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Major changes in diversification and ventures

Discuss about the Buisness Strategy of Wesfarmers.

Western farmers co-operative limited was established by a group of farmers for their demand of better pay and less working hours in 1914.Walter Haper leaded this organization to support the rural community. His opinion was that the farmers should co-operate in trading their production without political interference. The Westralian farmers limited was registered on 27 June 1914 and then they started their trading from the location called 13 Howard Street, Perth. In the beginning it was initiated by marketing of the products through co-operative agencies thus known as Farmer Company. Diversification in business for various sectors such as Hotels, Convenience stores, Home improvement  including  super market and retail stores; industrial production of chemicals, fertilizers, coals majorly led to the growth in business and further positioned  this company to a number one entrepreneur in Australia. Down the line it has now become one of the largest private sector organization which hired 220,000 employees and good numbers of stake holders ranging around 530,000. Its share is incorporated and addressed in Australia. It is listed on the Australian security exchange with codes ‘WES’. Three main industrial businesses of West farmers included Chemical energy, fertilizer and industrial recourses; and safety which have jointly created a new industrial division. Its headquarters is in Western Australia(2012) .

 Growth in last five years from 2011 to 2015 in profitability is as follows

Years                                          Sales revenue                                   Profit after taxation

2011                                              75.10                                                                1.210

2012                                              80.35                                                                1.511

2013                                              85.60                                                                1.653

2014                                              87.20                                                                1.712

2015                                              89.30                                                                 1791

By looking at this data one can easily make out that the company is increasing its profit in each coming year. Employees are treated as an asset here. The company is proud to have them as representatives of the Wesfarmers team. This combining with the strength of their diversified business portfolio, strong determination and commitment towards sustainable work practices, ensures to create long-term value –and deliver satisfactory returns to their shareholders.

Wesfarmers is a diversified organization. Its diverse business include supermarkets; departmental and retail stores; home improvement and office supplies; coal mining; insurance; chemicals, energy and fertilizers; and industrial and safety products. Wesfarmers’s strategy is to invest their sources in new fields, so that it can experience a constant growth without the impact of an industrial and economic downfall. Each diversion has good management capability which is very important for strategy development and to execute the company’s functions in a good manner(Hatch, 2016). Every department is headed by director of divisional board which includes managing directors of Wesfarmers. This is further controlled by governance framework and wide operating cycle. Wesfarmers way is the guideline for the company’s business model and it consists of core value and growth enables which helps to achieve primary object further providing a good return to shareholders.  (HOYLE, 2013)

Internal analysis

Corporate reputation has changed its concept down the line. It is no longer follow intangible management concept. This cannot be avoided by large companies’ senior managers (CEB , 2013).

The heap of problems is also one of the major factor; which includes -developing technology and shifting cultural trends. Whenever the reputation of the company is at stake it is very important for managers to maintain company’s positive reputation and further dig out proven plans. The shifts are categorized as follows:

Transparency within the organization: Corporate secrets do not remain secret anymore. Bad business news spread at a greater speed than the good news which   means the company hasvery short period of time revert  back on an attack on a company’s reputation.

Expectation of stakeholder: Consumers, investors, NGOs, and local communities usually have a perception that the businesses which stand for longer run can quickly and dramatically shift; the regulatory scrutiny and increased media also plays an important role to influence it.

‘Hyper-connection’ to extended networks: To provide business-critical services managers rely on large eco system third parties. The vital extended framework weakens corporate control sometimes on other importantbusiness aspects and further it also weakens control over  risk management’s reputation.

West farmer which is considered as Australia’s largest retailer came up with an interesting and innovative management strategy in corporate reputation risk sector of management.  Ben Lawrence, head of HR department at Wesfarmers, recently gave this statement in an interview. In competitive scenario, the company got a positive reputation which was of great advantage for them. These are some of the initiatives taken by the human resource department of the company in order to sustain the company’s reputation at all period of time.

Wesfarmers provides good employment opportunities for employees of various sectors. The company operates with 220,000 employees and is spread over the countries like Australia and New Zealand .These employees are working in various iconic and well known brands of West farmers.

The human resource department hires passionate and skilled employees who can put their maximum possible dedication and labor towards their work. Usually they look for candidates with following characteristics:-

  • The concerned person should be able to build strong relationship with his or her stakeholders.
  • One must think strategically but at the same time aware of the commercial factors.
  • The focus of an employee should be totally concentrated towards providing a good service to the customers.
  • An employee with good managerial skills should always try to bring additional required changes with good collaboration within the organization.
  • The first approach on an employee involves within solving a problem with best solutions. 

Wesfarmers has taken introduced various strategies like organization structure, capital allocation management, organization control, leadership management etc. The three main strategies are discussed below:

Acquisition strategy

Business strategy

Implementation strategy

The main objective of Wesfarmers is to provide a profitable return for its shareholders. As we all know Wesfarmersfollows the diversification strategy and further it has nine divisions. There are various types of business units included in it such as home improvement, coal and energy, industrial and safety insurance. Each division is controlled by a board of executive members and they are independent in operations and finally responsible for developing strategies for that particular division. BCG matrix specifies the nine divisions with its growth rate.

Wesfarmers on Making Corporate Reputation a Source of Competitive Advantage

There are two types of acquisition strategy. Additional business (add-on business) this term indicates the addition of new business with the existing one. Howard Smith (hardware retailer) which marched with West farmers was further joined with its existing division (Burnings). One such additional division example is Coles. West farmers have deferent strategy of business for various divisions. This company has 9 divisions and its each division maintains a separate business strategy. Therefore each division at divisional level has several corporate departments. However, all divisions to achieve return on equity and return on capital put very hard work and labor. Since 1984 every division is maintaining its separate balance sheet.

This analysis will provide a detailed overview of both the factors i.e. micro and macro analysis.

Pestle analysis provides a brief assay on macro environment. It assesses 6 factors which are stated as follows

Political factors:

Generally Australian central government settle the structure of legislative for mining environment and the states government can introduce different laws according to its need in concrete situation. Exploitation is   generally controlled by applying the state government’s agreement.  Moreover, carbon tax law has been al published. This law further laid a huge impact on energy division and resources business unit. Every mining company is bound to follow the carbon tax cost and state government agreement.

Economic factors:

Three sales such as Coles, Target and Kmart’s sales are affected due to global economic recession, Due to unemployment there was a decrease of revenue insurance and office supplies. Moreover Coles group in Australia is considered as second largest retailer conglomerate which has huge of supermarkets. (Kotler et.al, 2015). Due to this environment Coles joined with Shell as they had good services of petrol.  As a result it could help to increase the sales of West farmers.   Shareholders can get good return from Coles in Australia.

Every individual family in Australia usually spends lot of money in supermarkets. At least once a week house wife is likely to spend more than $ 120 for supermarkets usually form the family expenditure budget. Thus, supermarket generated more revenue formColes group. One-stop shopping business is usually preferred in Australia. Burnings supply provides large range of home hardware at reasonable price. Target and Kmart both provide clothes and electronics at a very low price. Increasing revenue return of Wesfarmers depends on these factors.

Australia is one of the world's best mining countries, Australia's mine resources and mining industry are best as compare to other countries in the world. Mining firm follows the most advanced technology which helps to create the world's highest production effectively further this is followed by environmental protection too.  Advance technical foundation is a vital support for enterprise development (Clegg et.al, 2015).

Talent Acquisition at Wesfarmers

Australia's legal system such as labor law, range of business law, natural resources law is very strong. As a large enterprise, all laws play an important role in management for Wesfarmers.

Environment’s protection was always taken care by Australian government.  Air pollution is controlled by related laws and department in Australia. The country takes great care of its Natural resources (www.wesfarmers.com).

Wesfarmers created great value for stake holders initially. One should create a positive perception in the community so that one can serve them for long term value creation .At Wesfarmers, people realized that understanding and managing will lay huge impact on the community and the environment and further they also ensured to create value in due course of time. It was the objective to operate the businesses in accordance with their 10 communities and environmental impact relating to five areas of people, sourcing, community, environment and governance  (Ahmed & Rafiq, 2003) . Every year, West farmers observe that there were important issues related to shareholder. The company tried to communicate these issues through materiality process and finally conveying the story in yearly report. Sustainability issues are managed (Brown & Lee, 2000).

Applying Porter’s five-force analysis for West farmers company(Dobbs, 2014).

Industrial rivalry

  Wesfarmers Limited is the largest and most competitive industry in the region.   In this case it shows that the company is still dominating Australian Western market. It further meansthe company ranks top among other electricity company. While enjoying the top rank the company is trying to sustain its competitive advantage among its other rivals.

Supplier’s bargaining power

This model explains the concept of the bargaining power of Buyers. Therefore Wesfarmers Limited always ensures to provide best quality service to their clients and customers. The company believes in distributing the products according to different segments of market. The company also ensures their environmental responsibility which helps them to build a good public image too.  The main agenda of the company is to meet the demands of the buyers which further helps them to attain top position in market as well as bitting the rivals in marketplace. . (Marginson, 2015).

Competitive Strategy

One of the best thing introduced by Westfarmers is Strategic Management .Strategic management helps the organisation to plan the strategies in morelogical, systematic and rational manner. It benefits the organization by following only one path which is towards achievement of its business mission, objectives and success. It also ensures that the organisation survives in the tough times and further adapts to the changes in the environment.

 

Threat of substitutes

The company is already aware of the fact that in today’s generation technologically advanced products are always welcomed; still it has a strong belief that no technological material can replace its environment friendly sustainable productssuch as energy, coals and other products and services.

Threat of new entrance

West farmers is able to attain the top position in Australian market as it focussed on various ion factors. In addition it has also maintained the quality of the product with cheap price in order to compete with the new products in the market.

Conclusion

In conclusion, this report mainly focuses on following factors such diversification, internal and external analysis etc. On the other hand, PESTLE analysis provides a in-depth knowledge on external factors of the company, which includes political, economic, sociological, technological, legal and environmental factors.

Eventually based on the following analysis, the company’s business strategy is analyzed further it also provides detailed information on how the company can reduce the cost to increase the net income.

References:

Ahmed, P. K., & Rafiq, M. (2003). Internal marketing issues and challenges. European Journal of marketing, 37 (9), 1117-1186.

Brown, J. R., & Lee, D. J. (2000). Managing marketing channel opportunism: the efficacy of alternative governance mechanisms. Journal of Marketing, 64 (2), 51-65.

Clegg, S. R., Kornberger, M., & Pitsis, T. (2015). Managing and organizations: An introduction to theory and practice. Sage.

Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Geppert, M., &Dörrenbächer, C. (2014). Politics and power within multinational corporations: Mainstream studies, emerging critical approaches and suggestions for future research. International Journal of Management Reviews, 16(2),pp.226-244

Hoyle, R., (2013).Wesfarmers Goes Against the Grain.The Wall Street Journal,61(2),pp.122-125

Hatch, P .,(2016).Coles owner Wesfarmers moves up to Australia's top company by revenue, beating Woolworths, Rio Tinto and BHP .The Sydney Morning Herald,73(5),pp.234-255

Jenkins, W., & Williamson, D. (2015). Strategic management and business analysis. Routledge Lawrence, B (2013).What best companies do. [online] CEB. Available at:13(1) //www. Ceb global.com/blogs/West farmers-head-of-hr-on-corporate-reputation/[Accessed: 19 September 2016]

Kotler, P., Burton, S., Deans, K., Brown, L., & Armstrong, G. (2015).Marketing.Pearson Higher Education AU.

Marginson, S., (2015). Is Australia over dependent on international students?.International Higher Education, 18(54),pp.236-254

Precinct, R., (2012). Wesfarmers Shareholder Review 2012  . Sydney: Westfarmers, 13(15). Available at:2012-shareholder-review .pdf  [Accessed 19 September].

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