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Strategic Analysis of Australias Retail Trade Industry

The role of globalization and its impact on Australian Business

Executive Summary

In this report, a strategic analysis of the macro (external) business environment of Australia has been discussed, considering the retail trade industry. This report focuses on globalization, global citizens, and its impact on the external business environment. In this regard, the PESTLE Analysis of Australia's external business environment has been conducted to achieve the objective of the study. Based on the report's findings, it can be highlighted that globalization has resulted in improvement and growth in a different industry. Global citizens play a vital role in this regard by taking active participation in the community to ensure the devilment of a global world. From the study, it has been apparent that globalization not only results in the economic development of the country but also associated with different environmental factors that are social, economic, and political, among others. Based on the PESTLE framework, it can be highlighted that the political and financial condition of Australia is stable for the growth and development of the retail trade industry. However, considering the technological factor, it can be stated that with the technological improvement, people are more interested in purchasing online rather than visiting the physical store that can be a negative point in case competition is high. To meet the social factor, the retail industries are also introducing different ways to meet people belonging to another class. Also, the legal factor can cost the drive in case of any change in the legal system. Furthermore, the retail sectors in Australia operate in an environmentally friendly manner to ensure the environment's safety.

Introduction

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Globalization has increased competition that affects the performance of the business. To retain the position of the company in battle, it is the responsibility of the top management to design strategies based on which the business operates. In this regard, the government must understand the environment in which the company operates. This is mainly because the environment impacts the progress of the business in the long run. In this regard, it can be highlighted that understating the external (macro) business environment is essential for the business's success. The outer (macro) business environment comprises of different forces that are economic, legal, political, social, demographic, global, technological, and competitive, among others. A company has substantial control over the internal environment of the business that mostly covers the daily activities and decisions. In the internal environment, the managers and employees use their skills and resources to satisfy the customer’s needs. However, the external (macro) business environment is ever-changing and thus beyond the business's control. Therefore, in this regard, it becomes essential for the top management to understand and analyse the external environment periodically so that company can compete successfully in the market (Kraja & small, 2015; Singapore Institute of Management, 2013).

The following are the objectives of the report.

To understand globalization, global citizens, and impact on the external (macro) business environment To use the PESTLE framework to understand the external (macro) business environment in Australia To analyse the positive and negative impacts that the external environment (macro) of Australia has on the Retail Trade Industry (supermarket and grocery stores)

Discussion

Globalization, Global Citizens and Impact on the External Business Environment

Globalization is linked with the growth of ideas, people, products, information, and money. This has a significant impact on the development of national identities. In this regard, it can be highlighted that globalization is an opportunity for people to become global citizens. The process of globalization not only impacts business activity but also ensures improvement in the mind-set of people living in society. This has both positive and negative impacts on the development of individual identity and their culture as well. In other words, it can be stated that globalization defines humanity and life that include cultural diversity, religious diversity, linguistic diversity, and biodiversity. Therefore, it can be highlighted that globalization is not just restricted to economic growth but also defines humanity. Globalization requires more global citizens in society. The global citizens are the ones who are active and participates in community work to ensure sustainability. Additionally, global citizens are the one who also encourages others to improve their skills and knowledge that helps in understanding different international events in the real world. Furthermore, globalization requires global citizens to develop their thinking in various forms, whether it is social, economic, or political (ILO. ORG, 2004; Lagos, 2001). Over the past few decades, globalization has increased competition in the market as it allows easy entry into the new market. Thus, globalization has becomes the reason for the growth of most industries. The four dimensions linked with PESTEL that indicate whether the sector is globalized or not are market, costs, government, and competition. In similar markets in a country, it becomes challenging for an industry to become globalized. Government trade policies are effective in encouraging the globalization of the drives. Thus, the government plays a vital role in globalization. Globalization has increased trade activities between countries. Therefore, it is a crucial factor for the growth of business in the external environment (IQualify, n.d.).

PESTLE Framework to Diagnose Macro Factors Affecting Current Business Operating Condition within Australia

PESTLE is an analytical tool that is used to study the external (macro) business environment. These factors enable the top management of the organization to take the necessary business operating decisions successfully. The political factors are the policies and regulations designed by the government that has to be followed by the retail trade industry of Australia. However, political instability can lead to reduced sales. For instance, the consumer policy of Australia allows easy entry into the market that increases the competition in the marketplace. From an economic point of view, Australia has a stable financial condition, and the growth rate is higher than the other OCED nations. Thus, there is a low risk for a retail business to invest in Australia (Market Research Reports, 2020; Lucintel, 2012). In the past few decades, consumers have become more aware, and thus their needs are increasing. With an improved lifestyle, the high social class people of Australia are demanding more branded products with good packaging. Therefore, these changes have impacted the customer services provided by the retail industry. The use of digital technology in the retail sector has increased competition. Online retail has experienced significant growth in the past few years. In this regard, the number of visits at the supermarket and grocery stores has reduced as the customers prefer purchasing online products at their convenience. For the long term profitability of the retail industry, it is vital to operate environmentally. This has required the supermarkets and grocery stores to implement environmental-friendly packaging of products and thus contributing the waste management in Australia. Lastly, the legal actor also impacts business operations. For instance, any change in the existing laws can affect the company’s actions; thus, it can cost the company in case of development of a new system for improving customers services (Frue, 2019; David, n.d.).

Analysing the Positive and Negative Impacts That External Environment (Macro) Of Australia Has On the Retail Trade Industry (Supermarket and Grocery Stores)

During the period 2001-2011, Australia has experienced positive economic growth. Despite the recession, the Australian economy has enormous scope for developing different industries, for instance, manufacturing, retail trade, mining, and finance, among others. The political environment of the country is stable, which makes it the most suitable destination for investment. However, despite the fact, the political factor impacts the performance of supermarket and grocery stores in Australia. For instance, the competition policy of the federal government restricts Woolworths to participate in the retail competition. Thus, there is market dominance and fewer struggles in the industry, and low independent stores' performance. Despite the stable economic condition, Australia faces challenges. For instance, the decline in the market condition of Australia and New Zealand impacts the performance of Woolworths supermarkets. Besides, the social factor also affects the performance of the retail industry in Australia. With the lifestyle change, the consumer need is growing. Thus, supermarkets and grocery stores need to implement societal initiatives to have a significant impact on customers. The technological factor has enabled improving the quality of services provided by the retail industry. For instance, Woolworths uses green refrigeration technology to offer quality products to customers (David, n.d; Fern Fort University, n.d.). Apart from these, the environmental factor also poses a threat to the retail industry. This is because of the issues related to waste reduction, materials used in packaging, and plastic bags in the supermarkets. Moreover, the law has both a positive and negative impact on the retail industry. The positive side is that it helps in controlling the price by minimizing the illegal trafficking of products. On the other hand, it has a negative impact as it can financially cost the retailers to adhere to labour law clauses and thus unable to offer products to customers at a low price (Fern Fort University, n.d.).

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Conclusions

From the above discussion, it can be highlighted that globalization has a significant impact on the external business environment. Thus, it can be stated that globalization is a vital factor that influences an organization's growth in the long run. In the globalized world, global citizens play the most critical role in understanding international events and encouraging improvement of knowledge and skills to meet the needs. In this report, the external environment of Australia has been analyzed considering the retail trade industry. From the political and economic point of view, Australia is the right place for conducting retail business. Globalization has further increased competition in the retail sector that can be faced by implementing modern technology. The example of Woolworth supermarket has been considered in the report. Woolworth has analyzed the external business environment that has to enable gaining a competitive advantage in the marketplace.

Recommendations

Based on the external environment analysis, it is evident that in Australia, the retail industry customers have started to prefer online shopping with the advancement of digital technology. In this regard, for the retail industry's success, it becomes vital for the industry to keep track of the needs of the younger customers so that they can be attracted to continue their purchase. The economic condition of Australia is stable, and globalization has resulted in the entry of many new companies in the place. This has increased competition in the marketplace. Therefore, for the retail industry's success, it is vital to study the strong market players. This will enable the supermarket and grocery stores to gain a competitive advantage in the marketplace (Outcomes Business Group, 2020).

References

  • ILO.ORG, 2004. Globalization and its impact. [Online] Available at: https://www.ilo.org/public/english/wcsdg/docs/rep2.pdf [Accessed 30 December 2020].
  • Lagos, T.G, 2001. Global citizenship. [Online] Available at: https://depts.washington.edu/gcp/pdf/globalcitizenship.pdf [Accessed 30 December 2020].
  • IQualify, n.d. How are PESTLE factors related to globalization? [Online] Available at: https://www.iqualifyuk.com/how-are-pestel-factors-related-to-globalisation/ [Accessed 30 December 2020].
  • Market Research Reports, 2020. Australia PESTLE Analysis & Macroeconomic Trends Market Research Report. [Online] Available at: https://www.marketresearchreports.com/countries/australia [Accessed 30 December 2020].
  • Lucintel, 2012, PESTLE Analysis of Australia. [Online] Available at: https://www.lucintel.com/pestle-of-australia-2012.aspx [Accessed 30 December 2020].
  • David, J., n.d. PESTEL Analysis of Australia. [Online] Available at: https://howandwhat.net/pestel-analysis-australia/ [Accessed 30 December 2020].
  • Frue, K., 2019. PEST Analysis of Australia: A Brief Look into Politics, Economy, Society and Technology. [Online] Available at: https://pestleanalysis.com/pest-analysis-of-australia/ [Accessed 30 December 2020].
  • Fern Fort University, n.d. Woolworths Limited PESTEL & Environment Analysis. [Online] Available at: http://fernfortuniversity.com/term-papers/pestel/nyse4/4816-woolworths-limited.php [Accessed 30 December 2020].
  • Outcomes Business Group, 2020. External environment. [Online] Available at: https://outcomes.business/2017/09/18/external-environment/ [Accessed 31 December 2020].
  • Kraja, Y.B., & Osmani, E., 2015. Importance Of External And Internal Environment In Creation Of Competitive Advantage To Smes. European Scientific Journal, Vol.11, No.13, pp. 1857 – 7881.
  • Singapore Institute of Management, 2013. Importance of the external environment. [Online] Available at: https://m360.sim.edu.sg/article/pages/Importance-of-the-External-Environment.aspx#:~:text=THE%20external%20environment%20plays%20a,in%20which%20their%20businesses%20operate. [Accessed 31 December 2020].
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