Strategic Direction of Woolworths Limited - Assignment Example

Woolworths Limited Student’s Name Subject Professor University/Institution Location Date 1. Strategic direction of Woolworths Limited Woolworths is conscious of its responsibilities in its retail business operations since it serves thousands of customers on a daily basis in different communities all over Australia as well as New Zealand. It needs to comprehend and manage its impacts and be in a position to aid achieve long-term and useful change which goes past its operations. Its business activities impact the manner in which it handles customers, invests in community initiatives, give returns to its shareholders and also has impact on the environment. The long-term goal for Woolworths Limited is to get recognition as the dominant sustainability-oriented retailer in the whole of Australia’s retailing industry. As a result, incorporating sustainability and corporate responsibility into its routine business operations forms one of its key priorities (Fair Disclosure Wire 2012, p.3). Targets, priorities, initiatives and commitments to guide the business towards the achievement of its goal were set up in its 2007-2015 Sustainability Strategy under its publication, “Doing the Right Thing”. Additionally, all the company’s functions have included their sustainability goals in the five-year tactical plans and they are obligated to follow sustainability criteria as well as take into account sustainability considerations in all their key investment decisions. The general governance and responsibility of sustainability is carried out by the Board of Directors. It also administers the efficacy of the company’s health and safety program via its employee policy committee. Woolworths Limited’s sustainability strategic plan focuses mainly on climate change, impacts of drought and direct water use, consumer and distribution packaging. It also includes; source of its private label commodities and ingredients, generation of waste from stores and store development aspects such as design, equipment, construction and specification of materials. The diagram below shows Woolworths limited’s strategic plan for corporate sustainability and the involvement of all stakeholders (Fair Disclosure Wire 2012, p.4). 2. Three organizational tensions, and how the strategic direction addresses them Climate change Drawing from Woolworths Limited (2007, p.12), climate change is one of the key tensions that Woolworths Limited is facing. This is because of its impact on the production of fresh food stuffs which in turn affects the company’s sustainability. A big percentage of the Australian population is aware of the destructive impacts of severe weather conditions like Cyclone Larry, and drought and how they influence the pricing as well as availability of staple food stuffs. Therefore, Woolworths’ business strategy for minimizing its carbon emission level, and through that lessening its role in global warming, forms a compelling idea. Several political aspects and regulations are influencing the landscape of climate change including obligations for disclosing emission levels to the public, execution of Australian trading scheme for emissions and more public awareness subsequent to the Stern Publication. Woolworths considers the reduction of carbon emission level as integral to its business growth. This is because; it will eventually strengthen its capacity to continue providing affordable fresh food products to its customers. Through a more efficient use of fuel and electricity, finding alternative fuel and energy sources, lessening the waste generated and disposing the waste in a responsible way, Woolworths will be able to reduce its effects on environment. It will also be able to render high quality services to its customers as well as get a better financial return (Woolworths Limited 2007, p.13). Packaging According to Business Wire (2010, p.11), retailers play an important role in packaging supply channel and they have the capacity to promote measurable and positive change in the retail sector. Woolworths is devoted to development by looking for economical ways of lessening packaging and minimizing waste that is generated from private label communities, whilst going on with the delivery of high quality products to consumers at affordable prices. Despite the company’s efforts in reducing waste, tension emerges from its use of plastic bags for packaging. Woolworths has more than 30,000 service cashiers that are employed in all the stores, and majority of them work on a casual or part-time basis. The company’s biggest challenge is to ensure that, all the employees are acquainted with and engage in programs to reduce plastic bags’ use at checkouts. Forty one percent of Woolworths’ transactions are for less than three items which are not supposed to be packed in a plastic bag except when a customer asks for it. 22 percent is transactions for 4-8 items which is normally unplanned, while 37 percent is for more items where a customer should come with an empty plastic bag for packaging. Sometimes, employees give plastic bags to customers for items that are not supposed to be packed. Thus, such instances together with unplanned shopping pose some difficulties for Woolworths in its initiatives for controlling the use of plastic bags. The chart below shows the percentage of transactions with the number of items. Sourcing Developing and retaining sustainable ways of sourcing commodities in order to meet the ever changing needs of customers is an important issue for Woolworths Limited, both at the domestic as well as the international level. A bigger percentage of the company’s private label commodities is grown or manufactured in Australia. However, Woolworths also engages in global sourcing which poses some challenges to the company. One of the main challenges is environmental standards and labour practices which vary from one country to the other and which are different from those in Australia. Other issues include; health, safety, wages, child labour, working hours and production impacts on the environment. Consequently, Woolworths has to set up wide range of purchasing policies to fit in the various sourcing points across the globe (Woolworths Limited, 2007). 3. Organizational structure CEO Chairman of the Board Directors Secretary Finance Central Finance Financial Financial Food Management Services Taylor (2009, p.67) maintains that, for the past few years, change and growth have been major themes for Woolworths, and both themes have a significant impact on the company’s employees and the company’s capability to meet the business’ resource needs and capacity. Backing up the corporate strategy by hiring and assigning the appropriate professionals to the appropriate jobs, as well as, retaining passionate, talented and devoted business retailers, remain crucial to the people’s strategy of Woolworths Limited. In order to achieve this core purpose and to focus its people’s attention towards its strategic direction, Woolworths’s organisational structure focuses on two key areas. First, it aims at developing a high performance group of employees. This is made possible by building motivating leadership which generate the suitable culture for turning business strategies into action. It is also achieved by driving transparent and consistent business practices and processes as well as, an integrated assortment of business regulations. The second focus area involves developing committed, passionate and talented retailers by drawing, keeping and developing varied talent, and building alliance of incentive and pay systems. This is also achieved through developing an organisational culture which allows employees to give their best when discharging their activities, and making sure that systems are designed in a way that delivers business strategy, while ensuring answerability at every level. In addition, Woolworths has executed a leadership structure which presents the company with a tool for interpreting the knowledge level of its employees, their abilities and their conduct at different levels. It gives a number of unique, organisation-specific, business-critical leadership and retail competencies, the structure is used in identifying future leaders along with their development needs, which helps Woolworths to keep and develop its talent. The chart below shows some of the competencies that Woolworths’ employees are trained on (Taylor 2009, p.68). Taylor (2009, p.69) further says that, in order to meet the company’s objective of drawing and keeping high performing employees, Woolworths comprehend the worth of recognition, which is done through financial and non-monetary rewards. The official recognition routine revolves around Difference awards which are done four times a year. In addition, extraordinary individuals are chosen from the Difference Awards’ group and recommended for a Chief Executive Officer Difference prize on an annual basis. 4. Reporting relationships of the individual managers The Chief Executive Officer as well as the General Manager for safety and risk, report to the employee’s policy committee, on matters relating to the general safety and health performance of Woolworths every three months. Divisions are accountable to the Board of Directors regarding their divisional performance on safety. The CEO chairs Woolworths’ executive committee for health and safety and includes divisional management. The committee members meet every month to assess the carrying out and efficacy of the health and safety vision, policy, principles, initiatives, procedures, governance and standards across the company (Bain 2007, p.88). According to Bain (2007, p. 89), the Group sustainability manager updates the Board every month on the general Woolworths’ performance in comparison to set targets, regulatory changes, policy implementation, compliance, risks and business openings. Additional details are given in 3-months reports to the Board regarding main performance indicators, reputation and emerging issues. The sustainability divisions are answerable to the Board of Directors on divisional sustainability achievement against the targets of the divisions. An executive committee for sustainability consisting of the CEO along with the general managers of Woolworths has been formed to make sure that, its sustainability policy is executed in a cost-effective and timely way. The committee is charged with the monitoring of progress in meeting the company’s targets, reviewing public opinion and legislation trends and ensuring conformity with pertinent legislation. It is also responsible for reviewing and approving business cases, pertinent new technology and policy positions. Moreover, there is a Coordinators Committee for sustainability which comprises of sustainability supporters from vending logistics and businesses, spots business processes which ought to be taken up to facilitate sustainable business practices, distributes ideas throughout the divisions and assists the Eco Ambassadors initiative. Lastly, Woolworths Limited has a corporate responsibility committee which comprises of the CEO and outside professionals from a broader assortment of pertinent fields, gather three to four times every year. The meeting aim is to exchange knowledge on countrywide and global best business practices and to give advice regarding Woolworths’ corporate sustainability and responsibility direction and strategies, and on efficient shareholder involvement strategies (Dagwell, Wines, & Lambert 2007, p.113). 5. The performance measures used by the organization Woolworths Limited uses different measures to assess the performance of different aspects of its business operations. To start with, lead time is used to measure the time that is taken by the company in meeting the needs of its customers. For old commodities, lead time may be measured starting from the time a customer gives an order to the company to when it delivers the commodity to the consumer. For new products that have not been introduced to the market, lead time implies the time taken from the product’s final stage to the launching of the product (Kaplan & Norton 1992, p.73). The information gotten from products’ lead time is used by Woolworths to gauge its efficiency in the delivery of products and services. It is also used to identify the sources of delays in its dealing with customers as well as, ways of preventing such delays to facilitate timely services (Woolworths Limited 2007). According to Kearns (2010, p.39), Woolworths uses ranking by its customers. Under this measure, customers give feedback to the company on the quality of its services as compared to the services of other retail companies. Woolworths has customer feedback systems for their customers to be able to give complaints and compliments on its services as well as to make suggestions on any changes they would like to be made on the company’s products and services. In case Woolworths is ranked in second or third position, it uses such ranking to make some improvements on its products and services’ aspects such as nutrient level, packaging and prices in order for it to be at the top. Another measure used by Woolworths Limited is its employees’ core competencies. This is used to determine the capacity of the employees to offer satisfactory services to the customers as well as the production of quality products. In order to enhance customer satisfaction, employees ought to have adequate knowledge and skills on customer service. The information gotten from such competencies is used by the company to develop the appropriate training and career development programs to fill skills’ gap. Lastly, the company uses the rate of introducing new products to measure its growth in its range of products. This is mainly applied to liquor and food stuffs. The data gotten from this measure is used to identify marketable products in order for the company to capitalise on such products (Kearns 2010, p.40). 6. Financial performance measures According to Woolworths Limited (2011), in assessing its financial performance, Woolworths uses augmented market share, operating income per function and cash flow. The market share of a company is used to measure the popularity of its products among the consumers as well as the size of its customer base. Increased market share implies high popularity and a large customer base which in turn implies high sales volume for the company’s products and services. A large market share matches Woolworths’ strategic direction of leading in sustainable retail activities. Having a large market share will make Woolworths a market leader. In addition, the operating income that is generated by every function of the company will be used to measure the profitability of every function. This is gotten by deducting the operating costs of each function from the income share generated by each function. This measure relates to the achievement of the five-year strategic plans for all functions. Cash flow is used to measure the overall profitability level of Woolworths. All the company’s operations revolve around its financial stability. Therefore, the company’s achievement of its strategic direction will be achieved through a good cash flow level (Simons, Dávila, & Kaplan 2000, p.36). List of references Bain, J 2007, A financial tale of two cities : Sydney and Melbourne's remarkable contest for commercial supremacy, Sydney, N.S.W, UNSW Press. Business Wire 2010, December 23, Research and Markets: This Woolworths Limited - SWOT Analysis Company Profile Is the Essential Source for Top-Level Company Data and Information, Business Wire, p. 11. Dagwell, R, Wines, GL & Lambert, C 2007, Corporate accounting in Australia, Sydney, N.S.W, University of New South Wales Press . Fair Disclosure Wire 2012, February 9, Interim 2012 Woolworths Limited Earnings Presentation, Fair Disclosure Wire, pp. 1-4. Kaplan, RS & Norton, DP 1992, The Balanced Scorecard -Measures That Drive Performance, Harvard Business Review, 71-79. Kearns, P 2010, European retail research, Wiesbaden, Gabler/GWV Fachverlage GmbH. Simons, R, Dávila, A & Kaplan, RS 2000, Performance Measurement and Control Systems for Implementing Strategy, New Jersey, Prentice Hall. Taylor, DH 2009, Global cases in logistics and supply chain management, London, Internat. Thomson Business Press. Woolworths Limited 2007, Doing the right thing-Sustainability Strategy 2007–2015, Australia, Woolworths Limited. Woolworths Limited 2011, Annual Report 2011, NSW, Woolworths Limited. Read More