BIZ202 The Business Environment- Macro Environment Report PDF

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BIZ202 The Business Environment: Macro Environment Report

Lecture Name: Ross Gunasekera Assessment Due date: Sunday Assessment Weighting: 40% Word Count: 1500 +/- 10%

Riku Tsunekawa 00311797T

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1.0 Executive Summary In this report, six macro factors were identified and analysed. As a result, we have recognized that politics, economy, society, technology, law and environment are major factors affecting business performance. We also found that changes in the business structure, corporate growth rate, and profitability are environmental factors that affect the company's business. In addition, the report was able to derive solutions that can be applied to overcome the challenges Target is facing in recent years.

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2.0 Table of Contents

1.0 Executive Summary……………………………………………………………………………………………….2

2.0 Table of Contents………………………………………………………………………………………………….3

3.0 Introduction………………………………………………………………………………………………………….5

4.0 Main Discussion…………………………………………………………………………………………………….5

5.0 Identification and analysis of macro environmental factors ………………………………....5

5.1 Political…………………………………………………………….……………………………………………………5

5.2 Economic ……………………………………………………………………………………………...................6

5.3 Society………………………………………………………………………………………………………………….7

5.4 Technological…………………………………………………………………………………………….………….7

5.5 Legal……………………………………………………………………………………………………….…………….8

5.6 Environmental ………………………………………………………………………………………………….…8

6.0 Challenges and solutions………….…………………………………………………………….………......8

6.1 Restructure your organization by reducing costs…………………………………………………8

6.2 Business Strategy Changes………………………………………………………………….……………….9

6.3 Market research and customer feedback analysis………………………………….……………9 3 Riku Tsunekawa

7.0 Conclusions………………………………………………………………………………………..…………….…10

8.0 Appendices………………………………………………………………………………………………………….10

9.0 References…………………………………………………………………………………………..……………...11

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3.0 Introduction The purpose of this report is to analyse how macro-environmental factors negatively impact business performance in a highly competitive market environment and to derive solutions and challenges. In this time, this report selected Target which is one of the largest Australian supermarkets for case study. Currently, the coronavirus is changing the way consumers consume. According to ("Why Australia's Target stores had to close", 2020), 92 out of 167 target stores will be converted to Kmart stores. This was because the sales were biased toward daily necessities with a small profit margin, and the new coronavirus was used to increase personnel expenses and other expenses, resulting in a significant decline in profit margin.

4.0 Main Discussion Kmart confronted each other in an increasingly competitive market and won its sister business. Actually, Kmart is one of competitor for business (Graff, T.2006). Target have steadily increased sales and successfully secured customers through social media and online marketing campaigns. So why have Target customers begun to disappear? Generally, when comparing Target products with Kmart products, Target is slightly more expensive. Consumer confidence is declining in Australia. And one of the reasons is that Kmart's low prices are far more attractive to the majority of shoppers as wages slow. Even so, it is clear that consumers are now reluctant to consume due to the Corona recession.

5.0 Identification and analysis of macro environmental factors As mentioned above, this report found six macro environmental factors that impact Target's business performance.

5.1 Political Since the majority of Target products are from the Chinese market, Target needs to build strong cooperation with China. If there is a dispute between China and Australia, it can adversely affect the target business. In fact, Australia asked the international community for 5 Riku Tsunekawa

its own investigation into the cause of the coronavirus in April 2020, which caused China's disagreement and the relationship between China and Australia deteriorated. In fact, Australia's distrust of China is deeply rooted. In addition, Target's Policy Committee is behind the decision-making for the political activities in which the company participates. This committee oversees the Target Citizens PAC, funded by team members. The Policy Committee decides on the use of corporate funds to support the interests of the company. While not limited to Target, organizations are challenged with environmental issues related to water use, waste reduction, carbon emissions, and store development, and Target spends huge amounts of money to solve those issues. is needed. (Pondent, C. S, 2018). In addition, since it is necessary to carry out within the scope of regulations, it may result in lower profitability.

5.2 Economic Some of the economic factors that have a significant impact on Target's performance include interest rates, savings rates, inflation rates, GDP growth rates, exchange rates and unemployment. Australia's GDP growth rate fell from 1433.9 (2018) to 1392.7 (2019). As you can see from the graph below, further GDP decline is expected in 2020 due to the coronavirus.

The unemployment rate in Australia has risen sharply since 2020. According to ("Why Australia's Target stores had to close", 2020), Target has been lower than Kmart's sales for the past five years. Kmart established itself as a discount retailer when consumer sentiment deteriorated, while Target was a mid-market retailer. In other words, consumers are more likely to choose Kmart, which has a lower price range inevitably in the current situation 6 Riku Tsunekawa

where the economy is being hit by the coronavirus. The unemployment rate has risen due to the effects of the coronavirus, and this fact affect to our daily life. As a result, it creates the potential for negative consumer sentiment.

5.3 Society A key factor affecting Target's business performance is changing customer needs and requirements. In recent years, many of the negative views of consumers are that the rate of increase in wages is small. In addition, as the number of high-income earners is increasing, the number of people seeking high-value products is also increasing, and it is a big fact that there is a big difference in consumption. (Jurczenko & Teiletche, 2019). In other words, for the retailer who establishes an intermediate position, the polarization of consumers is one of the major issues in order to maintain sales performance. Also, Target has recently faced barriers to maintaining stable economic performance due to inadequate relationships with many suppliers.

5.4 Technological The implementation of state-of-the-art technology has enabled Target to expand its business opportunities in the highly competitive middle market environment. Larger retailers like Target are using emerging and new technologies. It was able to improve the quality of promotion and performance management by using SNS and advertising. It also played a major role in increasing profitability in collecting feedback and managing customer relationships. However, the cost of technology has increased over the years. It seems to be a big concern for Target as it has a big impact on the profitability of the business. In recent years Target has increased its investment in technology to manage business functions 7 Riku Tsunekawa

effortlessly and has implemented advanced technology. However, many consumers do not have the knowledge or information to use advanced technology. For example, employees often get called when a consumer checks out a product at a cashier, because he doesn't have knowledge of how to use the self-service checkout feature introduced a few years ago. Although self-service checkout is a strategy to reduce labor costs, it still has the challenges outlined above. As a result, improving customer engagement is difficult.

5.5 Legal Under the influence of the coronavirus, it will be difficult for Target to carry out all operations of the business within the legal framework developed by the government. For example, wage compliance is one of them. Even if company's profit margin goes down, even if your profits go down due to coronavirus, it need to comply with wage regulations that require employees to be paid a certain amount of wages. These government-designed regulations play a key role in significantly affecting Target's performance. (Mark, J., & Nwaiwu, J. N, 2015).

5.6 Environmental In recent years, the Australian Government has begun to promote environmentally friendly business practices. One of Target's key corporate goals is to reduce depletion of natural resources. In fact, since 2020, free plastic bags have been removed from all Target stores. That is, consumers need to bring a bag. Target has large-sized products and heavy products. In other words, there are many products that require bags, so reducing plastic bags is inconvenient for consumers. It can result in customer disassociation. Also, there is a concern that organization’s suppliers are not committed to business guidelines (Wetherly, P., & Otter, D,2011). Some Target suppliers are not playing an effective role in reducing carbon emissions. To establish a good image in the market, Target needs to comply with government-developed regulations.

6.0 Challenges and solutions 6.1 Restructure your organization by reducing costs 8 Riku Tsunekawa

To effectively overcome the crisis that many such Targets are closing their retail outlets, it's important for organizations to rebuild their businesses during this period of economic stagnation by the coronavirus. Target needs to restructure its business to match its business strategy and objectives in order to survive in a crowded midmarket. Another important strategy Target can use to overcome financial barriers is to focus on reducing production costs.

6.2 Business Strategy Changes To overcome the challenges associated with the legal framework developed and implemented by the Australian Government, Target needs to create a business environment in accordance with regulations. When developing a business strategy aimed at growth in a highly competitive mid-market, an organization's strategy development team must take into account the political situation of the country ("Effect of Macro Factor Volatility on the Returns of Financial Sector in Southeast Asian Stock Markets", 2014). Maintaining quality in accordance with product safety regulations is important to Target's ability to engage its customers with their business.

6.3 Market research and customer feedback analysis Customer needs and requirements change frequently. In fact, Target was in a difficult situation even before COVID-19. According to McQuerrey, L. (2017), economic upturns typically result in a rush of new or expanded opportunities for small businesses, but recession cycles can have serious and lasting effects. In addition, unemployment is now increasing, and discretionary spending is decreasing. In other words, customers tend to spend only on certain types of products. Retailers are creating the challenges of maintaining and developing product categories. It is important for Target's sales and marketing teams to focus on performing market analysis to identify changing customer demands. By analysing customer feedback, Target can assess a customer's changing needs and preferences. Target can engage in proper market research by communicating with customers on social media platforms so that product updates can be sent to customers in real time regardless of geographical barriers.

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7.0 Conclusion In this report, Target finds itself in a serious crisis. Monitoring consumer behavior in the context of being affected by the coronavirus is extremely difficult. At retail stores, consumers make money by buying goods. With the period of self-restraint and the establishment of corporate remote systems, people's consumption behaviour has changed dramatically. Due to the coronavirus, people are living today with endless anxiety. Because of this situation, close communication with customers and feedback will help the organization grow. As a result, it may spawn new corporate strategies. Target will be able to grow by analysing and solving the six macroenvironmental factors described in this report.

8.0 Appendices https://www.abc.net.au/news/2020-05-23/what-caused-target-australiasdownfall/12277400

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9.0 References Effect of Macro Factor Volatility on the Returns of Financial Sector in Southeast Asian Stock Markets. (2014). Chinese Business Review, 13(01). doi: 10.17265/1537-1506/2014.01.003

McQuerrey, L. (2017). The Economy's Effects on Small Businesses. Smallbusiness.chron.com., Retrieved from http://smallbusiness.chron.com/economys-effects-small-businesses10269.html

Graff, T. (2006). Unequal Competition Among Chains of Supercenters: Kmart, Target, and Wal-Mart. The Professional Geographer, 58(1), 54-64. doi: 10.1111/j.14679272.2006.00511.x

Jurczenko, E., & Teiletche, J. (2019). Macro Factor Mimicking Portfolios. SSRN Electronic Journal. doi: 10.2139/ssrn.3363598

Mark, J., & Nwaiwu, J. N. (2015). Impact of political environment on business performance of multinational companies in Nigeria. An International Multidisciplinary Journal, 9 (3), 1-10. Retrieved from https://www.ajol.info/index.php/afrrev/article/download/119132/108606

Pondent, C. S. (2018). The Effects of the Political Environment on Business Organizations. https://bizfluent.com/info-8377458-effects-political-environment-businessorganizations.html

Wetherly, P., & Otter, D. (2011). The Business Environment : Themes and Issues (Vol. Second edition). Oxford: OUP Oxford. Retrieved from http://search.ebscohost.com.ezproxy.laureate.net.au/login.aspx? direct=true&db=nlebk&AN=678234&site=ehost-live

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