International Expansion Strategy for Woolworths in China

This report provides an appropriate international expansion strategy for Woolworths Plc in China. It includes macro-economic analysis, marketing and R&D considerations, and recommendations regarding production.

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Business International: Woolworths

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Executive Summary
This report is designed for purpose of developing an appropriate international expansion
strategy for Woolworths Plc. The target market, in which the company has planned to expand
its business, is China. China is the largest market from the point of view of market size. There
are different marketing objectives of Woolworths, which are anticipated to meet in the
Chinese market such as to enhance the efficiency and to gain larger customer base. The core
focus of this company will also be on gaining the customer loyalty for ensuring the consistent
and long term business growth.
According to the findings of this report, it is very important for Woolworths Plc to invest in
marketing and promotion strategies for purpose of gaining the success in business. The
localization strategy should be adopted by company for advertising and promotion of its
products and services. In addition to this, the company should also focus on presence of its
website in local language or Chinese language for showing the respect for Chinese culture.
This would contribute in the long term success of business in China. It is also important for
the company to invest in research and development activities for getting knowledge of
feasibility of different markets for its business.
From the macro-analysis of business environment of Chine, it is observed that China is an
attractive marketplace for the expansion of Woolworths Plc. The GDP of China is recorded
as 12014.61 billion US$ in 2016. In addition to this, the changes in GDP of China in last five
years are observed positive. These data are showing great growth opportunity for
Woolworths, as the high level of GDP is showing high level of purchasing power of Chinese
population.
As per the findings of this report, joint venture strategy is appropriate market entry strategy
for Woolworths Plc for the international expansion of business in China. In addition to this,

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the company is recommended to focus on warehousing operations to gain superior business
growth in China. There are different international human resources challenges that may be
faced by the company while running business in China. Example of these challenges includes
the fierce competition for talent hunt, lack of qualified candidates for any vacant positions
etc. Due to these challenges, the company may need to hire the qualified employees for
different at higher level of remuneration packages as compared to other countries.

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Table of Contents
Executive Summary...............................................................................................................................2
Introduction...........................................................................................................................................5
Brief description of Woolworths...........................................................................................................6
Macro-Economic Analysis of China......................................................................................................7
Recommendations regarding production.............................................................................................10
Marketing and R&D Considerations:..................................................................................................12
International HRM Issues and Considerations:....................................................................................14
Conclusion...........................................................................................................................................16
References...........................................................................................................................................17

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Introduction
International business is the term which includes all commercial activities taking placeto
promote the sharing of goods, services, people, resources, and ideas across the globe. This
report is designed to provide useful information about the globalization of businesses and
their potential impact. The study evaluates it in context of a well-known supermarket chain,
Woolworths Australia introduced in 1924. The report also analyse the environment of China
where Woolworths is planning to expand its operations, using PESTLE tool. The objective of
the report would be to identify the effective business practices and strategies which the
organization would use to become successful in Chinese market. Apart from this, some
valuable recommendations to the company would also be made so that it can compete with
the competitors efficiently.

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Brief description of Woolworths
Woolworths has been the biggest retail company in Australia since its establishment. For
more than 70 years, the company has been able to sustain in the market successfully with 900
stores and 12000 members across the world. Due to its excellence in product delivery, quality
and customer services, Woolworths has grabbed a significant market share in the supermarket
over Coles and Wesfarmers. It deals in a wide range of goods and services such as food,
clothing and grocery, home instruments and electronic products, loans, and other financial
services (Chimhundu, 2018). The company also proudly collaborates with the Australian
framers so as to offerpure and quality products to its consumers. Now, Woolworths plans to
operate in China as well to achieve the organisational goalworldwide presence and reduce the
overall costs while maximizing the productivity.Woolworths focus on the concept of offering
products at costing not more than five cents. This became agreat idea to attract the consumers
and the sales continued to grow gradually. The concept of applying a range of low priced,
non-perishable products helps the company to build an empire of more than 1000outlets with
turnoverof more than $119 million each year.
Marketing Objectives of Woolworths in China
In Australia, Woolworths has been successful in maintain a leading position in the retail
sector for many years. The marketing objective of Woolworths to expand in Chinese market
is to enhance its efficiency and gain a large customer base. In this regard, the company needs
to strengthen its marketing policies and strategies for lowering the risk of entering into the
new market. Also, there is great demand of daily-use products in all countries and
Woolworths aims to fulfil customers’ needs and wants in order to attain customer loyalty and

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confidence in the long run (Grimmer, 2018). Apart from this, the company also tries to take
advantage of the cheap labour available in China for cost reduction.

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Macro-Economic Analysis of China
China is considered to be the most feasible location across the world for doing business. It
has strived hard to be among the strongest powers and welcomed overseas entrepreneurs to
do business in China too. In this regard, the foreign investors also like to operate in China
mainly due to three reasons, huge market size, low cost of workforce, and predicted high
growth of China in future internationally (WidyaYudha et al., 2018).
In order to understand the market conditions of China, Woolworths needs to do PESTLE
analysis to evaluate the macro environmental aspects of doing business in China. PESTLE
will help the management to take right decision and apply best business strategies to survive
in Chinese market.
Political Factors
In China, political factors are unstable which may cause difficulty for Woolworths. The laws
made by Chinese government are strict and become compulsory to be followed by every
international company (Li et al., 2018). However, in the recent times, the focus of
government is on developing e-commerce, which can be useful for Woolworths.
However, there are no proper rules in e-commerce supporting recognition of electronic
signatures, privacy, and accuracyof electronic contracts and protection of consumer rights,
causing problems in smooth running of international corporations like Woolworths.
Economic Factors
It has been observed that China has undergone higher positive changes in terms of GDPsince
the last 5 years. Recent economic reports of the country show that this growth in GDP is

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likely to remain the same in the coming future as well and may also higher (Song &Jin,
2017). This is primarily due to low rate of savings, availability of talented and plentiful
labour, and high exports. The potential urban development of China is also beneficial for
Woolworths’ strategies of selling.
Every citizen of China gets fair per capital income thus contributing more to the economic
development. Woolworths can occupy significant market share in China by perusing people
to spend more on quality products
Social and Cultural Factors
In China, social and cultural factors play a vital role in the success and failure of an
international business due to constant changes in demography such as shift in cultural values,
social trends and population level. The family size and purchasing pattern in China is not
stable which may affect the selling volume of Woolworths. Other aspects such as education
level, religion, lifestyles and migration of people affect the functioning of international
business to a great extent. In China, the literacy rate is above 90 percent, suggesting that
consumers in China are well educated and aware. So, Woolworths needs to be cautious while
advertising and selling its products and services.
Technological Factors
In order to run successful in China, Woolworths needs to consider the changes in
technological fieldproperly. In China, technologies keep on changing with time in order to
provide more efficient and improved products to consumers (Wu et al., 2017). The
management of Woolworthsrequires studying new technological developments in production,
innovative selling mechanisms and feasible purchasing tools as the extranet and intranet,

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different distribution channels and modesof working through mobiles and internet in order to
gain competitive advantage.
However, the key technological issue that arises in China is the expansion of B2C sector
which does not have stable and safe online process of payment (Li, et al., 2017). Since the
consumers in China are athigh level of Long Term Orientation and Uncertainty Avoidance
level, this may cause problem for Woolworths to survive.
Legal Factors
In China, the legal factors are stringent especially for international companies. For example,
the foreign companies are compulsory required to get registered licenced and certified their
operations, services and products by the relevant authority; otherwise, they cannot sell
anything in the country. The safety of human beings is given priority in China and all
products are tested to prevent any loss of human life.
In this context, Woolworths is required to check all the regulations with the State
Government of inspection, quarantine, certification, quality supervision, Accreditation
Administration, and certification of the retail industry of China. If not followed properly, it
can bring the company to legal issues and penalty to sustain in the country for a long time.
In addition to this, China government has also recently enacted a new Food Safety Regulation
in 2009 according to which, all domestic and foreign companies dealing in FMCG should get
registered with the applicable authority before food products are served to the public.
Thus, on the basis of PESTLE analysis of China, it can be said that the country is an
advantageous market for numerous companies looking to expand their selling network and
there exist great opportunities to grow well in China. However, Woolworths should also

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consider all the risky factors with careful planning and managing so as to implement its
business expansion activities successfully.

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Recommendations regarding production
Woolworths is among those corporations which successfully compete with their rivalries in
terms of selling volume, market share and revenue in Australia. However, in order to run
successfully in China as well, the company is recommended to identify and exploit the
availableopportunities effectively. The management should design strategies to emphasise on
the products which are high in demand in China so as to develop a strong relationship with
customers and attract potential customers who are ready to spend high level of disposable
earning with ease (Hickman, & Silva, 2018). Moreover, Woolworths is recommended to
build expertise in the supply chain area of the production by forming joint ventures with the
popular suppliers in China and other countries.
The emergence of Radio Frequency Identity Tagging in the nearer future, Woolworths may
have to face some challenges in China. In order to deal with it effectively, the organization
create innovative strategies in align with country law. The products of the company should be
made able to be monitored from manufacturing to the consumption level enabling effective
and fast inventory management and develop insights into the consumer shopping behaviour.
Woolworths is also recommended to aim at forming its strategy consistent with that of legal
and political factors of China so as to provide products at competitive price(Hickman, &
Silva, 2018). This is due to the fact that consumer preferences and social trends are showing
fluctuations and these can be effectively identified using innovative strategy. The
recommendations to Woolworth’s strategy also includeto look towards further increasing its
assistance from experienced employees by way of effective training and development tool.
Apart from this, Woolworths is recommended to focus on its warehousing operations
throughout all cities of China with smaller actions on a regional basis. It canprovide them

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some benefits in terms of reducing investments in storage services and dropping double
handling between sites. However,more investment is required during peak season in extra
facilities. The period when such facilities are at the highest price, careful analysis should be
done by the management (Xia et al., 2018). Developing a structure of three or four large
provincial distribution facilities can be considered as the most advantageouswayto allow for
adequategrowth when required and extra space should be rented at lower times. Woolworth
can also enhance its practice of suppliers delivering directly to the outlets making the
production and supply system more efficient.The managementcan also design internal growth
strategies as part of business expansion strategy. The internal growth planning would
doubleits strengths and reduceits weaknesses. These strategies are usually low in risk because
the companyconcentrates majorly on refining what it does already.

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Marketing and R&D Considerations:
Marketing and R&D considerations play an important role in the growth and success of an
existing organization in a new market place. In general, the marketing can be defined as the
set of activities that are conducted for purpose of increasing awareness of company and its
products and services in the target market. The marketing and promotional activities are also
very important for the generation of extra ordinary sales in the target market. In context of
international expansion of trade, different factors need to be considered while planning and
investing in the marketing and promotional practices (Bjorksten and Hägglund, 2010).
Woolworths Plc has planned to expand its business in the territories of China. The culture and
values of the people residing in China is highly different as compared to culture and the
social values of Australia, which is the home country of Woolworths. In this context it
becomes very important for the management of company to understand culture and cultural
values of China while planning any business strategy.
In context of Chinese market, it would be appropriate for the management of Woolworths Plc
to adopt the localization strategy. Under this localization strategy, Woolworths Plc will need
to adopt local values and beliefs of the people. Most of population of China is habitual to read
and understand the local language (i.e. Chinese language). It would be a good initiative for
management of Woolworths to plan Chinese version of its website for showing the respect
for Chinese culture and their beliefs (Tang, 2010).. This would improve the brand image of
company among residents of country. It is also important for company to make advertisement
of its products and services in the local language. This would lead to maximum attraction of
the target population for the products. The company may adopt strategy to use two languages
(i.e. Chinese and English) for presenting different product specifications over product

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packaging. This approach is also appropriate for the outdoor advertising like shine boards,
hoardings etc and television advertising.
R&D stands for the research and development practices of an organization. The investment in
R&D activities is also very important for an organization for purpose of ensuring the success
of business in a new marketplace. Woolworths Plc is planning to enter into the retail market
of China, which is very new and strange for its management. In this context, there is risk of
failure of the business, if any pro-active actions are not taken by the company. So, the
investment in research and development activities becomes important for Woolworths Plc in
order to understand the needs and expectations of potential customers in chosen marketplace
(Rhoads et al., 2014). Initially, it can be appropriate for the company to look after opening of
its stores in big cities of China. The research and development activities can be carried out
over different big cities of the country. This would help to evaluate the feasibility of making
investigation of different factors of the top cities and making their comparison. Example of
factors that can be considered for the evaluation and comparison of cities involves population
size, demographical details, current level of development, transport facilities etc. This will
ultimately help to find out the most suitable geographical regions or cities for initial opening
of the stores of Woolworths.

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International HRM Issues and Considerations:
There are different human resource challenges that will be faced by Woolworths while
running its business in China. There is war for talent situation in China. For example, most of
companies that are operating in China are facing difficulty in finding and retaining the critical
skilled and top performing manpower. The increasing cost of labor is also a major HRM issue
that might be faced by management of Woolworths Plc while running its business in China.
For example, the real wages of labor in China in the production segment has evidenced
increase of 12%. This situation can be challenging for the profitability of company (Ginkgo,
2017). Another major challenge related to HRM that will be exposed to Woolworths is the
higher employee turnover. It is so because the average employee turnover of private
companies operating in China is 19%, which is very high. This kind of situation can enhance
the cost of recruitments and human resource management to the company. This can
ultimately hamper the profitability performance of company.
Apart from these, the management of Woolworths will also face the HRM challenge of
diversity of culture and language of the employees. The employees belonging to China are
mostly aware of Chinese culture and Chinese language. The basis language of spoken in
China is Chinese, which can create problem for the company. The employees belonging to
Australia are not much familiar with such language and culture, which can create conflicts at
the workplace in company in China (Liu and Tao, 2012). It can be suggested to the company
to focus on usage of an official language at the workplace (i.e. English, as it is a global
language). In addition to this, the company can arrange cross cultural training programs for
its staff for purpose of mitigating the cultural conflicts among the staff.
In China, there is also the challenge of HRM issue of lack of qualification. For example, 10%
of the overall candidates in China lack appropriate qualifications required for recruitment in a

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foreign company running in country. Due to this factor, there is very high level of
competition among the foreign business firms in China for recruitment of highly qualified
employees. Due to this issue, the Woolworths Plc has to hire the qualified employees at
higher level of remuneration package as compared to its stores in other countries. One of the
HRM issues that may be faced by company in China is related to false data in resume of the
candidates. According to a research conducted by Kroll, 20% of the job applicants in China
have discrepancies in their resumes as compared to their original qualifications (Ginkgo,
2017). It means, the company has to put extra efforts in China in order to find out genuine
applicants for any vacant position in the business.

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Conclusion
On the basis of above report, it can be concluded that Woolworths can successfully go for
business expansion in China as the country offers good business development opportunities
through better cultural and technological factors. However, the legal and political conditions
in China are not exactly fine and may cause hurdles in business expansion. To deal with this,
Woolworths is required to operate with careful planning utilisingavailable resources. The
Chinese market can be grabbed significantly but it could take some time for the organization
to understand and interpret the dynamic nature of the market and target customers.

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References
Chimhundu, R., (2018). Marketing Food Brands: Private Label versus Manufacturer Brands
in the Consumer Goods Industry.Germany: Springer.
Grimmer, L., (2018)The diminished stakeholder: Examining the relationship between
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Behaviour, 17(1), pp.e13-e20.
WidyaYudha, S., Tjahjono, B., &Kolios, A. (2018).A PESTLE Policy Mapping and
Stakeholder Analysis of Indonesia’s Fossil Fuel Energy Industry. Energies, 11(5), 1272.
Li, Y., Lu, Y., Ma, L., &Kwak, Y. H. (2018). Evolutionary Governance for Mega-Event
Projects (MEPs): A Case Study of the World Expo 2010 in China. Project Management
Journal, 49(1), 57-78.
Song, J., Sun, Y., & Jin, L. (2017).PESTEL analysis of the development of the waste-to-
energy incineration industry in China. Renewable and Sustainable Energy Reviews, 80, 276-
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Wu, Y., Xiao, X., & Song, Z. (2017). Competitiveness analysis of coal industry in China: A
diamond model study. Resources Policy, 52(1), 39-53.
Li, Y., Li, P., Li, X., & Zhang, P. (Eds.).(2017). Economic Analysis and Forecast of
China.Gemany: Springer.
Xia, Q., Qiu, Y., & Zhou, M. (2018). Economic regulations of coal enterprises’ scale
expansion in China. Resources, Conservation and Recycling, 129(1), 366-372.

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Hickman, C. R., & Silva, M. A. (2018). Creating excellence: Managing corporate culture,
strategy, and change in the new age. UK: Routledge.
Ginkgo (2017).Top 5 Human Resources Challenges in China. Retrieved from:
https://www.ginkgosearch.com/top-5-hr-challenges-in-china/
Liu, J. and Tao, H. (2012).Chinese Under Globalization: Emerging Trends in Language Use
in China. USA: World Scientific.
Tang, F. (2010). Marketing Strategies of Chinese Companies: Focus on Germany und
Europe. Germany: DiplomicaVerlag.
Bjorksten, J. and Hägglund, A. (2010).How to Manage a Successful Business in China. USA:
World Scientific.
Rhoads, R.A., Shi, S.X. and Chang, Y. (2014).China's Rising Research Universities: A New
Era of Global Ambition. USA: JHU Press.

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