ARTICLE: PEST Analysis of Woolworths

PEST analysis is a measurement tool for evaluating markets for business or its products at a given time frame. PEST is an acronym for Political, Economic, Social, and Technological. They are important factors for business and have to be analyzed for better business decisions. Here, we would be talking about all these factors considered by Woolworths Limited and its subsidiaries. But before reaching to that, let us see the importance of doing PEST analysis for a company.

WHY IS PEST ANALYSIS IMPORTANT?

Understanding the changes and most importantly those that are about to knock the doors of the industry, plays a vital role in the success of a business. This knowledge can prove effective in influencing market and relationships.

POLITICAL FACTORS

The company with the extensive retail interest in hundreds of products throughout New Zealand and Australia has the organizational performance-based political background. It is so because the political factors influence the working of the retail companies as the other entities are affected by other factors. The conditions are responsible for modifying the business environment and shaping it as per requirements by offering growth opportunities.

Political Stability is required for proper functioning and growth of a business as the foreign clients show interest in carrying out business activities and trade in a stable country. The market in which Woolworths has been carrying out its business is stable, and that’s the reason why the risk of business loss is not significant for it.

ECONOMIC FACTORS

If an economy is suffering from recession and high-value unemployment, then it is more likely to experience lower sales, and financial decline, thus declining the performance of the business entity. Woolworths also experienced this due to the global financial crisis that turned up after closing down its retail stores in the UK. It led to the unemployment of more than 30k people and drastically affected the overall sales of the company.

But the organization managed to perform better in other markets, for example, Australia retail industry which acted as a backbone for the business of the company.

SOCIAL FACTORS

Social Factors of a company include the customers, and these are the source of revenue for every business. The basic rule of a business is that the customer has to be satisfied and all its needs are to be identified and fulfilled. The next step is the development of that specific plan as per the needs and the demands of the target market. The company for the sustained profitability has introduced means to fulfil the customer requirements.

Woolworths Limited has taken the step forward by identifying the occurred changes in the social context and began selling different items at the lowest prices. The next step it has taken is considering the social trends and launching a loyalty program. This program has helped the organization earn 900,000 members.

TECHNOLOGICAL FACTORS

For the efficient management of the organization use RFID as a part of the retail stores. It also helps in keeping the stock available for the store visitors. Woolworths has incorporated integrated SOA (Service Oriented Architecture) to support the technology effectively. The upcoming technologies help the company in gaining a strong position in the market.

Self-service checkout is another innovation adopted by retail stores and Woolworths Limited as well. But for a wide number of customers have a negative response.

These were the elements of the PEST analysis. The framework of the analysis includes PESTEL or PESTLE. These add legal and environmental factors.

LEGAL FACTORS

The basic legal framework of a retail industry includes taxation policies and management of employee and recruitment regulations. For this, the most important aspect is food licensing and its requirements which the retail sector should comply for better performance. Quality of the food items has to be as per the regulations of the particular country. The company has the approval of the concerned government authority and plan accordingly.

ENVIRONMENTAL FACTORS

It includes environment friendly business practices and participating in activities to minimize the harm caused to the environment. In accordance with this, the company has reduced the carbon footprint and wastage of the natural resources like water. Woolworths also actively participate in the recycling activities.

You might be interested in reading SWOT Analysis of Woolworths.