PESTLE Analysis of Woolworths Supermarkets of Australia

This article conducts a PESTLE analysis of Woolworths Supermarkets of Australia to identify the macro environment factors affecting the company's operations and growth. The six factors of PESTLE analysis - Political, Economic, Social, Technological, Legal, and Environmental - are discussed in detail. The article concludes that these factors have a significant impact on the company's operations and success.

Running head: BUSINESS ENVIRONMENT SCAN
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Table of Contents
Introduction................................................................................................................................2
Background information........................................................................................................2
Discussion..................................................................................................................................3
PESTLE analysis....................................................................................................................3
Political factors...................................................................................................................3
Economic factors................................................................................................................4
Social factors......................................................................................................................4
Technological factors.........................................................................................................5
Legal factors.......................................................................................................................5
Environmental factors........................................................................................................6
Conclusion..................................................................................................................................6
References..................................................................................................................................7

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Introduction
Woolworths Group Limited is a multi-facilitated company that was founded in the
year 1924 offering consumers with wide range of products and services that satiates the need
of the demanding consumers (Woolworthsgroup.com.au, 2018). It is one of the essential
Australian company that has its dynamic retail interest in countries such as New Zealand
along with the home country of Australia. The company deals with variety of business chain
such as liquor, hotel, supermarket and others. However, its significant functioning area is in
supermarket stores that are spread across with the brand name Woolworths in Australia and
Countdown in New Zealand.
In the below discussion a PESTLE analysis is conducted for the purpose of analysing
the macro environment of Woolworths Supermarkets of Australia. The six factors that
comprises the PESTLE analysis may have a direct on the functioning of the Woolworths
Limited instead can have a major influence on the overall associated competitors in the Food
and Staples Retailing industry. This analysis shall help the firm to identify the operating
obstacles that it may face in the field of macro environment.
Background information
Woolworths Supermarket is a multi-chain grocery store founded in the year 1924 in
Sydney, Australia (Woolworthsgroup.com.au, 2018). The company’s mission is to provide
the consumers with a convenient and useful products all in one place in cheap price range. On
event of the company’s inauguration the founding Chief Executive Officer, Mr Percy
Christmas commented that each individual requires a convenient place where quality
products should be available at affordable rates (Woolworthsgroup.com.au, 2018). The
company still now follow by this statement and offers quality products at cheap prices. The
company first expanded its venture in the year 1927 in Brisbane and despite of the ongoing

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economic depression that overtook the entire globe in following years the company was able
to survive it all and grow gradually. The company adopted to the evolving environment and
flourished its way over a large context. At the moment, the Woolworths Supermarket have
almost 1000 stores spread across Australia and operates through online channel as well.
Discussion
Woolworths Supermarket is a well-known grocery firm that satiates the need of
millions of consumers spread throughout the nation. However, in recent times the company
have faced certain difficulty in operating. Therefore, the below discussion deals with
PESTLE analysis which will help identify the factors affecting the organisation in a macro
environment.
PESTLE analysis
The PESTLE analysis is a strategic tool that helps an organisation to identify
operating challenges that are present among the distinctive factors of macro environment
(Aithal, 2016). Below the six factors are discussed in details –
Political factors
The company has struggled over past few years due to the allegations regarding the
company’s unsustainable operating terms along with implementation of new policy plans
over the supermarket sector. The main obstacle that the company has faced over the years due
to the introduction of development policy in the sector of supermarket, fuel and others made
by the political party namely the Bank Reform Party (Burgess, 2018). The party released a
policy that constraint the negotiating terms of the supermarket companies on its suppliers.
Henceforth, making a major impact on the Woolworths functioning. Furthermore, the party
introduced an independent regulating body that would supervise the operating strategies of

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companies that are associated with supermarket sector for the purpose of reducing the unfair
actions.
Economic factors
It has been observed that the Australian consumers have a comparatively high
standard of living which in result affects upon the sales of the company. Therefore,
Woolworths have an advantage of operating in a stable economic environment. The Gross
Domestic Product per capita in Australia recorded for the year 2017 was at 44648.71 USD
which was an all-time high record since the previous years ("Australia GDP per capita PPP |
1990-2018 | Data | Chart | Calendar", 2018). This has benefited the company to achieve profit
for a long run.
The company’s first quarter sales growth showed a significant development compared
to the prior results. The company recorded as much as 4.3% of sales growth being one of the
strongest contender in the market. It has been observed that the company has achieved a
12.5% rise in profit for the financial year of 2018. However, it is also being observed that
since the company decided to discard the use of free single-use plastic bags the sales growth
have dropped in the new financial year of 2019. This is due to the fact that consumers need to
be adjusted to the phasing out of single use plastic bags. It has been predicted that this drop in
sales growth may improve after the first few months of the financial year.
Social factors
Even though the company enjoys one of the leading position in Australia it has been
observed that the company’s relationship with its suppliers have been one of the major
challenge for the company. The poor attitude towards the suppliers in the market have ended
up resulting in toxic relationship with the suppliers and eventually impacting upon the
operations of the company.

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This has impacted upon the company’s objective of providing quality products to its
customers and as result give rise to dissatisfaction among the consumers. For instance, the
poor relationship of the company with its suppliers resulted in cultural issues and the
suppliers deciding in providing poor quality products to retailers. Masters, one of
Woolworths home improvement operating chain was provided by the suppliers with poor
quality plants and eventually affecting the reputation of the company.
Technological factors
The technological factors have a heavy influence over an organisation or a firm for a
long term. It is to be noted that technology is always on the run of evolution and development
and aims at making the tasks to be completed in a whole lot easier way. Henceforth, majority
of organisations tend to adapt to the technologically advanced systems for making itself one
of the tough contender in the competitive market.
Woolworths being one of the leading company in the market have always been
technologically developed and henceforth making a significant change in its operations and
growth. For instance, the implementation of SAP merchandising systems in the year 2016 for
the purpose of making a less complex operating model. The company replaced its thirty year
old CASS system and made a bold move of introducing this new system upgrade. However,
this technological system upgrade faced many challenges and unstable operating glitches.
This impacted upon the sales of the company in a negative way. Henceforth it can be said that
these technological changes can bring in major impact over an organisations operations and
success.
Legal factors
The legal framework of the nation where the company operates influences
significantly the operations of the particular firm or organisation. The company is bound to

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oblige by the laws set up by the nation and if there is any violation of it, then the company
have to suffer hefty penalties. Now, for ensuring fair play of business and refraining
unjustified means of business the ruling government implies certain acts and law that the
companies have to comply by.
In context of this, the Competition and Consumer Act 2010 ensures the promotion of
fair trading and competition and even ensures protection of consumers and other market
related players such as suppliers, retailers, and others (Legislation, 2018). However, in recent
times, it has been observed that Woolworths was under the speculation of having a poor
relationship with the suppliers and in addition to this, the company was penalised for
conducting anti-competition agreement to artificially hike the price of its products. This
violation of act proved to be a heavy influence over the company’s image for the long run.
Environmental factors
It is one of the significant factors that majority of companies tend to be influenced
from. In recent times, companies are conscious with the way they operate in the competitive
industry. Henceforth, more and more companies tend to practice environment friendly
business that benefits both the company along with the environment.
In compliance to the above statement, Woolworths made the decision of discarding
the single use plastic products such as straws, plastic bags and other products. This action
plan was a huge step that the company took in the year 2018. This made a significant impact
over the sales of the company since the announcement of this action plan. The sales of the
company dropped as the consumers were unable to adjust to this new change. However, the
company predicts to be gaining its sales over the first few weeks of this change.

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Conclusion
Henceforth, it can be said that from the above discussion Woolworths have faced a lot
of challenges in the various fields of macro environment and is still in the process of
recovering from the losses it has endured. It can be also said from the above discussion that
these factors makes a significant impact over a company or an organisation for a long term.
Hence, it is extremely significant to consider these factors while operating in the competitive
environment.
References
Aithal, P. S. (2016). Study on PESTEL analysis technique for business models, business
strategies, operating concepts & business systems.
Australia GDP per capita PPP | 1990-2018 | Data | Chart | Calendar. (2018). Retrieved from
https://tradingeconomics.com/australia/gdp-per-capita-ppp
Burgess, R. (2018). A political hot potato for Coles and Woolies. Retrieved from
https://www.theaustralian.com.au/business/business-spectator/news-story/a-political-
hot-potato-for-coles-and-woolies/fdcc82dd547cca00f6c57f9f09c023ed
Legislation. (2018). Retrieved from https://www.accc.gov.au/about-us/australian-
competition-consumer-commission/legislation
Woolworthsgroup.com.au. (2018). The Woolworths Story - Woolworths Group. [online]
Available at:
https://www.woolworthsgroup.com.au/page/about-us/The_Woolworths_Story/
How_We_Were_Founded/#timeline-1924https://www.woolworthsgroup.com.au/
page/about-us/The_Woolworths_Story/How_We_Were_Founded/#timeline-1924
[Accessed 6 Oct. 2018].