Woolworths Supermarket Cooperate Governance - Case Study Example

Woolworths Supermarket Cooperate Governance By student’s name Course code+ name Professor’s name University name City, state Date of submission   Introduction Corporate governance is the mode by which a firm is controlled by several mechanisms not limited to ownership, company law, boards, and incentives. The method of management allows the leaders to set a particular direction that the whole organization should take, the objectives to be attained, and the ability to emphasize the ways that the goals set will be implemented. The knowledge of forming boards is vital for all the business firms to be able to adopt the corporate governance. Any company that applies the corporate governance tactics should embrace the NYSE or the UK corporate codes. The shareholders are the main actors who encourage their managers to ensure effective governance. The rights of the shareholders should be well laid out to prevent disharmony between them and the company. If such happens, the firm has to be protected to ensure that the business is not taken over through the legal procedures. The Finance Journal defines corporate governance as all the strategies that are set aside to be implemented to ensure more returns on any of the implementations set aside for investment. The management is crucial in making the business efficient to operate under all the shareholders at harmony. However, corporate governance is not all inclusive but sets to exclude some of the vices to maintain effectiveness (Erkens et al., 2012). There is a broad difference between corporate management and governance. The latter relies much on directing and controlling while management mainly deals with human resource management, financial and marketing management. Precisely, the managers are under the control and directions of the most senior managers who are within a particular firm. Corporate governance is a study and a field of practice and not necessarily a religion. The Woolworths supermarket is a good example that has for a long time implemented the corporate governance to ensure long-term returns in the whole of Australia. The market line journal focuses on the Jegen’s 2012 strategies and company overview with an aim of portraying the implications that come with corporate governance (Acharya et al., 2012). Company Overview Sue Mitchell, the author of the Woolworths: Margins are safe article, argues that Woolworths is among the most successful and largest Australia grocery brands sellers spreading its branch store across New Zealand and Australia. According to the other report released by Australian supermarket 2014, year financial report shows that this cooperation is involved or dominates two chains accounting for 805 of the Australian market. The two chain includes Coles and Woolworths, which accounts for 872 and 156 supermarkets stores in Australia and New Zealand respectively. According to Woolworths 2014 report show that Woolworths Corporation has expanded its stores to other regions such as South Africa India and UAE though in small levels. However, Woolworths Corporation targets to grow more in the area it dominates which remains its primary efforts (Dos et al., 2013). In the 2014 report on the number of employees show that the number of Woolworth’s employee has also increased by 190000 in the past one year. Also, the reports estimate that the number of customers has increased beyond 17 million in both Australia and New Zealand every day excluding the newly expanded branches to other regions such as South Africa. The Woolworths, as its stated in its 2014 final year report show that it is ranked among the top in the Pacific grocery brands in 2012. The 2012 brand value of the year was $4,203 (USD) which was a 5% increase from the previous year brand value Corporate governance issues addressed in the article The article by Sue Mitchell in the MMR newspaper mostly discussed the new strategies that were placed to aid the progress of the company. It also compares the company with the other chain operation (Coles). After Jegen had taken the position of director of the Woolworths supermarkets, he developed a plan with a number of strategies aimed to bring the company to great heights in terms of business developments as evident in the 2014 report. The plans initiated by the new director with the primary purpose to extend the company and defend it from the competitors intended to change the mode of Woolworths communicated with the customers. The second changes were to expand the market area of the products by the opening of more retail stores in various part of the world to give the company a significant market share. The resultant success in the annual 2014 report of the Woolworths cooperation was a correct prediction of the MMR Global newspaper article on the progress of the Woolworths strategies Woolworths: margin are safe. Also, the article outlines the development of the company in its current state which show that Woolworths have a greater range of sales than Coles. The Woolworths sales in the year (2012) were 40% higher than Coles and also 18% higher as a comparison of the sales per square meter were measured. Corporate issues raised in the article The election of the new director initiated a new face of Woolworths era under the resultant changes made on customer and the company communication. Also, an extension of the company into new more retailers store and change of the product label have a great implication on the future company development. Jegen believes that his changes would make great contributions to the aims and the goals of the business as he said that, “I think a healthy company that generates enough returns for shareholders is ultimately the best deal the customers can have.” (Mitchell, 2012). His statement a lined with his intended strategies that were to be implemented to meet the mission of the company. The Woolworth’s mission is to deliver high quality of fresh foods products and services with better price tags. Therefore the Jegen’s new strategy a lined with the mission of granting the cooperation a business opportunity not only in the Australia and New Zealand but also in other places worldwide (Wagiciengo & Belal, 2012). According to Finance Journal, the meaning of corporate governances refers to the mechanisms or processes that are made to supervise or guide the direction of an organization; Mitchell addressed four strategies in the (extend and plan) plans brought by the new director of the supermarket. These strategies, as discussed earlier, focuses on extending Woolworths supernatant market share and thriving the customer's cooperation through the developed customer's communications. Jegen, who took the helm of Woolworths’ liqueur food and petrol business, argued that the margin of the company could not be competitive enough than Coles by the current strategies of reduction of the brands prices and improvement of the brands quality rather than the new four strategies that he developed (Wagiciengo & Belal, 2012). The plans included the opening of new store and formats (expand the business), offering an improved range of products brands of fresh vegetable and fruits and finally changing the mode of communication by which the company used to communicate with its customers (Kiron et al., 2013). The resultant four strategies as the annual 2014 report showed have significantly aided the progress of the company especially the Woolworths retail stores. Addressing the change each of the strategy has impacted the growth of the company starting with the opening of the new stores which was the main agenda of Jegen in various region of the world. The Jegen’s fist plan on opening new store aimed to open 120 supermarket and 172 liquor stores in the next five year (that is from the year 2012 to 2017). The expression of the number of supermarket and liquor stores would grow the floor rate at 3% per year with a one percent increase from the current two percent net space growth increase per year. In the Industry Group Leader report 2013 one years after the initiation of the opening more supermarkets strategy, shows that Woolworths heard 872 supermarkets in Australia and also heard some retailers stores in South Africa, UAE and India even though in small levels (DeZoort &Salterio, 2001). The improvement of the customer communications was the second strategy in the Jegen plan. The implication of the efficient customer communication strategy has a significant impact on the rate of customers visiting the stores each day. In the Woolworths 2014 report on the business development showed that the number of customers has increased in a period of two years from the year 2012 to about 17 million customers who visited its retailers daily in 2013. The third plan involved increasing variety of brands and improving its quality. The resultant implication of this strategy was the increased the number of sales by 5% from 2012 to 2013. Also According to 2013 FY, the Woolworths’ earning of the year 2013 excluding taxes and interest Earnings before Interest and Taxes (EBIT) was $3,653.2 million where the revenue reported was $58.5 billion. The last strategy was improving the nature of advertisements. Jegen launched the advertisement account signing a contract with Droga5 to promote customer awareness of the products in the market (Harford et al., 2012). The argument made in media The argument developed in Mitchell article focuses on the new strategies that Jegen developed which involved aiding the growth of Woolworth. Despite the current strategies which involve reduction of the prices which perhaps would be perceived as a good idea, Jegen contradicts with the old ideas arguing that they did not make Woolworth supermarkets competitive enough. The central focus of the journal is to address the main agendas of the new Woolworth supermarket director that aimed to attain the goals of the business. Woolworth cost of products reduction could perhaps not be the only the way out to make its product competitive enough in the market. Therefore, Jegen’s aims to increase the area space of the retailers where the product will be distributed by opening more stores. Also, another similar plan was to improve the nature in which the advertising was made. The two strategies Jegen would bring a powerful imprecation on the future growth of the company. Standardizing the cost of the products and bringing the products close to the consumers which also accompanied by making the awareness of the types of the brands displayed in the resultant store was the best strategy that any other business would develop. Secondly, the Mitchell article dressed the issue of improvement of customer’s communication (Beneke et al., 2012). The importance of improving the customer’s communication by opening an open channel where the review of the customers on various type of brands helps to sport the point of weakness and also the area of improvement. The three strategies addressed by the article are the one that seen in the future Woolworths driving engine directing the company toward its goals. However, though the Jegen’s strategies have significantly improved the company sales in the last four years, it has received a number of critics from some consumers groups and branded grocery manufacturers claiming that the new strategies are squeezing their pockets especially the development of private labels plans. The argument raised by these two groups is that marinating the brands prices high and increasing the brands type do not benefit the consumer rather it increased the company profit. Jegen defended his strategies toward the critics by saying that, “our only objective is to grow our sales, to grow our customer number, to grow our value perception.” (Mitchell, 2012). Conclusion To conclude, as the article reviews the strategies that the new director invented, the resultant policies can also apply to all the companies which are not in the same field as Woolworth. For instance, most of the companies have created communications platforms such as websites that enable the customers to comment on a various range of products and the services offered by the farm in question. When a company operates in effective communications with its clients enables the farm to know its weakness and the opinions of the customers on particular products. For instance, a particular service may be not delivered as it is supposed, raised complains will make the resultant managers take an action to rectify the situation. Before opening other stores elsewhere as it were, marinating the current customers is of more important since it guarantees the business a future thrives. Reference List Acharya, V.V., Gottschalg, O.F., Hahn, M. and Kehoe, C., 2012. Corporate governance and value creation: Evidence from private equity. Review of Financial Studies, p.hhs117. Beneke, J., Wannke, N., Pelteret, E., Tladi, T. and Gordon, D., 2012. Don't bank on it: Delineating the relationship between corporate social responsibility and retail banking affinity. South African Journal of Business Management, 43(1). DeZoort, F.T. and Salterio, S.E., 2001. The effects of corporate governance experience and financial-reporting and audit knowledge on audit committee members' judgments. Auditing: A Journal of Practice & Theory, 20(2), pp.31-47. Dos Santos, M.A., Svensson, G. and Padin, C., 2013. Indicators of sustainable business practices: Woolworths in South Africa. Supply Chain Management: An International Journal, 18(1), pp.104-108. Erkens, D.H., Hung, M. and Matos, P., 2012. Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. Journal of Corporate Finance, 18(2), pp.389-411. Harford, J., Mansi, S.A. and Maxwell, W.F., 2012. Corporate governance and firm cash holdings in the US. In Corporate Governance (pp. 107-138). Springer Berlin Heidelberg. Kiron, D., Kruschwitz, N., Reeves, M. and Goh, E., 2013. The benefits of sustainability-driven innovation. MIT Sloan Management Review, 54(2), p.69. Mitchell, S 2012, 'Woolworths: Margins Are Safe', _Mmr_, 29, 13, pp. 31-32, Business Source Complete, EBSCO_host_, viewed 17 March 2016. Siegel, M., 2013. Chinese safety concern empties distant shelves. The New York Times, 7. Wagiciengo, M.M. and Belal, A.R., 2012. Intellectual capital disclosures by South African companies: A longitudinal investigation. Advances in Accounting, 28(1), pp.111-119. Read More