Analysis of Woolworths' Operation of Gaming Machines in Australia

This report provides an in-depth analysis of Woolworths Limited's involvement in operating gaming machines in Australia, exploring the company's history and principles. It delves into the application of agency theory, examining conflicts of interest and the responsibilities of Woolworths as an agent. The report also applies stakeholder theory, presenting arguments for and against the company's continued operation of gaming machines, considering factors like profitability, government regulations, and ethical concerns regarding problem gambling. A recommendation is made based on the strengths and weaknesses of both theories, followed by a conclusion that summarizes the key findings and the overall industry landscape. The report highlights the complexities and challenges faced by Woolworths, emphasizing the need to balance financial objectives with social responsibility and regulatory compliance.

Running Head: ACCOUNTING AND SOCIETY 1
ACCOUNTING AND SOCIETY
STUDENT:
INSTITUTION:
DATE:

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Executive Summary
In the essay, I have described the role of Woolworths Limited in its involvement in the operation
of gaming machines in Australia. The introduction covers a brief overview of the history and
interests of the company with a relational exposition of its principles. The next part explains the
agency theory and its correlation with the operation of the gaming machines indicating both
areas supporting and discouraging continuity with the operation of gaming machines. The
stakeholder theory approach is also pronounced together with the reasons why the company
should continue operating the machines and those which indicate why the operation should be
stopped. In the end, a recommendation based on strengths and weaknesses of the two approaches
is followed by a conclusion that gives a quick recap of the whole report and the industry.

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Woolworths: Operation of gaming machines in Australia
Introduction
Woolworths Limited has the largest interest in the Australia in the operation of poker gaming
machines. Also, Woolworths operates in the retail liquor market, supermarkets and the petrol and
finance industry. The introduction of gaming machines has tremendously increased the
company's revenue amid a considerable public and legal outcry because of failing to fight the
problem of addiction. The current speculation is whether or not Woolworths has to exit the
industry. Woolworths next goal in gaming is to limit the number of bets down to $1 against the
current $10. The action aims to attract low-income gamblers to get a wider market coverage to
raise the revenues from gambling creating more income for the stakeholders. The idea of altering
of gaming machines to take a $1 is a recommendation of the productivity report of 2010 that
widely described other gambling products in the market which did not have bet limits. The
legislation has controlled any form of alteration of gaming machines to the manufacturers only
(Devon, 2016).
The Agency Theory Approach
The agency theory supposition describes the management of a company as an agent to the
shareholders. The approach aims to solve the challenges arising from conflicting views between
Woolworths limited as an agent of various parties (Boateng, 2017). Areas of conflicts of interests
have been experienced significantly with how the company’s business and the manufacturers of
gaming machines and also the government view the issue of operating gaming machines.
Woolworths Limited has an agent responsibility to some entities namely the public, the
government, the employees, suppliers, and the lenders among others. All the principals have

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varying interests to the business of Woolworths that may differ with one another’s from time to
time (Wolfswinke, 2017).
Why should Woolworths continue to operate gaming machines in Australia?
Argument 1
Firstly, the operation of gaming machines has boosted the profits of Woolworths. Gaming
machines in the Australian gambling industry are fed with a money amounting to $11.5 billion,
and the quantity is worth flowing into our revenue. The Australian Leisure and Hospitality
Group (ALH) gets 80% of revenue from gaming with the 2016 financial accounting year gaining
up to $4.11 billion (Breen, 2017).
Argument 2
The government has put plans underway on amending the Australian Gaming Machines Act so
that an operator will be only allowed to introduce features that are:
 Less addictive,
 Lowers the frequency of losing by players, and
 Less harmful.
The business has tried to be on the toes to be at the peak of competition. The existence of any
firm in our case Woolworths Limited is through effectiveness in competition in the gambling
industry to grasp a significant market share and increase its power of control in the industry. The
regulators are even ready to offer their support in the process. A few legal suits have been filed
in the recent past against Woolworths' competitors for deceptive design indicating how delicate it
is to alter machines without validation by the manufacturers (Carvalho, 2017).

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Why should Woolworths not continue to operate gaming machines in Australia?
Argument 1
The government has precise restrictive laws on the manufacture and operation gaming machines
A big challenge arises on problem gambling that causes 40% of the total losses on bets as
reported by the productivity commission report. The legislation of the government plainly stops
everyone else but the manufacturers on altering the working of poker machines. The government
moreover claims that the machines will be evidenced-based if operated at $1 minimum bet.
Woolworths alongside with the manufacturers has recently been hauled through by law for not
making attempts to gaming machines not as much addictive (Ramachandra, 2017).
Argument 2
The manufacturers have refused to reduce bets on their machines to $1 because of their interest
on the is capitalizing the sales, increase efficiency, cut costs to increase revenues. The
manufacturers have thrown back a hard haul claiming that trying to limit the amount to be placed
into a poker machine would add extra costs amounting to more than $3 billion that will probably
increase the costs of purchasing the devices by operator firms. The process would also consume
more time than the average duration and thus be inefficient.
The Stakeholder Theory Approach
The stakeholder theory describes the relationship between the company and the shareholders.
The existence of the business is based on the shareholders as providers of capital for business.
The goal of Woolworths’ management according to the stakeholder theory approach as stewards
of the funds entrusted to them solely to create profits (Freeman, 2017). In their thinking, the
stakeholders of a company deliberate on conducting business on one objective rather than

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diverging energies to different purposes arguing that it may strain the business's resources of
finance, time, human resources and efforts of innovation all of which when put at one point may
give more revenues. Concentrating on the interests of the shareholders alone is historic and
makes the business to be run on short term goals to ensure that the stakeholders have value for
their money.
Why should Woolworths continue to operate gaming machines in Australia?
Argument 1
Shareholders want to see their investments giving them more income as dividends. More
investment and operation of gaming machines in Australia will reap an income that is higher
than the current $4.11 billion. Shareholders are the most important party in the firm as an
operator of gaming machines in Australia as providers of capital. Apart from shareholders the
company interest in receiving dividends, the company at large requires profits (Hermass, 2017).
More gaming revenue will enable the firm to expand operations through more investments and
increase its competitive edge in the industry by being able to conduct marketing strategies
sufficiently, compensate employees and fund research and development (Paul, 2017).
Argument 2
The business has a role in safeguarding the moral ethics for the general public. Corporate social
responsibility has to be considered at full length to strengthen the reputation of the company.
Woolworths Limited has a role to play in creating a solution to problem gambling in the same
way it is trying to increase the market base and industry control (Zarestk, 2017). We have to
reduce the losses arising from addiction. Involvement in corporate social responsibility is a

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revolution that has been seen to shape the industry from one point to another by creating player
loyalty and is, therefore, a necessary cost of business operation.
Why should Woolworths not continue to operate gaming machines in Australia?
Argument 1
Running a business on short term goals basis overrides the principle of the perpetual existence of
the firm. Every business should be managed at an unforeseen future time. Short term profit goals
are always shortsighted and can even make accounts to be manipulated to create fictitious
profits. Even though profit alone is the concerns to the shareholders, the complete business unit
is run by very many subunits that come together to make the company. The management has to
coordinate smooth functions in all dimensions to create healthy internal and external
environments. The departments of accounting, the human resource, finance, procurement, legal
team, business research, and internal auditing must work in a coordinated function. Overlooking
one area is a disjunction that will place a gap in the flow of money from the point an investment
is made to the point when a single unit of profit is realized. The above explanation explains how
different principles get involved in the affairs of a firm rather than the shareholders alone.
Various interests in the business of Woolworths' gaming machines operation are created and
have to be taken care of efficiently (Freeman, 2017).
Argument 2
The shareholders of Woolworths limited especially the majority ones are against the $1 bets as
proposed. Shareholders have little or no knowledge of the management of the business, and this
is the reason why they have entrusted the management of their money to Woolworths. The
investors view it as a loss trying to reduce bets from $10 all the way to $1. Decision making is a

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part of the shareholders and their decisions: major shareholders must be heeded to by the
management.
The first idea of the board to cut down of the bets was to cover the gambling market to the low-
income earners, and yet the shareholders still want to get the highest value for their money.
Investors do not have a clear understanding of the link between limiting the bet amount to
incomes at all. With stand, they still want to see their money paying them back even though they
investment options available to the management. Conflicts such as this is a cause of war which
will eventually limit any growth of income (Lowic, 2017). Share values will automatically fall.
The small value of investments will be unattractive to new investments and even make the
current shareholders pull out their investments. Involvement of shareholders in management will
demean the role of management in running the business (Lanon, 2017).
Recommendation
My recommendation is to Woolworths is to continue operating gaming machines in Australia
and align the interests to minimize conflicts of interest. Restrictions in the industry by the
government have to be abided with by the government. The Government of Australia has a duty
to protect the rights of the citizens, and this is the reason why it gets involved in the affairs of the
gaming machine operators. Failure to keep the government regulations will make the company
being forcefully stopped from operating in the industry. The company should at its best minimize
the problem of problem gambling and addiction to reduce exploitation of the general public. The
management has to effectively describe to the stakeholders the importance of lowering the
minimum bets to $1 to align their interests.

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Conclusion
In conclusion, the conflicts between the various industry players have been elaborated. It is seen
that the biggest fight comes from the government, followed by the management, the
manufacturers, and the general public. The industry is still less developed as Australia is still
ranked lower in the world for maximum bets in poker machines with a slow speed in growth.
The young stage of the Australian industry attracts loopholes for misunderstandings from various
principals as each one seeks to gain control in the industry. It is no reason for Woolworths to
stop operating the gaming machines in Australia. The success of every business entity comes
from persistence. Time has to pass to efficiently develop and change appropriately in a move to
adapt to the environment. With time the industry will be streamlined with time to a mature
development stage.

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