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BIZ202: The Business Environment

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BIZ202: The Business Environment

1 Download11 Pages / 2,662 Words

Course Code: BIZ202
University: Laureate International Universities

MyAssignmentHelp.com is not sponsored or endorsed by this college or university

Country: United States

a) Examine the influence of the external environment on the organisation.b) Identify an apply appropriate frameworks and tools to the problems and challenges faced by organisations.c) Research industry specific factors to the organisation decision-making process.d) Apply a relevant framework to evaluate the influences of political, legal, economical, social, cultural and technological facotrs on an organisation.e) Create a business case for potential growth opportunities based on analysis of external environmental factors.

One reason why Woolworths had launched the Masters sub-brand so enigmatically was that the US native Lowe’s market strength had been with the company. The expansionist policy of the US government enticed Lowe’s to explore the retail market of South East Asia and conquer major Asian and Oceania markets earlier than the European giant Coles. This is why, as Biddle (2016), puts it, the US organisation unhesitatingly entered in to a strategic partnership with Woolworths to enter in to the hardware sector. However, the market differences and the customer trends between the US and Australian business domain became too dominant and evident. The US Company focused on beating the existing market players with their inventory strength and began to stock up their showrooms with a long range of products which affected the consumer choices. The consumers became confused regarding which market the actually operated in to and gradually abandoned the brand. Besides, as per the opinion of Addis (2016), the company also planned to reflect the Australian government’s policy of opening female friendly retail stores. As an impact, the sales of the company fell at a havoc rate and the bevy of the traders who felt that these women only stores would not be able to do successful business, alienated Masters. The customers of Australia were also unmoved by the business policy of the Australian government and remained loyal to the Bunnings company which enjoyed monopoly in this industrial sector where Masters were operating.
Political influence that accounted to the failure of the Masters campaign of Woolworths were evident. As informed by Swan (2016), the US partnership of over 30% in the native market of Australia incurred higher corporate tax rate and other overseas taxes which they did not have to incur if Masters had been projected as a Multinational corporation or the previous board of Directors who included Government delegates from the Reserve Bank of Australia. In fact, Annabel (2015), opines that the market acquisition rate of Masters had always been low and the heavy burden of taxes made the revenue and investment differences marginal. Nevertheless, the US connection slackened when Lowe’s had to pay additional tax rate as a foreign franchise.  
Legal issue between Woolworths and Lowe’s
The supermarkets Chain Woolworths faced immense legal issues regarding the failed business case of Masters Home Improvement, a joint venture between Lowe’s company of USA and the Woolworths of Australia. As per the opinion of Annabel & Scrymgeour (2018), the legal dispute that Masters faced was regarding the decision from the end of Lowe’s to appoint one liquidator to the cause of the failed business of the hardware chain of Masters. The two companies had however decided to shut down the business of the failing business of Masters Home improvement brand. Nevertheless, as opined by Annabel & Scrymgeour (2018), Lowe’s had raised concerns in the court of Australia regarding some ambiguity in the business shares of Hydrox Holdings, the enterprise under which the Masters brand was founded. The company also alleged that a certain proportion of the shares came under the range of disputed property holdings. In this context, Lowe’s favoured the intervention of the court and the appointment of an independent liquidator who would look after the wind up process and ensure that the wind up process was equitable for both the corporations. However as revealed, Lowe’s had a lot of pending equity and tax payments left, since they were the foreign franchise. Besides their claim was Hydrox Holdings was typical Australian company and so the market equity was not in equal proportion (Grimmer, Miles & Grimmer, 2016). They further claimed that the risk proportion was also not same for Woolworths and Lowe’s. The latter as a foreign franchise had undertaken a larger market risk. This is why they demanded a neutral liquidation process. However the Australian court ordered both the organisations to enter in to an arbitration and thereby resolve the conflicts mutually. Justice Foster who looked after the case, ordered that Lowe’s paid their share of the equities. In fact, Woolworths was found liable to receive some pending payments from Lowe’s. Since there have been no intervention of any third party creditor in this case and there have not been any substantial public interest involved in the case of foreign franchising, the judge favoured the process of arbitration (Ciravegna & Brenes, 2016). Masters holders Lowe’s had to agree to this verdict since the joint venture Hydrox Holdings had no impending market issues at the moment that were insolvent of arbitration.
At next Lowe’s brought charges of shareholder oppression against Woolworths also in the Masters case. Their primary charges against the parent company of Masters were:

Breach of major contracts, more than once
Wrongful corporate conduct
Wrongful purporting of the process of termination in order to drive personal favour
Unjustified termination of the business contract

However, Liu, Margaritis & Qiao (2016), opines that Woolworths cited a loss of $1 billion AUD on the day prior to the day of announcement of the termination of this corporate contract.  
Another major allegation before the court was that Woolworths had engaged unethical clearance of the shares and that is why they conducted the process in three steps. As per the information provided by Tehseen et al. (2015), The Australian contract Property Law was applicable in this context and the court rightfully appointed a mediator in clearing the assets of Masters’ 80 development sites only. The court declared the rest of the dealings legal. Woolworths had to compensate AUD $15 million to forsake the cause of Lowe’s.
Social Factors affecting the growth of Hydrox Holdings
The Masters brand was formed by Woolworths as an official strategy to meet the day to day needs of the average Australian. The company had also not considered the undertaking of an internal survey in order to understand the demographic trends before entering in to the manufacturing sector from core sales. The company had imagined that the magic touch of Woolworths as a Supermarket chain would work this time also on the Australian consumers. Hence the company declared with conviction the opening of new 150 home improvement outlets. In fact Seifhashemi et al. (2018), opines that on top of everything, the company had done an agreement with foreign brand Lowe’s with 33.3% all round partnership. However, this launch of the Masters brand had a social perspective also. The Woolworths Company had aimed at launching a direct attack on the Bunnings, which was a franchise of the biggest competitor of Woolworths in Australia, which is Westfarmers. The partnership with Lowe’s was actually a publicity stunt to beat Westfarmers in the same fashion as they occupied the market of Australia. However, Azmat & Fujimoto (2016), opines that Lowes who were in the hunt of a major investment campaign could not have framed a safer business partner than Woolworths in Australia.  What happened after that, is known to everyone. However the major question here is that, what led the corporation to launch such a big business campaign which involved such a large percentage of market risk? Researchers have explained the abrupt brand launch of Masters from the perspective of the Halo Effect (Audzeyeva & Hudson, 2016). This theory is based on a typical social myth that makes person believe that since somebody (Woolworths, and for so Lowe’s also, since they believed in Woolworth’s business plan) is exemplarily good at a particular case, the same entity would be good at anything and everything else also. The step of rapid launch of the brand can be termed as confirmation bias. However, the company failed to judge the behavioural psychology of the customers. It should have been apprehended that the customer perception could not have changed overnight (m.masters.com.au, 2018). The Bunnings Company that had such a mighty customer holdings proved once again when the stock clearance rate hit a meagre 21% in the 1500 stores of Masters opened countrywide in Australia.
Technological Factors that impeded the business growth of Masters
The business strategy of Masters in Australia had to be altered due to the interruptions in internet connectivity that cost the company dearly. The dealers appointed in the remote areas of the country could not communicate the sales reports with the upper management continuously due to the interrupted internet connections. As an impact, Humayun (2016), opines that the company estimated that they incurred a loss of 12% added investment amount equivalent by opening stores in such areas (Sharma, Garg & Sharma, 2016). Again, it was evident that Wi-Fi usage in the Australian community was not popular and hence the internet sharing culture for business operations would not have clicked in the Australian community. Nevertheless, as per the opinion of Riemer et al. (2014), the lack of online portal connectivity did not allow the company to automate the customer service in many outlets and in turn they had to appoint workers for many outlets.  Moreover, the technical and It skills being low among the low wage workers, the company also suffered. They could not risk the appointment of permanent workers with IT and computer application knowledge as they had to constantly cut short the operational cost with an eye on the declining sales rate.  
Environmental factors leading to the loss
The Hydrox Holdings had already lost AUD $200 million before they were compelled to shut down their ill-faceted home improvement business chain Masters. The official declaration stated that the business chain could never resonate with the actual customers’ demands. Customer satisfaction ratings from the average Australians shows that in terms of home décor and improvement Masters was the fourth preference of the Australian customers (Azmat & Fujimoto, 2016). The first brand had been Home Hardware, Bunnings occupying the second spot and Masters with only 1.5% of the customers (m.masters.com.au, 2018). Surveys reveal that Masters was never in the list of likings of the customers and lingered in the fifth spot in terms of brand fame. This was the position of the company for 2011, 2012, 2013, and 2014 and up to the middle of 2015. By that time the company had engaged in aggressive market battle and it kept on firmly believing that the brand fame of Woolworths and the strong brand equity of Lowe’s would work in their favour and the Australian civilians would respond to their appeal in no time (Humayun, 2016). However, actual statistics show that for the major part of the years 2014 and 2015, 216 Masters Stores all over Sydney, Melbourne and many other reputed places of Australia had been kept closed down for the lack of customers. Moreover when Masters Management saw that the sales percentage of the Masters Business chain had been failing so miserably, they did not take any extra initiative for ensuring customer retention or raising the level of brand equity. According to Audzeyeva & Hudson (2016), the investment behind brand endorsement of Masters had been 30% lesser than what other major hardware companies like Home Hardware undertook. The company was rather strife torn at that time. On one hand, they were worried about the failing partnership with Lowe’s in the Masters franchise and on the other hand the company was facing immense issues in competing with Coles supermarkets. For the last 25 business fiscal quarters, the sales proportion of Coles had been higher than Woolworths by at least 8 to 10% (Seifhashemi et al. 2018). The beliefs and the value streams of the Australian diverse populations is also divergent and as an impact such factors have a deep impact on the nation’s choices regarding home décor and home improvement products. Initially the Masters management assumed that concentrating on the market occupation and emerging as a big brand would be the only success mantra for Masters. Till around the middle of 2015, the company realised that business strategy of launching Masters is actually a big flop and this has not only incurred financial losses of about $3 billion AUD which Woolworths and Lowe’s s are liable to divide among themselves (m.masters.com.au, 2018). On the contrary, Lowe’s had not been able to recover the money they have invested behind the infrastructure development of the 80 sites of Masters. Again, this failed business venture had serious impact on the core business of Woolworths that s Supermarket retail. Statistics show that from 2014 to 2016, Woolworths were supposed to open around 142 new outlets and shared malls (m.masters.com.au, 2018). However only 26 of them had opened in that time span none of the openings were publicly launched. This showed that the management of Woolworths was also nurturing an immense fear that the failed business case of Masters could also have its impact on the brand equity of Woolworths which had fallen by 0.28 units for miscellaneous reasons (Ciravegna & Brenes, 2016).
Australia being a very primitive country, the company needed to consider the cultural, socio-political as well as the economic factors that would have driven the consumer choices also. The population of Australia is much diverse as well as complex and as an outcome the country is divided in to various communities (Annabel, 2015). The sales of Masters Products in the country had depreciated by 67% since 2013 in Northern Australia and the regions adjacent o Great Barrier Reef and by almost 45% in Southern Australia.
Reference List
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Addis, J. (2016). Retail sector wrap: One opportunity and plenty of worry. Equity, 30(3), 6.
Annabel, B. (2015). Retail material: Assuming the status quo will remain is risky business. AJP: The Australian Journal of Pharmacy, 96(1142), 60.
Annabel, B., & Scrymgeour, M. (2018). Business: Retail matters: Getting to home base. AJP: The Australian Journal of Pharmacy, 99(1174), 54.
Audzeyeva, A., & Hudson, R. (2016). How to get the most from a business intelligence application during the post implementation phase? Deep structure transformation at a UK retail bank. European Journal of Information Systems, 25(1), 29-46.
Azmat, F., & Fujimoto, Y. (2016). Family embeddedness and entrepreneurship experience: A study of Indian migrant women entrepreneurs in Australia. Entrepreneurship & Regional Development, 28(9-10), 630-656.
Biddle, I. (2016). The Wesfarmers/Woolworths duopoly war: The Bunnings vs. Masters battle. Busidate, 24(3), 3.
Biddle, I. (2016). The Wesfarmers/Woolworths duopoly war: The Bunnings vs. Masters battle. Busidate, 24(3), 3.
Ciravegna, L., & Brenes, E. R. (2016). Learning to become a high reliability organization in the food retail business. Journal of Business Research, 69(10), 4499-4506.
Grimmer, L., Miles, M. P., & Grimmer, M. (2016). The performance advantage of business planning for small and social retail enterprises in an economically disadvantaged region. European Journal of International Management, 10(4), 403-421.
Humayun, S. H. (2016). Merchandising operation of Woolworths Global Sourcing.
Liu, M. H., Margaritis, D., & Qiao, Z. (2016). The global financial crisis and retail interest rate pass-through in Australia. Review of Pacific Basin Financial Markets and Policies, 19(04), 1650026.
m.masters.com.au, (2018). About the Company. Retrieved on 19 August 2018. Retrieved from https://m.masters.com.au/
Riemer, K., Gal, U., Brunk, J., Gilchriest, B., Ord, R., & Tong, J. A. (2014). Australian Digital Commerce: Now is the time for Australian Retailers to Address the Customer Engagement Gap. University of Sydney, Business School and Capgemini.
Roggema, R. (2018). Design with voids: how inverted urbanism can increase urban resilience. Architectural Science Review, 1-9. Roggema, R. (2018). Design with voids: how inverted urbanism can increase urban resilience. Architectural Science Review, 1-9.
Seifhashemi, M., Capra, B. R., Milller, W., & Bell, J. (2018). The potential for cool roofs to improve the energy efficiency of single storey warehouse-type retail buildings in Australia: A simulation case study. Energy and Buildings, 158, 1393-1403.
Swan, P. L. (2016). Mandated divorce: company boards, incentives and performance.
Tehseen, S., Sajilan, S., Ramayah, T., & Gadar, K. (2015). An Intra-Cultural Study of Entrepreneurial Competencies and SMEs Business Success in Whole Sale and Retail Industries of Malaysia:-A Conceptual Model. Review of Integrative Business and Economics Research, 4(3), 33.

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