International Business - Countdown-Woolworths Group
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This article analyzes the international collaboration between Countdown and Woolworths Group, discussing how and why the collaboration has increased organizational effectiveness, issues faced, feasibility, and alternative exit strategies.
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Running head: INTERNATIONAL BUSINESS International Business - Countdown-Woolworths Group Name of the Student Name of the University Author Note
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1INTERNATIONAL BUSINESS Introduction: Internationalcollaborationsarealliancesorpartnershipsbetweentwoormore organizations (profit or non profit) from more than one country with the aim of fostering development of the allied organizations though a collaborated effort, sharing of knowledge and information as well as resources. The collaborations help the organization by utilizing the strengths of each of the participating organization in a way that can support the collaboration oralliance(Ganotakis&Kafouros,2015).Thecollaborationscanalsohelpforeign companies to enter into a new market, increase the product sales, increase their profits, achieve a competitive advantage, secure a stable supply of raw products, reduce vulnerability of the business and incorporate diversity through the collaboration with a local organization. In such kind of collaboration, the local partner can support the organization with their knowledge and experience in the local market while the international partner can provide resources, knowledge and help in the diversification and growth of the alliance (Melander & Lakemond, 2014; Luzzini et al., 2015). Countdown-WoolworthsGroupisanInternationalcollaborationbetweentwo companies, Countdown supermarket based in New Zealand and Woolworths Group based in Australia. This collaboration have let to the setup of Countdown supermarkets which operates across New Zealand with a total of 180 stores and is a subsidiary of Woolworths Limited. This collaboration also have allowed the Countdown to develop itself as the biggest supermarket chain in New Zealand, having the maximum number of stores in the countries and outcompeting its competitors such as Four Square. This alliance was formed in 2005 when Woolworths NZ was purchased from Foodland Associations Limited by Woolworths Limited (Australia), followed by the rebranding of the Foodtown and Woolworths Stores to Countdown Stores in 2009 (woolworthsgroup.com.au, 2018).
2INTERNATIONAL BUSINESS The aim of the study is to analyze this collaboration to understand how and why the collaboration has increased the organizational effectiveness, the different issues faced while developing the collaboration, feasibility of the collaboration and any alternative exit to the collaboration. Discussion: -HOW and WHY this collaboration will increase organizational effectiveness. The collaboration between Countdown and Woolworths have helped to increase the organizational effectiveness of the Countdown Stores across New Zealand and helped it to grow to become the biggest supermarket chain in the country (woolworthsgroup.com.au, 2018). Discussed below is how and why this collaboration has helped to increase the organizational effectiveness: Implementing Innovation: The collaboration have enabled the implementation of innovative ideas such as digital business to support organizational effectiveness and make the business transactions easier and more seamless. The Countdown stores have implemented the WooliesX which is a new digital arm of Woolworths which combines digital business strategies with e Commerce, customer experiences and customer services. This have enabled the company to make more than AUD 1 billion in sales helping them to service 6.2 million orders (between 2017 and 2018) with a promising growth rate of 30%, thereby supporting better organizational effectiveness (Mortimer & Milford, 2018;woolworthsgroup.com.au, 2018). Increasing value for shareholders: Between 2017 to 2018, the organization was able to make a total return of 22.4% of their profit to the shareholders, thereby helping to increase the value for the shareholders.
3INTERNATIONAL BUSINESS This was enabled by an improvement of the financial performance of the organization after the collaboration and expansion. The profits helped in the increase in the share price of the organization,thusshowinganimprovementintheorganizationaleffectiveness (woolworthsgroup.com.au, 2018;Parkinson, 2018). Creating better experience for the customers: The collaboration has helped to improve the experience of the customer mainly becauseofthefollowingreasons.Firstlythecollaborationhaveallowedsharingof knowledge between Woolworths and Countdown through better customer loyalty programs and customer services implemented across the Countdown Stores. Secondly, involvement of effectivecustomerrelationsteamfromWoolworthshassupportedbettercustomer experience. This has provided the customers a convenient, personalized and a connected shopping experience, thereby making it a highly successful collaboration in the New Zealand market (woolworthsgroup.com.au, 2018;Gupta & Singh, 2015). Evolving the Endeavour Drink Business: Thecollaborationhasallowedasignificantgrowthtothedrinkssegmentof Countdown through an evolution in the business. The collaboration has allowed growth in sales of the organization thereby supporting the growth of the organization through effective marketing strategies and addresses the changing habits and choices/preferencesof the customers.Thishasalsohelpedtheorganizationtostayaheadofthecompetition (woolworthsgroup.com.au, 2018;Biddle, 2016). Portfolio Value: The sharing of resources between Woolworth and Countdown has enabled a reduction of the prices of more than 4000 products across the supermarket chain. The collaboration has
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4INTERNATIONAL BUSINESS allowed an increase in the value of the portfolio of the organization, as the market values for both Woolworth and Countdown was improved by this collaborated effort. The strategic alliance also led to the implementation of customer loyalty programs, wholesale food supply as well as improving the fuel supply across the convenience stores. The alliance helped to improve the network of fuel sites where the customer can redeem fuel discounts and earn reward point in order to increase the inflow of customer to the Metro Stores and also benefit thepetroleumbusinessfurtherimprovingthevalueoftheportfolioofthealliance (woolworthsgroup.com.au, 2018;Spillan & Ling, 2015). Implementing End to End process: As a result of the strategic alliance, the ensuing rollout included the training for 90,000 employees, up gradation of the wifi across 850 stores and added more than 9500 remote handheld devices in the stores which allowed end to end customer service and improve the customer experience in the stores. This development helped to increase the speed of checkouts for the customers, simplified the process for the stores and eliminated the paperwork, making the process much simpler for the store owners. These new rollouts further helped to improve the efficiency of the organization allowing it to process more orders every day, and thus service more customers in an effective manner while helping to improve customer experience (woolworthsgroup.com.au, 2018;Morrison, 2016). -issues pertaining to (1) motivation, (2) partner selection and management, (3) governance and structure, and (4) performance evaluation and exit strategies. Motivation: The formation of the strategic alliance between Woolworth and Countdown was motivated by many factors such as:
5INTERNATIONAL BUSINESS Overcoming the market competition: Due to the formation of this alliance, the organization was able to overcome competition from other businesses (like Four Square), and acquire a better market hold in New Zealand (Cameron & Green, 2015). Business Growth: The alliance also helped in the business growth due to the sharing of resources and knowledge from both Woolworth and Countdown, allowing them to share their expertise in the retail market in a way that can help the collaboration to grow and prosper in New Zealand (Cameron & Green, 2015). IncreaseincustomerBase:Duetothecollaboration,themarketsegmentsforboth Woolworth and Countdown could be effectively merged into a larger customer base, thereby increasing the popularity of the brand across Australia and New Zealand (Cameron & Green, 2015). Sharingrisks:Thecollaborationalsohelpedtosharethemarketrisksbyboththe organizations and thus ensured any potential adverse effects and impacts of the collaboration or any future market crashes to be shared among the partners in order to avoid the full impact on any one organization (Cameron & Green, 2015). Partner Selection and Management: Selection of the business partner was influenced by several factors such as: SimilarityinorganizationalVision:BothWoolworthandCountdownsharessimilar organizational vision of providing the best service and experience for the customers, which helped in the development of the alliance to a significant level (Spillan & Ling, 2015). Business Network: Woolworth already had an extensive business network across Australia and New Zealand which allowed the alliance to easily spread its business across New
6INTERNATIONAL BUSINESS Zealand by rebranding and refurbishing the existing stores under Countdown without having to develop its own network from scratch (Biddle, 2016). Experience:Woolworth group was established in 1924, making it operational for almost 94 years, makingitone of the oldestbusinessesinthisindustry. Throughthe alliance, WoolworthwasabletosharetheirbusinessexperiencewithCountdownwhichwas established in 1981 (37 years ago) and thus develop a vast pool of experience gathered be both these organizations to support the alliance (Cameron & Green, 2015). Financial Strength: Woolworth also was able to provide a significant financial strength to the alliance through its robust financial structure and reserves which helped in the development and growth of the strategic alliance, making it the fastest growing retail in New Zealand (Biddle, 2016). Resilience to market risks: The alliance also provided resiliency towards market risk in a dynamicconsumermarketwherechangingconsumerneedsandpreferencesarevery common (Spillan & Ling, 2015). Governance and Structure: The strategic alliance utilizes a hierarchical structure of governance in which the Chairman and CEO (Gordon Cairns) is at the top of the hierarchy to whom the rest of the management reports to (woolworthsgroup.com.au, 2018). Discussed below is the governance strategies used in the organization. Shared Understanding: The governance of the alliance is based upon a shared understanding of the organizational values, goals and objectives, which guides the management towards its strategic decision making process. This can be a useful governance strategy since it allows
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7INTERNATIONAL BUSINESS both the partners to be on the same page, having a common or shared goal in mind to continue with the management of the alliance. Accountability: Accountability is of key importance in the organization which ensures that everyemployeehasacompleteresponsibilityandownershipoftheiractionsandis answerable to the stakeholders and management of the organization for their actions and the ensuing outcomes. By ensuring accountability, the organization can ensure that the business partners take responsibilities of their activities and decisions. Commitmenttowardstheorganizationalsoinfluencesthegovernancesystemofthe organization which starts at the top of the hierarchy and ends with each employee. Through the focus on commitment, the business partners can show their seriousness towards the growth of the organization and lead the employees towards the shared objectives of the business. Codes of conduct and leadership: The organization maintains a strict code of conduct based oncustomercentricityandbusinessobjectivesandvaluesandthemanagementuses participatory leadership strategies. (Spillan & Ling, 2015; Biddle, 2016) Performance and Evaluation and Exit Strategies: Evaluation of the performance of the organization is an important concept which can help the management and stakeholders to assess how the business is performing and if they are able to achieve the business goals and objectives. The performance is quantified and evaluated using various strategies by the organization. Discussed below are those strategies: Market Performance: This is indicated by the market penetration of the brand as well as the market share. This also helps to understand how well the organization is able to use its
8INTERNATIONAL BUSINESS economic resources to an optimum level. The market performance is determined through several factors such as product efficiency (effectiveness of the organization to produce goods/products), distribution efficiency (usage of cost effective distribution systems and minimizing costs of distribution), pricing efficiency (setting up a fair but effective price for the product), performance of the product (the ability of the products to address the needs and expectationsofthecustomer),technologyandinnovation(improvingorganizational performance and efficiency through technology and innovations) (Parmenter, 2015; Anand & Grover, 2015). Financial Indicators: The financial performance of the organization is assessed using various financial indicators such as operating cash flow, working capital, gross profit margin, net profit margin, current ratio, return on equity, inventory turnover, Liquidity and solvency ratio, Revenue vs. target ratio and expense vs. budget ratio. These values help to understand the performanceof the organizationin pure technicaltermsand comparewith other organizations to assess performance (Levanon et al., 2015; Amaitis et al., 2016). Quality of the product: Product quality is an important index that shows an improved performance of the organization in product development and manufacture in order to ensure bettersatisfactionofthecustomersandthereforeimprovetheprofitabilityofthe organization. The quality of the products can moreover be measures through the following values such as defect ratio, cost of defects, product volatility, product complexity, product returns and customer satisfaction index (Wang, 2017). Customer Satisfaction: Customer satisfaction is another index that helps to understand whether the organization is able to satisfy the customers. Customer satisfaction can be measured through customer feedbacks and reviews. Additionally, number of repeat orders help to measure customer loyalty and customer retention (Powers et al., 2017).
9INTERNATIONAL BUSINESS Internal Indicatorssuch as employee training and job satisfaction are important internal indicators which impacts the employee retention and employee turnover rate as well as the performance of the employees. Also, the number of trainings given to the employees and average length of service of the employees also acts as effective internal indicators of organizational performance in the alliance (Parmenter, 2015). Operational Variablessuch as sales and profitability are important operational variable that helps to assess operational efficiency. Additionally, product life cycle and production time also helps to analyze the operational efficiency of the business (woolworthsgroup.com.au, 2018). Theexit strategythat can be used by the business partner to exit from the alliance in case of any adverse incident can be Liquidation and Closure, using which the exiting partner can liquidate its share of properties and holdings. Also, the exiting partner can sell of its share of the business to another company with similar expertise, helping in the maintenance of the alliance after the exit of a partner (Devi, 2016). -Justification of feasibility Potential investments in the alliance can be justified through several aspects. These aspects have been discussed next: Financial Justification: The financial performance of the organization can be a significant justification for investing in the business. With a good financial performance, the potential investors are more likely to feel assured and comfortable to start investing or continue investing in the business and help the company to grow and give them positive benefits (Miletkov et al., 2014).
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10INTERNATIONAL BUSINESS Cost Justification:The investors can also be attracted through the justifications of the costs of investments, which can impress the investors upon the exact costs that would be incurred through their investment, which they can then compare to the potential gains from the investment and assess the feasibility of the investment (Williams et al., 2015). Return on Investments:This can help the investors to assess how much return they can expect from their investment which can thus influence their investment related decisions. Better ROI can also assure investors to start or continue investing in the alliance. Through the ROI, the effective efficiency of the investments can be understood and identify whether the gains from the investments is able to cover the costs of investment, thus attracting potential investors (Westcott, 2016). Customer Satisfaction and Customer Retention Rates: These factors help the organization as well as investors to understand the performance of the organization to address the customer needs and expectation and thus the possible sustenance of the business. Good customer satisfaction and customer retention shows that the business has a significant customer base consisting of a significant number of loyal customers which reflectstowards a good performance of the business (Ennew et al., 2015). Market Share and Profitability: This is a vital indicator that can help the investors and stakeholders to understand the extent to which the alliance was able to penetrate and hold market shares and the extent of the awareness of the brand thus supporting better profitability of the business. A good market share is an indicator of a stable business which can help to attract potential investors to the business (Spillan & Ling, 2015). -alternative exit to collaboration
11INTERNATIONAL BUSINESS Apart from the merger and acquisition, additional exit strategies to the collaboration can also be utilized. These alternatives include: PlannedVoluntaryExitorVoluntaryBuyout:Thisstrategycanhelpthepartnersto voluntarily exit the alliance in case of any adverse events preventing the partner to continue working in the alliance. The business partners can make a predetermined plan on the situations that can warrant exit of a partner from the alliance, such as financial conditions, performance issues or loss of business allowing the other partner to buyout the complete business transferring the ownership to themselves (Klatzke, 2016). Initial Public Offering: The organization can also use initial public offering strategy which can allow the partners to offer their company stocks to public stock exchange, thereby transferring the ownership in a strategic manner. This can also help to minimize any potential losses for the business partner exiting the alliance without affecting the operations of the business. Listing the shares in the public exchange also helps the alliance to acquire new business partners or enable the existing partner to continue without the need for a new alliance (Fjesme, 2016). Liquidation and Closure: In case of serious crisis situation where the alliance is completely failing to provide any fruitful results and causing losses for the partners, liquidation and closure of the business can be strategies to cut any further losses by completely resolving the alliance, and closing the business. Liquidation of the assets can help to take out any possible financial gains to cover the loss as much as possible (Spillan & Ling, 2015). Selling it to similar businesses: The business partners can also exit the alliance by selling the organization to other businesses in the same industry, having similar experiences, which can help them to continue the business through the transfer of its ownership, thus preventing the
12INTERNATIONAL BUSINESS closure of the business and helping to retain the customers and thus the value and market share of the brand (Klatzke, 2016). Conclusion: International collaborations is a form of business partnership between two or more international organizations, which can be both profit and non profit, with the aim of collaborating their actions, sharing the knowledge and resources in a strategic manner to promote growth of the alliance. The case study is an analysis of the business alliance between two international companies, Countdown supermarket of New Zealand and Woolworth Group from Australia which led to the development of the Countdown-Woolworth group. This alliance operated in New Zealand and the creation of the alliance have allowed Countdown Woolworth group to become the largest supermarket chain in New Zealand, far outcompeting its rivals such as Four Square and capturing a significant amount of the market share.The development of the alliance have helped to improve the effectiveness of the Countdown Woolworth supermarket chain through the implementation of innovative ideas and technologies from the business partners, increasing the value for shareholders through the merging of the reputations of both the partners, improving the customer experience by utilizing effective customer management knowledge brought in by the business partners, helping in the evolution of the business to address the market challenges and helping to develop an end to end process to streamline the business operations. Factors such as overcoming the market competition, potential for business growth, increasing the customer base and sharing of business risks are the key motivations of the alliance. The selection of the business partners was based on similarities in the organizational vision of both the partners, the extensive business network, experience, financial strength and resilience to market risks of the partners. The governance structure of the organization is based upon a shared understanding of company’svalues, accountability,commitment,code of conductand
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13INTERNATIONAL BUSINESS organizational leadership. The organization follows a hierarchal organizational structure. Performance of the alliance can be measured through their market performance, financial indicators,productquality,customersatisfaction,internalindicatorsandoperational variables. The alliance uses the merger and acquisition strategy to plan for exit of the partners. Feasibility of attracting investors to the alliance can be done through financial justifications, cost justifications, return on investments, customer satisfaction and retention as well as market share and profitability of the business. Additionally, the alliance can also use alternative exit strategies such as planned voluntary exit, initial public offering, liquidation and closure and selling off the alliance to a similar business.
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