Woolworths UK Management Challenges - Essay Example

Introduction Woolworths was a company that was started in the year 1879 in the of New York. Its founder Frank Woolworth was interested in offering a one stop shop for a wide range of commodities at an affordable price. He transferred this same concept to the United Kingdom thirty years after establishing the same stores in the United States. He was well received in Liverpool with enthusiastic shoppers thronging the premises. However, the retail chain store industry has undergone numerous dynamics and Woolworths seems to be a victim of these circumstances. The report shall highlight some of the internal and external challenges that have affected the company. Additionally, an analysis of the company will be done with reference to the theme of globalisation and recommendations for improvement given as a result. Description and analysis of the internal and external factor to which Woolworths UK is subject 1) Internal factors Woolworths is affected by some human resource based issues plaguing the retail industry. For instance, some clients have asserted that before purchasing items in any retail store, they usually consider behaviours of the store’s employees. Woolworths has received numerous reviews about this aspect. Consumer surveys have indicated that a half of retail purchasers are happy with Woolworth’s consumer service while the other halves have asserted that their employees are rude. Consequently, the company has to work on the latter percentage. (Hammer and Champy, 1993) Marketing strategies are crucial in running any business. For companies to dwell in the retail sector today, they need to portray a clear theme in their advertisement and marketing strategies. Woolworths’ marketing manager asserts that the company’s marketing strategy is largely centred on three major categories and these are; Family Entertainment Home These three themes are what make Woolworths stand out. However, other critics assert that Woolworths is severely lacking in this area. They claim that while other retail chain stores are distinct and stand out depending on specific themes; Woolworths has nothing special that makes it unique. Consequently, this is a marketing or branding issue that will affect future decisions made by Woolworths. Demand determinants are also instrumental in determining how Woolworths performs in the UK market. There are a number of things that UK consumers look for when shopping in retail chain stores and some of them include Convenience Quality of items Price Brand recognition (Chopra and Meindl, 2000) When one talks about convenience, they are referring to the ease of reach with which one can find commodities in retail stores. This is usually depicted by the manner of arrangement. When commodities are arranged haphazardly, then customers may not be enticed to come back there. Woolworths seems to have failed in this regard because many consumers complain of its haphazard nature. For instance, when one steps into a Woolworth store, they are likely to find children’s costumes placed together with table mats and the table mats may be placed alongside video games or other kinds of things. Consequently, it can be argued that Woolworth’s sense of appeal in terms of convenience is quite wanting. However, it can also be argued that this haphazard arrangement is what contributes to Woolworth’s uniqueness. This is because it is kind of a ‘spur of the moment’ alternative rather than a distinct kind of arrangement. (Price Waterhouse, 1995) On the other hand, convenience can also be assessed through a stores location, when stores are located in busy streets or in accessible places, then demand for one’s items may increase. Woolworths may receive a plus for this aspect because their stores are conveniently located and one does not have to look for parking to get into their stores. Brand recognition and quality of items are an important demand determinant. Once a company fails to deliver in terms of these parameters then there is fertile ground for failure. Woolworths have been praised by some consumers for their high quality items. However, there are still other buyers who have not been satisfied with their commodities claiming that they are a jack of all trades but a master of none. Lastly, demand for commodities in this industry is affected by the price of its commodities. In analysing whether Woolworths is doing well, it is essential to look at what other companies in the industry are doing. Most of the commodities offered by Woolworths are sold by other competitors such as Asda and Tesco at cheaper prices. This means that Woolworth’s decisions need to be changed to respond to these challenges. 2) External factors One of the major external factors affecting Woolworths is closely associated to its operating aspect. The retail chain industry is quite a huge industry since the numbers of stores located in the UK are numerous and this means increased competition for Woolworths. Additionally, the industry is not export oriented. Most products are sourced from outside and then bought into the region thus making players here to become susceptible to international forces that may sometimes be difficult to predict. It is also interesting to note the fact that the retail chain industry is slowly being outcompeted by supermarkets. Times have changed over the past few years and the sale of non household items within the retail industry is no longer a reserve for companies such as Woolworths alone. Supermarkets which were once associated with the sale of food alone now offer almost all household items under one room. This increased competition from other categories of business has affected the overall productivity and performance of the company. (Porter, 1985) Market size is an important factor that affects the any kind of business. This is largely because the rate of growth of the market largely reflects the amount of consumers available to purchase one’s time. Statistics indicate that the UK retail chain sector is slowly reaching saturated levels. There are stores for almost every type of product under the sun. For instance, when one is looking for old suits then they may choose the option of going for Argos, when they require music CDs, then they have the option of going to Zavvi. Consequently, Woolworths is placed at a position where they are competing for a stagnating market i.e. one that is growing at very low rates yet the number of industry players is on the rise. Other external factors affecting Woolworth’s decision making processes are also linked to the way they go about making their personal decisions. For instance, the issue of taxation is quite important in determining whether Woolworths succeeds or not. Since it depends on exports for most of their commodities, then the company is affected adversely by international tariffs in trade. However, it should be noted that the retail chain store sector is not highly regulated by the UK government and this is a plus on the part of Woolworths. Globalisation 1) How globalisation influences policies and decision making at Woolworths UK Enterprises and corporations alike are highly influenced by the concept of globalisation and Woolworths is not an exception. Before critically analysing this issue, it is essential to clarify its meaning; globalisation is defined as the increased level of contact between a certain entity and the rest of the world, through globalisation, mutual understandings, personal friendships and world citizenry is created. However, in terms of business entities, globalisation may not be a positive. This is largely because it causes increased competition which may be difficult to out manoeuvre especially when one lacks the capacity for change. Woolworths UK was a brainchild of the US based subsidiary. Consequently, it had transferred knowledge and business structures from that part of the world to the United Kingdom. This meant that the company ought to have created a local solution to the local UK environment. Local marketing appeal for international companies such as Woolworths is crucial in succeeding in their market. This can only be done by incorporating all the external and internal factors. The United Kingdom was not the original company base for Woolworths; consequently, they needed to look for ways in which they could adopt to the local culture in the UK. The UK consumer culture has changed dramatically over the past few years. This is as a result of increased levels of exposure brought on by information technology. Consequently, consumers are well aware of their rights and they also know where to find cheap bargains. This is actually the reason why Woolworths has not been performing very well; most consumers want a retail store with preset themes or one with cheap products. Since so many other retail stores are available, then Woolworths has been pushed to the periphery in light of this competition. It should be noted that globalisation has played a large role in promoting this information driven consumer culture. Through interaction with other parts of the world, the UK’s technological status has dramatically improved. People can get important retail information at the touch of a button and this makes them very choosy. In other words, globalisation has boosted information technology which has heightened consumer awareness and thus diminished demand for Woolworths’ products which do not represent the best value for money. Globalisation has highly affected shopping behaviour among a series of consumers owing to the fact that it has promoted more job opportunities. Many UK consumers are constantly moving form country to country while conducting business, getting educated or working for a certain multinational. This therefore means that globalisation has created situations in which the UK consumer has very little time in his or her hands. People are now working for more hours and most of them have very little spare time for themselves. What this means for Woolworths is that consumer also have little time to spend in their retail outlets. When going for shopping, buyers may be interested in spending as little time as possible in such outlets so that thy can get back to their busy schedules. Decision making in Woolworths must be such that it centres on meeting this need to save time when purchasing. (Kubeck, 1995) Globalisation highly affects the productivity levels at Woolworths through its supply section. This is because now Woolworths and other retail chain stores have a wider supply base to choose from. They can source their commodities at a cheaper price from other countries of the world or they can locate high quality goods from suppliers in continents. Depending on how Woolworths reacts to this, global supply sourcing can either be a positive or a negative. It can be positive when good suppliers are chosen. However, it can be negative when Woolworths has been outcompeted by other retails who manage to get cheaper goods at lower prices. Globalisation has also raised the level of competition among various industry players in the retail chain store sector. This is because globalisation favours growth of multinationals. The UK is plagued with a series of multinationals such as Tesco, Wal-Mart, Asda and many more. These multinationals create greater competition because of their diffused processes and also because of greater network structures, greater flows of information and hence greater productivity. Lastly, globalisation has created fertile ground for outsourcing of jobs. The new buzz word was largely associated with the manufacturing sector where most businesses chose to outsource their manufacturing function to Asian based countries such as China and Taiwan. The retail sector is also involved in this buzz word because a number of their suppliers come from the Asian continent. They have chosen to outsource this aspect to other parts of the world so as to promote their level of competitiveness. 2) Critical evaluation of the effectiveness of the organisation’s response Globalisation has promoted greater adoption of information technology and thus a more informed consumer. This kind of consumer is less loyal to particular brand unless that brand offers good quality or value for money. Woolworths has also been slow in responding to this aspect of globalisation. Since the consumer is more informed, the company should have worked on their prices and it should also have taken the time to check the quality of their commodities so that they can increase their client base. Woolworths still has a long way to go in handling these challenges. It can be argued that Woolworths has not responded as strongly as it should to forces of globalisation. As it has been asserted earlier, many consumers are now engaging in more work and have less time to shop. Consequently, Woolworth’s store formats should have been changed to meet this need. Compared to other retail outlets in the United Kingdom, Woolworth is yet to catch up with the rest in terms of in-store organisation. More often than not, consumers may not be able to find what they are looking for in a Woolworths store unless assisted by one of the employees. Consequently, this takes a lot of time and may prompt some of them to choose other stores. (Scheer, 1999) In terms of sourcing for suppliers from other parts of the world, it is imperative for Woolworths to awaken to the possibility that other retail chain stores in the UK are doing much better than they are. This is largely as a result of the lower prices that some of their commodities are grouping for and also because of a result of greater investment in dependant supplier who offer high quality. Woolworths may have been overwhelmed by the increased competition facing the retail chain industry from multinationals. Globalisation has created sound operating structures for facilitating better productivity and this has given greater precedence to these large multinationals. Woolworths is supposed to be competing with the multinationals by offering products or services that whether they meet or exceed the offerings in these multinationals. However, Woolworths has not responded as quickly and assertively as it should. The company therefore needs to look for other ways in which they can promote this development through sound service delivery. (Sterman, 2000) Woolworths has responded to the need to outsource by getting some of their goods from the Asian continent. However, compared to their competitors, this company still has along way to go in terms of being at per with its competitors. Most of the time, the company relies on European based manufacturers for their commodities or their in store brands. Conclusion - Areas for improvement in the response of the organisation Globalisation is eminent in almost all spheres of the UK economy. Consequently, companies that fail to react swiftly to this phenomenon are bound to be left behind. Woolworths has debts of three hundred and eighty five million pounds as of mid 2008. This poor performance is further illustrated by the figure below depicts its performance over the past few months. Its shares have been on the decline. Source; (Eriksson and Penker, 2000) In order to boost its performance in the global arena, then Woolworths needs to change a number of things. First of all, the company needs to respond to the need to save time this can be done by more orderly arrangements of their commodities in their stores. Secondly, the company needs to take greater care in terms of sourcing better quality items. Consequently, the company will do much better in the retail industry by placing greater precedence on this matter. (Eriksson and Penker, 2000) On top of the latter, there should be greater emphasis on the adoption of information technology especially with regard to the use online sales. Also, they need to embrace the fact that their brand is barely recognised among future market segments. The company has to work on adding value to their name and making their services easily recognised. References Hammer, M. and Champy, P. (1993): Reengineering the Corporation - A Manifesto for Business Revolution; Harper Business Book Porter, M. (1985): Competitive Advantage - Creating and Sustaining Superior Performance; Free Press Price Waterhouse (1995): Change Integration Team - Best Practices for Transforming Your Organization; Irwin Scheer, A. (1999): ARIS - Business Process Frameworks; Springer Sterman, J. (2000): Business Dynamics: Systems Thinking and Modelling for a Complex World; McGraw-Hill Kubeck, L. (1995): Techniques for Business Process Redesign - Tying It All Together; Wiley-QED Publication Chopra, S. and Meindl, P. (2000): Supply Chain Management - Strategy, Planning and Operations; Prentice Hall College Division Eriksson, H. and Penker. H. (2000): Business Modelling with UML - Business Patterns that Work; Wiley Read More