Sample HM5003 Economics for Business Report

HM5003 Economics for Business Report Sample

Detailed Requirements of The Assignment

You are a group of advisors to the Management Board in your company with Headquarters in Australia. As advisors you are first, required to conduct research on your selected sector/industry covering the previous 5- 10 years. Second, you are required to present a company strategy to your Management Board and to the Federal Government of Australia covering the next 5 years. Your Management Board requires that you submit a 3000-word market report containing your findings and strategies. Finally, your Management Board requires that your research should predominantly be based on microeconomic and macroeconomic theory and application of Holmes Institute syllabus.

Company Selection Guidelines

Note:

(i) Choose a company/firm of your choice.

(ii) The company/firm must be an enterprise based in Australia either as a national enterprise or a multinational subsidiary in Australia with headquarters abroad

Note:

i. if your company has many products and/or services, you can select a representative product/service to be the basis for your research.

ii. This report should provide useful information for your company’s Management Board. It should use a variety of resources, including the textbook, newspapers, industry reports, the ABS website, and other sources.

iii. Furthermore, your report should include headings and sub-headings. It needs to be properly referenced using the Harvard style and at least 5 references.

Solution

Introduction

It is the retail sector where one may find a few of Australia's strong economic pillars; and in that retail sector, there is the paramount position of the Woolworths Group. Formed in 1924, Woolworths has grown to become Australia's only largest supermarket chain, having gained a strong force of customers from metropolitan and regional areas. A broad portfolio comprising groceries, clothes, and other household goods or items really pinned this company to the leading spot in the retail industry. This report will deeply analyse the Woolworths Group's positioning in the market through discussions of both microeconomic and macroeconomic variables that shape its operations, from consumer preference and cost structures to regulatory environments, each influencing overall demand and supply. Furthermore, this essay discusses two recent important macro events that have affected Woolworths and the retail sector: the COVID-19 pandemic. Precisely, through an understanding of such variables, the report is supposed to render strategic proposals that would allow Woolworths to sustain its competitive advantage and adjust to the constant economic changes occurring within the Australian market.

Company Background

The group of Woolworths was established in 1924 and grew steadily as the largest supermarket chain in Australia, holding an outstanding share in the retail market. The company Woolworths was able to secure about 37% shares in the concerned market by the year 2024 and indicates its leading position in the business sector (Woolworths Group 2024). Major group operates via a host of brands and among them, Woolworths Supermarkets is the most famous. In Australia, there are the Woolworths Supermarkets, which serve millions of customers with extensive varieties of fresh produce and groceries, bakery foods, and household items.

Apart from Woolworths Supermarkets, the company owns a chain of discount department stores, Big W, which offers everything from clothing and electronics to homeware. This way, Woolworths Diversity can enable its company to infiltrate various sectors of the retail market and make sure customers enjoy one-stop shopping. With more than 1,000 store locations across the country, in both urban and regional settings, Woolworths' immense network ensures outreach to all types of customers, from metropolitan centers down to the most remote rural communities (Woolworths 2024). The company has now embraced digital transformation, expanding its online shopping platform and home delivery services to meet growing demand for convenience.

The commitment to sustainability by Woolworths has also seen the company embark on plastic use reduction strategy, energy efficiency, and supports the local community. With its solid supply for The Assignment Helpline complemented with a focus on customer service and innovation, the company has sealed a position among the leaders in the Australian retailing industry. While Woolworths continues to adapt to the changing market conditions and consumer preference, the company is positioned to maintain its leadership in the market in coming years.

Industry/Sector Background

The Australian retail industry is dynamic and highly competitive. Among the many it plays one of the important roles in the nation's economy. It perceives tough competition from all major companies like Woolworths, Coles, and Aldi, fighting for more shares of the market. This has made conditions such that there is a moderately low profit margin in the marketplace and for companies to make money based on high turnover rates.

Over the past decade, the retail industry has changed a lot, and it still does, for reasons that are very important. Among such causes of change are technological advances, which brought a full change in consumers' ways of shopping (KMPG 2024). This grudgingly forced companies like Woolworths to extend their online shelf space to a greater degree and integrate more technology into their operations to make the customer experience great and to make supply chains efficient.

Consumer preferences have also changed dramatically. Convenience, price on value, and sustainability are absolutely demanded. Providing the same information as before, consumers are more knowledgeable and price-sensitive, and they usually reach for digital means when comparing prices or searching for the best value. That trend has forward-shifted the retailer's price competition; therefore, companies run promotions very frequently, discounts, and loyalty programs to win and retain customers (KMPG 2024).

Besides that, economic cycles of recession and recovery have also taken their turn to hit the retail industry. Some major factors that determine retail sales include inflation, unemployment rates, and consumer confidence (Chen et al., 2024, p. 1678(2)). However, the most unparalleled attack on the industry has come from the unseen enemy known as the COVID-19 pandemic, which disrupted supply chains, altered the way people shop, and accelerated the switch to online shopping.

Despite these, the Australian retail industry is equally resilient, with companies in the industry working constantly to innovate, especially at times when the demand from consumers shifts. The resilience of the sector strongly depends on how it will adapt to changing economic conditions and technological advancement.

Market Structure of the Industry

Woolworths falls into the oligopolistic market structure in that of the Australian supermarket sector, wherein there are a limited number of large-scale firms put together in one market (Woolworths Group 2024). This market structure is highly manifested through the duopoly between Woolworths and the other major competitor, Coles. Aggregated, these two giants share more than 70% of the supermarket market share in Australia. Significant economies of scale, for instance, are few of the reasons that maintain this dominance, besides the fact that the extensive supply chains and brand loyalty exhibited by their products make it very difficult to effectively compete with new entrants.

Markets are oligopolistic in nature, and hence entry barriers for the market are high. Some of these impediments include the huge capital amount required to enter into a supermarket chain, huge distribution networks required, and it is difficult to earn consumer trust and loyalty (Devine & Bertsch 2023, p. 559(2)). Moreover, woolworths and Coles representing players of this category have existing relations with all suppliers in addition to having the best logistics system and hence are in strong positions.

Here, product differentiation plays an important role. Indeed, varied products are not absent in Woolworths and Coles as both sell private label brands, organic produce, and locally produced goods, which enable them to cater to the various preferences of their customers (Yuki & Kubo 2023, p. 95(3)). In turn, this would allow companies to retain brand loyalty and impede the entry of competition by small players and discounters such as Aldi.

Another defining characteristic of oligopoly in the Australian supermarket industry is price leadership. In this respect, both Woolworths and Coles have the predisposition to often lead any changes to prices, while through their market power, they have been able to lay down the law on overall pricing across the sector. These situations tend to build into minor price wars where aggressive discounting by both companies is used to lure customers away and hurts profitability throughout the industry.

Microeconomic and Macroeconomic Factors Influencing Demand

Microeconomic Factors:

1. Consumer Preferences:

Consumer preferences: These are vital and, therefore, have the effect of changing demand for products offered by Woolworths. Of late, consumers have been demanding organic and locally sourced products. This reflects an increased awareness by Australian consumers of health sustainability and environmental problems. Woolworths has responded by expanding its organic and locally produced products to position itself as the retailer of these emerging consumer needs. In doing so, it finds itself in a better position to meet the consumer requirements for such values in the products and also enhances its brand image among consumers for being responsible and customer-centric (Forest et al., 2023, p. 148(2)).

2. Price Elasticity:

Woolworths has highly elastic demand in many of its products. This means that with minor price increases or decreases, the level of demand changes significantly. Where this aspect is most striking among products for non-essential and luxury categories, consumers in this regard tend to be rather sensitive regarding price. For instance, when on sale, they consume more and more consumers are found when on sale. Still, any increase in price brings down the level of sales considerably (Chen & Lim 2023, p. 236(3)). Price elasticity empowers Woolworths with the necessary insights to either raise or lower prices in order to optimize product revenues within the realm of competitiveness.

Macroeconomic Factors:

1. Economic Growth:

The general economic conditions, such as the growth in Australia's GDP, have an impact on the spending capacity of consumers, influencing the demand at Woolworths. In good economic times, when the consumer has a sense of financial security, there is usually gains in discretionary spend, improving sales of higher-margin items for Woolworths in premium groceries and household goods. Due to this, consumers are sometimes very conscious of their prices during the downtrends in the economy, shifting demand to basic and cheaper varieties. Woolworths would have to be agile in its product offering and pricing strategies based on these economic cycles (Kaye & Nair 2023).

2. Inflation Rates:

Inflation: it is one of the most vital macro-economic factors that can occur, and it will directly affect the consumers' purchasing power. Increased inflation diminishes disposable income (Kozlov 2023, p. 23(3)). Therefore, consumers will become very conscious about spending. It can dampen demand for non-essential, high-value products of Woolworths, since they prefer to spend money on plain, basic merchandise only. Probably, Woolworths will also need to pass on some of the inflationary pressures that are related to an upsurge in the cost of goods sold. However, this is not always easy in a highly competitive market without having any adverse impact on demand. Therefore, Woolworths has to make a fine balance in pricing strategy to retain demand amidst cost pressures.

Microeconomic and Macroeconomic Factors Influencing Supply

• Microeconomic Factors:

1. Cost of Goods Sold:

The cost of goods sold or COGS is a major microeconomic factor that influences the supply of Woolworths. Any sort of change in the input cost from suppliers mainly in agriculture has a great effect on the supply chain. In such a scenario, the ensuing changes in fresh produce, dairy, and meat price are brought about by conditions of weather, crop yield, and feed prices and it influences the cost structure for Woolworths. If the cost to the supplier goes up, it will be hard for Woolworths to maintain their usual price without giving up some of the profit margin, which could affect how much is supplied or the pricing approach.

2. Labour Costs:

Other than that, one of the basic microeconomic factors which could affect the supply of Woolworths is labour costs. An increase in minimum wage or any other employee-related cost such as cost of training and development and employee benefits may affect the overall operational cost for the company (Woolworths Group 2024). For example, an increased cost of labour increases the operational cost for maintaining stores and logistics; hence, such increased cost might force Woolworths to change the supply of its merchandise with a view to optimizing cost. The shortage or surplus of labor could also impact the efficiency of supply chain functions, ensuring that the store shelves are always stocked or empty.

• Macroeconomic factors

1. Global Supply Chains:

Global supply chains significantly affect the sourcing and supplying of products to Woolworths. Disruptions in global trade have started to take their toll in regard to the availability and cost of imported goods. Shipping delays, along with increased costs for freight and bottlenecks in supply chains, have caused shortages with some products; thus, higher costs that have, in turn, been one factor making Woolworths reconsider strategies on sourcing. This dependence on global supply chains means international disruptions have a cascading effect on Woolworths' domestic supply capabilities.

2. Government Regulations:

Government regulations, particularly governmental laws about food safety and environment-friendly practices are still one of the major macroeconomic determinants that can affect Woolworths supplies. Compliance with strict regulations typically requires investment in improving technology, processes, and training (Nouhaila, M. & Younes 2023, p. 77(4)). These usually sum up to operational costs. Similarly, environmental-related regulations directed at reduction of carbon footprints or waste methods influence packaging, sourcing, and distribution channels. While they are regulatory requirements that ensure this product is safe and sustainable, they add complexity and cost to the Woolworths supply chain, which impacts the availability of goods and price of some of those goods..

Elasticity

Different products offered by Woolworths have different elasticities of their respective prices. For example, the demand for most of the essential goods, such as bread, milk, and eggs, is usually inelastic. In other words, for inelastic demand, a change in price would relatively have a small effect on the quantity demanded (Kolay & Tyagi 2018, p. 92(3)). For instance, even if the price of milk increases, consumers would still buy the product since it is considered an essential commodity. This inelasticity allows Woolworths some flexibility in transferring price increases without significantly impacting sales volumes for these staple commodities.

On the other hand, goods of luxury or non-essentials, like high-end chocolates, gourmet foods, and seasonal goods, operate under elastic demand. This means consumers are always sensitive to price changes, and even with a slight increase in price, there can be a reasonable fall in the quantity demanded (Kolay & Tyagi 2018, p. 95(2)) As an example, if the price of a particular luxury chocolate increases at Woolworths, then their consumers may opt for a more economic version of the same brand or may not buy it altogether. This elasticity means that for such products, pricing strategies should be carefully worked out by Woolworths to ensure competitiveness at an optimum revenue level.

Knowing the elasticity of said various products will also enable Woolworths to adapt its pricing strategies to ensure that it is able to maximize revenues without hurting consumer sensitivity over the prices of various group products. By balancing the pricing of inelastic and elastic products, Woolworths can maintain overall profitability and customer satisfaction.

Recent Macroeconomic Event Affecting Woolworths and Australia

The COVID-19 pandemic is, without doubt, one of the most pivotal macroeconomic events of the modern era. It has hit hard on the retail industry worldwide, including Woolworths, an Australian retail company. Surprisingly, as the pandemic started to take shape, it brought in changes in customer purchase patterns that were fundamental in nature. The demand the Company witnessed for basic items such as groceries, households, and hygiene was arguably unprecedented. Since Woolworths has always been one of the biggest supermarket chains in Australia, it found itself at the receiving end of such a demand and thus had to effect immediate alterations in their operations with all due haste.

The sudden rise in the demand for essential products led to a situation where stock was out and disrupted supply chains. Due to the closure of international borders, slowed production, and delayed shipping, the global supply chains were highly disrupted. Woolworths had to take on this challenge by optimizing its supply chain, cleaning up its inventory levels, and ensuring that the key products were available in the stores. Furthermore, they attached importance to the health and safety of its employees and customers by following strict hygiene practices and social distancing in its stores.

Another major change which the pandemic brought in its wake was the rapid acceleration of online shopping. Consuming populations were fast depending on online services for their grocery needs with lockdowns and social distancing norms in force. Woolworths scaled up its digital infrastructure and expanded its online shopping to reach home deliveries to meet the demand surge (Vohra & Mehta 2021, p. 19(2)). Contactless delivery is one of the innovative solutions proposed by Woolworths for customer convenience along with click-and-collect services to make customers and staff safer.

Recommendations

Other key strategic recommendations that would help Woolworths remain competitive and resilient in the changing retail landscape will include:

1. Invest in Digital Transformation:

o Woolworths should continue its integration and development of the online shopping platform, and ensure a wider delivery network to meet the consumer expectation for convenience. Further, this would be cemented by investing in technology-enabled solutions in forms of AI, whether for inventory management or personalising the shopping experiences.

2. Supply Chain Diversification:

o To reduce the risk of disruption within international supplies, Woolworths should decrease reliance on international suppliers by buying more products locally. Building stronger relationships with local producers and investing in domestic supply chains will reduce supply chain vulnerability stemming from external shocks.

3. Sustainability Initiatives:

It is recommended that Woolworths further invest in sustainable practices such as reduction of plastic use, enhancing energy efficiency, and support for local communities. Such initiatives are likely to find resonance among environmentally sensitive consumers and also ensure compliance with regulatory demands, which indeed are getting tough. This will be positioning Woolworths as one of the leaders in sustainable retailing.

Conclusion

In such a situation, Woolworths Group should be well placed to maintain a competitive edge in the Australian retail market. However, it is equally true that this industry faces stiff volatility, at the same time suffering at the hands of economic fluctuations and consumer changes. For example, Woolworths would need to pursue digital transformation continuously to sustain the growth of its online platforms and reach consumers with more convenient options for increased delivery services. Besides, the supply chains must be spread out to minimize risks of global disruption and ensure supplies of goods smoothly. Lastly, full-scale commitment to environmental sustainability will attract customers who are green-aware and thus help the supermarket comply with increasing demands by regulators. With such strategic focuses, Woolworths is bound to continue surging into the future, capitalize on any forthcoming opportunities, and stay viable through unforgiving retail competition. These efforts ensure that Woolworths will continue to be a powerhouse that leads the Australian market with trusted and innovative leadership.

References