BIZ202: Woolworths' Macro Environment, Challenges, and Strategies

This report provides a comprehensive analysis of the macro-environmental factors impacting Woolworths' business operations, utilizing the PESTLE framework to assess political, economic, social, technological, legal, and environmental influences. The analysis identifies key challenges such as increasing competition, changing consumer trends, technological advancements, and the need for sustainable business practices. The report evaluates the impact of these factors on Woolworths' business, including market opportunities, profitability, and strategic decision-making. Furthermore, it offers strategic recommendations for Woolworths to address these challenges, including product and service differentiation, market development strategies, and a focus on online channels to enhance competitive advantage and ensure long-term sustainability. The report concludes by emphasizing the importance of proactive adaptation to the external environment for Woolworths to maintain its market position and achieve future business success.

Running head: BUSINESS ENVIRONMENT
Business environment
Name of the student
Name of the university
Author note

1BUSINESS ENVIRONMENT
Introduction
In the current business state of affairs, impact and influence of the external business
factors are more than ever. This is due to the reason that in the current business scenario,
organizations are facing different and diverse business situations, which are becoming difficult
for them to cope up with. In this case, it is important for the contemporary business organizations
to effectively determine the external business factors using different frameworks to have the
proper understanding about their trends and patterns (Gupta, 2013). Accordingly, the
organizational strategies can be initiated by them in the long term. In addition, it is also
important for the business organizations to also identify the extent to which the particular
external factor is having their impact on the operations.
In the previous assignment, the micro environmental factors of Woolworths are being
discussed and in this section, the macro environmental factors will be discussed. In addition, the
impact of the environmental factors will also be evaluated from the perspective of the business of
Woolworths. In accordance to the identified challenges, a few recommended steps will be
discussed in this section.
Determination of the external environment
Political factors
In the current business scenario, political factors are important to get determined due to
the reason that changes in the political scenario will change the entire business approach of the
organization. Woolworths are having their major business in Australia and thus the political
scenario of Australia will have the most impact on their business. It is identified that Australia is
having stable political regime in place with having efficient governance. In addition, majority of

2BUSINESS ENVIRONMENT
the political alternatives in the country are pro-business and pro-capitalist. Thus, the business
environment for Woolworths is favorable in Australia (Acemoglu & Robinson, 2013). However,
it should also be considered that pro-business and pro-capitalist approach is also having own set
of challenges. This is due to the reason that with the business friendly approach in the country,
more global companies will get attracted and Woolworths will face increased level of
competition in the market. In addition, it is also identified that Australia is having favorable
political relationship with the major economies across the world including the free trade
agreements with a few countries. Thus, it is beneficial for Woolworths in having larger
opportunities in the global market by means of having more market and trading potentialities
(Marsh, Lewis & Chesters, 2014). However, on the other hand, it should also be noted that
different Australian states are having different sets of business regulations and standards and it is
important for Woolworths to have the proper understanding about these differences and initiate
their business strategies accordingly.
Economical factors
It is reported that Australian economy is growing at a constant rate from the last few
years. This is one of the major positive sides for Woolworths due to the reason that the more will
be the growth of the economy, the more will be the market opportunities for them. However, it is
also being identified that rate of competition is rapidly increasing in the Australian retail market
due to the inflow of new entrants (Bishop et al., 2013). This is mainly due to the reason of lower
entry barriers in the market and favorable business environment. Thus, profitability of
Woolworths is getting affected with the increase in competition. Another major and probable
economical factor will be the emergence of economic recession. This will reduce the purchasing
power of the customers and average revenue trend of Woolworths will get affected (Fairlie,

3BUSINESS ENVIRONMENT
2013). In the recent time, the rate of unemployment in Australia is increasing, which will also
have adverse impact on the business due to the reason that unemployment will reduce the
purchasing power of the customers. Australia is also one of the leading countries in the world in
terms of inflation, which denotes that average price of the products is high as compared to other
countries. This is also restricting the market growth for Woolworths.
Social factors
Australia is a globalized economy and thus global factors are having larger influence on
the society. In this case, it is a challenge for Woolworths to cope up with the change in the global
trend of customer trends usage pattern and offer the latest in the market. In addition, it is also
being identified that the bargaining power of the customers is high due to the presence of large
number of competitors in the market. This is having negative impact on the pricing decisions of
Woolworths due to the reason that odd pricing strategies will fade away potential customers.
Australian society is diverse in nature and in the recent time, the diversity is increasing with the
increase in the inflow of the immigrants in the country (Markus, 2014). Thus, Woolworths is
facing the challenge of catering different customer segments and increasing the diversity in their
product ranges.
Technological factors
Australia being a developed economy is having the access to the latest technologies and
innovation. On the other hand, retail sector is also witnessing a huge bump in the technological
advancements in the recent time. Hence, it is important for Woolworths to have the access to
latest technologies such as self service and self checkout systems for the customers (Orel &
Kara, 2014). Even though they are offering these technologies currently but the major challenge

4BUSINESS ENVIRONMENT
for them is the rapid evolution of the technologies (Mithas, Tafti & Mitchell, 2013). Therefore, it
is becoming challenge for Woolworths to maintain the continuous process of technological
development and involve huge capital in it. On the other hand, it is important due to the fact that
offering latest technologies will add to the convenience of the customers and help in gaining
competitive advantages over the competitors. Thus, Woolworths have to invest more capital in
developing their existing technologies in staying relevant in the market (Lee & Yang, 2013).
Legal factors
Legal factors are also important for the business organizations due to the reason that rules
and regulations will influence the organizational policies and approaches. Australia is having
favorable position in terms of number of procedures to start a new business (Grabosky, 2013). It
is beneficial for Woolworths in expanding their businesses but equally challenging. This is due
to the reason that the threat of new entrants gets increased. In addition, Australia is having
stricter regulations and standards in terms of employee management and this is important for
Woolworths to get adhered to it. Though the overall legal environment of doing business in
Australia is favorable enough, but radical changes in the legal formalities will cause issue for
Woolworths to match up.
Environmental factors
In the recent time, there are number of environmental standards being introduced by the
authorities and Woolworths is also initiating sustainable business practices (Head, 2014). They
are working towards the reduction of carbon footprint from their business operation. In addition,
Woolworths is also having effective supply chain management process to monitor the
sustainability of their suppliers as well (Klettner, Clarke & Boersma, 2014). However, it should

5BUSINESS ENVIRONMENT
be noted that Woolworths is incurring added cost for ensuring the sustainability of their business.
This will have adverse impact on their business profitability in the long term.
Recommended strategies
 It is recommended that Woolworths should initiate the product and service differentiation
strategy. This is due to the reason that one of the major challenges for Woolworths is the
increase in competition in the market. Thus, with the help of the differentiation strategy,
Woolworths will be able to enhance the value proposition for their customers. For
instance, offering distinctive items under the private label brands will help them to fend
off the competition. On the other hand, offering differentiated approach in terms of
customer service will also help to stay ahead in the competition.
 It is also suggested that Woolworths should initiate the market development strategies
also. This is due to the reason that with the help of the market development strategies,
they will be able to have their market presence beyond their existing market. Thus, the
challenges being faced by Woolworths will also get segregated.
 It is also recommended that Woolworths should focus more on their online channel due
to the reason that it will be more effective in the current scenario. In addition, online
channel will also ensure that carbon footprint is lower for them and business operation is
more sustainable. Focusing more on the online channel will also ensure that new age
customers can be targeted along with enhancing their convenience. Thus, the competitive
advantages can also be gained in the long term.

6BUSINESS ENVIRONMENT
Conclusion
It is concluded that Woolworths is facing a number of challenges in terms of their
external business factors. These challenges are identified and evaluated in terms of their impact
on the business. PESTLE analysis helped in identifying all the major factors, which will pose
challenges for Woolworths in their existing market. One of the major challenges for Woolworths
being identified is the increase in competition. In accordance to the identification of the
challenges, a few recommended steps are also being discussed in this paper. These steps or
strategies will help Woolworths in overcoming their current business challenges and enhance the
future business effectiveness and opportunities.

7BUSINESS ENVIRONMENT
Reference
Acemoglu, D., & Robinson, J. A. (2013). Economics versus politics: Pitfalls of policy
advice. Journal of Economic Perspectives, 27(2), 173-92.
Bishop, J., Kent, C., Plumb, M., & Rayner, V. (2013). The resources boom and the Australian
economy: a sectoral analysis. RBA Bulletin, 3, 39-50.
Fairlie, R. W. (2013). Entrepreneurship, economic conditions, and the great recession. Journal of
Economics & Management Strategy, 22(2), 207-231.
Grabosky, P. (2013). Beyond Responsive Regulation: The expanding role of non‐state actors in
the regulatory process. Regulation & Governance, 7(1), 114-123.
Gupta, A. (2013). Environment & PEST analysis: an approach to external business
environment. International Journal of Modern Social Sciences, 2(1), 34-43.
Head, B. W. (2014). Evidence, uncertainty, and wicked problems in climate change decision
making in Australia. Environment and Planning C: Government and Policy, 32(4), 663-
679.
Klettner, A., Clarke, T., & Boersma, M. (2014). The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics, 122(1), 145-165.
Lee, H. J., & Yang, K. (2013). Interpersonal service quality, self-service technology (SST)
service quality, and retail patronage. Journal of Retailing and Consumer Services, 20(1),
51-57.

8BUSINESS ENVIRONMENT
Markus, A. (2014). Attitudes to immigration and cultural diversity in Australia. Journal of
Sociology, 50(1), 10-22.
Marsh, D., Lewis, C., & Chesters, J. (2014). The Australian mining tax and the political power of
business. Australian Journal of Political Science, 49(4), 711-725.
Mithas, S., Tafti, A., & Mitchell, W. (2013). How a Firm's Competitive Environment and Digital
Strategic Posture Influence Digital Business Strategy. Mis Quarterly, 37(2).
Orel, F. D., & Kara, A. (2014). Supermarket self-checkout service quality, customer satisfaction,
and loyalty: Empirical evidence from an emerging market. Journal of Retailing and
Consumer Services, 21(2), 118-129.