Strategic Analysis Of Wesfarmers' Target Essay.

You are required to select an organisation of your choice and to undertake a strategic analysis of the organization, which aims to achieve an understanding of the key strategic issues, both externally and internally, that are likely to influence the performance of the company into the future.

In this report, you are required to write a 2500 word report including 200 words of an executive summary but excluding references and appendix. You should also perform the following tasks:

1. Describe briefly the background information of the firm (or Strategic Business Unit - SBU) assigned. This information should be brief and relevant to the discussion of your assignment and thus may include ownership, history, size, business scope, major products/services, and major markets of the firm (or SBU) selected.
2. Conduct external environment analysis including a macro-environment analysis and Porter's 5 forces analysis:

• Conduct a macro-environment analysis for the entire industry within which the firm (or SBU) operates. You should use PESTEL model and focus on the understanding of the purpose of this analysis, the identification of key factors and their implications in terms of key opportunities and threats, and the discussion of their overall impact on the industry growth in the future. Draw your conclusion based on your macro-environment analysis.
• Undertake a competitive analysis using Porter’s 5 forces model. You are required to pay attention to the purpose of this analysis, the inter-connectedness of different aspects of the competitive forces, and their overall impact on the industry and the organisation selected in terms of main driving forces in the competitive environment. Draw your conclusions based on your five-force analysis.

3. Conduct internal environment analysis. You should identify 4 to 5 key resources and competencies of the firm (or SBU) that are likely to provide sustainable competitive advantage.
4. Summarise your findings based on your external and internal environment analysis. Identify the key issues that the firm (or SBU) faces and give your recommendations.

Strategic analysis has become a crucial aspect of any organization who wants to attain long term success. The business environment has become highly competitive and for this reason, it has become very relevant for the organization to ensure that it has adequate resources that will assist it to gain a successive advantage in the long run (Barney, 2014).  For this reason, it is important for every organization to undertake the assessment of the environment on a regular basis and form reasonable strategies accordingly so that there exists no barrier between the organization and its goals.

The primary aim of the report is to throw light on the strategic analysis of one such organization. The organization which has been chosen for analysis is the Wesfarmers and the strategic business unit which has been selected for analysis is Target. The report will be discussing the background of the strategic business unit which will then be followed by the external environmental analysis which will be done using strategic tools like Michael Porters Five Forces Analysis and Pestle analysis. The third part of the assignment will be analyzing the internal environment of the business. Moreover, the different issues which have to be taken care of will be analyzed and recommendations will be provided adequately.

The Target in Australia is a mid-priced departmental store which is owned by the conglomerate giant Wesfarmers. The departmental stores is one of the largest chains as present in the country with more than 205 stores present nation wise (Target.com.au., 2018). The store has a wide product line which ranges from products like clothing, cosmetics. Electronics, homeware and fitness. However, the clothing line of Target is quite popular and profitable as well. The organization has its headquarters in the Williams Landing in Australia. Although certain stores of Target have been performing considerably well, there exists some stores which are not performing well and have shut down. In the year 2017, the company has made a net loss of 10 million and the net value of the company has also reduced considerably. This can be better understood with the given figure.

Figure  The depleting performance of Target

(Source: Target.com.au. 2018).

The external environmental analysis can be described as the strategic analysis of the macro environment of the business (Brown & Bessant, 2013). The macro environment can be rightfully described as the overall general country where the firm operates it and may often also take consideration of the industry analysis as well. Hence, for this purpose, the strategic tools of PESTLE Analysis and the Porters Five forces tools are used.

PESTLE Analysis of Target Departmental Store

The Macro Environmental Analysis for the departmental store of Target will be done using the strategic tool of PESTLE. The PESTLE is an acronym for Political, economic, socio-cultural, technical, legal and environmental (Williamson, Cooke, Jenkins & Moreton, 2013).  An understanding of these aspects of the business goes a long way in helping the firm to understand the different aspects of the business environment.

Political: The political factors can be described as elements which comprise of tax policies, changes in the various trade restrictions, tariffs and the political stability of the governmental organization (Hubbard, G Rice & Galvin, 2014).  The political factors which have an impact on the business of the Target Departmental stores are factors like the different laws and regulations which are implemented by the Australian government for the protection against the misuse of the different market powers which are held by the market leaders. The government wants to promote fair trade and hence, these laws are applied.

Economical: The economic factors comprise of various factors like the gross domestic product, unemployment rates, disposable income, general growth or decline of the economy, inflation rates and other related factors (Goworek, McGoldrick & McGoldrick, 2015).  The customer habits have been an impact of the economic conditions. Online shopping has soared considerably and due to this, there has been an impact on the departmental stores.

Socio-cultural: The social factors comprise of demographic factor like the size of the population, the ethnic mix, the age, the cultural trends the attitudes and other aspects as well. The manner in which the audience as a specific prospect is gathered under the given factor (Hill, Jones & Schilling, 2014).  For Target the socio factors may be factors like the product line preference of the customers, the behavior of the audience, their increasing preference towards online shopping and others.

Technological: The technological factors comprise of the rate of change of the new technology, the new product development, automation and the advancements which have been made by the service industry (Jarillo, 2013). The technological aspects related to the present departmental environment is the graduating preference towards online shopping, the inaugurations of the new generation stores and the consumeristic sales.

Legal: The legal factors comprise of the different laws involving issues like employment, discrimination, health as well and safety along with antitrust laws. The legal factors which Target in Australia has to consider are factors like legal actions taken by ACCC with respect to price wars, the actions taken against the misrepresentation of safety of the different products and in relation to supply.

Porter's Five Forces Analysis of Australian Departmental Industry

Environmental: The environmental factors comprise of factors like natural disasters and other weather issues (Jarzabkowski & Kaplan, 2015). It also comprises of the different environmental laws and policies which have to be abided by in order to ensure long term success of the business. The environmental factors which Target has to consider comprises of the environmental policies with respect to sustainable practices and products

The Porters Five forces

The Porters Five forces tools can be described as the industry analysis tools which have an aim to understand the different players and forces which are present in the industry and tend to have an impact on the business (Trigeorgis & Reuer, 2017). The five factors are as follows:

• Competitive rivalry.
• Bargaining power of suppliers.
• Bargaining power of customers.
• Threat of new entrants.
• Threat of substitute products or services.

Degree of competitive rivalry

The competition among the different departmental stores in Australia is very high. The different companies are required to cater to the same set of customers who have no switching costs and moreover, there also exists problems relating to the each firm going for the others to gain a larger market share (Target.com.au. ,2018). The completion in the Australian departmental industry is largely based on differentiation and moreover, the firms are also required to consider the economies of scale to drive profitability.

The power of the Buyers

The buyers can be described as the customers who belong to the domain of the departmental stores (Morschett, Schramm-Klein & Zentes, 2015).  These buyers have high bargaining powers because they are exposed to larger options. Although there exists a lack of large volume customers, the different buyers are sensitive to pricing which makes them switch easily without incurring additional costs. Hence, the different departmental stores rely on service differentiation to cultivate their existing loyalty from the customers

The Threat of substitutes

The different products which are sold by the different departmental stores are mostly products from the same set of suppliers. This simply means that the customers might easily find the same set of products from different stores (Rothaermel, 2015). However, the buyers are generally inclined towards certain brands but no store in Australia seems to have an exclusive access to these products. Moreover, certain stores try to develop in house brands which gain popularity.

The Threat of new entrants

The threat of the new entrants is quite low in the given industry as due to the advent of e-commerce, the industry revenue has been declining considerably and with respect to this, no new company would like to enter the chosen industry (Gamble & Thompson, 2014).  Moreover, as the competition between the difference

Internal Environmental Analysis

The power of suppliers

The power of suppliers does not pose a major threat to the different companies who perform in the stated industry as there exists a presence of low switching costs which reduces the strength of forward integration (Target.com.au., 2018).

The internal analysis can be described as the analysis of the internal capabilities and the resource of the company. An awareness of these resources helps in the understanding of the capabilities and future endeavor estimate of the organization (Rees & Smith, 2017).  The internal environmental analysis of the Target will be done using the strategic tool of SWOT analysis, which will then be followed by the analysis of the present capabilities as well resources which will be measured for Sustainable competitive advantage with the VRIO Analysis.

The SWOT Analysis is a useful strategic management tool which can be used by the different organizations to analyze the strengths, weaknesses as well as the opportunities and threats which are faced by the organization. The SWOT Analysis of the Target depart

Strengths

The strengths of the Target Departmental stores are as follows:

• The brand presence is very strong as the company has been in the market since a long period of time (Kotabe & Helsen, 2014). 
• Moreover, as the firm is under the conglomerate giant Wesfarmers it has a good backing
• The relationship with the company shares with its different suppliers is very strong.

Weaknesses

The weaknesses of the Target departmental stores are as follows:

• Recently, some of the stores of the departmental store, Target in Australia have not been performing quite well (Lasserre, 2017). 
• Moreover, they have been facing problems while dealing with the dynamic fashion trends

Opportunities

The different opportunities which the company is exposed to is as follows:

• The company can expand Target online. E-commerce has become a considerably famous domain and hence, Target can make use of it to expand in Australia as well as other countries as present around the globe (Johnson, 2016). 
• Moreover, an exploration of the emerging market in Asia region with special reference to countries like Malaysia, India, Myanmar and Singapore can be done as the market in the continent is very attractive.

Threats

The threats faced by the organization have been given as follows:

• The competition from various brands like Vero Moda, ONLY, Levis, H & M and Mango have increased considerably and act as a barrier to the organization (Harrison & John, 2013). 
• Moreover, the market of departmental stores has not been performing considerably well, which can lead to a negative impact on the economy.

The resources and capabilities of the Target Departmental stores have been stated as follows:

1. Brand name:The Company has a good brand name which acts as a considerable competitive advantage for the organization.
2. Strong relationships with suppliers: The relationship which the organization shares with its suppliers is very healthy.
3. Human resource: The Company has a good supply chain which assists it in achieving competitive advantage in the long run (Frynas & Mellahi, 2015). 
4. Infrastructure: The company has a large number of stores in the country and had other infrastructural capabilities in adequate as well.

The VRIO Analysis the different resources and the capabilities of the firm and categorizes them under the tag of Valuable, Rare, Imitable and Organized to Exploit

Hence, from the given analysis on the external as well as internal environment of the organization, it can be stated that the organization is amidst a highly competitive advantage. The summary of findings have been given as follows:

1. There are various competitive pressures being faced by the organization. These competitive pressures are a result of the increase in the e-commerce which leads to an increase in the choices as provided to the different consumers and as a result the sales of the company has dropped considerably.
2. Moreover, certain stores of the organization have not been performing well and for this reason, the Target has become financially very weak as well (Eden & Ackermann, 2013). With respect to this, it can be stated that the organization the company has been suffering huge profits.
3. Additionally, there has been substantial political pressure on the organization as well with respect to various laws and legislatives with respect to the competition policies and supplier relationships management.

The following recommendations will be provided for the Target departmental store:

Consider expanding into the e-commerce domain

According to Wheelen, Hunger, Hoffman and Bamford (2017), the ecommerce domain has become increasingly popular and therefore, in order to gain popularity and sustainable advantage in the given scenario, the organization can look out to expand, into the various states in Australia using the e-commerce website. The website can sell the same products as the Target departmental stores and moreover, through this e-commerce domain, the organization can also expand into the other counties as well.

Invest into countries like India and Malaysia

Along with expanding into these countries using the online domain, the organization Target, can also expand to these countries like India and Malaysia using physical expansion. India serves as a considerably attractive market and hence, Target can open physical stores at the Prime location.

Conclusion

Therefore, from the given analysis it can be stated that the external environmental analysis using Porters Five Forces tool and the PESTLE analysis tool helped in understanding the different market and industry forces which have had an impact on the Target departmental stores in Australia. The existence of cut throat competition and governmental rules serves as a barrier for the firm. Moreover, from the internal analysis, it could be understood that the finances of the firm have not been doing well. For this reason certain recommendations have been provided in order to improve the performance of the organization.

References

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