International Management: Analysis of Expansion of Woolworths in Russia

The report provides an analysis of the macro environment of Russia as a prospective host country for Woolworths who wants to expand its operations in the chosen country. The report uses PESTLE Analysis to analyze the legal and political, economical, cultural aspects, CSR and ethical aspects of the country. The report concludes that although there are several limitations in the economy, the country appears to be a good location because of the emerging purchasing consumers and their capacities.

Running head: INTERNATIONAL MANAGEMENT
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Name of the Student
Name of the University
Author Note

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Executive Summary
The given report is based on the general factors governing in the environment of the host
country, Russia. International business is considered to be a crucial aspect of an organization and
any organization which aims to expand its operations, is required to ensure that essential analysis
of the host country are thoroughly analyzed. The international organization which is chosen for
expansion is the Woolworths in Australia. The host country which is chosen for the expansion is
Russia and using the PESTLE Analysis framework, the environment of Russia was analyzed. It
was found that although there are several limitations in the economy, the country appears to be a
good location because of the emerging purchasing consumers and their capacities.

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Table of Contents
Introduction......................................................................................................................................3
Brief company Background of Woolworths....................................................................................3
Reason for expansion...................................................................................................................4
Brief Introduction to Russia.............................................................................................................4
Macro Environmental Analysis of Russia.......................................................................................5
Political & Legal Analysis...........................................................................................................5
Legal Analysis.............................................................................................................................6
Economic Analysis......................................................................................................................7
Cultural aspects............................................................................................................................9
Ethical and CSR in Russia.........................................................................................................10
Conclusions and Recommendations..............................................................................................11
References......................................................................................................................................12

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Introduction
International Business is often considered to be an essential aspect of an organization. In
order to gain a competitive edge in the global business environment, the different organizations
are required to expand their horizons and look out for expansion opportunities in different parts
of the globe. For this purpose, the primary aim of the given report is to analyze the general
factors underlying the economy of the host country, Russia. In this manner, the different
governing factors can be understood and the expansion decision can be made (Bryce, 2017). The
company which has been chosen for the purpose of the assignment is Woolworth`s Australia.
The Woolworths Australia is an Australian Supermarket store which has business in Australia as
well as certain parts of New Zealand. However, as a growth strategy, Woolworths has been
looking forward to expand its operations in different parts of the globe and thus, Russia is being
considered as a host country. The report will follow a structured format whereby an introduction
to the organization will be given which will then be followed by the briefing on the host country.
The latter half of the report will be using six aspects namely, Political, Legal, Economic, Cultural
and CSR & Social Responsibility in order to understand the feasibility of the chosen expansion
idea. The report will also be providing certain recommendations based on the same.
Brief company Background of Woolworths
The Woolworths Supermarkets is an Australian grocery chain which is owned by
Woolworths and is owned by the Woolworths Limited. The organization was found in the year
1924 and along with its competitor Coles, the organization forms a duopoly in the Australian
supermarket and forms approximately 70% of the supermarket share. The primary specialization
of Woolworths lies in selling grocery items like vegetables, meat, fruits, packaged foods and
other items, however, the store also sells DVDs, household items, pet supplies, stationery items,
beauty products and other related items. The organization has more than 1000 stores across
Australia and has an e-commerce website as well. The firm also allows home shopping delivery
services (Woolworths.com.au. ,2018). Woolworths is a household name in Australia and has
offices in various parts of the country where they stock fresh fruits, vegetables, large range of
food items, private labels as well as imported items. With time, Woolworths has adapted to the

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advance technology and expanded to New Zealand as well. However, in order to ensure the
sustenance of the company, the firm should consider expansion to other parts of the globe. The
different reasons for expansion are as follows:
Reason for expansion
 Global expansion is a driver to revenue growth: Global expansion shall assist
Woolworths in achieving a higher revenue growth as this would go a long way in
assisting a business to engage in economies of scale, which will allow larger sales with
lower costs.
 It provides access to a wider consumer base: The consumer base of Woolworths will also
increase considerably in case it plans to expand.
 Increases market share: The market share of Woolworths in Australia is already quite
high. An expansion to the different parts of the globe will allow the firm to have a larger
market share in the international market as well.
 Access to Raw Materials: Very often Woolworths has to import certain raw materials and
hence, this increases their cost. However, in case they expand internationally they can
easily have an access to these raw materials.
Figure 1: The drivers of expansion
(Source: Wolterskluwer.com., 2018).
Brief Introduction to Russia
Russia can be stated to be the largest country in the globe. The country has an average rea
of around 17098.242 thousand square kilometers and is located near to Eastern Europe and the

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northern part of Asia. The country borders to around 16 countries and runs on a Federal
Republic Political system. The legislation which is followed in the country is the Bicameral
Parliament. The capital of the country is Moscow. The population of the country is around
143.800 million people and the official language of the country is Russian with the primary
region followed is Christianity (David-Fox, 2015). The monetary unit of the country is Ruble.
Macro Environmental Analysis of Russia
The following section will be discussing the macro environmental analysis of the Russia
as a prospective host country for Woolworths who will want to expand its operations in the
chosen country. Legal and Political Economical, Cultural aspects, CSR and ethical aspects of the
country shall be analyzed (Hill, Cronk & Wickramasekera, 2015). Primarily this analysis is
popularly known as the PESTLE Analysis. The PESTLE Analysis is a crucial strategic tool
which is used to analyze the macro environment of a country and assists in examining the
thorough general factors lying in the environment.
Political & Legal Analysis
The understanding of the political environment of a business assists in understanding the
freedom which a business has in the economy and their performance based in the long run. In the
year 1993, Russia turned out to be the Federation of Russia and runs with a semi presidential
republic system. The country runs under the same system even today (Hubbard, Rice & Galvin,
2014). This is because, stability is an important aspect of the country and a stable regime and a
policy goes a long way in assisting the country to gain higher investments. The current president
of the country is Mr. Dmitri Medvev and the Prime minister is Mr. Vladimir Putin. Although
Russia is considered to be a Federation, it tends to run on the involvement of the primary
government and even with the interference of the local government. There exists a lack of
freedom in the economy and although there exists a strong judicial system, the prisoner rate is
quite high (Wolterskluwer.com., 2018). The Russians follow an open foreign relationship
strategy and hence, the trade and economy of the country is considered to be viable for any
organization which aims to expand to the chosen country. Moreover, the military base of the
country is also good and it has a well-developed as well as home grown arms industry

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(Danilevskii & Woodburn, 2013). The government tends to support the development of the
technology and hence, the foreign relationship policy tends to play a major role in the stability of
the country as well as the growth of the economy. As the country shares a favorable relationship
with other countries, the sense of safety and security of the business operations in Russia is quite
strong and persuades other companies to invest in the economy of the country (Harrison & John,
2013). Given below is the political stability indicator of Russia for a period of 1996-2016. The
average value was -1.01 and the minimum was -1.51 with a maximum of -0.72.
Figure 2: The Political Stability in Russia
(Source: IBISWorld., 2018).
Legal Analysis
When the country was transforming from a communism to a capitalistic regime, Russia
changed its laws so that it could match with the new regime and the present law is more in
association with the Western approach and is systematic in nature. The corruption rates of the
country have been quite high in the past few years and in the index as measured in the year 2017,
Russia ranked around 135 out of the 176 considered companies which is very poor and portrays

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an image about the lack of transparency in the economy. The Russian law of trade is the law
which Woolworths would be required to take into consideration and as stated in the previous
section, the country does not discriminate between he foreign investors and the national investors
which thereby ensures ease of operations. With respect to the laws related to the to the retail
grocery industry, the government has strict antimonopoly laws and other related Law on Trade.
Figure 3: The Corruption Data
(Corruption Perceptions Index., 2018).
Economic Analysis
The economic freedom in Russia is 58.2 and hence, it can be stated to be the 107th in the
2018 index. The higher score is a reason of the trade freedom and tax burden indicators on the
chosen economy (Stone, 2013). The transition of the country from a centrally planned economy
to a market based regime, has stalled the growth of the economy. Moreover, in relation to this,

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there have been various economic reforms.
Figure 4: The GDP of Russia over the years
(Source: IBISWorld., 2018).
The economy is being largely dominated by the state owned government and other
inefficient institutions. The jurisdiction is corrupt and there are weak protection of the property
rights. Trade is crucial and the value of imports as well as the exports equal to around 46% of the
GDP (The World Bank., 2018). The tariff which is applied is 2.8% and the restrictions which are
sectoral in nature tend to limit the foreign investments, however conducive the economy might
seem.
Figure 5: The Economic Freedom score of Russia
(Source: IBISWorld., 2018).

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The country primarily relies on its natural resources and moreover, the GDP of the
country can be stated to be the 10th largest around the globe. Moreover, it has an upper middle
income mixed economy and the domestic consumption has increased considerably. The average
nominal salary in Russia is around $1090 per month and the unemployment rate is around 6%.
Cultural aspects
The Russian culture as a long history and the country is divided into various aspects of
the economy like arts, folk dancing, philosophy, ballet, cinema, animations and politics. The
culture of Russia has grown from East Slavas and was influenced by the tribes (Bettis,
Gambardella, Helfat & Mitchell, 2014). The country ranks 7 in the National Brands Index and
for this reason, various aspects of the culture are not known to many foreigners which then
causes problems to them in various expansion aspects. The country is one of the global leaders in
energy export and moreover, the country due to its limited approach has a mass level of potential
unfulfilled (Hofstede, 2018). Hence, when conducting business in the country, the complex
nature of the country needs to be considered effectively.
The Hofstede cultural dimension
Figure 6: Hofstede`s comparison between Russia and Australia
(Source: Hofstede, 2018).

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Power distance
Russia as observed scores relatively high in this domain as compared to Australia and
hence, it can be stated to be highly centralized and the power is concentrated unlike in Australia.
Individualism
The individualism in Russia is low as compared to that of Australia and hence, they are
concerned about the society and family (Johnson, 2016).
Masculinity
The low score in Australia reflects that they value quality of life and success. Moreover,
they understate their personal achievements, capacities as well as contributions.
Uncertainty avoidance
They are not willing to take risks and have developed complex bureaucracies around the
globe. Moreover, Australia is quite the opposite in this case (Barney, 2014).
Long term orientation
With a high score, the country seems to have developed a pragmatic mindset.
Indulgence
The Russians are restrained in their actions and are mostly pessimism.
Ethical and CSR in Russia
The business ethics in Russia has been improving and more local companies now seek to
apply western standards and their ethical codes as well so that they can function easily in the
corrupt environment and foster a sense of trustworthiness (Hill, Jones & Schilling, 2014). These
codes which are formed by the different companies state various aspects regarding daily
operations and employee life. Earlier, the processes were not clear but now the government has
planned to increase the transparency and formed specific guidelines which may take a few years
to deploy.

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With respect to the corporate social responsibility, in Russia this is highly taken into
consideration with the different charity projects and the businesses have begun to realize that
they need to give it back to the society (Jarzabkowsk & Kaplan, 2015). The different companies
in Russia carry out social responsibility in the form of helping various schools, hospitals and
other funds. However, there exists certain restrictions to the development of the CSR in Russia
is that the environment has been depleting. Moreover, there exists no support from the
government’s side to encourage the companies to make them invest in CSR.
Conclusions and Recommendations
Therefore from the given analysis, it can be stated that Russia, which has been taken as a
host country is quite unique in nature. Moreover, the economy has been recently developing and
there have been various legislative reforms which allow the foreign businesses to make
considerable investment in the long term. With respect to the given analysis, it can be stated that
Woolworths in Australia can look ahead to investing in Russia because of its emergence as a
global economic power. Although after the analysis of the economic and political environment, it
can be understood that the overall scenario seems uncertain, but the consumer purchasing aspect
of the economy has improved considerably and the customers look out for better products.
Understanding of the economic culture will be a major barrier for Woolworths but in the overall
context, it can be stated that Russia has obscured its static past and now is marching towards
development. Hence, this development and growth pace needs to be captured by Woolworths
and can be used as a source of its expansion and increase in market share.

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References
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