Woolworth Going to Enter and Develop in China Market Essay Example

WOOLWORTH GOING TO ENTER AND DEVELOP IN CHINA MARKET
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Woolworth Going to Enter and Develop in China Market

Woolworth Going to Enter and Develop in China Market

Australian based company Woolworths is aiming to expand their market globally to countries like China and is looking at using the following business strategies to enable expansion (Johnson, Scholes and Whittington, 2008). The objectives that are to be used by Woolworth will aid the company set up a chain of shops in a foreign country like China. China, as a country, attracts foreign companies, like Woolworths, to come up with shops by giving them both the advantage of cost saving potential and also a huge market with a constant rise in purchasing power. Therefore Woolworths aims at establishing structures that will take care of both the local market as well as the international market (Smith, 2014). Objectives for entry into a foreign market is to either tap into their growth potentials or their cost saving potentials. Woolworths as a company aims at utilizing the growth aspects of a foreign market rather than the cost reduction of the market (Zahra, 2005). Entering into a global market will help Woolworths strengthen their market potentials therefore giving them a competitive advantage in terms of global opportunities.

First and foremost, Woolworths’ objective seeks to internationalize their market to China in order to reduce risks (Zahra, 2005). The company is aiming at decentralizing their manufacturing by launching them in multiple locations for example China which will help them secure dependable operations. In addition, Woolworths is entering into China in order to utilize the insatiable demand for Australian grocery products (Smith, 2014). The rising demand for healthy and high quality products manufactured oversees especially for China’s middle class level of people has opened up market for Woolworths’ food and dairy products (Johnson, Scholes and Whittington, 2008). Also, another major business objective of Woolworths is to increase their revenue as well as their profits. Expanding its markets to China, the retail store will be able to expand the full potential of its business since China is considered a highly competitive country.

Another business objective that Woolworths has in entering the China market is its motives for efficiency (Smith, 2014). Efficiency benefits are as a result of economies of scale and risk diversification. Woolworths’ efficiency seeking can be considered as gaining from culture of China, economic system, factor endowment to name a few (Knox, 2015). Woolworth’s will benefit from differences of factor endowments placed in different countries. For instance, value-adding activities such as technological, capita, resources, informational intensive etc. would be placed in Australia. Economies of scale are a factor that the company’s business objectives focus on. In general, Woolworths, as it originates from a saturated and dense market look to widen their consumer base in order to assist them in realizing economies of scale. In addition, another objective and goal of Woolworths entering the China market is that the company will be able to reduce the amount of taxes they pay to the government (Knox, 2015). Entering the China market will increase the number of market in which they operate in thus lowering the tax burden.

In addition, another business objective of Woolworths in China is for growth and expansion. Overseas operations especially in china are very attractive to Woolworths since it will be a chance for it to reduce budget and increase its profits (Dollinger, 2003). China has relatively deflated currencies and this will assist the retail store cut on cost. In addition, in China, it will be very cheap for Woolworths to employ workforce. Furthermore, China’s enormous market allows and attracts companies such as Woolworths by providing a ready market therefore encouraging them to go global. As one of Woolworths’ business strategy, it will encourage the company decrease its dependence on its local market therefore expanding into a larger and much profitable market (Smith, 2014). Therefore Woolworths aims at expanding its market to China so as to look for new opportunities as well as expand their products with which they provide to their customers. Moreover, Woolworths’ objective into its entry into China’s market comes with the need for a competitive advantage (Dollinger, 2003). Thus, the company uses leverage as a strategy by going into China establishing itself as part of China’s vast market.

A further fundamental business objective of Woolworths in China is that the company is continuously faced with foreign competition in their domestic market. For Woolworths to keep up with such competitors who increasingly pursue aggressive policies in gaining market share, it aims to gain entry into China (Zahra, 2005). This will offer them an opportunity to effectively react to unforeseen foreign competition. Likewise, Woolworths’ objectives in expanding into China comes with the change of the global economic climate. The company has used this as a business strategy in order to internationalize their products into China since they are no longer faced with stronger market entry barriers. Another business objective of Woolworth is to seek target markets. This motive focuses largely on demand aspects (Zahra, 2005). Woolworths acknowledges the importance of accessing China’s market and thus believes its presence in China will be essential for its operation in the China market. Thus Woolworths is looking at conducting investments in foreign countries like China to encourage the exploitation of new markets. Reasons for this may be inclusive of the large size of the Chinese market as well as an anticipated growth of the same which indicates that the company has the ability to gain profits from the market (Dollinger, 2003).

Finally, Woolworths also is looking at using networking as a business strategy to gain entry to the China market. This strategy will help Woolworths identify what they are really participating in for example alliances, cooperatives as well as ventures (Johnson, Scholes and Whittington, 2008). This kind of networking is very essential to Woolworths and thus it will help the company nurse and develop their existent networks and progress it into the China market. This will also increase and improve its relationship with its target market in China in the basis of relational capital which embodies trustworthy as well as goodwill. Investing in the above will help the company come up with a competitive advantage within the China market (Zahra, 2005). This will be beneficial when it comes to their business relationships which in turn can bring about sharing of knowledge, innovation and creation of value within the company.

References

Dollinger, M. (2003). Entrepreneurship : strategies and resources. Upper Saddle River, N.J: Prentice Hall.

Johnson, G., Scholes, K. & Whittington, R. (2008). Exploring corporate strategy. Harlow: Financial Times Prentice Hall.

Knox, M. (2015). Supermarket monsters : the price of Coles and Woolworths’ dominance. Collingwood Scoresby Melbourne, Vic: Schwartz Publishing Pty, Limited Penguin Group Australia distributorBlack Inc. Books.

Michael Smith, (2014). Woolworths’ baby steps into China, Agribusiness General News. Retrieved from
http://www.farmonline.com.au/news/agriculture/agribusiness/general-news/woolworths-baby-steps-into-china/2718971.aspx

Zahra, Shaker A. (2005). A theory of international new ventures: a decade of research. Journal of International Business Studies, vol. 36, pp. 20–28.