Essay: Should Woolworths Limited Keep Gaming Machines In Australia?

Agency theory approach to determine whether Woolworths Limited needs to continue operating gaming machines in Australia

Assume you are a business consultant recently hired by the Board of Directors of Woolworths Limited. The Board has asked you to prepare a business report which evaluates whether Woolworths should continue to operate gaming machines in Australia.

Woolworths Limited is a major Australian organisation having immense retail interest throughout Australia and New Zealand. It is the second largest organisation in terms of revenue after Wesfarmers in Australia and New Zealand. The organisation owns 75% of the Australian Leisure and Hospitality Group, which operates above 12,650 poker machines in Australia (Woolworthsgroup.com.au 2017).

Hence, the first section of the report aims to discuss the approach of agency theory for ascertaining whether Woolworths Limited should carry on with the gaming machines in Australia.  The company should also abide by the corporate relationship strategy it has developed as well as the corporate responsibility strategy it has brought out for the year 2020.

The current report aims to evaluate the probability of operating gaming machines in Australia on the part of Woolworths Limited. Depending on the company strategies as well as objectives it needs to be understood that the image of the company should not be destroyed in any way.

The agency theory approach is basically the association between the agents in a business and the business principles. The agency theory deals with solving issues that remain inherent in the relationships of the agency due to the unaligned goals as well as several aversion level risks (Bosse and Phillips 2016).

• The major reason why the company needs to continue the operation of gaming services is from the business aspect and the gains part of it. It has been found that the company has generated revenue amounting to several millions which can be compared to the revenues generated by the company form the retail market (Lozano, Carpenter and Huisingh 2015).
• It can also be said that a company prospers from getting revenue from all aspects of the business it participates in and thus it can be said that if it is found that the company prospers from the  gaming machines as well as its operations it should not be stopped. The annual report generated for the business returns and the gains for Woolworths limited clearly shows that it has become one of the retail supergiants in the gaming segment as well (Bridoux and Stoelhorst 2014).

• The gaming machine operations in Woolworths comprises mainly of the poker machines which are specifically known as pokies. Due to this scenario Woolworths has faced flak from the groups which do not favour such gambling methods. In terms of collection of revenue, though the poker machine has generated several millions as profit for the company, it can be said that the retail supergiant needs to refocus its strategies as well as business decisions.
• It can also be said that the business relations of the company with other industries in which it was already established needs to be maintained. It can also be said that the other aspects of the business should not be impacted due to the involvement of Woolworths in the gaming operations (De Massis et al 2014).

The stakeholder theory is that which is related to the organizational management as well as the ethics in business that put forward values as well as morals in managing the organisation. Stakeholder’s are extremely crucial to a company. They can affect as well as be affected by the actions, policies and objectives of the company. Stakeholders of a company include employees, directors as well as creditors (Bonnafous-Boucher and Rendtorff 2016). It is the duty of the Woolworths company that the shareholder’s funds as well as the stakeholders claims and values need to be controlled (Westphal and Zajac 2013).

• It can be said that the company can give rise to employment options for the people as well as give opportunity to several efficient gamers as well. It can also be said that the company will help increase it revenue as t6he gaming systems are bound to have a high demand in the game stations of Australia (Chiu and Wang 2015).
• As stated by the stakeholders as well as the share holders it can be said that the revenue claims which the company has received show that the revenues collected contribute to about 40% of the revenues. Thus it can easily be said that the revenues collected from the gaming industries is huge. So a sudden shutdown of gaming operations of the company should not be considered. So there should also be several reforms which need to be adopted to find the value of them.

• An important reason the retail supergiant should consider stopping the operations of the gaming systems is that majorly in case of poker, the gaming influences the human brain and causes the secretion of dopamine hormone which only occurs in cases where there is a sort of addiction just like the addition to cocaine. In case the gaming theory becomes an addiction it can lead to a tarnished image for the retail supergiant (Stufflebeam and Coryn 2014).
• Moreover for high and increased demand it can lead to a dearth of the man power which can be said to hamper the business of the company if it fails to deliver the required demand within a stipulated period of time. It can also be said that if the clients are lost then the company will suffer overall from all the segment6s of the economy. Risks can be encountered in the several segments.
• The investment in the market is also extremely heavy as it requires more and more capital to manufacture the gaming machines. It can also be said that the business of investing in the high loss poker machines is extremely risky as it can lead to the social cost of the industry as well as it can tarnish the image of the company which it has build over the past several years (Waldman and Balven 2014).
• It can be said that the growing investments of in an electronic gaming machines can cause a range of social as well as political harm as well as the community obstacles. It can also hamper the probabilities of the company in other aspects as well. The demands of the company in the retail sectors can also suffer (Mitnick 2015).

Conclusion

Going through all the facts which have been discussed above, a clear conclusion cannot be drawn as such regarding the topic of Woolworths stopping its gaming operations. It can also be said that the company can adopt social as well as economic reforms and should not cause financial harm to any particular market or segment of the economy.

Arguments for the motion

There have been many speculations regarding the fact that whether the company should adopt the reforms. It should also be said that the cost of adopting the reforms is beneficial or detrimental to the company. It can also be said that the criticism which Woolworths attracts form the different quarters on issues namely the concentration of ownership in the grocery retailing, impacts on the grocery stores and the overall impacts of business in different quarters. Unlike the other problems, the majority of the Australians do not realize yet that Woolworths Company is the hugest operator of the poker machines. Hence closing it down can just impact the overall business of the company.

As illustrations suggest that the involvement of the Woolworths group in the poker machine as well as the gambling scheme can lead to the risks in the organisations revenue as well as the business. It can also be said that it is a potential strategic business risk to the organisation. The company does not have a probable strategy for tackling the problem (Raelin and Bondy 2013).

Woolworths also focuses on the relationships as well as building the trusted relations with the people. So it should not indulge in any scenario where the trust is destroyed. It is quite likely that the campaigns against the manufacture as well as the operations of the gaming machines should be stopped as well as it can be said that the stakeholder issue related to the gaming operations in Woolworths should be given a due time before the claims as well as problems die down. Though there is enough speculation regarding the matter that the problem will die down anyway unless the issue is addressed in a meaningful as well as demonstrated way.

References:

Bonnafous-Boucher, M. and Rendtorff, J.D., 2016. Stakeholder Theory: A Model for Strategic Management. Springer International Publishing.

Bosse, D.A. and Phillips, R.A., 2016. Agency theory and bounded self-interest. Academy of Management Review, 41(2), pp.276-297.

Bridoux, F. and Stoelhorst, J.W., 2014. Microfoundations for stakeholder theory: Managing stakeholders with heterogeneous motives. Strategic Management Journal, 35(1), pp.107-125.

Chiu, T.K. and Wang, Y.H., 2015. Determinants of social disclosure quality in Taiwan: an application of stakeholder theory. Journal of Business Ethics, 129(2), pp.379-398.

De Massis, A., Kotlar, J., Chua, J.H. and Chrisman, J.J., 2014. Ability and willingness as sufficiency conditions for family?oriented particularistic behavior: implications for theory and empirical studies. Journal of Small Business Management, 52(2), pp.344-364.

Hasnas, J., 2013. Whither stakeholder theory? A guide for the perplexed revisited. Journal of Business Ethics, 112(1), pp.47-57.

Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in sustainability management: Links, similarities, dissimilarities, and a conceptual framework. Organization & Environment, 27(4), pp.328-346.

Lozano, R., Carpenter, A. and Huisingh, D., 2015. A review of ‘theories of the firm’and their contributions to Corporate Sustainability. Journal of Cleaner Production, 106, pp.430-442.

Mansell, S., 2015. Book Review: Rejoinder to Veldman’s review of Capitalism, Corporations and the Social Contract: A Critique of Stakeholder Theory (Vol. 22, No. 2, pp. 271-275). Sage UK: London, England: Sage Publications.

Mitchell, R.K., Weaver, G.R., Agle, B.R., Bailey, A.D. and Carlson, J., 2016. Stakeholder agency and social welfare: Pluralism and decision making in the multi-objective corporation. Academy of Management Review, 41(2), pp.252-275.

Mitnick, B.M., 2015. Agency theory. Wiley Encyclopedia of Management.

Raelin, J.D. and Bondy, K., 2013. Putting the Good Back in Good Corporate Governance: The Presence and Problems of Double?Layered Agency Theory. Corporate Governance: An International Review, 21(5), pp.420-435.

Stufflebeam, D.L. and Coryn, C.L., 2014. Evaluation theory, models, and applications (Vol. 50). John Wiley & Sons.

Waldman, D.A. and Balven, R.M., 2014. Responsible leadership: Theoretical issues and research directions. The Academy of Management Perspectives, 28(3), pp.224-234.

Westphal, J.D. and Zajac, E.J., 2013. A behavioral theory of corporate governance: Explicating the mechanisms of socially situated and socially constituted agency. Academy of Management Annals, 7(1), pp.607-661.

Woolworthsgroup.com.au. (2017). Woolworths Group: Quality Brands and Trusted Retailing. [online] Available at: https://www.woolworthsgroup.com.au/ [Accessed 11 Aug. 2017].