Woolworths' Strategic Entry into the Chinese Retail Market

This report explores Woolworths' potential expansion into the Chinese market, highlighting the opportunities and challenges associated with this international venture. It identifies China as a promising target market due to its significant economic growth and large population, while also acknowledging potential risks like investor protection and local competition. The report recommends a joint venture entry mode to mitigate risks and leverage local market knowledge. Furthermore, it suggests competitive strategies such as cost leadership, differentiation, and market focus to gain a competitive edge. Marketing strategies, including market penetration and omni-channel distribution, are also recommended to effectively reach Chinese consumers. The report also addresses research and development considerations, production strategies, and HRM strategies, advocating for polycentric and geocentric staffing approaches and diversity management to ensure successful operations in China. Desklib offers this report as a study resource, providing students access to a variety of past papers and solved assignments.

Running head: INTERNATIONAL BUSINESS
International business
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Executive summary
The aim of this report is to discuss about the potential foreign market for Woolworths in the
global business scenario and discussing about a few recommended steps. This report had also
discussed about the external factors of the selected country and the advantages to be gained by
Woolworths in entering that particular country. China is being selected as the most potential
country for Woolworths. In addition, there are number of positive and negative factors being
identified in this report. This report concluded with number of recommended steps that will
further help Woolworths to have effective business operation in China.

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Table of Contents
Introduction......................................................................................................................................3
Company profile..........................................................................................................................4
Selected country...........................................................................................................................4
Chosen entry mode..........................................................................................................................6
Identification of the competitive strategy........................................................................................7
Cost leadership.............................................................................................................................7
Differentiation..............................................................................................................................8
Market focus strategy..................................................................................................................8
Recommended marketing strategies................................................................................................9
Market penetration strategy.........................................................................................................9
Omni Channel distribution strategy...........................................................................................10
Research and development considerations....................................................................................10
Recommended production strategies.............................................................................................11
Recommended HRM strategies.....................................................................................................11
Polycentric approach of staffing................................................................................................12
Geocentric approach of staffing.................................................................................................12
Diversity management...............................................................................................................13
Conclusion.....................................................................................................................................13
Reference.......................................................................................................................................14

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Introduction
International business is important for the contemporary business organizations due to the
reason that in the current business scenario, organizations should also look beyond their domestic
market. This is mainly due to the reason that current market scenario mainly in the Australian
domestic market is highly competitive in nature. In addition, the retail business scenario of
Australia is intensely competitive with having the presence of number of small and big brands.
Therefore it is becoming more important for the domestic organizations in the Australian retail
business to look for potential target market in the foreign markets. This will help them to have
more market potentiality along with having the global value (Vahlne and Johanson 2017). On the
other hand, entering in the foreign market will also ensure that the particular business
organization will not only have to be dependent only on the Australian market.
This report will discuss about the potential foreign market for Woolworths in the global
business scenario. Woolworths is being selected due to the reason that they are the market leader
in the Australian retail business scenario. However, in the recent time Woolworths is facing
increased number of challenges from their established competitors and from the emergence of
new set of players in the market. Thus, they are having the need of entering in any potential
foreign market to overcome the increased challenge in the domestic market. This report will
discuss about the external factors of the selected country and the advantages to be gained by
Woolworths in entering that particular country. In addition, number of recommended steps will
also be discussed in this report in order to enable Woolworths to have effective foreign market
operation.

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Company profile
Woolworths is one of the major retail chains in the Australian region. In addition, they
are the market leader in the Australian retail business. Woolworths was founded in 1924 in New
South Wales and currently they are having more than 900 stores across Australia. It is also being
reported that currently Woolworths is having more than 100000 employees across all their stores.
In the current time, they are also offering online retail services through Woolworths Online
(www.Woolworths.com.au 2018). However with the increase in the competition in the domestic
market scenario, Woolworths is having the need to enhance their market share and presence in
the foreign market.
Selected country
China is being selected as the potential target market for Woolworths due to the reason
that China is having one of largest economic growth in the recent time with having 6.9 percent
growth as of 2017. They are also one of the major economies in the world and with having the
largest population in the world; China is having immense opportunities for the foreign business
organizations (Shahbaz, Khan and Tahir 2013). This is due to the reason that the more will be the
population, the more will be the retail market opportunities for the foreign business houses.
According to the global competitiveness index, China is having the ranking of 1 in terms of
domestic market size (Www3.weforum.org 2018). Thus, Woolworths will have huge market
opportunities in entering and operating in China. China is also having the first ranking in terms
of GDP according to the global competitiveness index. Thus, it can be concluded that
Woolworths will have favorable economic environment in operating in China.

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It is also being reported that China is having the ranking of 26 in terms of country credit
rating, which denotes that Woolworths will have less risk related to their investments in entering
in China. Another major advantage that will also be gained by Woolworths in operating in China
is having the access to the lower rate of operation. This is due to the reason that China is having
the lower cost of human resources that will further help Woolworths to reduce their average cost
of operation. The less will be the cost of production, the more will be the profitability of
Woolworths. Majority of these factors will help Woolworths in having business advantages in
operating in China.
However, apart from the advantages that may be gained by Woolworths in operating in
China, there are number of challenges and threats also to be faced by them. According to the
global competitiveness index, China is having the lower ranking of 102 in terms of investor
protection. Thus, it will pose a threat for Woolworths in relation to their investments in China. In
addition, it is also being stated that China is having the ranking of 33 in terms of intensity of
local competition (Www3.weforum.org 2018). This is mainly due to the reason that China is
now being considered as one of the major business hubs in the Asian region. This will lead to the
emergence of competition for Woolworths in China that can have adverse impact on the business
operation of Woolworths.

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Figure: 1
Problematic factors in doing business in China
Source: (Www3.weforum.org 2018)
The above figure shows that China is having the problem of access to finance for the
organizations in doing business. In this case, Woolworths will face barrier in sourcing the
finance for their operation. It is also seen in the above figure that inefficiency in the government
bureaucracy is another issue for doing business in China. This will cause Woolworths to have
negative issue on their political and legal environment.
Chosen entry mode
It is recommended that Woolworths should initiate the strategy of joint venture in
entering the Chinese market. This is due to the reason that initiation of joint venture will enable
Woolworths to have their physical market presence in China along with having lower level of
risk related to the investments. The first major reason for recommending the joint venture
strategy is involvement of lower risk. In the case of Joint venture, Woolworths will get partnered

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with a local Chinese firm (Sun and Lee 2013). Thus, both these organizations will have
investments in the venture and Woolworths will not have to invest the entre capital. Another
reason of recommending joint venture strategy is the differences in the market trend, taste and
preference pattern of the customers between China and Australia. Thus, Woolworths will not get
succeeded by offering their existing products in the market of China. They have to offer more
localized products in order to match the local need and requirement of the customers (Meschi
and Wassmer 2013). In this case, initiation of the joint venture strategy will help Woolworths to
have a local partner, which have the knowledge about the local market trend and can help
Woolworths in initiating their product strategy in China.
Implementing the joint venture entry mode strategy will further help Woolworths to have
physical presence in the Chinese market. This is important due to the reason that in the retail
sector, Woolworths will not be able to attract customers if they are not being present in the
market. Retail market is having the requirement of touch and feel for the majority of the
customers. Thus, initiation of the joint venture strategy will help Woolworths to have their
physical stores in the Chinese market. However, it is also to be noted that initiation of the joint
venture strategy will pose challenges also for Woolworths such as having lower level of control
on the business operation (Shi et al. 2014). This may get difficult for them to drive their business
in the Chinese market as their Australian business.
Identification of the competitive strategy
Identification of the competitive strategy is important for Woolworths in starting their
business in Chin due to the fact that effectiveness of the competitive strategies for Woolworths

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will determine their efficiency in the doing business in China. There are mainly three major
competitive strategies being stated by Porter.
Cost leadership
The first competitive strategy if cost leadership. According to this strategy, if the business
organizations can reduce their cost of operation to the maximum level in the industry then it will
help them to offer their products in cheaper rates in the market. Thus, the more affordable will be
the price of the products, the more will be their attractiveness in the market (Marchi, Maria and
Micelli 2013). Moreover, it is also to be noted that retail sector where Woolworths is currently
operating is much price sensitive in nature. Thus, it is recommended that they should take the
advantage of low cost of human resources in the Chinese market along with maximizing the
local sourcing. This will reduce the cost of operation for Woolworths and they will be able to
offer their products in more competitive prices.
Differentiation
The next competitive strategy to be recommended for Woolworths in their Chinese
operation is product differentiation strategy. According to this strategy, offering different and
distinctive products in the market will help Woolworths to gain competitive advantages. This is
due to the reason that retail market sector of China is already crowded with number of global and
domestic competitors (Ray Gehani 2013). Thus, offering the same and similar products in the
market will not increase the customer attractiveness for Woolworths. Thus, it is recommended
that they should come up distinctive product offering in order to create the distinctive image in
the market. The more differently they can operate in the market, the more competitiveness they
will gain among the crowded market.

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It is also recommended that Woolworths should initiate the product differentiation
strategy by means of private label brands. They can come up with unique and distinctive private
label brands according to the market taste and preference pattern that will help them to have
different value creation in the market for the customers. Woolworths should initiate the
differentiation strategy in regards to their service delivery process such as implementation of
automated checkout process for the customers (Kaliappen and Hilman 2014). This will also help
in creating the distinctive image in the market for Woolworths.
Market focus strategy
The last recommended competitive strategy is market focus strategy. This refers to the
determination of the requirements of the target customer segments and offering products
accordingly. It can help the business organizations in operating in a particular target segment and
offering products according to the taste and preference pattern of the target segments. Thus, it is
recommended that Woolworths should first identify their target customer segment and determine
their needs and requirements (Haenlein and Libai 2013). This will ensure that the requirement of
the target segment can be effectively fulfilled and will ensure that level of customer satisfaction
will also be more ad favorable.
Recommended marketing strategies
Market penetration strategy
It is recommended that Woolworths should initiate extensive marketing activities in order
to effectively operate in the Chinese market. This is due to the reason that Chinese market is
huge and vast and extensive marketing strategies are important to cover the maximum customer
segments. It is recommended that Woolworths should initiate the market penetration strategy in

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order to gain the majority of the market share in the initial stage (Banerjee and Soberman 2013).
As discussed earlier, Woolworths is operating in the price sensitive consumer goods market and
thus initiation of the market penetration strategy will help Woolworths in covering the major
market share. Market penetration strategy can also be well aligned with cost leadership
competitive strategy by offering the products in more affordable price (Spann, Fischer and Tellis
2014). It is also being recommended that Woolworths should initiate the market penetration
pricing strategy in order to cater to maximum number of customers. The price should be as par to
the market standard in order to cater to the mass market customers.