Discuss about the Case Study of Woolworths’ Organization.
Woolworths is a supermarket that has captured a larger market share in Australia irrespective of the fierce competition experienced. The leadership role in this sector of business is attributed to well laid and executed strategies. The organization besides many other strategies is cognizant of environmental responsibility. It is with this view that the report examines Woolworths beginning by the company background and followed by its strategy, the competitors, organizational structure, responsibility centers, environmental responsibility, performance measurement and rewards, recommendation and end by giving a conclusion.
Woolworth is an organization based in Australia with its head office in Melbourne. It is a leading company in retails business operating as a supermarket. The organization has grown as penetrated the Australian market and has built retail stores that are spread across Australia (Woolworths group, 2018).
The mission is to deliver the best products at the conveniences of their customers as well as ensuring quality products and services.
The organization’s success in Australia is due to the used business and corporate strategies. In the utilization of business strategies, the organization has differentiated its products with the aim of capturing all segments in the Australian market. It is evidenced by the categorization of its product and services to different sections. Additionally, the organization has a strategic marketing technique that permits penetrate the market with ease. On the other hand, corporate strategy gets employed by skillful engagement with corporate responsibilities and sustainable environmental principles (Woolworths group, 2017).
Woolworths irrespective of its market leadership, it has rivals in the same market. The competitor in the second position rivaling Woolworths is Coles followed by Wesfarmers and ALDI, Distributor, Safeway, Giant Eagle, Carrefour, Metro, and Supermercato24 in that order respectively (Woolworths group, 2017).
The organization uses pricing and product range strategy; and creation of new products with better experience which is a competitive advantage for the organization.
This is an arrangement of a line of authority in a hierarchical manner in which shows the lines of command and communication flow. It specifies how roles, duties, powers get assigned, coordinated and controlled (business dictionary, 2018). Woolworths adopts a decentralized type of organizational structure. The degree of decentralization is divided into three lines. The organization uses the decentralized system as is shown in appendix 4 in which the process of making the decision get distributed to various sections. The reason for using a decentralized system is to reduce the complexity of the system and make it simpler for serving customers effectively (Topic 6 Lecture slides, 2018). Also with this approach, communication flows freely to and from the concerned parties for efficient delivery of services (Topic 6 Lecture slides, 2018).
The organization employs a market-based approach. In the approach, every section has their own specialized area of operation and distinct from other sections of the organization (Topic 6 Lecture slides 2018). At Woolworths, there is a supervisor in every section. For example supermarket and General Merchandise section (Topic 6 Lecture slides, 2018). Every division has are capable and responsive to the need of customers. There are two divisions that are segmented so that there is the improvement in the management as well as specializing in the services or products for the customers. The director supermarket has two managers, one responsible for supermarket and the other responsible for Mercury program. And the director general merchandise has two general managers, one responsible for electronics and the other responsible for Big W (Topic 6 Lecture slides, 2018).
As per Topic, 6 Lecture Slides, (2018) responsibility centers are units that have been decentralized so that the management can be accountable for its operations. Woolworths uses profits centers where take charge of the revenues as well as the costs of that specific work unit. For example, the general manager electronics is taking care of profits and expenses that are related to this unit. Alos, the general manager Big W is responsible for costs and revenues associated with this unit. There get assessed based on their capabilities to manage revenue, expenses and improve performance (Topic 6 Lecture Slides, 2018)
The concern for the environment has become an essential component of everyday life and individuals as well as businesses have a responsibility of making sure that the environment is taken care of for the benefit of all human beings (Parsa et al., 2015, pp.250-260). As per Jo, Kim, and Park (2015), the concept of environment began in the early 1980s when there was a call for conservation of the environment in order to protect the ozone layer. The focus was on enlightening people on deforestation since human work was heavily destroying the environment. Over time, this focus has shifted to business entities because it came to the realization that consumption of energy cuts across and hence calls for greener utilities of energy (Cai, Cui and Jo, 2016, pp.563-594).
According to Hansen, Nybakk, and Panwar (2013), a large part of a commitment to sustainable environment begin from the inside of the organization and these touches on shaping the principles of operation beginning with the employee as an individual. The neutrality of carbon is now becoming an aspect considered in businesses and it has now become the norm for businesses to offset the emissions of carbon (Welford, 2016). Additionally, businesses opt to adopt environmental sustainability in their supply chain. This is possible through adopting environmental friendly means and working with suppliers who are also using environmentally friendly techniques (Orsdemir, Hu, and Deshpande, 2016). The uses of greener methods in now a sustainable means of strategizing in order to make the company into the future since these options are cheap and sustainable.
In the business world, environmental sustainability involves making decisions that have the interest of keeping the environment. Even though critics may argue that this is not the role of businesses, there are valid reasons that support environmental sustainability for businesses (Baumann-Pauly et al., 2013, pp. 693-705). The impact and risks on business’s operations are low, there are implications of penalty in future for not acting now, augments efficiency and reduces expenses and create a competitive edge for business (Mack, 2013). Additionally, environmental sustainability is now a strategic means of differentiating from the rivals in the competitive market. It is because a larger number of customers are becoming sensitive to environmental sustainability and associates themselves with green products (Hart, 2017).
Woolworths is an organization that takes environmental issues at the heart of the business and therefore the organization has adopted environmental sustainable strategies (Arli et al., 2013). The organization has improved on the brand packaging recyclability with the aim of reducing non-recyclable materials and hopes to eradicate polystyrene in the near future (Woolworths group, 2017). Additionally, the organization has a plan to introduce recycling instructions that are clear and user-friendly so as to protect the investment for both the suppliers and the organization. Woolworths is also cognizant of forest protection and it is with this that they are sourcing, protecting people as well as reducing the impact on the environment (Woolworths group, 2017). Also, the company is creating awareness through Good Egg Guide initiative on the importance of sources sustainable products. The organization is a member of the net zero deforestation campaign and the organization is committed to sourcing high impact commodities like palm oil among others from certified independent supply chains (Ward, 2014). In addition, the organization is committed to reducing the carbon footprint to 10% in response to the Paris Agreement. In order to attain this, Woolworths is going to employ science-based targets in assessing the influences of a two-degree world, as well as look at the applicability to the organization (Woolworths group, 2017).
The responsible section for the remuneration regulations are people performance committee. They also acts with the advice of the remuneration advisors. The strategies of remuneration at the organization get focused on the delivery transformation of business. Appendix 2 gives different remuneration components that are in the framework. The remuneration of the executive has their components structured such that they are rewarded in a progressive manner across the different time frames as is shown in Appendix 1. The period over which the remuneration get delivered and awarded is shown. The executive remuneration gets weighted with variable remuneration in order to ensure that there is a focus on attaining the company’s transformation objectives as is shown in Appendix 3(Woolworths Annual Report, 2017).
The people performance committee and the remuneration advisors are responsible for making policies of remuneration in the organization and additionally ensure they make the remuneration of the non-executive directors, senior executive as well as executive directors. The committee is charged with the responsibility of revising the remuneration policies from time to time such that they are in line with the companies objectives for the purpose of being consistent with the market competition, consistent and in line with the roles played by each employee (Woolworths Annual Report, 2017).
The Woolworths remuneration is structured in terms of Total TFR, STI as well as LTI. The TFR is set based on the prevailing market in consideration of the size, role’s complexity, and roles of an employee, the skills as well as the experience. The STI is based on the performance of an individual; the business and the get employed to give proper pay differentiation. The LTI is made such that it gets aligned with the long-term performance of the organization and follows the drivers in business and the return of shareholders (Woolworths Annual Report, 2017).
As per Woolworths Annual Report (2017), food and endeavor drink’s sales were strong and this is attributed to price, service investment for the last eighteen months and the renewal programs. The sales lie between the target and stretch for the year 2017. In the examination of Earnings before Interest and Tax (EBIT), the performance went above the hurdle but did not reach the target which is attributed to improvement in sales and stock loss that was counteracted with the competitive pricing. Moreover, EBIT for Petrol and Hotels businesses was strong and that of Endeavour Drinks was in line with the sales. There were trading challenges that were offsetting the results in BIG W. The results of working capital were on top of the stretch and this is because of inventory improvement that was seen in good improvement in average inventory realized by all the businesses (Woolworths Annual Report, 2017).
The inclusion of safety in the incentive program refocused the safety efforts. This has resulted in the improvement of safety across the group as the concentrated on physical as well as the physiological safety of the Woolworths team. This has led to great improvement in safety that has resulted in enhancement of performance stretch. The outcome is 20% improvement in TRIFR as well recording 29% in LTIFR (Woolworths Annual Report, 2017).
The remuneration of the executive and executive directors is set into fixed and variable remuneration which can be through STIP or LTIP. The executive and finance director get the remuneration calculated at the highest percentage of a fixed remuneration and is the subject attainment of KRAs of the company as well as a non-financial component and weigh 70% financial and 30% non-financial. The KRAs are measures like EBIT, sales, ROFE, and the CODB.
On the non-financial aspect, the KRAs comprise safety, food safety compliance and reduction in employee turnover rates in which all targets get set at the start of the year and deliver results at the end of the financial year. This shows that the organization is cognizant of the safety of the employees, those around and the environmental concerns. It is apparent in the corporate social responsibility where the organization has championed to care for the environment by adopting green techniques as well as advocating for better ways of reducing carbon footprint by recycling waste materials through good techniques to reduce landfills and pollution of the environment (Woolworth’s shareholder review, 2017).
In order to be competitive in the market, it is paramount to employ best strategic in business. Adapting the best organizational structure permit the company to recognize different responsibility centers for easy management. Additionally, environmental responsibility is key in the process of making decisions and also in curving a niche which customers can easily identify with n the competitive market. Moreover, it is important for the company to have best performance measurement and rewards in order to motivate the employees to work towards KRAs.
Conclusion
Woolworths’ environmental responsibility, performance measurement and rewards and decentralized organizational structure make the company stand amongst its competitors in the retail business. It is through this and coupled with penetration and marketing strategies that it will continue to remain at the top of the Australian market.
References
Arli,V.,Dylke, S.,Burgess, R.,Campus, R.,& Soldo, E. (2013).Woolworths Australia and Walmart US: Best practices in supply chain collaboration. Journal of Economics, Business & Accountancy Ventura, 16(1).
Baumann-Pauly, D., Wickert, C., Spence, L. J., and Scherer, A. G. (2013). Organizing corporate social responsibility in small and large firms: Size matters. Journal of Business Ethics, 115(4), pp. 693-705.
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Cai, L., Cui, J. and Jo, H., 2016. Corporate environmental responsibility and firm risk. Journal of business ethics, 139(3), pp.563-594.
Hansen, E., Nybakk, E. and Panwar, R., 2013. Firm performance, business environment, and outlook for social and environmental responsibility during the economic downturn: findings and implications from the forest sector. Canadian journal of forest research, 43(12), pp.1137-1144.
Hart, T., 2017. The role for the personnel practitioner in facilitating environmental responsibility in work organisations. In Greening People (pp. 185-198). Routledge.
Jo, H., Kim, H. and Park, K., 2015. Corporate environmental responsibility and firm performance in the financial services sector. Journal of business ethics, 131(2), pp.257-284.
Mack, M. (2013). A sneak peek into Woolworths’ strategy. Available from: https://www.supermarket.co.za/SR_Downloads/S&R%202013-9%20September%20Africa%20focus.pdf [Accessed 13 May 2018]
Orsdemir, A., Hu, B. and Deshpande, V., 2016. Ensuring corporate social and environmental responsibility through vertical integration and horizontal sourcing.
Parsa, H.G., Lord, K.R., Putrevu, S. and Kreeger, J., 2015. Corporate social and environmental responsibility in services: will consumers pay for it?. Journal of retailing and consumer services, 22, pp.250-260.
Tran, Q. and Tian, Y., 2013. Organizational structure: Influencing factors and impact on a firm. American Journal of Industrial and Business Management, 3(2), p.229.
Ward, M. (2014). Woolworths brings back ‘Fresh Food People’ positioning in first brand campaign from Leo Burnett. Available from: https://mumbrella.com.au/woolworths-brings-back-fresh-food-people-positioning-brand-campaign-leo-burnett-243805 [Accessed 13 May 2018]
Welford, R., 2016. Corporate environmental management 1: Systems and strategies. Routledge.
Woolworths shareholder review, (2017). Woolworths Limited. Retrieved from https://www.pc.gov.au/inquiries/completed/executive-remuneration/submissions/sub091-part2.pdf
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