How Legal Frameworks Affects Woolworth Limited

Woolworth Limited Background

How legal frameworks affects Woolworth limited.

This report examines the management of Woolworth Limited Company Australia. The aim of the report is to study the various legal frameworks and policies and observe how they influence operation of the company. The report will also examine some of the international policies  that affect the business at a global level

Woolworth Limited is one of Australia’s biggest retail company regarding revenue and the second largest in New Zealand. It boasts of being the biggest liquor retailer in Australia and also offers gaming and hotel services.

With its headquarters based in Sydney Australia, Woolworth runs about 961 stores in Australia alone and boasts of 111,000 employees who are stationed in various stores and distribution centers to run its operations. Globally the number of staff working for this organization stands at 193,000 according to Woolworth annual report of 2016

Its products are mainly sold in supermarkets, hotels, and pubs. In supermarkets, it operates under the Woolworth brand while in liquor stores it supplies Dan Murphy’s and BWS. In hotels and pubs, Woolworth Limited operates under the ALH Group (Australian Leisure and Hospitality Group). The group is believed to own over 10,000 poker machines in Australia which bring in over $1.2 billion regarding revenue each year. In summary, Woolworths ranks amongst the top food retailers in the world and approximately 31% of market share in Australia(See appendix 1)

Changes in the market structure have pushed organizations to think outside the box when it comes to  developing strategies that will lead the company to profitability. One of the main factor that affects and  determines which strategy is to be used is the external environment. According to Hollensen (2007) the strategy adopted by Woolworth limited is aimed at achieving higher profitability and growth  while at the same time minimizing operational losses. In addition the analysis  further indicates that Woolworth just like other global companies is susceptible to environmental factors that might affect its operations and profitability in the long run (Kotler & Armstrong, 2010).

Woolworth has been making a difference in terms of profit margins in the recent past, but the introduction of major amendments in the competition policy which seeks to introduce major micro-economic reforms threatens the growth  of this organization.

Some of the major concerns that Woolworth has raised concern over and will affect the profit margin of the company includes the amendments in the Consumer and Competition Act of 2010 that will create a leeway for misuse of  market power provisions. Changes in this  clause may negatively affect the performance of Woolworth in the already volatile market.

For instance the amendment of  clause that would see non prohibition on price discrimination introduced into the competition policy has been welcomed  by main players in the grocery sector as this would give and a better opportunity to increase their sales revenue. In addition an amendment  that would see greater flexibility in the notification process   for collective bargaining by upcoming businesses has also  been highly welcomed by players  in the grocer sector.

Competition Policy Review

Despite this there those amendments that have raised concern in the circles of management at Woolworth with regard to the competition policy. One of such amendment has been the extension of  section  45 of the Competition and Consumer Act  to cover what is reffered tto as “concerted practices”.If implemented this will have  a negative effect on competition and in worst cases  be harmful to the  consumers who are at the receiving end. Another detrimental reform that may negatively affect woolworths perfomannce  would be  the introduction of the infamous  “effect-test”

Woolworth is operating in a market that is highly volatile and any changes to the competition policy may equally affect the performance of the business. The Australian government has moved  to introduce various amendments in the competition policy some which have further favoured the business while others have been seen as a threat to the operation of the business.

Woolworth as a retail industry in Australia has been one of the leading retail store in the industry. The firm has achieved a significant level of the market share and exponential growth across the Australian retail industry

One of the main factors that has drove Woolworth into profitability especially in the Australian retail industry is the ability to operate multiple stores thus having the advantage of being spread over a larger geographical area as compared to its competitors. It commands about 31% of the market share in the Australian market alone (Kotler, et al,2009)

Woolworth is also famous of their high food safety standard which has seen it attract more customers in the recent past. Safe and fresh products are always an attractive bargain for customers and this has further pushed up sales in major Woolworth outlets in Australia. In addition the prices of Woolworth products are affordable and this has attracted more customers to shop at their convenient stores (Johnson, Whittington,and Scholes, 2009),.

Woolworth is also offering value for money to its clients. For instance, their products are fresh and hygienically prepared for the end consumer. This includes fruits and vegetables and other grocery products. The firm has gone ahead to partner with best farmers in Australia and its environs to supply them with fresh farm produce (Cadle, Paul, and Turner.2010).

As Woolworth boasts of higher profit margins environmental factors continue to affect the productivity  of the company in the Australian market. A closer look at  its operations data show that the wine making  business and its petrol investment have direct effect to the environment and thus having negatively affected its operations

Legal factors has also played a role in affected the profitability of the company. Policies such as carborn tax  that have been introduced by the government in Australia have seen companies such as Woolworth counting their losses.  Other policies recently introduced such as the adoption of fair price policies have had similar effects  on the profitability of the company (Wether  and Otter, 2014).

Political factors .Any political lobbying that may lead to the amendment of  trade policies within the Australian economy may  adversely affect  the profitability of Woolworth in this market. Changes to local  or national laws  that do not support favorable working environment may in turn affect companies that are to operate under this new political dispensation (Starlin,2003). This  might have serious implications on this firms in terms of profitability. In the recent years the Australian government has launched a series of laws that seem to negate fair competition in the market. This policies have seen to target specific companies within the retail industry and in the long run this companies have recorded losses. This companies include Woolworth. Their argument has been that Woolworth and other companies are enjoying monopoly and market dominance hence the need to amend the law to favor other players

Competition Policy Agenda

Economic .Factors that affect economy  such as the rate of inflation and the weakening of the Australian dollars  have been observed as serious economic factors that may bring a company to its ground. Trade regulations have also been seen as a threat to profitability of many businesses. A look at Australian retail market reveals that a deep in the market conditions as a result of bad economy has eventually throne the retail market into disarray. This has in turn negatively affected the productivity of market players such as Woolworth. Weakening of the Australian dollar and high inflation rates has further worsened the situation ((Woolworth Annual Report,2016)

Technological advancement has also been seen as a key driver of the economy. Global companies like Woolworth have taken advantage of this tool and they are raking millions of profits due to efficiency and cost effectiveness that has been achieved as a result of technology. For instace looking at the Australian market, Woolworth has adopted the use of technology. Use of green refrigeration technology is just but a few of the many places where technology has been adopted in this company. However this tool has its fair share of trouble since it comes with disadvantages that may affect the productivity of the organization (Arthur, 2009).

Cross-cultural practices and social factors should also be considered by company that is seeking to penetrate the market that it operates in. In Australia social factors are influencing consumer pattern. With this in mind companies need to invest heavily on the social and cultural practices of the consumers in order to push their products to potential consumers. Woolworth will have to develop ties with the local community through engagement and corporate social responsibility to increase customer base (Burt. & Starlin,2003).

An in-depth analysis of Woolworths limited has been conducted   with an aim to assess the important   strategies that have been in put in place to drive productivity. The result of the analysis has shown that Woolworth has specifically focused its strategies to control the market share in the Australian retail industry while at the same time attaining double growth in its operations. It is evident that the growth being experience in the firm is as a result of its strong commitment towards delivering high quality products to its customers while at the same time valuing its employees.

The analysis of the macro environment facing Australian retail industry has had a direct impact on Woolworth as a firm operating within this market. Political conditions, social trends, changing demographic patterns and competitive business environment have all negatively affected the profit margin and overall growth of Woolworth.(McDonald and Wilson,2011).

Conclusion

According to the analysis, the Australia retail industry is flooded with companies offering similar products at almost the same price as Woolworth. Other retail stores have moved an edge further to cut the prices of their products so as to attract more customers to their stores. This move can adversely affect the profit margin of Woolworth especially if the competitors are offering high-quality products at a lower price. Woolworth needs to come up with a strategy to mitigate market ‘price-wars” that may arise as a result of this. For starters, they should avoid paying attention to the price competition and focus more on improving service delivery thus having an extra edge over their major competitors. They can also plan to buy out the upcoming new players in the market to reduce the level of competition

Finally, the Australian retail market is a volatile market. Therefore Woolworth will be required to be in constant consultation with market observers  in order to come up with strategies that will see the company sail through constant changes in the environment they operate in. This therefore will require strategies that are flexible and can accommodate sudden changes brought about by external environment(Porter, 2010). Economic indicators should also act as a red flag for the company when crafting up strategies that would see the company maximize their profit. Changes in the legal frame work will also have an effect on the operation of such firms and as a result this companies should always be on their feet thinking of how to maximize profit and minimize loss irrespective of these eventualities

References

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Woolworth Annual Report, 2016

Woolworth Annual Report, 2016