MGT501 Business Environment: Analyzing External Factors on Woolworths

This report provides an in-depth analysis of the business environment of Woolworths Supermarkets Australia, utilizing a PESTLE analysis to assess the impact of external factors such as political, economic, social, technological, legal, and environmental elements. It explores Woolworths' relationships with suppliers, investors, and customers, highlighting the company's strategies for maintaining strong partnerships and customer loyalty. The report identifies key challenges, including economic recession, competitive rivalry, and public opinion, and proposes management concepts and frameworks, such as low-price strategy, product development, and innovation, to overcome these obstacles. The analysis concludes that Woolworths has achieved sustainability through its operations, customer base, and effective management strategies, emphasizing the importance of addressing external factors to improve market functioning. Desklib provides access to similar reports and resources for students.

Running Head: BUSINESS ENVIRONMENT 0
Business environment
10/13/2018

BUSINESS ENVIRONMENT 1
Contents
Introduction................................................................................................................................2
Company Overview...................................................................................................................2
Influence of External environment/PESTLE ANALYSIS........................................................3
Frameworks or theories to overcome challenges.......................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................8

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Introduction
The report brings about the discussion on the business environment or environmental analysis
of the firms operating in the market. Every business organisation operates or functions in the
society or environment surrounding; therefore, they are accountable for their actions to the
environment. It is a known fact for every business organisation, it is important to interact and
respond to the environment, because they have direct relationship with external environment.
Some of the factors that are economic, social, legal, political, and environmental affect
business environment. These factors have direct or indirect influence on the environment of
business, and their operations. The report is based on the analysis of external environment of
the company, Woolworths Supermarkets Australia. The company is assessed with the impact
of external environmental factors, and devising strategies or frameworks to meet those
challenges. Therefore, the report includes the environmental scanning of Woolworths, and the
frameworks to be used to overcome those challenges faced by the firm (Bailey, 2016).
Company Overview
Woolworths Supermarket is an Australian based company, a supermarket/grocery
store chain that is owned and managed by Woolworths limited. The company was established
in the year 1924, and captures about 80% of the market of Australia. Woolworths deal in
selling groceries specially fruits, vegetables, and packaged foods; but has expanded their
operations into other items also. It includes magazines, selling DVDs, pet & baby supplies,
health, beauty, stationery items and household products. Woolworths Limited is known as the
largest retailers in New Zealand and Australia, as they recognise trust and delivering values is
the core of attaining maximum customer satisfaction (Sutton-Brady, Kamvounias & Taylor,
2015).
Woolworths is a company with strong ethical base, and moral values and practices
through efficient strategy and objectives. These strategies and objectives are based on
increasing shareholder value, building new growth business, and expanding to a bigger
market size. The company is very vigilant about the changing environment, and consumer
needs and focus on ways to bring people to their supermarkets, and enhance their customer
base. Woolworths attract large number of customers, also play a key role in satisfying the
interests and expectations of their shareholders; the company has 450,000 shareholders and is
a trusted company in the eyes of investors (Farfarn, 2018).

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Influence of External environment/PESTLE ANALYSIS
An organisation operating in an environment needs environmental scanning which
results into assessing the impact of external factors on the firm and their operations. The
external environment comprises of the factors, which affect an organisation includes micro
and macro environmental factors affecting businesses directly and indirectly. Suppliers,
customers, marketing intermediaries, financial institutions, and public perceptions are micro
factors, and the macro-level includes economic, social, political, legal, technological, and
environmental factors (Karpen et al., 2015). In context to the Woolworths, the report leads to
the discussion of the external factors i.e. Pestle analysis of the company to devise strategies to
overcome issues faced by firm. Discussing about the Woolworths relation with suppliers and
investors Woolworths has found to be committed into partnerships and believes in
establishing long-term relationships with them. As for their business or supermarkets their
dealings with suppliers is important, thus the company ensures in maintaining good terms
with these people. Woolworths established strong collaboration with farmers of Australia to
ensure delivery fresh and high quality food to the people (Grimmer, 2018).
Customers are the focus of any organisation, and determine the way they run their
businesses, and become successful. Woolworths has been remarkable in satisfying their
customers largely, as they serve the needs and expectations of their customers across all their
brands. It has found through researches that Woolworths establishes their customer base of 24
million every week. In addition, the company runs a program everyday called as reward
program, designed to study the behavioural patterns of the consumers and assess their loyalty.
In addition, the company responds to the feedbacks of their customers, fulfils their needs, and
resorts to their issues or complaints. However, an initiative program conducted by the
company known as ‘Customer talkback’ through which they have established customer focus
groups across the country. Thus, the above-mentioned initiatives describes that the customers
behaviour is found to be positive or favourable which exerts a positive influence on
Woolworths (Paasovaara & Luomala, 2017).
Political, legal: corporate governance, it has been stated that every business requires a
strong political or legal framework to conduct their operations. Woolworths has a proper
constitution, which lays policies and rules followed in compliance to the laws. Australia and
New Zealand are the countries, found with the political stability from a long period.
However, performance of Woolworths affected by the political forces on the retail business in
Australia in a number of ways. Woolworths has been restricted from eliminating small

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retailers to enter the retail market in Australia. In addition, political disturbances to the
company discourage other businesses and investors to enter the market due to the risk of low
rate of interest and returns. Nevertheless, the company has achieved sustainability that
ensures that it is operating in a stable market, and does not result into any significant loss
(Underhill & Rimmer, 2017).
Discussing about economic factors such as recession and higher unemployment exerts
a major influence on the financial performance of any business. Especially Australia’s
economic factors play a great role in retail sector thus, for the Woolworths business. In earlier
years, the company has suffered a major loss due to the global financial crisis, which led to
the problems of unemployment in those years. However, the country has achieved economic
sustainability, which supported the operations of Woolworths leading to a bigger success
(Schaltegger & Wagner, 2017).
Competitors’ strategy- Every organisation faces the situation or issues of rivalry
among existing firms Woolworths main competitors includes Aldi, Coles, and many others.
These competitors pose major threat creating rivalry among the retailers in Australia, as they
compete for higher market share affecting the profitability of Woolworths. This situation had
major influence on their customers, as due to decreased profitability, but Woolworths has
gained market share in recent years, which has reduced the negative impact on their growth
(Knox, 2015).
Public opinion- The era in which modern businesses operate, is referred to as
reputation era which mentions that the corporate reputation of any firm can either make or
break the brand/company. Public opinion, in context to an organisation, defines about the
collective opinion of the society towards an issue, subject, or the organisation. As
Woolworths is the value-driven business, identifies, and communicates their values well
internally as well as to the society/consumers leading to a good image in public. It has found
that the company has been successful in establishing a good image. The company has focused
on the customers who belong to the long-income group in Australia, by taking initiatives
through the ‘For Less for Families” and ‘Australia Favourite Lamb Cuts for less everyday’
programs. Hence, there has been a little impact or no impact on the smooth functioning and
reputation of the company Woolworths (Woolworths, 2018).
Thus, a number of issues or challenges affecting the operations of Woolworths
include the impact of recession, i.e. economic environment that can be resolved with the

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effective business strategies and frameworks applicable in Woolworths. Some other issues
such as stiff competition, due to the presence of competitors pose major threats in the
supermarket, as a big challenge for Woolworth’s expansion and success in the future.
Moreover, close down of several stores of Woolworths in the country and UK, has affected
the profitability and success of the company (Methner, Hamann & Nilsson, 2015).
Frameworks or theories to overcome challenges
Woolworths has been at the leading position in the Supermarkets, in Australia;
however, there are some issues or challenges, which influence the profitability and success of
the company. Therefore, some of the management concepts and frameworks designed to
resolve the challenges faced by the firm. Woolworths devised some strategies to improve
their customer service, enhance their capabilities to cater the needs and desires of every
section of the society. First, the implementation of low price strategy by Woolworths will
help the company gain competitive advantage over their competitors. Secondly, they can
focus on product or market development to enhance the effectiveness of their products in
other markets. Here, product development implies that Woolworths can take an initiative to
modify their products too increase market penetration with the existing market group. Other
strategy can be use of innovation, in their operations that will help them overcome the trade
barriers and considering the environmental concerns for the better experience of their
customers worldwide (Methner, Hamann & Nilsson, 2015).

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(Sour
ce: Woolworths Group, 2018)
The above diagram represents that by putting customers first, and catering to their
needs and expectations, any business can attain sustainable advantage over other competitors.
Focusing on their basic needs, providing value-driven products, and services with a good
price and right range is the strategy, which can be used by Woolworths to satisfy their
customers and become successful. Effective supply management can improve the system and
supplier relationships at Woolworths, which will help the firm, resolve the problems of
supply, and bulk delivery of the goods to the customers (The new daily, 2018).
Conclusion
To conclude the above discussion it has been analysed that the grocery or retail
industry in Australia, has significantly created employment for many people across the world.
It has been found through the research that there are many disruptive forces, such as changing
patterns of the consumers. Woolworths has established a leading position in the Australian
retail market, and catered to the needs and expectations of the customers. There has been
significant impact of the environmental factors on the working of the company, which
influenced the profitability of the business. However, company has achieved sustainability
through their operations, and large customer base and management concepts and strategies.
Hence, an organisation must focus on overcoming their issues and challenges related to
external factors and improve their functioning in the market.

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References
Bailey, M. (2016). Marketing to the Big Middle: establishing Australian discount department
stores. Journal of Historical Research in Marketing, 8(3), 416-433.
Farfarn, B. (2018). The Largest Australian Retailers. Retrieved from:
https://www.thebalancesmb.com/largest-australian-retailers-2892105
Grimmer, L. (2018). The diminished stakeholder: Examining the relationship between
suppliers and supermarkets in the Australian grocery industry. Journal of Consumer
Behaviour, 17(1), 13-20.
Karpen, I. O., Bove, L. L., Lukas, B. A. & Zyphur, M. J. (2015). Service-dominant
orientation: measurement and impact on performance outcomes. Journal of
Retailing, 91(1), 89-108.
Knox, M. (2015). Supermarket monsters: The price of Coles and Woolworths'
dominance (Vol. 6). Australia: Black Inc.
Methner, N., Hamann, R. & Nilsson, W. (2015). The Evolution of a Sustainability Leader:
The Development of Strategic and Boundary Spanning Organizational Innovation
Capabilities in Woolworths. In The Business of Social and Environmental Innovation
(pp. 87-104). Berlin: Springer.
Paasovaara, R. & Luomala, H. (2017). The Effects of Brand Familiarity and Consumer
Value–Brand Symbolism (In) Congruity on Taste Perception. In The Customer is
NOT Always Right? Marketing Orientations in a Dynamic Business World (pp. 754-
757). Berlin: Springer.
Schaltegger, S. & Wagner, M. (2017). Managing the business case for sustainability: The
integration of social, environmental, and economic performance. United Kingdom:
Routledge.
Sutton-Brady, C., Kamvounias, P. & Taylor, T. (2015). A model of supplier–retailer power
asymmetry in the Australian retail industry. Industrial marketing management, 51,
122-130.

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The new daily. (2018). How Woolworths is winning over consumers. Retrieved from:
https://thenewdaily.com.au/money/finance-news/2018/02/23/woolworths-half-year-
profit-coles/
Underhill, E. & Rimmer, M. (2017). Private governance, state regulation and employment
standards: how political factors shape their nexus in Australian horticulture. Relations
Industrielles/Industrial Relations, 72(1), 33-55.
Woolworths Group. (2018). Strategy and Objectives. Retrieved from:
https://www.woolworthsgroup.com.au/page/about-us/our-approach/strategy-and-
objectives
Woolworths. (2018). Consumer influences. Retrieved from: https://retailsector-
woolworths.weebly.com/consumer-influences.html