This is the detailed PESTLE/PESTLE Analysis of Woolworths which explains the external factors impacting the retail Company and Industry; Political, Economical, Social, Technological, Environmental and Legal.
Woolworths is a notable name in the retail industry, fulfilling the needs of its customers through its different retail outlets. The political environment of a country is linked with the performance of an organization and the retail companies are affected by the political climate of a region just like other business entities in other sectors. The political condition shapes the business environment, providing the organization with suitable growth opportunities. Moreover, the business sector also grows due to political stability as the foreign investors and trading partners show interest in carrying out trading and business related activities. On the other hand, political disturbance discourages the businesses and investors from entering in a market due to the risk of low rate of return and higher risk of business failure. Since Woolworths is functioning in a market that is fairly stable, the risk of business loss is not significant.
The economic factors such as recession and higher unemployment has a strong effect on the financial performance of a business entity as both of these factors can lead to lower sales, ultimately causing financial decline of the company (Woolworths Limited, 2015). The condition of the organization has declined due to the global financial crisis, causing serious issues in the financial aspect of the business. Woolworths faced a major loss during the financial crisis when the company had to close its operations in UK, leading to unemployment of around 30,000 people who have been working at the retail store (Hall, 2009). The financial crisis has hit the company massively which had a major effect on the overall sales earned by the organization. on the other hand, in some of the markets, the company has been able to perform in a better manner despite the financial disruption. For instance, Australia retail industry has maintained more stability than in other parts of the world, supporting Woolworths in continuing the business operations despite the setback in the UK market.
The customers are the central source of revenue for a business entity, thus identification of the needs of the target market and the development of a plan that focuses on the fulfillment of those needs is essential for the sustained profitability. Woolworths has recognized the importance of customer’s experience as a part of their sales and profitability. The company has introduced new means of fulfilling the needs of the customers, emphasizing the notion of customer delight (Woolworths Limited, 2015). The management has identified the changes occurring in the social context, concluding that the customers in today’s era are increasingly seeking retail shopping experience that includes availability of wide range of products with prices that are in accordance to the customer’s affordability. In order to respond to this social factor, the company has offered lowest prices on different items to the store visitors. Moreover, the location of the stores is a critical area as the customers expect the retail stores to offer them with convenience. Another step that the company has taken, keeping the social trends into consideration is the launch of a loyalty program which has earned the organization a set of 900,000 members (Woolworths Limited, 2015).
The company has also been able to identify the shift towards healthy eating, adding the grocery items in the merchandise that appeal the customers seeking healthy food options. Apart from that, the location of some of the items has been altered to indicate the company’s support for healthy lifestyle choices. For example, the removal of confectionary items from the check-out counters is one step in this regard (Business Tech, 2015).
In case of technological factors, the newer forms of technologies that enhance the shopping experience of the customers constitute a main area of focus for the retail organizations. The use of RFID has long been a part of the retail stores which helps them in efficient management of the inventory and keep the stock available for the store visitors. The company has also integrated service oriented architecture (SOA) in its operations, aiming to support this technology in effective management of the supply of the different items across different retail outlets. The retail sector needs to rapidly identify and incorporate upcoming technologies as it can become a means of gaining a stronger position in the market.
Another innovation that has become a part of the retail sector, is the self-service checkout, which has been adopted by Woolworths as well. However, not every form of technology is readily accepted by the customers and a similar case is evident for self-service check-out arrangement which has created a negative response among a large number of customers (Wynne, 2015). It can be seen that not every type of technology is welcomed by the consumers, therefore, the businesses need to link the technology with the customer needs and preference.
The taxation policies and recruitment and employee management regulations are a part of the basic legal framework for the retail industry. In addition to these legal aspects, the food licensing requirements are important in the retail sector as the retail companies need to comply with these regulations. The quality of the food items made available at the stores have to be in accordance to the country’s regulations. Furthermore, the opening of new retail outlets needs approval from the concerned governmental authority, and such plans need to follow the legal requirements (Woolworths Limited, 2015).
The environmental aspect of retail industry is reflected in the form of use of environment friendly business practices as well as participating in activities that aim to reduce the harm caused to the environment. Woolworths has been investing its resources in minimizing the carbon footprint of the organization, as well as reducing the wastage of natural resources such as water (Woolworths Limited, 2012). The organization has also been participating in recycling activities to reduce the amount of wastage in landfill while making the recyclable materials useful by processing them efficiently. Moreover, the sustainability practices of the organization include the sourcing of food items using ethically sound approaches, which establishes the image of the company as a socially responsible business along with supporting the sustainability initiatives of the organization.
Business Tech (2015). Woolworths takes sweets and chocolates off checkout shelves. Retrieved from http://businesstech.co.za/news/general/97057/woolworths-takes-sweets-and-chocolates-off-checkout-shelves/
Hall, J. (2009). Woolworths: the failed struggle to save a retail giant The Telegraph. Retrieved from http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/6570626/Woolworths-the-failed-struggle-to-save-a-retail-giant.html
Woolworths Limited. (2012). Environment. Retrieved from http://www.woolworthslimited.com.au/page/A_Trusted_Company/Environment/
Woolworths Limited. (2015). Annual Report. Retrieved from http://www.woolworthslimited.com.au/icms_docs/182381_Annual_Report_2015.pdf
Wynne, E. (2015, July 22). Self-service checkouts risking consumer loyalty: marketing expert. Retrieved from http://www.abc.net.au/news/2015-07-21/forcing-shoppers-to-self-checkout-risks-consumer-backlash/6636702