Developing A Business Case For International Expansion: A Case Study Of Woolworths

Introduction and Background

The well-known Australian company, Woolworths was founded in 1924. Owned by Woolworths limited the Woolworths supermarkets is a grocery store chain. The company specializes in selling groceries including fruits, vegetable, packaged foods, meat, fish and related items. Items such as magazines, household, health and beauty products, pet and baby items are also found in company’s stores. The company has 1000 stores across Australia consisting 976 supermarket and 19 convenience store (Wolfsbauer and Bobbin 2016).  Along with supermarkets operating across Australia, the company also has an online store named HomeShop, widely famous for their “click and collect” service and their home delivery service. In July 1997, the chain of the company stopped operating and put their prime focus on sporting goods. After the decision of shifting company’s focus, the company renamed itself Venator group. In the year 2008, the final decision was taken to close all the Woolworths stores by the first months of 2009 (Parkinson 2018). Although there are other existing companies across the globe the Woolworths Company has no affiliations. The company aim to be the first priority and be placed 1^st across all their brands. Five priorities are set by the company to achieve their goal. The company works on building a customer and store-led culture and team. It also works towards the generating sustainable sales momentum in food. The next priority is to evolve drinks business and be able to provide more convenience to customers. Working on their company’s portfolio to pursue strategies and deliver shareholder value. Lastly, the company works to become a retailer through end –to-end process and operating with excellence.  

Corporate Social Responsibility (CSR) is the era when the organization achieves the development of sustainability in both the scenario of economic dimension and in the social and the environmental dimension (Cheng, Ioannou and Serafeim 2014). It is the CSR that encourages and assist companies to think about the impact they can have on the rest of the society including the environment as well as their stakeholders. In the following case study of Woolworth, the approach towards CSR is recognized by the success that is not measurable in the terms of growth and profit but in the way it reduces the impact in the environment. In Woolworths, it is believed that the integration of the financial performances with the criteria of the non-finances will generally enhance the value for the stakeholders and the members engaged and connected to the organization. The organization launched its first strategy of sustainability in the year 2007 named as doing the right (Frigerio 2017). Being a part of the CSR strategy for the year 2020, Woolworths aims towards daily reporting on the progress of its targets towards its goals and commitments. The company has goals and commitments covering Woolworths’s customer, stakeholders, team members and the communities where the company operates. The noble cause that the company has initiated is all about people, planet and prosperity which will be explored in this paper.

Woolworths CSR Activity

However, there have been times when the company is faced with various challenges such as removal of CEO and dropping of share price. Along with all the obstacle the company there are opportunities as well that are on the way of Australia’s largest retail company. The company has got the opportunity by the e-commerce platform and now can enter the international markets of Asia. Through the help of Tmall Global, which provides scope to the overseas businesses to conduct business, the Woolworths has got the exposure and ready to be accessed by the consumers (Whitehead 2016). According to research there is a very high demand for high quality, Australian made products in the overseas market. Hence there is a high possibility for Woolworths to experience a business venture.

Woolworths has grown in one of the biggest retail groups in the southern hemisphere with its retail market from Ghana to New Zealand. The company has their own purpose, their vision and their set of values. These constitute the natural progression from the values and the vision of the business that develops the Woolworths. The goals of Woolworths have always been to put forward the customers and the clients in the first priority. The overall purpose of the company has been adding quality to the life. Woolworth targets to be one of the world’s most responsible retailers by reflecting the commitments, the passion towards the customers, the people and the planet. The assignment focuses on the case study of Woolworths highlighting the focus of the organization towards the initiative of an international business platform. The main scope of Woolworths as explained in this assignment is to expand its platform of the business in the retail sector from one country to another. Woolworths aims towards the growth of its business to the markets of Asia. Some of the targeted markets that the company is focusing to expand and grow are of China, Japan, Malaysia and Indonesia.

As per the investors and bankers opinions, through extending in Asian market rather than domestic or US debt markets Woolworths could afford to operate more in Hong Kong’s, to become the second largest grocery chain in China. Apart from that, outbidding Japan’s Aeon and Thailand’s Charoen Pokphand Group could also bring enough opportunity for Woolworths to flourish. However, borrowing in local currency can create an ordinary prevaricate while reducing the currency risk in the operating zone. Recently Woolworths has already launched their first online store on Tmall Global in China as their fist overseas platform by collaboration with Alibaba Group’s B2C Tmall business. This business strategy is enabling Chinese consumers to order a wide range of products directly from the company through the portal of Tmall. The recent e-commerce platform will provide an opportunity for Woolworths’ local suppliers to enter the China market as well. In this situation, rapidly growing middle class population in china could increasingly seek the Australian products.

Scope of Expansion

Along with adequate funding for overseas business and with low-cost Asian debt Woolworths can most likely to see an underlined potential reinvestment plan to put their business in proper place. The regional market as well as global economics could stack up easily while as a retail company Woolworths could also pay more for the profitable acquisitions. Apart from that, Woolworths can also take advantage of their high share price in order to raise capital rapidly. If the company can get their assets for a reasonable price while using the equity to pursue new achievement,   it could be the best way to operate in a ever expanding market in China, because of their highly rated reputation throughout the globe. The initiative of Woolworths towards the international expansion of its business mainly involves the establishment of the operations in the foreign markets. Woolworths will benefit from the opportunity to access new pools of talents in the market of Asia, gain a competitive edge over the opponents of Woolworths in the competitive sector of retails in the continent of Asia.

Retail Market analysis of China

In order to enhance its business in the retail industry of China, the management of Woolworths needs to analyze and evaluate its external as well as internal environment. In order to understand its external environment, PESTLE analysis of Woolworths has been conducted.

Political Factor

The political environment of China is highly stable. Stable political condition has imposed positive impact on the retail industry of the nation. Being a popular retail organization, The mentioned agreement has combined the two countries where Woolworth is considered to be the single organization that is supposed to meet the requirements of the consumers (Scarborough 2016). Considering the fact that like China, the political environment of New Zealand is highly stable, both local as well as international stakeholders of Woolworths are politically stable.

Economic Factor

The global recession has imposed an adverse effect on the economic environment of majority of the developing countries including China. However, being a developing country, the living standard of China is lower than that of the developed country. Due to recession, the yearly revenue of the mentioned organization has got lowered. However, not being a nation with aging population, the labor charge of the nation is not high. This factors are imposing positive impact on the business of Woolworths  (Burns and Dewhurst 2016).  However, both China as well as New Zealand is gaining economic stability.

Socio cultural factor

Considering the fact that the current rate of death in China due to obesity and inappropriate diet has got increased with time, majority of the consumers have got inclined towards a healthy lifestyle. Consumers are found to be preferring fat free as well as organic food items over food items with higher fat content. This in turn is imposing a negative impact on the business of the mentioned organization since a god amount of its suppliers are popular coke and fast food selling companies. However, in order to deal with the situation, Woolworths have taken several initiatives through its sustainability techniques 2015-18. However, majority of the consumers prefers to shop at street or traditional markets instead of shopping at international malls. This may adversely affect the revenue of the country.

Technological factors

Being a developing country, China is not highly advanced in technology. This has imposed negative impact on the organization. However, due to the availability of internet as well as communication 24*7 hour hours, Woolworths is able to provide its consumers with excellent services  as well as products  (ZHANG et al. 2014). Thus it can be said that lack of technological advancement can be one of the barrier to the success of the company.

Legal Factor

The Chinese government is highly strict when it comes to the retail industry of China. The taxation policy as well as the recruitment an employee management regulation is a major part of the basic legal framework for the Chinese retail industry (ZHANG et al. 2014). Along with the legal aspect, the food licensing requirements are crucial in the retail sector as the retail organizations needs to comply with the regulations.

Environmental Factor

Due to the high negative impact of continuous environmental degradation, the consumers of the mentioned organization have got highly aware of environmental factor. In today’s environment friendly world, the customers give preferences to companies and products that show commitment towards producing products that are organic and come with a green-tag. In order to gain competitive advantage the mentioned organization not only abides by the environmental laws of the nation but has also implemented several strategies in order to minimize carbon footprint.

In order to analyze the internal environment of the company, a SWOT analysis of Woolworths has been conducted bellow.

Strengths

1. Woolworths is considered to be the pioneer and one of the oldest companies that has introduced the modern retail trade model in Australia and New Zealand.
2. The company is highly popular globally and posses more than 900 stores across the country.
3. The brand equity of the mentioned company is high.
4. Currently more than 1000,000 employees works for the company. Thus the workforce of Woolworths is huge (He et al. 2016).
5. The company posses a good number of brand loyalty schemes for its regular consumers.
6. The brand name of the company is strong and it has efficient operations.
7. The consumer loyalty of the Woolworths company is huge

Weaknesses

1. One of the major weaknesses of the company includes its limited global presence across the world. The mentioned company is currently present only at Australia that is origin country of origin as well as at New Zealand. Lack of global presence is imposing negative impact on the competitive advantage of the organization.
2. Another weak point of the mentioned company is its late entry in the world of online marketing. As a result of this, the company is suffering from lack of competitive advantage in the online market.
3. Finally, the recent conflict between the staffs of the organization is imposing negative impact on its annual revenue

Opportunities

1. Woolworths, since it posses high brand equity has the potential to promote the brand through both online as well as offline marketing g and sponsorships.
2. In order to gain competitive advantage and enhance its yearly revenue, it is high time for the management to establish its branches in the less saturated retail industry of the middle eastern countries.
3. The company can also see growth strategic acquisitions as well as franchise models in the emerging economies (Kumar 2014).
4. In order to enhance its online consumer loyalty, the company should use social media platforms. These platforms will enable the management of Woolworths to directly communicate with the consumers and understand their specific requirements.

Threats

1. Rising costs of the raw material costs from both food and non-food industries has the potential to adversely affect the profit of the mentioned organization.
2. Economic recession could hinder the overall growth strategy of opening more stores of the organization.
3. The high competition in the retail industry of Australia and New Zealand can be considered as a major threat for the mentioned organization.

Building strong partnership and connection with the stakeholders is the basic key towards the development and building of a sustainable future for the business. The power and the influence of the stakeholder tend to affect the profit margin of an organization.

Woolworth, the retail brand of Australia, aims towards the proper understanding of the influence and the impact of the stakeholders for effectively learning and leveraging the existing base of the stakeholders (Our Stakeholders – Woolworths Holdings Limited 2018). The organization targets a good journey of the business with a comprehensive management of the risks related to the business together with meeting the expectations of the key group of the stakeholders. The group of stakeholders of Woolworths include the customers, the employees, the suppliers, the industry organizations, the government and the regulatory, the media, the union, the communities, the debt funders and the investors from the pubic traded company and abroad.

The purpose of this stakeholder analysis is to inform the project manager and sponsor who are contributing to this business project conserving the potential barriers and the actions that need to be taken prior to detailed project planning.

Stakeholder	Their interest or requirement from the project	What the project needs from them	Perceived attitudes and/or risks	Actions to take
Chine and Australian government and authority	Strict compliance with legislation, Good tax-paying ability, stable employment	Amount of taxes paid, number of jobs, payroll, investments, structure and regional coverage of the store network	Ethical issues, breach of regulation, penalization	Maintenance of a comprehensive store and distribution network
Directorial Personnel	Business growth, good liquidity, long-term business relationships	planning and development of operations, quality of management	Development and breakdown of purchases, organizational structure	Communication, business planning, following directions
Employees	Job satisfaction and safety, Career growth, Experience,	Internal and external service, compliance, integrity, coordination, ground level operation, leadership, improvement	Operational Resistance, Strike, Turnover, recruitment, training	Monitoring, Controlling, training, development, rewording, motivation, empowerment
Customers	Service, products, variety, satisfaction, cooperation, guidance	Purchasing, demand, cooperation, investment, curiosity, loyalty	High consumer attrition, decreasing market share, lower demand	Consumer service, sales, promotion, communication, reviewing
Business partners	Profit, Business growth, good liquidity, long-term business relationships	Cooperation, investment, loyalty, coordination, faith, patience	Low investment, low gross profit, market collapse	Communication, negotiation, involving in decision making, informing
Suppliers	cooperation agreement, price, loyalty, Demand	agricultural producers, manufacturers, and importing, cost efficiency, time efficiency	Poor material quality, Logistic issues, delivery delay, high price	Negotiation, Demanding, supply chain planning, strengthening relationship
NGOs, Charity, Trusty	Presentation of activities, contacts in the preparation, transparency, donation, financial support, principles, reliable results reporting	responsibility, clear operating principles, Indirect promotion, recognition, reputation, sustainability, cooperation	Ethical issues, Poor transparency, corruption, ignorance	Corporate image surveys. Amount and breakdown of support, sustainability measurement, CSR planning
News media, social media	Open, comprehensive, reliable, cooperative, fast communications	Indirect promotion, recognition, reputation, sustainability, cooperation, media focus, popularity	Daily media monitoring, corporate communications surveys, comparisons of annual reports and investor communications	Information about operations, meetings, communication, Annual Report, web pages, presentation, conferences

The resource for this project can be segmented in three sections namely financial resources, material resources and human resources. The financial resources will be discussed in the budget section. However, in this section the report will discuss the material resources and their utilization as well as the human resources and the respective departments.

Workforce type	Contract of recruitment	Number of recruitment	Required qualities
Marketing and promotion	Part time	150	Communication skill, information handling, following order, convincing, team work
Marketing and promotion	Full time	50	Communication skill, information handling, following order, convincing, team work
Sales and consumer relation	Part time	150	Convincing power, social communication, psychological understanding, team work, integrity
Sales and consumer relation	Full-time	50	Convincing power, social communication, psychological understanding, team work, integrity
Administration and facility	Part time	20	Collaboration, coordination, cleanliness, monitoring skill, administration experience, fault detection skill, maintenance experience
Administration and facility	Full time	30	Collaboration, coordination, cleanliness, monitoring skill, administration experience, fault detection skill, maintenance experience
Middle managerial position	Part time	5	Monitoring, controlling, making decision, problem solving, psychological understanding, risk assessment skill, reasoning capability
Middle managerial position	Full time	5	Monitoring, controlling, making decision, problem solving, psychological understanding, risk assessment skill, reasoning capability
Finance and accounts	Part time	2	Experience in charter, financial calculation, problem solving, accuracy, information handling, integrity
Finance and accounts	Full time	1	Experience in charter, financial calculation, problem solving, accuracy, information handling, integrity
Training and development	Part time	10	Experience as trainer, academically qualified, communication skill, influencing, motivating skill, information handling
Training and development	Full time	5	Experience as trainer, academically qualified, communication skill, influencing, motivating skill, information handling

Physical Resources	Count	Materials /Type	Equipping process
Large office premises	3		Purchasing
Small office premises	5		Purchasing/lease
Chair	60	wooden	Purchasing
Cozy Chair	40	metal	Purchasing/lease
Small Table	10	metal	Purchasing/lease
Medium size table	5	wooden	Purchasing
Conference Table	3	metal	Purchasing
White board	10	Metal/wood	Purchasing
Projector	4		Purchasing
Wiring equipments	55	Metal/rubber coated	Purchasing
Air conditioner	20	Central integrated	Purchasing
Air conditioner	15	Window	Purchasing/lease
Stocking Rack	50	Metal/wooden	Purchasing/lease
Carriage	30	Metal	Purchasing
Electric light	20		Purchasing
Fan	15		Purchasing
4 wheeler vehicle	5		Purchasing/lease
2 wheeler vehicle	25		Purchasing/lease
Desktops	15		Purchasing
Laptop	25		Purchasing
Mobile/communication devices	40		Purchasing

Net start up cost is 44000 AUD and the total recurrent expenditure in next 12 month will be 2995600AUD. The expenditure capital considering CAPITAL EXPENDITURE, Equipment purchased, Vehicles purchased, Furniture purchased is 150000. As per the break even analysis the Targeted Selling Price per Unit  is 30.00, Break Even Point (units) 586.36 and Break Even Point (revenue) 17,590.91 AUD. To break even the company must sell 586.363636363636 units or generate AUD 17590.9090909091 per month. The expected profit after subtracting the tax the net profit will be after three conjugative months 4132500, 4659940 and 4892975 respectively.

The activities are subdivided into 4 sections namely Operational Activities, Marketing activities, Financial activities, and CSR Activities. The Operational activities contain of of Communication with direct stakeholders, conducting a market research, Communication with local suppliers, finalizing the business compliances and polices, Recruiting workforce, executing Training and Development, Initiation of logistic operations . The marketing activity contain of Conduct a research on consumer  behavior, Communicating with marketing and promotional agents, Developing marketing strategy, Executing print and digital media marketing. The financial activities contain of Cost and benefit analysis, Budget estimation and Financial resource allocation. The Corporate Social Responsibility related activities content of Communicating with NGOs and Charities, imposing the environmental sustainability regulation including carbon emission, waste management and other.

References:

Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to finance. Strategic management journal, 35(1), pp.1-23.

Frigerio, C., 2017. The Public’s’ Perception of Corporate Social Responsibility (CSR) and Its Impact on Marketing Strategies (Doctoral dissertation, The IIE).

Parkinson, M.M., 2018. Case Study 4: Woolworths Group plc. In Corporate Governance in Transition (pp. 203-221). Palgrave Macmillan, Cham.

Whitehead, M., 2016, June. Digital technology through the supply chain. In Digital Disruption in Agriculture Conference, Sydney (pp. 2-3).

Wolfsbauer, C. and Bobbin, P., 2016. Estate planning series: I’m not dead yet-the power of attorney. Equity, 30(6), p.8.

Burns, P. and Dewhurst, J. eds., 2016. Small business and entrepreneurship. Macmillan International Higher Education.

He, B., Li, W.Y., Zeng, Z.Q. and Li, Z.G., 2016. First Report of Canker Disease Caused by Thyronectria pinicola on Lacebark Pine in China. Plant Disease, 100(11), pp.2331-2331.

Kumar, S., 2014. An improved one-pot and eco-friendly synthesis of aurones under solvent-free conditions. Green Chemistry Letters and Reviews, 7(1), pp.95-99.

Scarborough, N.M., 2016. Essentials of entrepreneurship and small business management. Pearson.

ZHANG, S.S., Yu-jie, W.A.N.G. and Gao-feng, R.E.N., 2014. Safety study on propagation law of pestle and jet flow in detonator explosion based on high-speed photography. China Safety Science Journal, 24(2), pp.47-51.