In the current business state of affairs, impact and influence of the external business factors are more than ever. This is due to the reason that in the current business scenario, organizations are facing different and diverse business situations, which are becoming difficult for them to cope up with. In this case, it is important for the contemporary business organizations to effectively determine the external business factors using different frameworks to have the proper understanding about their trends and patterns (Gupta, 2013). Accordingly, the organizational strategies can be initiated by them in the long term. In addition, it is also important for the business organizations to also identify the extent to which the particular external factor is having their impact on the operations.
In the previous assignment, the micro environmental factors of Woolworths are being discussed and in this section, the macro environmental factors will be discussed. In addition, the impact of the environmental factors will also be evaluated from the perspective of the business of Woolworths. In accordance to the identified challenges, a few recommended steps will be discussed in this section.
Determination of the external environment
Political factors
In the current business scenario, political factors are important to get determined due to the reason that changes in the political scenario will change the entire business approach of the organization. Woolworths are having their major business in Australia and thus the political scenario of Australia will have the most impact on their business. It is identified that Australia is having stable political regime in place with having efficient governance. In addition, majority of the political alternatives in the country are pro-business and pro-capitalist. Thus, the business environment for Woolworths is favorable in Australia (Acemoglu & Robinson, 2013).
However, it should also be considered that pro-business and pro-capitalist approach is also having own set of challenges. This is due to the reason that with the business friendly approach in the country, more global companies will get attracted and Woolworths will face increased level of competition in the market. In addition, it is also identified that Australia is having favorable political relationship with the major economies across the world including the free trade agreements with a few countries.
Thus, it is beneficial for Woolworths in having larger opportunities in the global market by means of having more market and trading potentialities (Marsh, Lewis & Chesters, 2014). However, on the other hand, it should also be noted that different Australian states are having different sets of business regulations and standards and it is important for Woolworths to have the proper understanding about these differences and initiate their business strategies accordingly.
Economical factors
It is reported that Australian economy is growing at a constant rate from the last few years. This is one of the major positive sides for Woolworths due to the reason that the more will be the growth of the economy, the more will be the market opportunities for them. However, it is also being identified that rate of competition is rapidly increasing in the Australian retail market due to the inflow of new entrants (Bishop et al., 2013). This is mainly due to the reason of lower entry barriers in the market and favorable business environment. Thus, profitability of Woolworths is getting affected with the increase in competition.
Another major and probable economical factor will be the emergence of economic recession. This will reduce the purchasing power of the customers and average revenue trend of Woolworths will get affected (Fairlie, 2013). In the recent time, the rate of unemployment in Australia is increasing, which will also have adverse impact on the business due to the reason that unemployment will reduce the purchasing power of the customers. Australia is also one of the leading countries in the world in terms of inflation, which denotes that average price of the products is high as compared to other countries. This is also restricting the market growth for Woolworths.
Social factors
Australia is a globalized economy and thus global factors are having larger influence on the society. In this case, it is a challenge for Woolworths to cope up with the change in the global trend of customer trends usage pattern and offer the latest in the market. In addition, it is also being identified that the bargaining power of the customers is high due to the presence of large number of competitors in the market.
This is having negative impact on the pricing decisions of Woolworths due to the reason that odd pricing strategies will fade away potential customers. Australian society is diverse in nature and in the recent time, the diversity is increasing with the increase in the inflow of the immigrants in the country (Markus, 2014). Thus, Woolworths is facing the challenge of catering different customer segments and increasing the diversity in their product ranges.
Technological factors
Australia being a developed economy is having the access to the latest technologies and innovation. On the other hand, retail sector is also witnessing a huge bump in the technological advancements in the recent time. Hence, it is important for Woolworths to have the access to latest technologies such as self service and self checkout systems for the customers (Orel & Kara, 2014). Even though they are offering these technologies currently but the major challenge for them is the rapid evolution of the technologies (Mithas, Tafti & Mitchell, 2013).
Therefore, it is becoming challenge for Woolworths to maintain the continuous process of technological development and involve huge capital in it. On the other hand, it is important due to the fact that offering latest technologies will add to the convenience of the customers and help in gaining competitive advantages over the competitors. Thus, Woolworths have to invest more capital in developing their existing technologies in staying relevant in the market (Lee & Yang, 2013).
Legal factors
Legal factors are also important for the business organizations due to the reason that rules and regulations will influence the organizational policies and approaches. Australia is having favorable position in terms of number of procedures to start a new business (Grabosky, 2013). It is beneficial for Woolworths in expanding their businesses but equally challenging. This is due to the reason that the threat of new entrants gets increased. In addition, Australia is having stricter regulations and standards in terms of employee management and this is important for Woolworths to get adhered to it. Though the overall legal environment of doing business in Australia is favorable enough, but radical changes in the legal formalities will cause issue for Woolworths to match up.
Environmental factors
In the recent time, there are number of environmental standards being introduced by the authorities and Woolworths is also initiating sustainable business practices (Head, 2014). They are working towards the reduction of carbon footprint from their business operation. In addition, Woolworths is also having effective supply chain management process to monitor the sustainability of their suppliers as well (Klettner, Clarke & Boersma, 2014). However, it should be noted that Woolworths is incurring added cost for ensuring the sustainability of their business. This will have adverse impact on their business profitability in the long term.
Recommended strategies
Conclusion
It is concluded that Woolworths is facing a number of challenges in terms of their external business factors. These challenges are identified and evaluated in terms of their impact on the business. PESTLE analysis helped in identifying all the major factors, which will pose challenges for Woolworths in their existing market. One of the major challenges for Woolworths being identified is the increase in competition. In accordance to the identification of the challenges, a few recommended steps are also being discussed in this paper. These steps or strategies will help Woolworths in overcoming their current business challenges and enhance the future business effectiveness and opportunities.
Reference
Acemoglu, D., & Robinson, J. A. (2013). Economics versus politics: Pitfalls of policy advice. Journal of Economic Perspectives, 27(2), 173-92.
Bishop, J., Kent, C., Plumb, M., & Rayner, V. (2013). The resources boom and the Australian economy: a sectoral analysis. RBA Bulletin, 3, 39-50.
Fairlie, R. W. (2013). Entrepreneurship, economic conditions, and the great recession. Journal of Economics & Management Strategy, 22(2), 207-231.
Grabosky, P. (2013). Beyond Responsive Regulation: The expanding role of non?state actors in the regulatory process. Regulation & Governance, 7(1), 114-123.
Gupta, A. (2013). Environment & PEST analysis: an approach to external business environment. International Journal of Modern Social Sciences, 2(1), 34-43.
Head, B. W. (2014). Evidence, uncertainty, and wicked problems in climate change decision making in Australia. Environment and Planning C: Government and Policy, 32(4), 663-679.
Klettner, A., Clarke, T., & Boersma, M. (2014). The governance of corporate sustainability: Empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics, 122(1), 145-165.
Lee, H. J., & Yang, K. (2013). Interpersonal service quality, self-service technology (SST) service quality, and retail patronage. Journal of Retailing and Consumer Services, 20(1), 51-57.
Markus, A. (2014). Attitudes to immigration and cultural diversity in Australia. Journal of Sociology, 50(1), 10-22.
Marsh, D., Lewis, C., & Chesters, J. (2014). The Australian mining tax and the political power of business. Australian Journal of Political Science, 49(4), 711-725.
Mithas, S., Tafti, A., & Mitchell, W. (2013). How a Firm’s Competitive Environment and Digital Strategic Posture Influence Digital Business Strategy. Mis Quarterly, 37(2).
Orel, F. D., & Kara, A. (2014). Supermarket self-checkout service quality, customer satisfaction, and loyalty: Empirical evidence from an emerging market. Journal of Retailing and Consumer Services, 21(2), 118-129.
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