Analyzing the UK Market: A PESTLE Study for Woolworths' Expansion

This report provides a comprehensive analysis of the macro environment of the United Kingdom to identify potential challenges and opportunities for Woolworths as it considers expanding into the UK market. Utilizing a PESTLE analysis, the report evaluates political, economic, social, technological, environmental, and legal factors. While Woolworths is a leading supermarket in Australia, its success in the UK market is not guaranteed due to the saturated retail landscape and the presence of numerous global competitors. The analysis reveals both positive aspects, such as ethical consumerism and demand for high-quality products, and negative aspects, including economic uncertainties related to Brexit and strict regulatory environments. The report emphasizes the importance of understanding these factors for Woolworths to develop a successful market entry strategy, focusing on sustainability and compliance with UK regulations. Desklib offers a variety of resources, including past papers and solved assignments, to aid students in similar business analyses.

Running head: INTERNATIONAL BUSINESS
International Business
Name of the student
Name of the university
Author note

1INTERNATIONAL BUSINESS
Executive Summary
This report had analyzed the macro environment of United Kingdom to identify the issues that
Woolworths might face while making an expansion into the UK market. The report had used a
PESTLE analysis as a tool to analyze all the aspects of the macro environment. Woolworths is
the market leader in Australia and is the one of the major Supermarkets. However, the
organization has not been able to expand their business successfully in the United Kingdom
market. United Kingdom is one of the strongest economies in the world where there are presence
of large number of supermarket chains. The analysis of the macro environment had shown that
there are both positives and negatives which could be capitalized by the company especially the
ethical perspective and quality of the products offered are the key factors. However, there are
other factors related to the economy which would act as a barrier for Woolworths.

2INTERNATIONAL BUSINESS
Table of Contents
Introduction......................................................................................................................................3
Background of the company............................................................................................................3
Introduction on United Kingdom.....................................................................................................4
Macro Environment analysis...........................................................................................................5
Political and Legal.......................................................................................................................5
Economic.....................................................................................................................................8
Culture and Ethics........................................................................................................................8
Technological............................................................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

3INTERNATIONAL BUSINESS
Introduction
This report will analyze the macro environment of United Kingdom to identify the issues
that Woolworths might face while making an expansion into the UK market. The report will use
a PESTLE analysis as a tool to analyze all the aspects of the macro environment. Woolworths is
the market leader in Australia and is the one of the major Supermarkets. However, the
organization has not been able to expand their business successfully in the United Kingdom
market. United Kingdom is one of the strongest economies in the world where there are presence
of large number of supermarket chains. The retail industry in the United Kingdom market has
become highly saturated due to the presence of large number of global companies in the market.
Therefore, in order to make a successful entry into the United Kingdom market it is essential for
Woolworths to analyze the market environment and develop a suitable strategy.
Background of the company
Thee retail industry in Australia is highly competitive due to the presence of large
number of global companies and growth of the retail industry. The largest super market chain in
Australia is Woolworths both in terms of market share and revenue generation streams.
Woolworths has been operating almost 1000 stores in all parts of Australia and consists of
almost 120,000 team members across support offices, distribution centres and stores to provide
customized service to the consumers in the market. The organization aims to work closely with
the farmers and the growers to ensure that best products are made available to the consumers.
Woolworths’ sources 100% fresh meat and 96% fresh vegetables and fruits by being constantly
involved with the growers and farmers in Australia. The organization has been using innovation
to identify the simplest ways for the consumers to shop their products (Woolworths, 2018). The

4INTERNATIONAL BUSINESS
organization has developed their own online website and mobile application which enables the
consumers to access the products from anywhere and they can get the best quality of service at
every touch point. Woolworth have increased the number of stores to more than 3000 where
205,000 employees serve 29 million consumers every week in an attempt to deliver the best in
quality, value and convenience in products from the market. The organizational culture in
Woolworths states that doing the right thing is the approach of the organization towards
corporate social responsibility. Therefore, Woolworth uses sustainable measures while operating
in the market so that their impacts on the corresponding environment, communities and
economies are positive.
Introduction on United Kingdom
United Kingdom is one of the superpowers in the world and has been one of the strongest
economy in Europe. The country has been growing rapidly until their decision of making the exit
from the European Union. United Kingdom consist of England, Scotland, Wales and Northern
Ireland. The economic growth of the country slowed which made UK as the slowest growing
nation in the G7 which shows the degradation of the economy as it was one of the fastest
growing country in G7 only second to Germany. The recovery of the country from the recession
phase to the prerecession phase is slower than ever before (Koenig, 2015). Globalization has
increased migration of population into the country which is an issue for the country as increase in
diversity and availability of cheap labours increases the unemployment rate in the country. The
retail industry in the United Kingdom consist of major players in the global market and the
market is highly saturated. This is the reason that no company has clear competitive advantage in
the industry so most of the companies use innovative strategies to develop new products and
increase their short term sales to generate more revenue.

5INTERNATIONAL BUSINESS
Macro Environment analysis
The macro environment analysis will evaluate the external environment of Woolworths
and will consist of factors such as political, economic, social, technological, environmental and
legal in respect to United Kingdom.
Political and Legal
United Kingdom is a monarchy at the constitutional level and a democracy at the
parliament level. There are four countries in the United Kingdom which are England, Wales,
Northern Ireland and Scotland. The chief of state is the Queen and majority of her role in the
country is ceremonial but exercises her rights such as right to advice, right to warn and right to
be consulted. The prime minister of the country is appointed by the queen after the ending of the
legislative elections (Miller & Rose, 2017). Prime minister acts as the head and conducts all the
day to day affairs including development of laws in the country. The political environment of the
country is stable which presents opportunities for the companies within the market and for those
who wants to make an entry into the market. The public in the country has a large influence on
the inner workings. The government is proactive and well developed to facilitate the growth of
the economy. However, BREXIT had a deep impact on the political environment as political
parties had varied opinion on BREXIT which divided the organization into their political
environment. This has resulted in the decline and redistribution of the UKIP electoral votes
which has resulted in the weakening of the political stability of the country (Yilmaz, 2016).
This will be problematic for Woolworths as political stability is essential for the company
to enter the market. The changes in the political environment will have direct impact on the

6INTERNATIONAL BUSINESS
operations of the company. This will also have an impact on the rules and regulation in the
market and changes in rules and regulation in the industry will have a direct impact on the
company’s activities.
The legal environment in the United Kingdom has been effectively developed to facilitate
smooth operation of trade and increase the market attractiveness. The government has been
instrumental in developing law to protect the consumers and corresponding environment. The
taxation laws and changes in the tax policies by the government will have an impact on the
prices set by the companies to ensure competitive pricing. The retail industry is highly affected
by the food, employment, environmental, grocery safety, health issues, competitor regulations
and financial services (Bagley, 2015). The retail industry will have to strictly follow the rules
and regulations regarding hygiene and maintain the quality standards prescribed by the Food
Standard Agency. The Food Safety Act has been developed to guide the retailer to develop food
that is consumable. These regulations have set rules about quality, distribution, transportation,
maintenance, selling and advertising of food.
United Kingdom has developed the Food Hygiene regulations and HACCP (hazard
analysis critical control point) which are standard protocols that will have to be followed by the
retail companies (Psomas & Kafetzopoulos, 2015). Therefore, the companies not following
these regulations will be heavily fined by the government and United Kingdom is one of the
countries having strict regulations and has adopted their sets of regulations to protect the
consumers and the domestic companies. The Office of fair trading and Competition commission
are the two bodies monitoring the performances of the companies and whether the companies are
complying to the prescribed laws. These regulatory bodies have been developed to maintain the
balance in the market by intervening at the times of oligopoly, cartel phenomena and monopoly.

7INTERNATIONAL BUSINESS
The governing bodies also have to make sure that they maintain fair trading between the
suppliers and the competitors in the country. This would also protect the interest of the farmers
and breeders as they are major contributors to the products available in the supermarket industry.
The regulations in the country are very strict and there have instances where various companies
in the retail industry have been fined heavily for using anti competitive measures. The
government forces the retail companies to comply to the rules and regulations so that the price of
the products can be reduced slightly to benefit the consumers.
The environmental law in United Kingdom is rigid when compared to the laws followed
by European Union as they have additional laws to protect the environment. The retail
companies will have to comply with the planning law before making expansions. The retail
industry in United Kingdom is one of the largest employers of workers so the labour laws and
employment rights are regulations which the companies have to follow (Welford, 2016).
Moreover, the workplace health and safety standards are key laws applicable to operation of
electrical equipments, machineries and transportation of goods. The changes in the laws increase
the complexity of the sector as there may be increase in labour cost and reduction in profit
margin due to protection of rights of the workers. Moreover, there are large numbers of
supermarkets providing credit cards and loans to the consumers and changes in the Financial
Services Authority will have an effect on the profitability of the firms. Woolworth will be
subjected to all these regulations and they will have to abide by these strict regulations in the
market. This will initially be tough for the company to gain competitive advantage but the
organization will have to focus on maintaining their sustainability initially.

8INTERNATIONAL BUSINESS
Economic
United Kingdom has been one of the fastest growing economies among G7 countries
only being second to Germany. However, BREXIT has affected the economy of the country in
severe way and the growth of the economy is the last among the G7 nations. This shows that
economic growth of the country has slowed down in the last year. The recovery levels of the
country have also been slow and the country took a long time to reach to the pre recession levels.
The inflation rate in the country is increasing due to the depreciation of sterling. This will also
decrease the disposable income of the general population due to the reduction in the household
incomes and spending of the consumers. These key economic drivers have been affected which
has slowed the growth of the economy in the year of 2017 (Jackson et al., 2018). This will result
in the delay of the investment from different companies in the market. This will affect
Woolworths’ plan of expansion in the market as decrease in the consumers disposable income
will definitely affect the revenue generation. United Kingdom has created free market which will
facilitate Woolworth to enter easily in the market. However, there are large populations that are
migrating into the United Kingdom and this will present an opportunity for a cheap labour
(Jonson & Wymer, 2017). This could have a positive impact for Woolworths as they can acquire
cheap labours. The increase in the unemployment rate will also facilitate the organization to hire
employees at lower prices. This will reduce the human resource cost for the company and
agricultural industry is one of the major contributors to the productivity and Woolworths can
easily derive fresh products from the market at lower cost due to the economic slowdown.
Culture and Ethics
United Kingdom has a diverse culture due to the increase in the migration of population
from different parts of the world. Social class is very much prevents in the society and the

9INTERNATIONAL BUSINESS
population are identified based on their social class. There are complex meanings attached to
social class where economic, political and social dimension defines the class they belong
(Muldrew, 2016). The social standards in the country are high which has provided better
circumstances in the society. This has lead to high standard of living in the country and
migration is the reason for availability of cheap labours. The dependency ratio in the country is
high and increasing at a rapid rate which shows that a large number of populations are dependent
on the rest of the population. This has increased the number of national health centres in the
country resulted in public free services. These people are not contributing to the GDP of the
country and people will require higher disposal income to take care of the dependents. The
migration of different population having different backgrounds has resulted in social unrest in
the country. This has increased the unemployment ratio in the country and the general population
are protesting against migration of people from different ethnicity. The companies are hiring
these migrants as cheap labour and this is a concern for the citizens with the decrease in job
opportunities. The consumption and disposable income of the citizens vary with the age. The
population belonging to the higher age group have a low consumption level as their disposable
income is low and the disposable income of the lower age groups are high which results in the
increase in their consumption level. Therefore, the population having l3oer disposable income
will prefer making their purchases from the discounters in the retail industry while the population
with higher income will prefer making their purchases from the high end retailers having higher
quality of products. The use of digital medium has increased significantly where the shopper
prefers to shop from online stores.
Therefore, there has been sudden shift in the purchasing behaviour of the consumer in the
market. The number of online users has increased and people tend to purchase products at the

10INTERNATIONAL BUSINESS
online platform due to convenience. The obesity level of the general population is high, which is
the reason that companies are promoting health initiatives to inspire people to live a healthy life.
Woolworths are presented with positives and negatives in the social environment where it will
tough for the company due to the high dependency ratio (Ediev, Sanderson & Scherbov, 2016).
On the other hand, the high standard of living and the diverse population is a positive for the
company. The increase in the use of online media for purchase is also another factor which can
be used by the organization as a strategy for gaining competitive advantage. Moreover, as the
diversity of the population and culture have increased significantly which means that variety of
products are required as different cultures have different tastes and choices.
The major ethical aspects of business are integrity and trust. These factors affect the
success and functioning of the organizations. Integrity is the process of conducting business
honestly by following all the rules, regulations and standards set by the regulatory bodies. This
will also consist of treating the consumers impartially and providing the consumers with value
for money. The United Kingdom retail companies have been limelight for their malpractices
where the providing the consumers with fir trade products is absolutely necessary. Even though
few companies are following these methods they are many retailers not following the fair trade
policies. The consumers in the United Kingdom have morally conscious about the products they
buy and their affect on the corresponding environment (Jones et al., 2017). They do not want to
be a part of a bigger chain contributing to the harm to the environment. The carbon footprints of
the retailers are due to the leakage of gases such as Hydro fluorocarbon which is the one of the
green houses and contributes to depletion of the ozone layer. The industry giants in the industry
have been criticized badly for their practices and companies like ALDI, Tesco, Asda and
Morrison received heavy criticism for purchasing their seafood from the CP Foods who are the

11INTERNATIONAL BUSINESS
Thai industry giants. CP Foods have been accused on buying fish meal from the finishing boats
that are slave manned. Similar scandals such as Horse shoe scandal and chicken campylobacter
contamination. Therefore, the companies have been under the scrutiny for quality issues which is
the main opportunity for Woolworths. Woolworths can make an expansion by focusing on their
fresh food strategy and quality of their food.
Technological
United Kingdom being one of the developed countries in the world has accessed to latest
technology and technologically the country has progressed a lot. The country possesses high
quality innovation skills which has been used various organizations to gain competitive
advantage in the global market. The country has gained expertise in information technology and
science with increase in internal competition. This is the factor for stimulating growth within the
country. The technological development has operation of the retail industry in the United
Kingdom due to the change in the buying behaviour of the consumers (Rai & Kumar, 2015). The
companies in the retail industry are able to reduce their cost of operation to provide the
consumers with products at competitive prices. The use of online medium is a common
behavioural change among the consumers in the market and the grocery retail companies have
been using this medium to promote their products as the cost of digital market is very less when
compared to the traditional form of marketing. Therefore, this has lead to the increase in intense
competition among the companies in the market. The technological growth has been crucial in
providing benefits to both consumers and companies. This has reduced the labour cost in the
industry due to use of self checkout machines. This has also reduced the time taken by the
consumers and the cost of shopping (Lee & Yoon, 2015). Moreover, this has also increased the