MGT 530 - Woolworths' Expansion Strategy in China: A Detailed Report

This report details an international expansion strategy for Woolworths Plc into the Chinese market, highlighting China's market size and growth potential. It outlines marketing objectives, such as enhancing efficiency and customer loyalty, emphasizing the importance of localization and R&D investment. A macro-analysis reveals China's attractive business environment, supported by strong GDP figures. The report recommends a joint venture market entry strategy and focuses on warehousing operations for superior growth. It addresses potential international HRM challenges, including talent competition and the need for competitive remuneration. The analysis incorporates PESTLE factors and concludes that China offers significant opportunities with careful planning. The report also suggests building expertise in supply chain management, aligning strategies with legal and political factors, and increasing assistance from experienced employees through training and development. Desklib offers a wealth of similar reports and solved assignments for students.

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Business International: Woolworths

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Executive Summary
This report is designed for purpose of developing an appropriate international expansion
strategy for Woolworths Plc. The target market, in which the company has planned to expand
its business, is China. China is the largest market from the point of view of market size. There
are different marketing objectives of Woolworths, which are anticipated to meet in the
Chinese market such as to enhance the efficiency and to gain larger customer base. The core
focus of this company will also be on gaining the customer loyalty for ensuring the consistent
and long term business growth.
According to the findings of this report, it is very important for Woolworths Plc to invest in
marketing and promotion strategies for purpose of gaining the success in business. The
localization strategy should be adopted by company for advertising and promotion of its
products and services. In addition to this, the company should also focus on presence of its
website in local language or Chinese language for showing the respect for Chinese culture.
This would contribute in the long term success of business in China. It is also important for
the company to invest in research and development activities for getting knowledge of
feasibility of different markets for its business.
From the macro-analysis of business environment of Chine, it is observed that China is an
attractive marketplace for the expansion of Woolworths Plc. The GDP of China is recorded
as 12014.61 billion US$ in 2016. In addition to this, the changes in GDP of China in last five
years are observed positive. These data are showing great growth opportunity for
Woolworths, as the high level of GDP is showing high level of purchasing power of Chinese
population.
As per the findings of this report, joint venture strategy is appropriate market entry strategy
for Woolworths Plc for the international expansion of business in China. In addition to this,

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the company is recommended to focus on warehousing operations to gain superior business
growth in China. There are different international human resources challenges that may be
faced by the company while running business in China. Example of these challenges includes
the fierce competition for talent hunt, lack of qualified candidates for any vacant positions
etc. Due to these challenges, the company may need to hire the qualified employees for
different at higher level of remuneration packages as compared to other countries.

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Table of Contents
Executive Summary...............................................................................................................................2
Introduction...........................................................................................................................................5
Brief description of Woolworths...........................................................................................................6
Macro-Economic Analysis of China......................................................................................................7
Recommendations regarding production.............................................................................................10
Marketing and R&D Considerations:..................................................................................................12
International HRM Issues and Considerations:....................................................................................14
Conclusion...........................................................................................................................................16
References...........................................................................................................................................17

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Introduction
International business is the term which includes all commercial activities taking placeto
promote the sharing of goods, services, people, resources, and ideas across the globe. This
report is designed to provide useful information about the globalization of businesses and
their potential impact. The study evaluates it in context of a well-known supermarket chain,
Woolworths Australia introduced in 1924. The report also analyse the environment of China
where Woolworths is planning to expand its operations, using PESTLE tool. The objective of
the report would be to identify the effective business practices and strategies which the
organization would use to become successful in Chinese market. Apart from this, some
valuable recommendations to the company would also be made so that it can compete with
the competitors efficiently.

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Brief description of Woolworths
Woolworths has been the biggest retail company in Australia since its establishment. For
more than 70 years, the company has been able to sustain in the market successfully with 900
stores and 12000 members across the world. Due to its excellence in product delivery, quality
and customer services, Woolworths has grabbed a significant market share in the supermarket
over Coles and Wesfarmers. It deals in a wide range of goods and services such as food,
clothing and grocery, home instruments and electronic products, loans, and other financial
services (Chimhundu, 2018). The company also proudly collaborates with the Australian
framers so as to offerpure and quality products to its consumers. Now, Woolworths plans to
operate in China as well to achieve the organisational goalworldwide presence and reduce the
overall costs while maximizing the productivity.Woolworths focus on the concept of offering
products at costing not more than five cents. This became agreat idea to attract the consumers
and the sales continued to grow gradually. The concept of applying a range of low priced,
non-perishable products helps the company to build an empire of more than 1000outlets with
turnoverof more than $119 million each year.
Marketing Objectives of Woolworths in China
In Australia, Woolworths has been successful in maintain a leading position in the retail
sector for many years. The marketing objective of Woolworths to expand in Chinese market
is to enhance its efficiency and gain a large customer base. In this regard, the company needs
to strengthen its marketing policies and strategies for lowering the risk of entering into the
new market. Also, there is great demand of daily-use products in all countries and
Woolworths aims to fulfil customers’ needs and wants in order to attain customer loyalty and

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confidence in the long run (Grimmer, 2018). Apart from this, the company also tries to take
advantage of the cheap labour available in China for cost reduction.

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Macro-Economic Analysis of China
China is considered to be the most feasible location across the world for doing business. It
has strived hard to be among the strongest powers and welcomed overseas entrepreneurs to
do business in China too. In this regard, the foreign investors also like to operate in China
mainly due to three reasons, huge market size, low cost of workforce, and predicted high
growth of China in future internationally (WidyaYudha et al., 2018).
In order to understand the market conditions of China, Woolworths needs to do PESTLE
analysis to evaluate the macro environmental aspects of doing business in China. PESTLE
will help the management to take right decision and apply best business strategies to survive
in Chinese market.
Political Factors
In China, political factors are unstable which may cause difficulty for Woolworths. The laws
made by Chinese government are strict and become compulsory to be followed by every
international company (Li et al., 2018). However, in the recent times, the focus of
government is on developing e-commerce, which can be useful for Woolworths.
However, there are no proper rules in e-commerce supporting recognition of electronic
signatures, privacy, and accuracyof electronic contracts and protection of consumer rights,
causing problems in smooth running of international corporations like Woolworths.
Economic Factors
It has been observed that China has undergone higher positive changes in terms of GDPsince
the last 5 years. Recent economic reports of the country show that this growth in GDP is

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likely to remain the same in the coming future as well and may also higher (Song &Jin,
2017). This is primarily due to low rate of savings, availability of talented and plentiful
labour, and high exports. The potential urban development of China is also beneficial for
Woolworths’ strategies of selling.
Every citizen of China gets fair per capital income thus contributing more to the economic
development. Woolworths can occupy significant market share in China by perusing people
to spend more on quality products
Social and Cultural Factors
In China, social and cultural factors play a vital role in the success and failure of an
international business due to constant changes in demography such as shift in cultural values,
social trends and population level. The family size and purchasing pattern in China is not
stable which may affect the selling volume of Woolworths. Other aspects such as education
level, religion, lifestyles and migration of people affect the functioning of international
business to a great extent. In China, the literacy rate is above 90 percent, suggesting that
consumers in China are well educated and aware. So, Woolworths needs to be cautious while
advertising and selling its products and services.
Technological Factors
In order to run successful in China, Woolworths needs to consider the changes in
technological fieldproperly. In China, technologies keep on changing with time in order to
provide more efficient and improved products to consumers (Wu et al., 2017). The
management of Woolworthsrequires studying new technological developments in production,
innovative selling mechanisms and feasible purchasing tools as the extranet and intranet,

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different distribution channels and modesof working through mobiles and internet in order to
gain competitive advantage.
However, the key technological issue that arises in China is the expansion of B2C sector
which does not have stable and safe online process of payment (Li, et al., 2017). Since the
consumers in China are athigh level of Long Term Orientation and Uncertainty Avoidance
level, this may cause problem for Woolworths to survive.
Legal Factors
In China, the legal factors are stringent especially for international companies. For example,
the foreign companies are compulsory required to get registered licenced and certified their
operations, services and products by the relevant authority; otherwise, they cannot sell
anything in the country. The safety of human beings is given priority in China and all
products are tested to prevent any loss of human life.
In this context, Woolworths is required to check all the regulations with the State
Government of inspection, quarantine, certification, quality supervision, Accreditation
Administration, and certification of the retail industry of China. If not followed properly, it
can bring the company to legal issues and penalty to sustain in the country for a long time.
In addition to this, China government has also recently enacted a new Food Safety Regulation
in 2009 according to which, all domestic and foreign companies dealing in FMCG should get
registered with the applicable authority before food products are served to the public.
Thus, on the basis of PESTLE analysis of China, it can be said that the country is an
advantageous market for numerous companies looking to expand their selling network and
there exist great opportunities to grow well in China. However, Woolworths should also

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consider all the risky factors with careful planning and managing so as to implement its
business expansion activities successfully.

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Recommendations regarding production
Woolworths is among those corporations which successfully compete with their rivalries in
terms of selling volume, market share and revenue in Australia. However, in order to run
successfully in China as well, the company is recommended to identify and exploit the
availableopportunities effectively. The management should design strategies to emphasise on
the products which are high in demand in China so as to develop a strong relationship with
customers and attract potential customers who are ready to spend high level of disposable
earning with ease (Hickman, & Silva, 2018). Moreover, Woolworths is recommended to
build expertise in the supply chain area of the production by forming joint ventures with the
popular suppliers in China and other countries.
The emergence of Radio Frequency Identity Tagging in the nearer future, Woolworths may
have to face some challenges in China. In order to deal with it effectively, the organization
create innovative strategies in align with country law. The products of the company should be
made able to be monitored from manufacturing to the consumption level enabling effective
and fast inventory management and develop insights into the consumer shopping behaviour.
Woolworths is also recommended to aim at forming its strategy consistent with that of legal
and political factors of China so as to provide products at competitive price(Hickman, &
Silva, 2018). This is due to the fact that consumer preferences and social trends are showing
fluctuations and these can be effectively identified using innovative strategy. The
recommendations to Woolworth’s strategy also includeto look towards further increasing its
assistance from experienced employees by way of effective training and development tool.
Apart from this, Woolworths is recommended to focus on its warehousing operations
throughout all cities of China with smaller actions on a regional basis. It canprovide them