Ethical Issues in the Australian Retail Industry

This assignment delves into the ethical dilemmas plaguing the Australian retail sector. It explores issues such as precarious employment practices for workers, delayed payments to suppliers potentially leading to legal ramifications from the ACCC, and the pressure to prioritize financial gains over sustainable business models. The document suggests strategies for retailers to address these concerns, emphasizing non-financial measures like improved customer relationship management and supply chain transparency for long-term sustainability.

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Section 1 Abstract
This case study is based on the role of ethics in the profit of Australian retail industry. The
case study is about the operations of retail industry. Woolworths has announced to restructure
its operations by shutting down the stores where the performance is not good and the
company is planning to reduce its selling price. The Australian competition and consumer
commission has taken legal action against Wesfarmers, Coles’s owner because the company
is delaying the payment of its suppliers too much. To eliminate such type of misconduct of
suppliers, ACCC has issued certain guidelines for Woolworths, Wesfarmers, Coles. The
companies involved in the case needs guidance about the lag in the payment of suppliers and
suitable tool to measure the overall performance of the company. From the case, it is analyzed
that the investigation about this case study is done on the basis of different types of online
articles and journals. ACCC is concerned with the protection of suppliers of supermarket and
will issue certain policies for the retail companies dealing with the suppliers. As per the given
case, in the retail business, the only thing that matters is the market share. Woolworths and
Wesfarmers are the largest companies in the retail business because these companies are
owing a huge share of Australian retail industry. Woolworths is owing the highest market
share in Australia’s retail industry. Woolworths is owing 37.3% of total market share, codes
group has 32.5% of market share. ACCC has set out code of conduct for food and grocery
business to protect the interest of consumers and suppliers. One important aspect which shows
the importance of rebate for DSG was when DSG’s earnings before interest tax depreciation
and amortization (EBITDA) was $72mand if the rebate was excluded then DSG will face a
loss of ($119m).

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Table of Contents
Section 1. Abstract.....................................................................................................................2
Section 2. Introduction...............................................................................................................4
Section 3. Responses to the Case Questions..............................................................................6
Section 4. Conclusion...............................................................................................................10
Section 5. References...............................................................................................................11

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Section 2 Introduction
In Australia, there are almost 140000 players in retail industry. The retail industry is full of
competitive challenges. The challenge of online retailing is the latest one. The growth of retail
business in Australia is dependent upon the growth of the economy. Retailers are required to
operate under various regulatory constraints so these constraints limit the ability of retailers to
innovate and achieve competitive advantage. As per the estimation of Australian competition
and consumer commission, the online retail business owes 6% of Australian retail industry.
The retail companies operate in a broad environment. The macro environment includes the
technological, economic, political and social influence on the retail business and a retail
company is required to expand these influences to compete within the retail industry. The
policies of government increase the cost for retailers. Woolworths limited and Wesfarmers
limited are the major players of Australian retail industry. There are a number of challenges
that are being faced by the retail industry. Corporate governance is the rules and processes by
which the company is being carried on. The challenges include brand reputation, corporate
governance, globalization, and customer relationship management, and risk management,
effectiveness of market, technological changes, value creation, corporate social responsibility
and supply chain management. Retail industry is facing the issue of auditing. The retail
companies are facing strong competition so the companies are required to control the cost of
production and the existing auditing practices are becoming outdated. The companies dealing
in retail industry are required to update the auditing practices with the changes in the
competition of retail industry. The retail industry is also facing the economic challenge. Retail
industry is being affected by the economic changes. For example: if the economy is
developing then it will increase the purchasing power of the people and ultimately the retail
industry of the economy grows. Technology is another issue faced by retail industry. The
companies operating in retail industry are required to be updated as per the technology. The
accounting records of the retail business are to be maintained electronically so the companies
are required to use latest software and systems to make the accounting records more accurate
and reliable. The retail industry involves many distribution channels which can be a big issue.
The increase in the number of distribution channels will ultimately increase the cost of a
product and hence, either increases the selling price or reduces the profit margin. Every
intermediary will add his share of commission to the cost of the product. But if the retail
businesses are planning to achieve competitive advantage then the companies are required to
minimize the selling price which can only be done by minimizing the cost of production.
Achieving the brand image is easier than maintaining such brand image. Woolworths and

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Wesfarmers have already achieved a brand image and are considered as a leader of retail
industry. Now, the challenge in front of both the companies is to maintain that position of
major players of retail industry (Sewell, et al., 2017).

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Section 3 Responses to the Case Questions
Delaying Supplier’s payment: Cash flow position of a company is linked with the time
between when the debtors pay to company and when the company is paying to creditors. As a
Chief financial officer, I will prefer to delay the payment to supplier if there is a delay on the
part of customers. The CFO of a company is responsible to make a balance between the time
taken by the company to pay to its suppliers and the time taken to be paid by the customers. If
the supplier already given a time like 30 days period then as a CFO, I will not prefer to prepay
the supplier (Price,2016). When the customers are delaying in the payment then in such case
the company is required to delay the payment to suppliers. This can be done on the part of the
company to shorten the time period between when the company have to pay its sues and when
the customers are paying to the company. By the delay of payment, the company is also able
to earn interest on such payment. The CFO’s main task is the movement of cash. The CFO
can only release payment when it will receive payment from customers. The companies are
not having enough cash that they will make payment to the suppliers even when the customers
are delaying the payment. This will mismanage the cash flow of the company. Integrated
reporting: Integrated reporting means integrating the organizational planning, strategy and
resources for the creation of value for a long period of time. Integrated reporting is used to
achieve the vision of the company. Integrated reporting affects the performance system as IR
helps the organization in developing a structure which is dynamic and can change as per the
changes in external environment. IR integrates the resources of the organization with the
objectives and hence affects the performance system. Integration reporting is concerned with
the performance of the company and remuneration is linked with the performance of the
people working within the company (Bandara, et al., 2017). Some of the employees show
their performance on the basis of remuneration given to them. Integrated reporting changes
the remuneration design in order to achieve superior performance.
“At risk” component: “At risk” component is that part of remuneration which is variable or
which is at the risk of not being paid by the company. “At risk” component is that portion of
the remuneration which can be paid on certain conditions related to employment. At risk
component is a larger component of total remuneration because in case of Woolworths, the
fixed pay of CEO is only 44% and long-term and short-term incentive pay is 56%. In this
way, “at risk” component is more than fixed pay. Short term incentive pay can be paid as a
bonus and long-term incentive pay can be paid by the issuing of shares. Like this both the
incentives are based on certain employment conditions. This is the reason that “at risk”
component is a critical part of total remuneration of CEO and senior management. Any person

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who is having some interest in the company is known as the stakeholder of the company.
Stakeholders: Stakeholders are the people either within the company or outside the company
connected with the operations of the company. Stakeholders are the people who are
responsible for the achievement of the overall objective of the company. There are two types
of stakeholder’s i.e. internal stakeholders and external stakeholders. Both the stakeholders
affect the company because the company is totally dependent upon these stakeholders.
Internal stakeholders are the people who are having direct link with the company and the
external stakeholders are the people who are not directly linked with the company but these
people affect the company. The internal stakeholders of large supermarket company include
employees, managers, directors, adjudicators, etc. These stakeholders work within the
organization. The external stakeholder’s include shareholders, investors, creditors, suppliers,
government, customers, auditors, competitors, wholesalers and retailers (White, et al., 2017).
These are the people who work outside the organization but have a significant effect on the
company.
Aim of Wesfarmers to sustain rather than making profit: The target of Wesfarmers is to
achieve sustainability for long term rather than making profit in short term. The short-term
profit always shows unethical or illegal working of a company because a company is not able
to earn profit in a short run by ethical principles. The culture of Wesfarmers is to grow and
sustain for a long period of time. Wesfarmers is not merely focusing on making profit. When
a company is running with the objective of making profit only then it takes the company
towards unethical activities because the company is planning to earn money. Wesfarmers is
one of the largest retailing company of Australia and the company has achieved this brand
image with the help of its ethical culture (Simões and Sebastiani, 2017). The aim of profit
cannot take the company towards long run sustainability because the company will reduce the
quality of product to gain profit and quality is an important component of sustainability.
Product mix decision: It is the responsibility of the accountant to take decisions regarding the
buying of stock based on the risk attached with a particular share. The decision related to the
purchase of shares should be made according to the risk bearing capacity and the price
fluctuations of shares. Customer’s demand is not a perspective related to the purchase of
shares. The accountant is required to prepare a product mix based on the rebate attached to the
shares. The performance of the company is attached with the changes in the prices of shares
and the rebate linked with the shares. The investment made by the company in the acquisition
of stock will affect the overall performance of the company. So, the company is required to
make decision as per its purchasing power not as per the demand of consumers. Before

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making decision about the purchase of shares, the management is required to consider its
purchasing power parity and the risk associated with each share. The management should not
rely on a single share instead of relying on single share; the management is advised to prepare
a product mix of stock. The product mix decision will help the company to bear the loss in
one stock by the gain of other stock.
Ethical organization: An organization is said to be ethical if it relies on both financial and
non-financial measures. The non-financial measures are equally important for the companies.
Financial measures only determine the performance of accounting records but non-financial
measures cover the performance of all the other aspects of the company (Delgado-Téllez, et
al., 2017). Non-financial measures include quality check, employee satisfaction, customer
service and public relations.
Suitable measure to determine performance: TSR stands for total shareholders return. This
measure only measures the performance of the shares of the company. Total shareholders
return determines a difference between the increase in the prices of shares and the dividend
paid to shareholders to find out the total return to the shareholders.TSR measure is not
suitable for the measurement of overall performance of the company because this measure
only focuses on the performance of the company based on the prices of shares but this method
will not consider all the other factors which contributes towards the performance of the
company. As a CFO of a company, I will prefer a balanced set of measure which will consider
all the factors and measures the performance of the company in a balanced manner. If I was a
junior accounting officer rather than CFO then also the decision will be same. Because as a
junior accountant, I was also contributing towards the performance of the company and if the
company will use a measure which is only considering the return to shareholders then that
will be unfavorable to all the other stakeholders of the company.
Is ethical decision differing from audit: The ethical behavior of a company is very significant
for dealing with their stakeholders. If the company involve in the unethical behavior then it
will force the government to interfere in the operations of the company. The companies which
are operating legally always rely on ethical decision-making. Ethical decision-making helps in
making the audit process easier. The internal as well as external audit is performed to identify
whether any mis happening taking place in the company is. To avoid the chances of fraud and
misstatement in the financial records, every company is suggested to make the decisions
ethically (Tan, et al., 2016). The auditors sometimes rely on the statements given by the
managers and employees. In this situation, the audit and the ethical decisions differ.

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How Balance scorecard framework leads to resolving ethical and sustainability issues:
Balance scorecard is a performance measurement tool which helps the organization to
improve the performance of various functions within the organization. Balance scorecard
determines the actual situation of the company and provides guidelines for further
improvement. Balance scorecard is classified into four areas. Balance scorecard determines
the performance of the company by considering four major perspectives (Maniora, 2017).This
is the reason that this measure is known as balance measure because it takes into account all
the material components of the company. The four perspectives include customer perspective,
internal process perspective, learning and growth perspective and financial perspective. The
components related with customer perspective include time, cost, service and quality. The
company is required to serve its customers with a quality product and the price should be
reasonable, timely delivery and smooth service of such product to the customer which
includes after sale service also. Internal process perspective majorly covers the whole internal
organization. It includes human resources, production, structure of the organization etc.
Learning and growth perspective focuses on the learning, turnover and job satisfaction of
employees. This perspective is basically related with employees. Financial perspective is
linked with the cash flow statement, profit and loss account, and return on investment and
return on capital employed. Balance scorecard is used by the companies to achieve
sustainability. Sustainability can be achieved if the organization focuses on the overall
improvement of the company. With the help of balanced scorecard, a company can be in
touch with every department. A company cannot achieve sustainability be focusing on the
performance of one or two department rather the company is required to improve all the
departments (Campbell and Price, 2016). Balance scorecard is the one and only measure
which is focusing four perspectives together. In this way, balanced scorecard eliminates the
issue of sustainability form the company. Balanced scorecard not only focuses on enhancing
the performance of the company but it also focuses on the ethical issues of the company.
Balanced scorecard suggests the company to adopt corporate social responsibility within its
culture. Corporate social responsibility means the company is required to take care of the
people living in the society because these people are the customers and ultimately reason
behind the profit of the organization. If the organization will follow the policy of corporate
social responsibility then it helps the company to avoid the ethical issues. This is how;
balanced scorecard helps the company in removing sustainability and ethical constraints.

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Section 4 Conclusion
After proper analyzing the case, some solutions are derived for the various issues faced by the
companies dealing in retail business. The retailers are facing the issue of how they can
achieve competitive advantage. The retailer can achieve the competitive advantage by
reducing the cost of production. The competition in the retail industry is high and one can
differentiate itself by providing goods at reasonable cost. For the issue of lag in supplier’s
payment then in such situation the company is advised to delay the payment but only to
maintain the balance between the time when the company should pay and the time when the
company is being paid off. For another issue of performance measurement tool, the company
should use a tool which will measure the overall performance of the company. Balanced
scorecard is recommended to the company because this will measure the performance by
considering four perspectives of the company and it will also help to resolve the issue of
sustainability and ethics. For the declining performance issue, the management of the
company is suggested to design a product mix as per the rebate on each stock rather than
considering the demand of consumers. The companies can tackle with the issue of delaying
the payment of suppliers by pre-deciding a specified time which can be of 30 days or 45 days
within which the company will receive the payment from its customers and transfer such
money to its suppliers to avoid any legal action by ACCC (de Villiers and Sharma, 2017).For
the issue of ethical operating of the companies, the companies are suggested to focus on non-
financial measures rather than financial measures because the non-financial measures will
determine the customer relationship management and supply chain management. Customer
relationship management involves the dealing of the business with its customers. These both
are the critical aspects of retail industry and if the company can improve the performance of
these two aspects then it will take the company towards long-term sustainability.
Sustainability can be achieved if the company has a huge customer base and the retail
business is all about increasing the customers through innovation.

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Section 5 References
Bandara, S., Bandara, S., Leckie, C., Leckie, C., Lobo, A., Lobo, A., Hewege, C. and
Hewege, C. (2017) Power and relationship quality in supply chains: The case of the
Australian organic fruit and vegetable industry, Asia Pacific Journal of Marketing and
Logistics, 29(3), pp.501-518.
Campbell, I. and Price, R. (2016) Precarious work and precarious workers: Towards an
improved conceptualization, The Economic and Labour Relations Review, 27(3), pp.314-332.
De Villiers, C. and Sharma, U. (2017) A critical reflection on the future of financial,
intellectual capital, sustainability and integrated reporting, Critical Perspectives on
Accounting.
Delgado-Téllez, M., de Cos, P.H., Hurtado, S. and Pérez, J.J. (2017) THE
MACROECONOMIC IMPACT OF DELAYED GOVERNMENT PAYMENTS: A CASE
STUDY, Public Finance & Management, 17(2).
Maniora, J. (2017) Is integrated reporting really the superior mechanism for the integration of
ethics into the core business model? An empirical analysis, Journal of Business Ethics,
140(4), pp.755-786.
Price, R. (2016) Controlling routine front line service workers: an Australian retail
supermarket case, Work, employment and society, 30(6), pp.915-931.
Sewell, W., Mason, R.B. and Venter, P. (2017) Socio-economic developmental strategies as
retail performance indicators: A balanced scorecard approach, Development Southern Africa,
34(3), pp.365-382.
Simões, C. and Sebastiani, R. (2017) The nature of the relationship between corporate identity
and corporate sustainability: Evidence from the retail industry, Business Ethics Quarterly,
27(3), pp.423-453.
Tan, P.J., Tan, P.J., Bogomolova, S. and Bogomolova, S. (2016) A descriptive analysis of
consumer’s price promotion literacy skills, International Journal of Retail & Distribution
Management, 44(12), pp.1223-1244.
White, C.L., Nielsen, A.E. and Valentini, C. (2017) CSR research in the apparel industry: A
quantitative and qualitative review of existing literature, Corporate Social Responsibility and
Environmental Management.