, B. A. & Zyphur, M. J. (2015). Service-dominant orientation: measurement and impact on performance outcomes. Journal of Retailing, 91(1), 89-108.

Knox, M. (2015). Supermarket monsters: The price of Coles and Woolworths' dominance (Vol. 6). Australia: Black Inc.

Methner, N., Hamann, R. & Nilsson, W. (2015). The Evolution of a Sustainability Leader: The Development of Strategic and Boundary Spanning Organizational Innovation Capabilities in Woolworths. In The Business of Social and Environmental Innovation (pp. 87-104). Berlin: Springer.

Paasovaara, R. & Luomala, H. (2017). The Effects of Brand Familiarity and Consumer Value–Brand Symbolism (In) Congruity on Taste Perception. In The Customer is NOT Always Right? Marketing Orientations in a Dynamic Business World (pp. 754-757). Berlin: Springer.

Schaltegger, S. & Wagner, M. (2017). Managing the business case for sustainability: The integration of social, environmental, and economic performance. United Kingdom: Routledge.

Sutton-Brady, C., Kamvounias, P. & Taylor, T. (2015). A model of supplier–retailer power asymmetry in the Australian retail industry. Industrial marketing management, 51, 122-130.

The new daily. (2018). How Woolworths is winning over consumers. Retrieved from: https://thenewdaily.com.au/money/finance-news/2018/02/23/woolworths-half-year-profit-coles/

Underhill, E. & Rimmer, M. (2017). Private governance, state regulation and employment standards: how political factors shape their nexus in Australian horticulture. Relations Industrielles/Industrial Relations, 72(1), 33-55.

Woolworths Group. (2018). Strategy and Objectives. Retrieved from: https://www.woolworthsgroup.com.au/page/about-us/our-approach/strategy-and-objectives

Woolworths. (2018). Consumer influences. Retrieved from: https://retailsector-woolworths.weebly.com/consumer-influences.html