Discuss about the Business Strategy for Analysis of Wesfarmers.
Wesfarmers is one of the leading organizations in Australia, and as a 102 year old organization, Wesfarmers has been dominating the retail market of Australia as well as New Zealand. Besides, the organization, headquartered in Perth, Western Australia, the organization deals with the production of fertilizers, chemicals, industrial products and many more. The organization employing as many as 2,00,000 people across Western Australian and New Zealand, the organization boasts of 4,00,000 shareholders, and owing to the diverse market, the organization has even greater prospect to flourish in future. Keeping this in consideration, it is important to conduct the environmental analysis of the organization (David and David 2016).
The importance of environmental analysis of an organization cannot be overemphasized. It helps an organization to comprehend and analytically evaluate the strategies necessary for the survival and growth of an organization. As far as Wesfarmers is concerned, the internal analysis of the organization will help it in identifying the factors within the organization that can enable the organization enjoy sustainable competitive advantage. Hence, the application of the SWOT analysis method is highly beneficial here. With the help of the SWOT analysis method, Wesfarmers will be able to gain an insight into the strength, weakness, opportunity as well as threat of the organization (Grant 2016).
· Wesfarmers enjoys a diversified market, and as such the organization, with a huge variety of diverse business, comprising of Coles, Target, and many more, can easily experience persistent growth without the impact of industry downturn.
· The organization is one of the most reputed organizations in the world, and it has earned huge brand recognition over the years.
· The organization enjoys an exceptionally high growth rate in the market.
· The organization has as many as 4,00,000 shareholders.
· The organization has a strong presence in Australia, and hence as a large scale industry, the organization encounters strong business risk.
· The profit making capacity of the organization is not as strong as it could be and the operating profit of the organization has been suffering a steady rate of decline since the last few years. For example, from the year of 2006 to 2007, the net profit of the organization dropped from $772.5 million, to $618.1 million (Kenny 2013).
· The organization also operates in a highly competitive market.
· The current financial crisis of Australia may harm the financial stability of the organization (Yuan 2013).
· Global expansion will help the organization enhance its revenue and profitability, and as a widely recognized organization, it will be easier for Wesfarmers to establish itself beyond Australia and New Zealand.
· The organization can enhance quality and its service.
· The income level of the consumers is at a constant increase.
· The cost of the raw material is increasing rapidly in Australia.
· Huge competition from rival organizations, such as Woolworths, MetaCash Limited, Myer, and others (Biddle 2016).
It is crucial for Wesfarmers to analyze the stakeholders of the organization. The organization has a huge number of stakeholders, such as shareholders, consumers, employees, government and media. The stakeholders are the main assets of any organization, and hence understanding their expectations is highly important. The consumers of any organization play an important role, and hence insufficient consumer involvement can be highly detrimental to the growth of an organization. The organization has conducted sufficient market research, which has helped it to evaluate the expectations of the consumers in a highly competitive market. The organization has recently invested an enormous amount of money for offering its service via online channels (Hackshall 2013). The organization has improved its optimism about retail sales, via the introduction of online shopping platforms. Besides, the employees also play a vital role in the organizational success of Wesfarmers. The organization has been providing on-job training so as to help the employees improve and enhance their professional skills. The quality of the workers increases with the opportunities they get to groom and enhance their professional skills. Further, the organization also employs a diverse workforce that allows it to hire people from various ethnic groups, such as Aboriginal Island and Torres Strait Island as well. One of the best features of the employee engagement policy of Wesfarmers is that the organization adopts a diverse workforce, not only in terms of cultural diversity but gender diversity as well. As far as the consumers and the employees are concerned, Wesfarmers is successful in exercising a positive impact on the stakeholders. The organization communicates and updates each piece of information as well as the relevant procedures to the concerned stakeholders. The managing authority of Wesfarmers believes in adopting the most effective communication strategy that will help it in communicating each of its strategies or achievements to the stakeholders. Hence, the organization prepares and submits annual as well as half-yearly reports and announcements via the ASX (James 2013).
SWOT Analysis of Wesfarmers
Apart from the internal factors, Wesfarmers is also required to identify and assess the external factors of an organization, bot at the micro as well as in the macro level. The major advantage of the external environmental analysis is that it will help Wesfarmers understand as well as to evaluate the size and opportunity of growth in the market, the intensity of the competition existing among the rival organizations, and to estimate the impact of the market condition on the profit earning capacity of the organization.
In order to conduct an external environmental analysis, Wesfarmers is primarily required to conduct the PESTEL analysis. The PESTEL analysis of an organization explains the framework of macro-environmental factors, such as the political factors of the economic factors that directly influence the growth or profitability of an organization. The PESTEL analysis of Wesfarmers is as follows:
Political: By the political factors, is implied the extent to which the government of a country plays an important role in influencing the business of an organization, in the form of taxes, or other legal regulations. Coal mining is an important department of Wesfarmers, and it should be remembered that the federal government of Australia has made it mandatory that the exploitation of the mining industry has to be approved by the state government of the respective state. The government t policies of Australia are more focused on the elimination of the trade protectionism, and restrictive policies, and as a result free trade can be conducted by the foreign organizations much more conveniently by the foreign organizations. This policy of free trade may not facilitate the economic growth of Wesfarmers, as a large number of non-Australian retail sectors may get easy entry into the market. This can definitely imply huge competition for Wesfarmers (Antonini 2016).
Economic : The economic factors of an organization , such as interest rates, exchange rates, inflation rate can largely affect the growth of an organization. Service sector plays an important role in the market of Australia, and in fact it is noteworthy that 71.1 % of the GDP of Australia is being contributed by the service sector only. Finance and service are the two most important service organizations in Australia, an keeping this into consideration, it can be stated that the insurance market of Wesfarmers can enjoy a highly profitable position in the market of Australia.
Social: The social environment of Australia also plays an immensely important role for the future growth of Wesfarmers. Social factors such as demographics, cultural trends, population analytics play an important role in the success of an organization. It is important to note here that most of the citizens of Australia tend to rely on one-stop shopping method. The Australians usually prefer to buy the necessary items in large quantity once in every week, so that it can suffice for the rest of the week. Hence, it is favorable for Wesfarmers to have the supermarkets and departmental store chains in Australia (Chan et al. 2013).
Technological:. It should be remembered that sustainable method of conducting business, plays an extremely important role in Australia. Hence, organizations such as Wesfarmers also are required to rely more on technologically progressive means of production that can help the nation maintain its ecological sustainability in future. Keeping this in mind, it is important to note here that Wesfarmers has adopted the use of low emission coal technology which is an innovative change that is expected to sustain the business in future. Coal mining, energy, chemicals and fertilizer production are some of the most important areas Wesfarmers works in, and hence good technological foundation as well as continuous innovation is highly needed for the future development of the enterprise (Luftman 2013).
Legal: There is a variety of new laws ruling and governing the trade system of Australia, such as the labor law business laws, resource law and many more. The organization is required to abide by each, while conducting trade.
Environmental: Ecological sustainability plays an integral role in the process of conducting business in Australia, and hence organizations such as Wesfarmers has been creating value for its consumers for its shareholders via sincere engagement for a wide range of environmental issues, such as prevention of environmental pollution, conservation of energy, and many more. It is noteworthy here that the organization operates its business activities in accordance with the 10 Community and Environmental Impact Principles that sets the guideline to the organization for energy efficient means of production. The in initiatives undertaken by the organization, for ensuring community well-being, decreasing product packaging, or maintenance of ecological sustainability help the organization conduct business smoothly in Australia (Islam et al. 2016).
In order to adopt the most effective strategy required to enhance the competitiveness of the business organization, the Five Forces Analysis of Wesfarmers is needed:
Threat of New Entrants: Wesfarmers is one of the most recognized organizations in Australia, that deals with the production and retail trade of various items, such as energy, industrial and safety chemicals, fertilizers, hardware, insurance and many more. Hence, it can be understood that Wesfarmers has a higher entry obstruction as far as its competitors are concerned. Owing to its recognition, and brand awareness as well as its diverse market, the threat of new entrant is low (Dobbs 2015).
Supplier Power: Wesfarmers avails its resources from different markets, as a result of its diverse variety of products it deals with, however it should be remembered that there is only a limited competition in the supplier market of Wesfarmers. Hence, this can be a major obstruction for Wesfarmers, as the organization is depended on too many suppliers at a time (James 2013).
External Environmental Analysis
Buying Power: Wesfarmers regularly conducts sufficient market research to understand the changing expectations and modern trends of the buyers. The organization also promotes its sustainable approach of conducting business that fetches further recognition to an already recognized organization like Wesfarmers. Hence, the buyer power is moderate, given the strategy adopted by Wesfarmers, despite the competitive market the organization operates in (Hubbard 2014).
Competitive Rivalry: Wesfarmers is still one of the most recognized organizations of Australia, and it is needless to state that the organization is absolutely dominating the Australian retail market. The organization is already enjoying competitive advantage in the region, and hence the risk of competitive rivalry is low for the organization (Silva 2012).
Threats of Substitutes: The threat of being substituted was undoubtedly high for Wesfarmers even in the last few years, however, the organization has adopted environment friendly, energy efficient method of production and has introduced a very high quality consumer service that can is sure to provide the organization with competitive advantage. Hence, the threat of substitute is low (Booth and Coveney 2015).
From the above analysis, it can be concluded that Wesfarmers enjoys a very strong position in Australia, and the organization has a huge prospect to flourish in future as well. The environmental analysis of the organization is a strategic tool that helps in assessing and analyzing the internal as well as external factors that facilitate or threaten the market condition of the organization. Wesfarmers is one of the leading names in the retail industry of Australia, however, it is important for the organization to be aware of its strength, weakness, competencies and other requirements so that it can bring about the desirable improvement in the organization. Again, at the same time, the organization will need to adopt the necessary strategy to sustain itself in a highly competitive market, and hence the organization must also conduct external analysis to have a comprehensive knowledge about the economic trends of the market, rival giants as well as the opportunities and threats in the retail market of Australia.
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