Regulatory framework affecting the Woolworths Limited

Discuss about the Legal Aspects of International Business and Enterprise.

Woolworth Limited, founded in 1994 is one of the leading companies in Australia. It was founded by the five members including Cecil Scott Waine, Percy Christmas, Ernest Williams, Stanley Chatterton and George Creed. The company primarily operates in the retailing industry in New Zealand and Australia with the aim to deliver best shopping experience to its customers based on quality and value services. Headquarter of the company is located in Bella Vista, Australia. The company serves it products and services in Australia, India and New Zealand globally.

The company offers wide range of products and services at lower prices to its customers than its competitors (Woolworths, 2015). The company is specialized to provide diversified consumer wholesale products. Woolworths Limited is governed under the chairmanship of Gordon Cairns and Brad Banducci, who is the CEO of the company. There are total 2,02,000 workforce operating in the company among whom 1,97,000 are Australian based employees while other 5000 employees are working in other region (Macroaxis, 2016). The company mainly operates in different markets including supermarkets, department stores, hotels and liquor retailing. The company has stable financial position along with the increase in the country’s economic growth (Woolworths Limited, 2016). The goods and services offered by the company create a favorable situation for the consumers and stakeholders for the growth and increased standard of living which greatly impacts the company’s success. However, growth and success of the company also leads to the competitive advantage over its competitors in the retailing industry in Australia (Productivity Commission , 2008).

Woolworth Limited is evolving and innovating its products and services in order to meet the challenges in the market through finding a new ways and methods to delight their customers. The company operates within the regulatory framework implemented by the country. Retailing industry never operates in a similar manner as, nowadays most of the customers search for greater value and choices than ever before. Every week the company serves more than 18 million customers. Thus, the company requires the vendor to comply with all the legal obligations and responsibility in all reverence. The code of conduct implemented by the company, enhance its reputation through achieving the legal, ethical and moral standards (Woolworths, 2016). However, there is  significant number of regulatory frameworks, which affects the Woolworth Limited in an effective manner. This framework varied from company to company within the retailing industry. The regulatory framework is complied in the various areas including safety health and environment, trade practices, responsible duty of alcohol, food safety and privacy. The company has to supply its products and services according to these conditions in order to meet the standards set by the industry (Woolworths, 2016). The Woolworths Limited standards are not proposed to function as an alternate source for the vendor to make certainty with the legal obligations and regulatory safety of the products.  Some of the regulatory framework affecting  the operations of Woolworth Limited leads to affect its financial performance and function in the longer term. In addition, the retailing industry in Australia indicates a great diversity through region, format of retail industry, nature of products and services produced and sold and the level of competition within the market and the size of the business. In the recent years, the company has met many challenges related to the rules and regulations implemented by the industry.

How regulatory framework affects the Woolworth Limited

The current performance, efficiency and structure of the company operating in the retail sector became a barrier to its economic contribution in Australia. According to the government rules, Australian retailers are forced to share their products and services with the overseas counterparts. The Australian government authorizes the industry to establish the consumer safety standards to guard health and life of the people. However, there are some taxes which affect the company in all the perspectives. The Government’s implementation of taxes and duties is creating an effective advantage and disadvantage to the company, depending on the condition in which, the company operates.

Consumer Law – The consumer law of Australia ensures fair rules and regulations on the contract terms, which guarantee to provide the consumer rights against the product safety, unsolicited agreements and penalties. The country’s national statutory framework has a great impact on the economy as it encourages the retailers to sell those products which are not harmful to the environment as well as to the consumer’s health. These statutory standards are imposed by the ACCC i.e. Australian Competition and Consumer commission. The consumer laws imposed by the country affect Woolworths Limited because the company is committed to service its customers in the best manner possible (Competition Policy Review, 2014). However, it manages to operate in such a manner that it protects the welfare of its consumers and other stakeholders. The company has implemented such policies, which work according to these Government rules and standards (Australian Government, 2016).  If these laws are not adhering  by the company properly, it will greatly hamper  its performance and success. In the year 2016, Woolworth Limited has been ordered to pay a fine of $ 3.057 million as it has violated the standards related to the safety and health issues. The company has failed to maintain the standards imposed by the Government. Therefore, any misconduct with the standard issues lead to poor performance as well as reduces the level of consumer’s trust (Groom & Lavers, 2016).

Goods and Services tax – In the year 2000, Australian government has introduced Goods and Services Tax (GST). This tax potentially impacts on the functions performed by the company and thereby contributes to revenue and expenditure generated by Woolworth Limited. The current Goods and Services Tax rates in the country is 10%. GST indirectly impacts the consumer products and retail sector. The implementation of GST is beneficial for the retail industry as it strengthen the policies of selling the consumer products and services. High rates of GST not only ensures that the company performs in a positive manner because it reduces the payments of taxes imposed in different areas related to real estate and services but, it also reduces the issues related to the value chain system through uniform tax rates (CPA Australia, 2015).  

Corporation Tax – The corporation tax effects the company’s investment and development within the industry. This tax is imposed on the net profit generated by the company and hence, reduces the investment. A high corporation tax reduces the company’s revenues and also enables the local retailers to compete with the company, as the implication of this tax reduces the investment opportunity in the industry. The current corporation tax in Australia is 30%, which shows that the company has to pay 30% on its marginal income (Djankov et al., 2010).   

Food Safety Regulation – The Australian government ensures to provide those goods and services which meet all the principles and safety objectives according to the consumer needs. The food safety regulation standards are mostly applied on the retailing industry who sells the consumer products and services (Woolworths, 2016). The compliance to all the food safety regulation leads the company to enhance its productivity and trust among the consumers (Food Standards, 2001). Woolworth Limited is dealing in the retail industry where it operates in the departmental stores and supermarkets. Thus, it also sells food products to its customers which foster the company to measure the quality of the products they are offering. Food Standards Australia New Zealand (FSANZ) establishes the code of practice and food standards within the industry to address the issues related to food safety regulation (Wowlink, 2016).

However, strict food safety regulation requires the company to sell those products and services which are environment friendly and are not hazardous to the consumers’ health.  Moreover, non fulfillment of this regulation forces the company to pay penalty for offering the unsafe products to its customers. Recently, the company has paid around $ 3 million for providing damaged consumer goods. This had greatly slowed  down the company’s revenue and performance (Han, 2016).

Woolworth Limited is one of the leading companies in the retail industry. It improves and enhances its products and services through entering into new contracts or agreements, which later has a great impact on its product and services. Woolworth Limited is serving its products and services in the key areas including Australia, New Zealand and India. Hence, the agreement between any of these countries has a great impact on its products and services.

In the year 1983, Australia and New Zealand came into an agreement popularly known as ANZCERTA or CER. It is a free trade agreement between the countries which brings economic relations closer among them. ANZCERTA stands for Australia – New Zealand Closer Economic Relations Trade Agreement. This agreement builds the foundation in the development of countries’ trade and economic association. It helps in strengthening the trading relationship between the countries through common valuable growth and extension of free trade. With the key respect of the establishment of the agreement, it has a direct impact on the product and services of Woolworths Limited. The transaction and compliance cost of the product offered by the company has reduces which in turn results into country’s significant progress in many key area of the business. The elimination of tariffs on the products and services reduces the quantitative restriction on the trade and consumption of products. Therefore, it also results into the minimization of market distortions and thereby satisfies needs and wants of large number of consumers. The elimination of trade barriers also results into a dramatic change in the products of Woolworth Limited. The technology used in the production of products has enhanced because the company has to invest less amount in the transportation cost and duties involved while trading the products. Therefore, it improves the quality of the products offered by the company and thus, enables the company to make profit (Department of Foreign Affairs and Trade, 2016).  

The bilateral Free Trade Agreement (FTA) between India and New Zealand has expanded economic cooperation between the countries. The agreement is also known as (CECA) i.e. Comprehensive Economic Cooperation Agreement. This agreement has an immense impact on the retailing of products and services of Woolworths Limited. The demand for products in both the countries increases as cost of the product is comparatively lower due to free trade. Therefore, quantity produced and supplied among the countries increases which greatly influence the investment opportunity in the products sold by the company (Bano & Paswan, 2010).

In the year 2009, the company has entered into the hardware sector with the investment of $ 24 billion. Through entering into this contract, the company has expanded local independent hardware sector by the way of acquiring Danks.  Danks Holdings Limited is one of the leading retailing company dealing in the hardware and building supplies products. Woolworth Limited has designed a multi format strategy to improve daily needs of the consumers. This contract has impacted on the consumer goods because it has grown the company’s opportunity to distribute and deliver the products with greater efficiency to the independent retailers (woolworthslimited, 2009). The growth and expansion in the home improvement and hardware sector enhances the company’s existing retailing capabilities, skills and technology. Despite of the current economic situation, the company has invested into the business which provides a greater competition in the retailing market. But, entering into a new contract affects the other products and services provided by the company. As the amount invested into the new project can be invested into the existing products and services, which affects the profitability of the company. The contract affects the overall business as huge amount of investment has been done in the new sector. It also affects the financial position of the company including the new strategies formed by the business. The company is now dealing in the diversified products and services in the different retailing sector within the market. This expansion of the company benefits the consumers with the different choices offered by the company. The resource allocation of producing other consumer goods and services has been reduced through funding this contract. Hence, entering into a  new sector expands and grows the company’s productivity but also greatly hampers the existing products and services offered by the company.

Conclusion

Retailing industry in Australia is affected by extensive range of varied factors, which greatly influences the capacity and willingness of the consumers to spend. Woolworth Limited is one of the recognized companies in this industry. However, the performance and productivity is affected by some regulatory framework implied by the Government in order to meet the certain standards issued by the regulator of the industry. This regulatory framework ensures that the company sells those products and services which do not hamper the consumer health and safety. Corporation tax, consumer laws, Goods and Services Tax (GST) and food safety regulation are some regulatory frameworks which affects the company’s policies to perform in the market. Woolworth Limited grows and expands its business across the world through entering into new contracts and agreements. These agreements also have a huge impact on the company’s existing products and services. It also ensures to enhance its shareholders value by providing access to the new market within the industry.

References

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