Strategic Entry into the Chinese Market: Woolworths Limited

The assignment content discusses the market entry modes for Woolworths Limited to enter the Chinese market. The content highlights the risks and opportunities factors of both markets were also discussed, along with those results, market entry modes were suggested to the Woolworths Limited to enter into the Chinese market for the establishment of their effective position in the competitive type of market.

Running Head: International Strategy
Woolworths Limited
International Strategy

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Table of Contents
Introduction......................................................................................................................................2
Global Scan and Audit analysis.......................................................................................................3
Indian market...............................................................................................................................3
Chinese market.............................................................................................................................3
Cultural and Market fit....................................................................................................................5
Woolworth Limited’s Strategic capabilities....................................................................................6
SWOT analysis of Woolworths Limited......................................................................................6
Risks involved in the Indian and Chinese business environment....................................................8
Recommendation.............................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
Woolworths is a retail store in Australia and it was established in 1924 under the name of
“Woolworths Bazar Ltd.”. Afterwards, it got registered under the name of Woolworths Limited.
In the Australia, they have approximately 1000 supermarkets which are serving various types of
goods. Mainly they deal in household items such as vegetables, fruits and other types of
perishable as well as non-perishable goods. The service provided by Woolworths Limited is very
useful in terms of the public as they do not need to rush to various stores and shops for
purchasing different category's products as mostly all products are available under one roof of
Woolworths Limited. Along with a large number of supermarkets stores in the Australia,
Woolworths Limited is present in global market too. In addition to this, Woolworths Limited has
planned to expand their business in another country of the world and for this, India and China
were selected. Amongst them, only one country will be chosen in order to expand the
Woolworths Limited’s supermarkets. These locations were chosen on the basis of their growth
rates in the recent years. China and India both are at the peak position in terms of the most
emerging markets across the globe. To complete this analysis, various business techniques will
be covered under this report such as determination of strategic capabilities of India and China,
analysis of risks and opportunity factors present in the host countries business environment will
also be assessed, and along with these, cultural and the market fit evaluation will also be
included in terms of selection of the most suitable market for the Woolworths Limited for its
operations in the global market.

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Global Scan and Audit analysis
Woolworths Limited is planning to expand their business in the international market. To convert
this idea into reality, marketing team and the management of the organization are given the
responsibility for evaluating the available risks and opportunities in the selected destinations i.e.
India and China in terms of successful expansion. Hence, the first step to evaluate the potential
market for Woolworths Limited will be global scan and the audit analysis of these two countries
(Frynas & Mellahi, 2015).
Indian market
The global scan is the term which could be used in order to evaluate all the risks and the
opportunities available in the particular market for an establishment of the foreign companies.
Marketing team and the management of the organization has determined various opportunities in
the Indian business environment in order to establish the supermarket store under the brand name
of Woolworths Limited. This will help the organization to evaluate the factors present in the
Indian market which could affect the performance of the business in positive or in the negative
manner (Mishra, 2017).
The scope of an establishment of supermarket store in Indian market is present because, in recent
years, the Indian economy has increased at the good rate and their GDP and the purchasing
power of the Indian people is also increasing with every passing year. Current GDP of India is
$2.454 trillion and the growth in the GDP is recorded at 7.2% from the last year. Prior to this,
most of the income of India was used to come from the agricultural sector but after adaptation of
certain strategies and the invitation of foreign companies to invest in India, contribution towards

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the national economy has increased from the other sectors which as service sector are the biggest
contributor to the Indian economy. The government of India has also promoted the youth of the
country in order to utilize the available resources of the country and government has also started
various policies under which people are provided support in terms of finically for starting up the
business with a unique idea (Boutabba, 2014).
Hence, Woolworths Limited would not face any challenge in terms of establishing their
supermarket store in India. Establishment of the supermarket store will also be beneficial in
Indian market because land rates and the labor rates will be cheaper in comparison to the other
countries as well as in comparison to the Chinese land and labor rates (Piekkari, Welch & Welch,
2014).
Chinese market
China is the most populated country across the globe and for controlling the population, they
have taken various steps to control the population and it is expected that in the next census
report, India will gain the peak position in terms of highly populated country. Despite being the
highly populated country, the Chinese government has utilized its man power resources
efficiently and effectively. Most of the big multinational brands’ products are manufactured in
China due to its low labor rates. China is moving towards the developed nation’s category very
rapidly and through adopting various unique and advanced strategies through which available
man power could be utilized. Chinese GDP is increasing at the rapid rate and the current GDP of
China's economy is $11.8 trillion and the growth in the GDP was recorded at the 6.7% from its
last year’s GDP (Wu & Chen, 2014).

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The high population of the country will also result in the positive factor for the Woolworths
Limited because with the increase in demand; the number of outlets will be established in the
Chinese market to fulfill the demand of the public. Apart from the population factor, Woolworths
Limited will be able to arrange the workers and the employees for its outlet at very cheap rates.
Efficiency and the effectiveness of the Chinese market could be analyzed from the national
income of the country in the year of 2016 i.e. $21.37 trillion which is high from the United States
of America and it is very high from India's national income. This is due to the optimum
utilization of the available resources and in the manner, China has used its man power, no
country is able to do the same yet. Apart from the utilization of available resources, the Chinese
market is so creative through which most of the multinational companies have shown their
interest in performing the business activities with China. For instance, Apple Inc. and other big
companies had contracted with China for manufacturing their products due to cheap labor rates
(Mastel, 2016).

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Cultural and Market fit
While moving towards the global market, Woolworths Limited needs to evaluate some business
factors in order to analyze the success of their supermarkets in an Indian and Chinese market.
Numerous cultural factors are available in the business environment through which Woolworths
Limited’s performance may get affected. While establishing the business in the global market,
along with the cross-border issues, cross-cultural factors also exist which affects the business
activities. Cultural factors such as publics influence over the business, acceptance by society,
communication strategies, etc. Generally, Indians prefers to choose the local shops and grocery
stores in order to get the products at cheaper rates (Kleinman & Lin, 2013). Supermarkets’ rates
and the general store’s rates may differ due to its processing activities, packaging, etc. Below are
some cultural factors present in India and in China:
 Attitudes and Styles: Indian customers believe in bargaining process while purchasing
whereas it is not practiced in China and in supermarkets, bargaining system is not
allowed. In order to attain the profits and the goals set up by the management of the
organization, they offer various offers in relation to the products and services offered by
them. Indian has the birth right to negotiate in the price of the products in order to save
the certain portion of the money. Whereas, these issues are not present in the Chinese
market and this is the reason for a rapid increase in the foreign direct investment rate in
the Chinese market (Fang, 2014).
 Distribution of information: Woolworths needs to establish the pattern of transparency
between its profits and the cost of goods sold. According to the Indian market, it is
crucial to establish the position in the customers’ mind and building trust amongst them

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through providing various attractive offers in order to sufficient response from the public.
For instance, Uber is a private taxi service company which was established in the United
States of America. While moving towards the Indian market, they launched various
attractive offers for the customers as well as for the drivers to build the trust level in
customers. And after the establishment of goodwill, they raised the rates, as well as few
offers, are provided to the regular consumers (Cappelli, et. al., 2015).
 Decision Making: Indian processes are quite slow in comparison to China's decision
making processes. Hence, if the Woolworths Limited will choose to adopt the Indian
market to expand their business, then it may get delayed due to slow decision-making
processes over there. Very few government authorities regulate their activities on time.
This could be estimated through analyzing a legal case study in Indian law court.
Apart from these factors, there are certain market entry modes available in the global market
environment through which organization could take entry in the host country for the expansion
of business purpose. While selecting the market entry mode, adequate rules, regulations and the
policies need to consider in order to fulfill those requirements as well as to avoid any kind of
glitch in the performance (Stahl & Tung, 2015).

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Woolworth Limited’s Strategic capabilities
Woolworths Limited has built its brand image in the Australia and for the growth terms, they are
planning to expand its business in the global market and for the purpose of expansion, Indian and
Chinese markets are chosen from the perception of high population. These countries are chosen
on the basis of its population because this factor leads to the expansion of the business rapidly
with the increase in the demand. Following are the factors which describe the strategic
capabilities of the Woolworths Limited:
 Financial Position: In recent years or from the period of its establishment, more than
1000 stores have been opened in the Australia only. This shows the major success of the
organization and establishment of new outlets requires huge investment and
establishment of this number of stores shows the strong financial performance of the
organization. Woolworths Limited has achieved the growth rate of 7.96% in recent five
years which is quite high in comparison to its primary competitors (Bayne, Schepis &
Purchase, 2017).
 Brand Image: Development of brand image requires adaptation of adequate strategies
such as providing adequate qualitative products; provide regular offers, adaptation of
adequate promotional and advertisement techniques, etc. As per the survey report of
2005, Woolworths Limited was ranked at the top position in terms of a retailer for
adaptation of the innovation strategies. Afterwards, in 2012, it was ranked at the peak
position for as the sustainable retailer and recently it is ranked as the major online
distributor of products and services in Australia.

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 Consumer and supplier relationship: The policies developed by the Woolworths
Limited are strong enough to contribute towards the establishment of the long term
relationship between the suppliers and the consumers. Regular offers provided to the
customers help the organization to maintain the relationship with consumers. Apart from
the relationship with consumers, an organization has adopted the set of rules and the
regulations through which organization is able to maintain the same sort of relationship
with the suppliers also (Das Nair & Dube, 2017).
According to these strengths and the positive points available in the workplace of Woolworths
Limited, management of the organization is determining its survival in the new environmental
conditions. The analysis of the risks and the cost impact will be discussed below in relevance
with the strengths of the organization.
SWOT analysis of Woolworths Limited
Strengths
 The main strengths of the organization
have been discussed already. The brand
image of the Woolworths helps the
consumers to trust the quality delivered
by them. As the first motive of
Woolworths is to deliver adequate
qualitative products to its consumers
(Gunjal, 2017).
 Along with the qualitative products, an
Weaknesses
 With the huge brand name, the debt
ratio is also increasing with the passing
year. As per the report of 2012,
organization's debt rate was at the peak
in comparison to the last five years'.
 Woolworth Limited is present in
Australia and in New Zealand. To beat
its primary competitors such as Wal-
Mart, they need to expand their

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organization has developed the
strategies through which adequate
relationship could be maintained with
the consumers.
 Pricing strategy adopted by them is also
their strength which does not impact
much burden over the consumers as
they directly purchase from the
manufacturers hence; a cost of
mediators are not included in their
product's price (Lima, 2014).
business in the Asian countries, in
European countries and in the US
market (Scott & Walker, 2017).
Opportunities
 The biggest opportunity for the
Woolworths Limited is expanding its
business in other parts of the world
except for Australia and New Zealand
(Marten, et. al., 2014).
 Apart from the global expansion
physically, Woolworths Limited could
also adopt the strategy of expanding its
business through online platforms.
 Apart from the household items, they
should also concentrate on the other
Threats
 The low-price policy adopted by its
competitors is the biggest threat for
Woolworths Limited.
 The uncertainty of the Australian
business environment and the
amendments made by the Australian
government in terms of retail market
are the factors through which business
could be impacted (Jie, Parton & Chan,
2015).

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items such as pharmaceutical goods,
alcoholic drinks, etc. (Martin, 2017).

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Risks involved in the Indian and Chinese business environment
There are a number of risk factors available in the Asian countries for international companies
such as the change in the environmental conditions, macros as well as micro environmental
factors, cross-cultural factors, etc. (Guha, et. al., 2014).
 Legal System: Rules and the regulations of the Australian country differ from the rules
and the regulations followed in Indian as well in the Chinese market. Whereas India
invites the foreign companies to operate its business functionalities in their country,
China has an optimum number of foreign companies which are already operating in their
country and with this effect; they have the huge foreign direct investment rate across the
globe. As Woolworths Limited is dealing with all types of goods in Australia such as
household goods, alcoholic drinks, etc. But in some parts of the India, consumption as
well as selling of alcoholic products is banned. Hence, all these rules need to be followed
in order to achieve sufficient growth as well as to avoid glitch in their performance
(Mahendra Dev, 2014).
 Tax System: Australian tax policies and the exemption of tax policies differ from the
Indian as well as Chinese tax system. Whereas in India Goods and Sales Tax has replaced
all other taxes, China is practicing the same sort of tax system for a long period of time.
Apart from the system, the Indian government may impose any tax rate in terms of
international organization for increasing their revenues. Hence, it may lead to the increase
in the prices of the products and the burden will be imposed on public directly. It could
result in the decrease in demand of the products offered by Woolworths Limited in both
the countries (Gereffi & Luo, 2015).

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 Environmental Conditions: Woolworths Limited may face some difficulties relevance
with the environmental conditions while expanding their business activities in the global
market. China’s and India’s global environment is unique from the Australian and the
New Zealand’s market conditions (Wu, et. al., 2015).

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Recommendation
As per the above analysis in relation to the expansion of the Woolworths Limited in the global
market, various destinations were analyzed but the most emerging markets of the world were
selected i.e. India and China. The central focus for choosing these two countries was their
emerging market conditions. Apart from the emerging market conditions, their population was
the second best attractive option for Woolworths Limited to expand their business over there. In
the retail industry, Wal-Mart has achieved the most favorable position across the globe in terms
of the retail industry as well as in terms of maintaining consumer and the supplier relationship.
Woolworths Limited is planning to beat its primary competitors and for the same, they have
adopted the policies of expanding their business in the international market apart from Australia
and New Zealand.
It is observed from the above techniques that China will be the favorite destination for
Woolworths Limited in terms of their expansion of business and in order to achieve the desired
objectives. The major reason behind the selection of the China market was its emerging
marketing conditions and along with this feature, most of the international companies are
working China and many are trying to work with China for achieving better growth and success
in the global market. Apple Inc., Samsung, and other big consumer electronic appliances
companies have developed their production centers in China market in order to maintain the
price of the products because if these are produced in the US market, the cost of the product will
be rise by approximately 50% from production in China. This is due to the low rate workers
available in the Chinese market and the low wages workers are available there due to the high
population of the country. The Chinese government has used its manpower to its optimum and

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this is the major reason for huge FDI in China. As per the survey report, most of the
multinational companies across the globe have established their presence in the Chinese market
whereas, many are planning and fulfilling the requirements of government to operate their
functionalities in order to attain the organizational objectives as well as to obtain the adequate
position in the international market.
To enter the Chinese market, adequate sort of entry mode needs to be adopted that could help the
Woolworths Limited in order to retain their brand image and goodwill could be improved in the
global market as well. Various entry modes are choosing the partnership type of business and
form the partnership firm with a reputed local brand in the supermarket. Apart from this, direct
exporting and the joint venture type of business could also be adopted in order to attain the
business objectives such as expansion in the global market.

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Conclusion
From the above discussion, it is concluded that the international movement is quite necessary for
the business organization in terms of the expansion in the global market. Woolworths Limited
has adopted the same sort of strategy in terms of developing the goodwill and expanding their
business in the global market. For the same, various analysis and the market research activities
were conducted in order to select the most suitable country for Woolworths Limited amongst the
India and the China. After obtaining results from the analysis conducted, China market was
selected for the expansion of the business and to achieve the desired goals for the organization.
Addition to the risks and the opportunity factors of both markets were also discussed and along
with those results, market entry modes were suggested to the Woolworths Limited to enter into
the Chinese market for the establishment of their effective position in the competitive type of
market.

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