BSRE301 Business Strategy

To write this report, you should perform the following tasks:

• Conduct a macro-environment analysis for the entire industry within which the new SBU will operate. You should use PESTEL model and focus on the understanding of the purpose of this analysis, the identification of key factors and their implications in terms of key opportunities and threats, and the discussion of their overall impact on the industry growth in the future. Draw your conclusion based on your macro-environment analysis.
• Undertake a competitive analysis using Porter’s 5 forces model. You are required to pay attention to the purpose of this analysis, the inter-connectedness of different aspects of the competitive forces, and their overall impact on the industry and the new SBU in terms of main driving forces in the competitive environment. Draw your conclusions based on your five-force analysis.

Strategic Business Unit (SBU) refers to fully autonomous unit of the existing businesses. SBUs are generally small so that they can be flexible; and they are large enough so that effective control can be exercised on them. SBUs help the parent companies in responding various economic changes and market situations on a quick basis. Thus, it can be said that SBUs are the important part of the business organizations (Resumption, 2016). The main objective of this report is to develop a new strategic business unit for one of the major Australian conglomerate, Woolworths. As per the provided situation, Woolworths is considering developing a new SBU that will involve in the import and export of different kinds of goods that is related with the retail business of Woolworths. For this reason, the SBU will provide the facility of storage and transportation of those goods.

Woolworths Limited is one of the major retailer conglomerates of Australian market and it is the second largest retailers in terms of revenues. The company was founded in the year of 1924 and the founders of the company were Percy Christmas, Stanley Chatterton, Cecil Scott Waine, George Creed and Ernest Williams (Woolworths.com.au, 2017). The major business divisions and products of the company are supermarket, petrol, liquor, general merchandise, home improvements, hotels and others. From the below figure, it can be seen that Woolworth is the market leader in terms of market share as the company posses 36.3% of market share worth AUS$ 32.6 billion. In the year 2016, the revenue and operating income of the company were AUS$ 59 billion and AUS$ 1.6 billion respectively. Woolworths has an employee base of 202,000 around. Hence, from the above discussion, it can be seen that Woolworths is a major market leader of Australian retail market; and the business growth of the company ensures the future business scope of the c company (Woolworths.com.au, 2017).    

External Analysis

As the new SBU of Woolworths is about the import and export that includes both storage and transportation, the external business environmental factors of Australia will have large impact on the new SBU. Two of the major tools for measuring this impact are PESTEL analysis and Porter’s Five Forces analysis. Both the analysis is shown below:

PESTEL Analysis

There are six major factors in PESTEL analysis; they are as below: 

Political Factors: Political situation of Australia is a major factor for the new SBU as import and export involve with it. It needs to be mentioned that Australia has a stable political situation that benefits the imports and exports business of the country. The political environment of Australia consists of stable business environment; skilled, well-educated and multi-lingual workforce, strategic time zone and others. All these aspects will support the business operations of the SBU (Joshi et al., 2012).

Economic Factors: Some major economic factors will have large effects on the business operations of the SBU. At present, Australian dollar is the fifth most traded currency all over the world. Foreign investors attracts towards Australia for its high interest rate. In the year 2016, the GDP of Australia was $1204.62 billion that is 1.94% of the world economy. At present, the GDP of Australia is higher than countries like United Kingdom, France and Germany. Thus, it can be seen that Australia has a strong economic condition that is a positive signal for the SBU (atlas.media.mit.edu, 2017).

Social Factors: The population of Australia consists of aborigines and other people like British and Irish descent. At present, as a part of the immigration policy of the country, Australian has brought liberalization in their immigration policy. As a result, the people of Australia has become a multi-cultural and multi-faith society where people have different choice and preferences. The SBU needs to consider these factors (Nix et al., 2013).

Technological Factors: New technologies will help to create new business processes for the SBU. Massive technological advancement of Australia has ensured the reduction in costs, improvements in product quality and innovation for the Australian businesses. Thus, the SBU also needs to take full advantage of the technological advancement of the country. Two of the major Australian organization that support technological innovation in the Australian businesses are the Commonwealth Scientific and Industrial Research Organization (CSIRO) and Defense Science and Technology Organization (DSTO) (Hakansson, 2015).

Environmental Factors: The major environmental issue in Australia is weather and climate change. Extreme weather change can affect the business operations of the SBU. For this reason, the Government of Australia has implemented certain acts and regulations to protect the environment like The Environment Protection Act of 1974 and others. It is needed for the SBU to take into consideration these acts and regulations at the time of commencing the business operations (Jahn et al., 2012).

Legal Factors: Australia has a strict legal and legislative environment. Some of the major legislatives that can affect the business operations of the SBU are the introduction of age discrimination, disability discrimination, increase in the level of minimum wages, requirement for recycling and many others. Thus, it is required for the SBU to consider all these aspects at the time of business operations (Hill et al. 2013).

Based on the above discussion, it can be said that the political and economical factors are two of the major success driver of the SBU. The stable political condition of Australia will ensure the hassle free business operations of SBU where the company will be beneficial from the growing economic condition of the country. At the same time, the SBU needs to design their product in such a way so that they can be able to match the taste and preferences of Australian people. The adoption of advanced technologies of Australia will ensure the effective business operations of the SBU. Most importantly, the SBU needs to well complied with the environmental and legislative regulations of Australia. Overall, it can be said that the SBU has a prosperous future, as most of the external factors of Australia will provide advantage to it.

Existing Rivalry (HIGH): It can be seen that the import and export industry of Australia consists of some major players; they are Australian Export Consortia, Australian Institute of Export, Australian Lamb Company, Haltec, Nungar Trading Company, Sanwa Australia, Wellard Group and others (az.ezilon.com, 2017). All these companies import and export various goods like retail products, foods and others. From the above, it can be seen that the new SBU will has to face immense competitions from these players. Thus, this risk is high for the SBU.

Threat of New Entrants (LOW): The establishment of an import and export business with storage and transportation facility demands high investment. The companies need to establish various national and delivery networks and they have entered into high-competitive market. Companies need to incur large costs for the establishment of business units and transportation. In addition, they need to comply with different kinds of regulations and legislatives at the tie of business operation. Thus, this risk is low for the SBU (Porter & Heppelman, 2014).

Bargaining Power of Buyers (HIGH): In the import and export industry of Australia, it can be seen that most of the companies offers almost similar kinds of products to the customers. For this reason, a particular customer can get the same kinds of products from different companies. Apart from this, the customers do not have to bear huge costs at the time of switching the companies. For this reason, the customers have a particular power to control the demand and supply of the industry. Thus, this risk is high (Hui, Klasa, & Yeung, 2012).

Bargaining Power of Suppliers (MEDIUM): The major inputs of import and export industry are labors, equipments, transportations, information system and others. In this particular industry, there is not much requirements for highly skilled labors. However, for the section of transportation, there is a need for skilled drivers. On the other hand, technologically sound employees are needed for different business operations of this industry. Overall, it can be said that this risk is medium for the SBU (Lee, Kim & Park, 2012).

Threat of Substitutes (LOW): In this particular business industry, there is not any space for substitute products. Companies in this particular industry use to import and export different kinds of products and for reason, there is not any restriction about products. Thus, in this regard, this risk is low (Lee, Kim & Park, 2012).

According to the above discussion, it can be seen that there is a presence of excessive rivalry in the import and export industry of Australia and most of the companies use to deal with almost same types of products. On the other hand, due to the huge establishment costs and need to comply with different legislative regulations, it is difficult for the new companies to enter into this market. The buyers in this particular industry have high control over the demand and supply as they can get similar kinds of products from different customers. Thus, it is suggested for the SBU to take into consideration all the above discussed factors.

Internal Environment Analysis

For the establishment of the new SBU, it is necessary to analyze the internal business environment of Woolworths in order to gain insight about various aspects like resources and competencies of the company. In this situation, SWOT analysis is considered as one of the major tool for internal business environment analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis of Woolworths is done below:

Table 1: SWOT Analysis of Woolworths

(Source: As created by Author)

From the above discussion, it can be seen that large market share and huge market growth of Woolworths will provide advantage to the SBU. As Australia is an emerging economy, it will create business opportunities for the SBU. However, the lack of international presence is a weakness for the SBU as import and export demands international presence. Lastly, excessive rivalry is also harmful for the SBU.

Conclusion

From the above discussion, it can be seen that Woolworths is considering to develop a SBU that will involve of the import and export of Woolworths’ retail products with storage and transportation. As a part of external environmental analysis, PESTEL and Porter’s Five Force analysis is done. As per the PESTEL analysis, political and economic factors will be favorable for the development of new SBU. On the other hand, the new SBU will have to comply with the environmental and legislative regulations of the country. After that, according to the analysis of Porter’s Five Forces, it can be seen that the threat of existing rivalry is high in the import and export industry of Australia. For this reason, excessive rivalry can be seen in this industry.

On the other hand, for the presence of many organizations offering same products, the buyers have the power to control the demand and supply of this industry. The new entrants in this industry have to comply with many regulations and the business establishment cost is very high.  For this reason, this risk is low. As per the SWOT analysis of Woolworths, it can be seen that highest market share and large sales are major strengths of Woolworths. However, the lack of international presence will have negative impact on the development of SBU of the company. The emerging economy of Australia will provide massive business opportunities to the new company. Aggressive expansion of some of the retail companies in Australia is creating future threats for the SBU of Woolworths.

Recommendations

Based on the above discussion, some recommendations are provided below:

• In order to avoid excessive competitions, it is recommended that the new SBU of Woolworths needs to design their products and services in such a ways so that they can be unique and innovative from its competitors. With the help of this strategy, the SBU will be able to gain competitive advantage.
• It is recommended that Woolworths needs to develop effective strategies for the expansion of their business outside Australia. This process will be helpful for the expansion of the SBU business of Woolworths.
• It is recommended that Woolworths needs to develop expansion strategy within Australia also. With the help of this strategy, Woolworths will be able to expand their new SBU  in all the places of Australia.
• In order to gain full access to the market, it is recommended that the SBU of Woolworths needs to implement the strategy of online marketing from the starting point of business. 

References

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