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Discuss about the Organizational Relational Mechanism on Firm Performance.

Understanding the legal and regulatory environment along with other factors that influence any business

An organization has to perform at its best in order to remain as a strong Contender in the market and ensure it success in the upcoming future. The senior executive departments and managers of the organizations therefore ensure that every aspect is followed which will ultimately help the company developed and expand in a better way and stay ahead of its competitors. However, it is also very important that no violation of rules is made by any individual of any hierarchy and the legal regulations are strictly followed to avoid any unnecessary consequences to the company. The following study has considered an Australian based public sector retail organization that is operating since a very long time and is excellent very well in its domain of operation. The study has mentioned the different legal factors that have influenced the operations of the company and has described some legal regulation mentioned by the Australian government. The legal factors have been included along with some other factors like political, economic, social/cultural, international and ethical factors for the company. Some of the specific rules and regulations that govern the considered organization have been described along with the areas that are under high risk. The short term and long term impacts of these different risk factors have been stated in the study along with some of the strategic options that the company can opt for considering the benefits and the costs involved in implementing those options.

The Woolworth Company is a public retail organization located in Australia which provides supermarkets and grocery services to the Australian customers since 1924 when it was founded by Percy Christmas, Stanley Chatterton, George Creed, Earnest William, and Cecil Scott Waine. The headquarters of this company is located at New South Wales Australia and it operates mainly in Australia and New Zealand. However, the company is slowly expanding its operations in South Asian countries like India. The existing chairman of this company is Gordon Cairns who handles the operations of the company along with the chief executive officer Brad Banducci. The company employs 328,511 employees all over the world as per the records of 2015 who contribute towards average annual retail revenue of over 100 billion Australian dollars. The Woolworth Company operates 2,022 supermarket and grocery stores in almost every major city of Australia. The company also recorded an almost 4% annual growth in the grocery and supermarket segment business between the year 2011 and 2016.

Legal and Regulatory Factors

There are many legal procedures that are required to be considered before initiating any business in any country. These legal regulations vary from one country to other depending on the regulatory environment of different nations. In case of Australia, There are several laws that are to be followed by businessmen both from private and public sector domain in order to run their respective companies without violating any of the legal procedures or regulations. The share trading laws are the most crucial aspects that an organization needs to considered before initiating any business and operating the pain after initiating it (Geppert, Williams & Wortmann, 2015). The most important regulations include the Australian share trading laws, Australian standards, and codes of practices, complying with the competition and consumer act, and the Australian consumer law. In addition to this, every organization especially those belonging to retail sector need to sell their products by following the necessary legal procedures like pricing regulations, product labelling, providing refunds and warranties on goods and services depending on its nature, displaying the prices, and adhering to the Australian trade measurement laws.

The fair trading laws include the most prominent federal law which is the Competition and Consumer Act also known as the CCA that was enacted in 2010 in the Australian parliament. According to this act, every organization needs to be transparent while conducting any negotiation or deal with the stakeholders of the business that might include wholesalers, suppliers, retailers, competitors, and most importantly with the customers. The main governing authority that administers the Competition and Consumer Act is the Australian Competition and Consumer Commission or the ACCC. This particular commission provides supports to any individual or organization that has been victimized because of any fraud conducted by any other person or company. This particular act of the Australian fair trading laws specifically mentions that every stakeholder involved in the shipping, transportation, manufacturing, retailing, wholesaling, storing, and selling of the products must keep the operations transparent and register to the tax laws followed in Australia.

The operations of Woolworths company in Australia is also affected by various other factors like economic, ethical, social, cultural, political, and international factors. The economic stability is very important for proper operation and expansion of any organization because it will ensure a safe future for the organization (Crosbie et al. 2018). Moreover, the social and cultural aspect is also very important because the products which are sold are the services that are delivered by the company must be in sync with the demands of the people based on their social and cultural preferences of products and services. The political scenarios do not matter very much in case of public companies but they too have an impact on the overall functioning of an organization. Following are the major impacts of these factors on the operations of Woolworths Company.

Impact of Other Factors on the Operations of Woolworth Company

Economic: The Woolworth Company has average annual revenue of more than 100 million Australian dollars which makes it an economically stable organization and makes it capable of doing new investments in different regions and domains of business. The company has been able to expand its area of operation in to the South Asian region in developing countries like India where it has identified a huge market.

Ethical: The ethical factors constitute the intentions of any organization in conducting the operations in a fair and unbiased manner. The production and packaging of every item must be done probably according to the necessary standard. The companies also need to ensure a desirable level of hygiene while packaging and processing of the food products (Stubbs & Higgins, 2018). The Woolworth Company has been able to deliver a superior level of ethical operations in delivering its services.

Social: The social factors like providing the necessary products that are demanded by the customers and delivering proper customer service are some of the crucial aspects of retail business sector (Greenlan, Johnson & Seifi, 2016). The Woolworths company has been able to deliver the right kind of service as per the customers’ expectations and therefore it is excelling in the Australian retail sector market at a considerable rate as it has expanded its operations by 4% in 5 years.

Cultural: Any organization must ensure that the products and services that are being provided to the customers are properly linked to the cultural preferences. This is a very important aspect in terms of fashion marketing and food preferences because the fashion of clothing is likely to vary with culture and hence the organizations must be careful about the clothing accessories that are being sold (Bernzen & Braun,  2014). The Woolworth Company primarily focuses on the items which are preferred by the customers from the cultural perspective and it also introduces some unique collection of decorative accessories during different festivals and seasons.

Political: The political perspective is not very harmful for the public sector organizations because the laws are not changed very frequently and the government is generally done by the individual that has been appointed as the chairman of the CEO of the company (Soh & Martinov-Bennie, 2015). The political scenario of Australia is very much in favour of Woolworth Company and hence the organization has experienced no adverse impact of political changes taking place in the country.

International: The international factors like manufacturing of different items and providing them to international destinations act as decisive factors whenever there is international trade businesses involved in the overall operation (Nossar et al. 2015). Since the Woolworths Company mainly deals with supermarkets and grocery related items which consist of products and services of daily household uses, the international factor has very less impact on this company. However, the company has recently started its operations in India where it has to compete with various other Supermarket giant like Big Bazaar. Therefore, the amounts of investments that are done in the different sectors have an impact on the overall operations of Woolworths Company.

Economic

There are various regulations that govern the public sector organizations. However, the Australian trade measurement laws are among the most significant legal aspects which must be covered while conducting any retail trade related operations. The National measurement act which was enacted in 1960 in Australia has specified the legal measures that the retail sector organizations belonging to both private and public sectors must follow properly. Following are the different aspects of regulations which are covered under the trade measurement law.

Defining legal measurement units: The organization must properly define the legal measurement units which are being used during the entire retailing operation. This means that the products which are being sold by retail companies must be measured according to some legal measurement units like kilograms for solid products which are being sold in small quantity and quintals for those solid products which are being sold in large quantity (Magnusson & Reeve, 2015). Similarly, the liquid items which are being sold by any retail company must have a proper measurement unit like liters or gallons. The Woolworth strictly follows the standards of legal measurement units and ensures that every item is either equal or more than the weight value specified on the packaging. The measurements of some unique items that require measuring the length and other dimensions must also be measured properly by using the legal measurement units like meters or foot.

Use of proper measuring instruments for trade: The companies must ensure that the instruments and devices which are being used for measuring are properly calibrated and tested before implementing them in the operations (Bernzen & Braun, 2014). It is a better choice for the companies to use licensed and branded products for measuring like weighing machines. This is very important in case of groceries because the companies that sell grocery related items are likely to face some issues while measuring the items. Hence, the measuring instruments must be proper without any error so that no customer is cheated deliberately or unintentionally.

Proper testing and verification of the instruments: The instruments which are used in measuring the items at every stage of the entire retail business must be calibrated properly and regularly to check the degree of accuracy and precision of those items (Mossialos et al. 2015). The normal time of testing and verification of the instruments is of 6 months interval. However, the electronic devices must be tested at least once in a year so that the necessary amount of precision could be maintained. In case of an internal damage of the sensor or spring of weighing machines, the necessary component must be replaced immediately with a healthy component so that the functioning of the device or instrument is not compromised in any manner. It has been observed that the reading of a malfunctioning machine shows a different value than the actual value. In case the displayed value is more than the actual value, it will be a loss to the company. However, if the case is vice versa, the customers will be at the losing and visual create an ethical related issue with the company.

Ethical

Licensing public weighbridges: The public weighbridges which are used to weigh the heavy items like trucks and transport vehicles must be licensed by the government authority. It is necessary for the users who are generally the transportation and logistics operators to ensure that the weighbridges operators are licensed by the government and have been provided a unique license number (Reinecke & Donaghey, 2015). This ensures that the overall operations of the company are conducted without any deliberate or unintentional fraud. The Woolworth Company is very strict about the measurement of its items in terms of weight at every location starting from public weighbridges where heavily loaded trucks are weighed to the end point where the customers are delivered the groceries packages after properly measuring their weights.

Although there are not many areas of high risk for Woolworths Company because every Legal procedure and regulation is followed by the organization, there are some areas where the company might have to face some risk factors because of the possibility of unintentional human errors. It is necessary that every Legal procedure is followed without any failure and an awareness of any law does not counts as an excuse to break the same in most of the countries including Australia. Therefore, the most prominent area where there might be a high legal risk for the company is the conduct of operations by and untrained professional where the individual has unintentionally broken a law. The most common area of this error is the weight measurement of items that are sold to the customers.

According to the trade measurement laws that have been enacted in Australian parliament during the introduction of national measurement act 1960, a company must ensure that the weight of any item during the time of sale is either equal or more than what is mentioned on the packaging. Hence, it is necessary that the company must be very careful about eatables or food items that tend to shrink after sometime (Kruisbergen et al. 2015). The processed food products like bakery items including bread and cheese are process with the help of yeast and some bacteria. Therefore, the item which has been packed at a weight of 1 kilogram might shrink by some percentage during the time of sale. Hence, it is necessary for the company to ensure that the right amount of material or food item is packaged so that the weight of that item is equivalent or more than the mentioned weight on the external packaging. However, the company must also mention the packaging and storage condition so that the bacteria and yeast do not result into some internal chemical or composition changes to shrink the entire food item. Therefore, most of the companies including Woolworth mention the specific condition under which the item must be stored in order to avoid any shrinking (Gartner & Hall, 2015). It is also very important to mention that the companies must specifically mention the weight by including a statement telling the weight during the time of packaging. This means that any food item which is based and is likely to shrink after few hours will have a statement in bracket telling that the weight of the item is during the time when it was packed just after the specified weight.

Social

There are various short term and long term effects of the implications of the legal risk that have been mentioned above with regards to various retail sector organization that deals in food and grocery products along with the Woolworth Company. The most prominent short term effect will be an argument with the customer who successfully finds out the difference in the weight of any item. The Woolworths Company stores and supermarkets sell millions of products everyday and the probability of such an outcome is very low. However, the overall short term impact could be significantly high if multiple customer report with the same issue in a short duration (Nossar et al. 2015). The short term effect might also include some minor loss to the company due to some errors displayed in the weighing machines. The long term effects however might include no compromise with the brand image of the company. Following are the details associated with short term and long term effects of implications of these days for the company.

The short term effects of the risk that has been discussed about include the temporary argument of any sales executive or manager of a Supermarket store with the customer (Kumarasiri & Jubb, 2016). The customer can report about an issue regarding the weight of an item if the overall weight of any food product is found lesser than the mentioned figure on the package. This argument can be easily handled by the managers by having a discussion with the customer and providing an assurance of better service in the future. Similarly, if this particular issue is faced by multiple customers at the same time, the managers might have to temporarily stop the operations associated with the product and order for an investigation in order to find out the perpetrators behind the matter. This can be caused due to some human error or due to some machine error and hence can cause some temporary impact on the overall operation. It is very important for any manager to investigate the matter within a limited time and restart the operation so that the inconvenience caused to any customer can be minimized (Nica, 2015). The short term effects are likely to cause some minor monetary losses to the company because might they need to pay some customer depending on the issues faced by the latter and the legal regulations specified in the Australian trading, marketing and business laws.

Cultural

The long term benefits associated with the risk discussed in the above section might be a huge loss of monetary assets to the company. Any individual public weighbridge can result into some heavy legal consequences for every stakeholders involved in the business (Waye & Morabito, 2016). For example, if any public weighbridge operator fails to identify an error within the internal machinery and components, the weighbridge display system is likely to display a different value of weight then the actual value. In case the displayed value is higher than the actual value, the company will reduce the extra amount of weight from the vehicles which will ultimately affect the customers who are at the receiving end of those products. However, in case the displayed value is lower than the actual value of items present in the vehicle, the company will add some extra items which will cost extra money resulting into some unnecessary losses of money and time to the company. The error can be detected at later stages and this will compel the organization to take necessary steps to adjust the previous figures which further might invite some unnecessary scopes of human or machine errors (Turner & Nugent, 2015). The long term effects of this operation might also leads to some highly critical impact like adverse effects on the company reputation among the public or customers.

In order to reduce the possibility of unfavourable consequences because of the legal risks associated with the scopes of error described in the above portions of the study, the company must ensure that all the regulations are followed without any compromise. The company must take proper measures to conduct its services in accordance to the government and legal procedure and regulations. Following are the different strategic options that the senior level management and executive officers of Woolworths Company can choose in order to reduce the legal risk.

Training the workforce: The Woolworths Company must train the workforce in almost every aspect so that the basic details of every aspect including the technical aspect are known to every individual working with the company. The proper training and practice of employees in technical sector ensures that there are multiple alternative available for the organization to handle any situation due to the availability of a larger workforce equipped with technical knowledge (Herteleer et al. 2018). The company must also cover all the basic and preliminary stages of Technical training associated with the devices and instruments used for weight measurement of different items sold by the company. This must include covering the syllabus of different types of Technical instruments used for vein the products along with their minimum value and overall range.

Political

Benefit and cost evaluation: The conduct of training of the employees in technical aspects will cost a significant amount of money to the Woolworths Company. Therefore, the managers must find out a profit schedules in order to train the employees so that the mainstream work of the company is not stagnated. The training of employees during an ongoing company operation must be given in multiple batches in order to avoid any form of compromise with the mainstream operation of the company (Uddin, 2017). This is very helpful to manage the training cost and profit earned by the company. Moreover, the benefit of training is also gain without involving much into the off stream operations like extra training.

Proper maintenance and calibration of the Machines: The machines must be calibrated on a regular interval and maintained properly to ensure their proper functioning. The company needs to employ is separate department in order to maintain and calibrate the machine. The maintenance team will look for proper lubrication and cleaning of the machines. The team will also look after the Machines in the storage locations to ensure that the machines are kept under the right conditions. The maintenance teams will also keep a record of the calibration dates of the machines and test the same to identify the errors in terms of deviations and magnitude.

Benefit and cost evaluation: The maintenance and calibration of the machines are very important and effective methods of ensuring the protection and immunity for the company from any legal risk. The overall cost will be quite higher than other methods but the benefits will be even higher. Therefore, this option will be very beneficial for the company for long term benefits as it will save the company from losing the monetary assets due to the main functioning of the machine as well as from some legal consequences in the future.


Replacing faulty machines: Replacing the faulty or malfunctioning machines can be considered as the best and the most appropriate option from the perspective of operational quality. This is because any machine after the usage of several years is likely to show some malfunctioning or unusual outcomes (Gibson & Warren, 2016). However, it includes a huge amount of cost that needs to be invested in purchasing new machines. This stem is likely to reduce the score of errors by a significant level and enhance the quality of operations by a considerable degree. The economic conditions of Woolworths Company do not form any kind of barrier in taking this step and the machines that are malfunctioning can be easily replaced.

Conclusion

Benefit and Cost evaluation: The overall cost of replacing every machine that is malfunctioning is likely to be very high and will result into a huge burden on the company management. However, the benefit of taking this step is very productive as the scopes of machine error will significantly reduced as well as time and cost can be saved from being wasted due to maintenance and repair options. The cost of replacing smaller machine will be very less and hence this operation will be very cost effective and highly beneficial in terms of smaller weighing machines. However, the weighing machines mounted in stores of the company will cost a happy amount to the organization if they are replaced. Therefore, the cost factors will be very high compared to the benefit parameter in case of heavy duty weighing machines that have started malfunctioning.

Repairing machine components: The repair of the Machines by replacing a minor part of the same is a very economic and feasible option for every organization. However, the option needs to be chosen on the basis of various factors. The machine components can be replaced if they are not too expensive compared to the overall cost of the machine and if the company can issue a better functioning for a longer duration. However, in case the components that are to be replaced in the machine are very expensive and are likely to show the same malfunctioning in the near future, repairing is not a good option (Friel et al. 2016). The small sized weighing machines are better for replacement option whereas the big sized weighing machines used in stores to measure the weight of heavy loads are good for being repaired.

Benefit and Cost evaluation: The overall cost that is likely to we spent by the company during repair is generally lower than the cost used to replace the entire machine. Therefore, the repair option for a big sized machine is very cost effective for the company apart from being very beneficial. However, repairing the components inside the smaller machines that are used for vein smaller items at the counter is not a cost effective option.

There are no specific options available for the company that can be chosen alone to deal with the legal consequences and risks in the operations. However, the organization can choose multiple options in a balance way to get the most favorable outcome. Following are the options that the company can choose in order to deliver the best result from the customers’ and company’s perspectives.

  • Maintaining and repairing the heavy duty machine:Carrying out the maintenance and repair for heavy duty machines will save a huge amount of cost because the replacement of the entire machine will cost a happy amount. Moreover, the maintenance and repair will also produce and display accurate outcomes that will be beneficial for the company and the customers.
  • Replacement of light weight machine if found malfunctioning:The light weight machine consists of some components that are quite expensive and even cost around 60 to 70% of the cost of entire machine. Hence, it is a better option to replace the light weight machines in case they start malfunctioning.
  • Training the staff in small batches:The working staff must be trained in small groups and batches so that the mainstream operations are not affected by the training. This is also very important because the trainers will be able to provide adequate training, guidance, and assessment to the trainees if present in small batches.

Conclusion

The above study has explicitly defined the legal aspects which must be considered in order to carry out any retail business successfully. The short term and long term impact of legal procedures and regulations present in the Australian business system have been included in the study along with the overall benefit of the same. The overall impacts of various other factors like ethical considerations, international factors, economic factors, social, and cultural aspect are stated in the study. The organization chosen for conducting this research was Woolworths Company which is located in Australia and serves in every major and suburban city of the country. Apart from that this company has also initiated its operations in India apart from New Zealand where it is already serving from a long time. The major risk factors associated with the operations and legal aspects of Woolworths Company have been mentioned along with the strategic options that can be chosen in order to mitigate or minimize the consequences of those risk factors.

References

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