Discuss about the Globalization and Diversification Strategy.
With the introduction of globalization in the modern century, business in the contemporary scenario has witnessed sea change. Businesses are no longer confined to set boundaries, rather have expanded into areas that were not possible to imagine few decades earlier. The global business environment as we name it today presents us with opportunities and challenges. The role of the managers has thus become increasingly important in the global environment. In the essay, I shall be discussing the above stated concept in a more elaborate way while giving example of the multinational company, Woolworths and its expansion strategies. I will discuss the company’s international competition and attempt to explain the solutions adopted by the company to resolve its conflicts and face competition (Acs, Szerb & Lloyd, 2017). Further, I will also provide arguments made by different scholars and experts in the field in order to prove my explanation.
According to Bowen, Baker and Powell, (2015), international business scenario has undergone a sea change since the 20th century and with it changed the role of managers. In the 21st century, managing business requires not just successful selling of products and services but also successful management of the entire workforce. Some of the most prominent challenges faced in the global market include cross cultural management, compliance with international business standards and policies, having a strong corporate social responsibility (CSR) policy and the customer relationship management (CRM) strategies amongst others.
Managers have to scrutinize the business environment frequently in order to be updated with the latest and changing trends. Another challenge faced by the companies in the global market is the constantly changing behavior of consumers across the globe. With the availability of information in hand through smart phones, consumers now have the option to choose companies of their choice. This has presented the companies with the biggest challenge as they are now aware of the fact that one misjudged decision could impact the entire business. A company looking to make its mark in a foreign land has to do extensive research about its demographics, behaviors and target population (Crane & Matten, 2016).
Companies that plan to expand globally have to face an added challenge of being sustainably superior. The increasing issues of environment degradation have compelled international regulatory bodies to instruct global companies to include environmental sustainability as their priority. It has also escalated the troubles companies face while expanding because running in the market successfully while maintaining sustainable practices is difficult (Davvetas, Sichtmann & Diamantopoulos, 2015).
Woolworths made the decision to expand internationally in the year 2013 when the management was sure that it has performed well in the Australian market. The decision was made after the company registered a 2.5% increase in its quarterly sales for that year. It opened its online store in China in 2016 thus making inroads into international expansion. The store was launched on the Tmall Global platform, a B2C business owned by the Alibaba Group.
The expansion strategy of the company has been seen by many as a smart move by the retail giant to maintain its dominance. With the presence of international companies like Walmart, it has to keep expanding in order to stay ahead in the race. In order for Woolworths to ensure a successful expansion in the Asian market, many aspects have to be taken into consideration. It could take a lesson or two from the recent cases of Ford and Qantas and their operations in Australia. The motor company was accused of selling cars in Australia that had defective dual-clutch automatic gearbox. Although the country’s consumer regulatory body Australian Competition and Consumer Commission (ACCC) made claims of 70,000 Ford vehicles of being fitted with the faulty devices, the motor company denied the allegations (Helm & Gritsch, 2014).
It is but imperative to state that businesses have not only been confronted with challenges but they have also been blessed with numerous opportunities as well. These opportunities have allowed the businesses to expand their domains and stay competitive in the global market. Caiazza, Shimizu and Yoshikawa (2017) opine that the global business scenario in the contemporary age has provided the companies with a chance to understand new culture and gain knowledge about the business traditions. Several opportunities like penetrating into markets faster, opportunity for faster development, and opportunity for extensions for existing franchisees are abound for companies in the global environment (Kolk, 2016).
The company chosen as example is Woolworths. Woolworths Limited is the company based in Australia that owns a chain of supermarket stores known as Woolworths Supermarkets. It was founded in the year 1924 and specializes in groceries, health and beauty products, DVDs, household products, stationery items and pet and baby products amongst several others. At present, the company operates over a thousand stores across the country. It holds the top position in Australia in terms of market share for the year 2017 with 35.7% of share (Martens et al., 2015). In 2017, the sales figure of the company went up to 55 billion dollars displaying a rise of 3.7% from 2016. The company also boasts of more than 200 thousand employees across the country that includes 952 Indigenous employees as well (Woolworths.com, 2018).
After surviving a debacle in the hardware business in 2016, Woolworths focused on its major strength that is its food offerings that proved successful. It was able to defeat Coles after seven years and be the leading food items provider. The company has been planning for the expansion of its operations and setting up its shops overseas. The organization has made huge investments in its global expansion related plans. Woolworths has also planned acquisitions which can immediate effect on the shares of the company in the market. Woolworths has been successful in taking the position of the largest retailer in the world along with the other Australian retail giants. Woolworths has shown strong growth from the year 2015 (Savrul, 1Incekara & Sener, 2014). The revenues of the organization have increased by 17.1% and the gross profit has further increased by 48.1%. The growth of the company is further related to the turnaround that has been shown by Woolworths in its various divisions like food and clothing. The global operations of the company have also shown high levels of growth. The South African operations of the organization have shown a turnaround after the success of the clothing division of the stores. The company has received the leading position in the retail market of the Southern Hemisphere. The sales in the food division of the organization also increased and the strategies implemented by the supermarket have succeeded. Woolworths has become the largest supermarket chain of Australia within a short span of time (Wetherly, 2014). The organization has further formulated a lean retail model which can provide huge opportunities for growth of Woolworths in the industry. Woolworths has developed a three-year strategy based on the growth of its revenues with the help of lean retail model. The lean model aims to deliver 500 million dollars cost reduction in the next three years of its operations. The customers of the organization have always been given the highest level of importance by the management of Woolworths. The lean retail model of the organization has been able to drive growth of the company by seeking efficiency and further investing in the customer related activities. The three major outcomes that are the focus of the lean strategy are mainly, the costs related to improvement of efficiency, the customers of the organization and the growth of the market share of Woolworths (Wheelen et al., 2017). The company thereby aims to manage the costs that are related to areas of the business and increasing investments in the customer-centric operations. Woolworths has huge opportunities in the online retail operations and the marketing of products on social media platforms. The company is well-known in the market for its famous jingle, “Woolworths the fresh food people”. The social media strategies and connections established by Woolworths has been effective for the company in its operations. The company has been delivering quite effectively in its various social media platforms and has become a retail powerhouse. Woolworths has huge presence in Australia with more than 800 stores and the firm has further increased its social media presence (Wirtz, Tuzovic & Ehret, 2015). This new online shopping website that has been launched by the organization has been able to increase the reach and the revenues of Woolworths in the retail market. Woolworths therefore has huge opportunities in the online retail market and it can be successful in providing tough competition to the ecommerce giant Amazon.
The report can be concluded by stating that the organizations have to face many different challenges in the global locations which are related to the external environment in which they operate. However, globalization and international expansion is further able to provide huge opportunities to the multinational organizations to increase their profits and their presence as well. The example of Woolworths has depicted that the international operations have provided the company with huge growth related opportunities and have helped it in increasing the presence in various countries. The online presence of organizations is another major factor that is related to globalization.
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