Company Overview

Woolworths Group Limited is a multi-facilitated company that was founded in the year 1924 offering consumers with wide range of products and services that satiates the need of the demanding consumers (Woolworthsgroup.com.au, 2018). It is one of the essential Australian company that has its dynamic retail interest in countries such as New Zealand along with the home country of Australia. The company deals with variety of business chain such as liquor, hotel, supermarket and others. However, its significant functioning area is in supermarket stores that are spread across with the brand name Woolworths in Australia and Countdown in New Zealand.

In the below discussion a PESTLE analysis is conducted for the purpose of analysing the macro environment of Woolworths Supermarkets of Australia. The six factors that comprises the PESTLE analysis may have a direct on the functioning of the Woolworths Limited instead can have a major influence on the overall associated competitors in the Food and Staples Retailing industry. This analysis shall help the firm to identify the operating obstacles that it may face in the field of macro environment.

Woolworths Supermarket is a multi-chain grocery store founded in the year 1924 in Sydney, Australia (Woolworthsgroup.com.au, 2018). The company’s mission is to provide the consumers with a convenient and useful products all in one place in cheap price range. On event of the company’s inauguration the founding Chief Executive Officer, Mr Percy Christmas commented that each individual requires a convenient place where quality products should be available at affordable rates (Woolworthsgroup.com.au, 2018). The company still now follow by this statement and offers quality products at cheap prices. The company first expanded its venture in the year 1927 in Brisbane and despite of the ongoing economic depression that overtook the entire globe in following years the company was able to survive it all and grow gradually. The company adopted to the evolving environment and flourished its way over a large context. At the moment, the Woolworths Supermarket have almost 1000 stores spread across Australia and operates through online channel as well.

Woolworths Supermarket is a well-known grocery firm that satiates the need of millions of consumers spread throughout the nation. However, in recent times the company have faced certain difficulty in operating. Therefore, the below discussion deals with PESTLE analysis which will help identify the factors affecting the organisation in a macro environment.

The PESTLE analysis is a strategic tool that helps an organisation to identify operating challenges that are present among the distinctive factors of macro environment (Aithal, 2016). Below the six factors are discussed in details –

PESTLE Analysis

The company has struggled over past few years due to the allegations regarding the company’s unsustainable operating terms along with implementation of new policy plans over the supermarket sector. The main obstacle that the company has faced over the years due to the introduction of development policy in the sector of supermarket, fuel and others made by the political party namely the Bank Reform Party (Burgess, 2018). The party released a policy that constraint the negotiating terms of the supermarket companies on its suppliers. Henceforth, making a major impact on the Woolworths functioning. Furthermore, the party introduced an independent regulating body that would supervise the operating strategies of companies that are associated with supermarket sector for the purpose of reducing the unfair actions.

It has been observed that the Australian consumers have a comparatively high standard of living which in result affects upon the sales of the company. Therefore, Woolworths have an advantage of operating in a stable economic environment. The Gross Domestic Product per capita in Australia recorded for the year 2017 was at 44648.71 USD which was an all-time high record since the previous years (“Australia GDP per capita PPP | 1990-2018 | Data | Chart | Calendar”, 2018). This has benefited the company to achieve profit for a long run.

The company’s first quarter sales growth showed a significant development compared to the prior results. The company recorded as much as 4.3% of sales growth being one of the strongest contender in the market. It has been observed that the company has achieved a 12.5% rise in profit for the financial year of 2018. However, it is also being observed that since the company decided to discard the use of free single-use plastic bags the sales growth have dropped in the new financial year of 2019. This is due to the fact that consumers need to be adjusted to the phasing out of single use plastic bags. It has been predicted that this drop in sales growth may improve after the first few months of the financial year.

Even though the company enjoys one of the leading position in Australia it has been observed that the company’s relationship with its suppliers have been one of the major challenge for the company. The poor attitude towards the suppliers in the market have ended up resulting in toxic relationship with the suppliers and eventually impacting upon the operations of the company.

Political Factors

This has impacted upon the company’s objective of providing quality products to its customers and as result give rise to dissatisfaction among the consumers. For instance, the poor relationship of the company with its suppliers resulted in cultural issues and the suppliers deciding in providing poor quality products to retailers. Masters, one of Woolworths home improvement operating chain was provided by the suppliers with poor quality plants and eventually affecting the reputation of the company.

The technological factors have a heavy influence over an organisation or a firm for a long term. It is to be noted that technology is always on the run of evolution and development and aims at making the tasks to be completed in a whole lot easier way. Henceforth, majority of organisations tend to adapt to the technologically advanced systems for making itself one of the tough contender in the competitive market.

Woolworths being one of the leading company in the market have always been technologically developed and henceforth making a significant change in its operations and growth. For instance, the implementation of SAP merchandising systems in the year 2016 for the purpose of making a less complex operating model. The company replaced its thirty year old CASS system and made a bold move of introducing this new system upgrade. However, this technological system upgrade faced many challenges and unstable operating glitches. This impacted upon the sales of the company in a negative way. Henceforth it can be said that these technological changes can bring in major impact over an organisations operations and success.

The legal framework of the nation where the company operates influences significantly the operations of the particular firm or organisation. The company is bound to oblige by the laws set up by the nation and if there is any violation of it, then the company have to suffer hefty penalties. Now, for ensuring fair play of business and refraining unjustified means of business the ruling government implies certain acts and law that the companies have to comply by.

In context of this, the Competition and Consumer Act 2010 ensures the promotion of fair trading and competition and even ensures protection of consumers and other market related players such as suppliers, retailers, and others (Legislation, 2018). However, in recent times, it has been observed that Woolworths was under the speculation of having a poor relationship with the suppliers and in addition to this, the company was penalised for conducting anti-competition agreement to artificially hike the price of its products. This violation of act proved to be a heavy influence over the company’s image for the long run.

It is one of the significant factors that majority of companies tend to be influenced from. In recent times, companies are conscious with the way they operate in the competitive industry. Henceforth, more and more companies tend to practice environment friendly business that benefits both the company along with the environment.

In compliance to the above statement, Woolworths made the decision of discarding the single use plastic products such as straws, plastic bags and other products. This action plan was a huge step that the company took in the year 2018. This made a significant impact over the sales of the company since the announcement of this action plan. The sales of the company dropped as the consumers were unable to adjust to this new change. However, the company predicts to be gaining its sales over the first few weeks of this change.

Conclusion

Henceforth, it can be said that from the above discussion Woolworths have faced a lot of challenges in the various fields of macro environment and is still in the process of recovering from the losses it has endured. It can be also said from the above discussion that these factors makes a significant impact over a company or an organisation for a long term. Hence, it is extremely significant to consider these factors while operating in the competitive environment.

References

Aithal, P. S. (2016). Study on PESTEL analysis technique for business models, business strategies, operating concepts & business systems.

Australia GDP per capita PPP | 1990-2018 | Data | Chart | Calendar. (2018). Retrieved from https://tradingeconomics.com/australia/gdp-per-capita-ppp

Burgess, R. (2018). A political hot potato for Coles and Woolies. Retrieved from https://www.theaustralian.com.au/business/business-spectator/news-story/a-political-hot-potato-for-coles-and-woolies/fdcc82dd547cca00f6c57f9f09c023ed

Legislation. (2018). Retrieved from https://www.accc.gov.au/about-us/australian-competition-consumer-commission/legislation

Woolworthsgroup.com.au. (2018). The Woolworths Story – Woolworths Group. [online] Available at: https://www.woolworthsgroup.com.au/page/about-us/The_Woolworths_Story/How_We_Were_Founded/#timeline-1924https://www.woolworthsgroup.com.au/page/about-us/The_Woolworths_Story/How_We_Were_Founded/#timeline-1924 [Accessed 6 Oct. 2018].