The Wesfarmers limited is referred to one of the most well-known conglomerates in Australia that has it’s headquartered in Perth, Western Australia. The company is currently the largest retail sector in Australia when it comes to revenue, Apart from Australia, the organization is also dominating the retail market of New Zealand, India, New Caledonia, United Kingdom, Hong Kong, Indonesia, China, Bermuda and Singapore. Wesfarmers, In addition to its supermarket chain in Australia and New Zealand, the company is also the largest liquor takeaway retailer as well as the largest hotel as well as gaming poker machine in Australia.
Other business of the company includes chemicals, fertilizers, coal mining and industrial and safety products (Akbar and Ahsan 2014). The annual revenue of the company in the year 2017 is 68.44 Australian dollars and the total operating income of Wesfarmers in the same year is 2.87 billion Australian dollars in the same year (Wesfarmers 2018). According to the official report of the company in the year 2018, the total number of employees working in the organization includes 223,000 including its outlets in New Zealand (Shauki 2016). In spite of being a highly popular company, Wesfarmers is evidencing high competition from its competitors as well as new entries. The chief reason for the high competition is that the western retail sector is highly saturated.
External environmental analysis of the Chinese retail Sector
Considering the fact the Wesfarmers organization is planning to establish their business in the Chinese retail sector, it is highly crucial for the management to access its external environment in order to understand the specific requirements of the Chinese consumers. In order to access the external environment of Wesfarmers, PESTLE analysis of the Chinese retail sector has been performed below.
Political factor
The political condition of China is highly stable and this, in turn, has imposed a positive impact on the retail industry of China. The chief factors associated with the political environment of the country include trade regulation, modernization and open market system.
Trade regulation: Unlike other Chinese industries, the retail industry of China is not considered to be prestigious by the Chinese government. As a result of this, the Chinese retailed industry is not sanctioned like any other heavy industry in China (Li et al. 2014). This fact has imposed a positive impact since the Chinese government does not see the requirement to restrict the development of the industry. Hence Wesfarmers will b able to enjoy lack of restriction in the Chinese industry.
Modernization: in order to enhance the annual revenue of the Chinese retail market, the government of China is converting the traditional street markets into supermarkets. This will impose a negative impact on Wesfarmers since this act of government will enhance the number of competitors of the organization
Open market system: In the past 30 years China has converted its retail industry from a market-oriented economy to an international market. As a result of the thus the Chinese government has implemented several rules and regulation in order to attract international retail organization and thus the trade barriers for foreign investors have to go removed. Wesfarmers being a foreign investor will definitely get benefited from this.
Economic factors
In spite of the fact that the gross domestic income of China has dropped by 11.9 percent in the year 2017, the demand for domestic and housed product is increasing with the increment in population. It is predicted that the consumption rate of the country will rise by 8.2 percent in the next 5 years.
This factor will enhance the potentiality of the Chinese retail sector for the foreign investors like Wesfarmers. The taxation rate in China is 25 percent. However, in order to enhance its revenue, the Chinese government has implemented an addition of special taxes in preferred regions like the western provinces (Camillo 2012). Considering the fact that the target region for establishing its business in China comprises the western region, this factor will impose a negative impact on the potential profit of Wesfarmers.
Considering the fact that a majority of fresh products originate in China, it is crucial for Wesfarmers to find local suppliers who are capable of providing raw materials keeping in accordance to the international quality and standards.
Social factors
Unlike the first world countries like the UK and USA, the population of China is not an aging population. The population growth rate of the country is 0.65 percent and the expected life expectancy is 73.19 years. More than 72 percent of the Chinese population includes individual within the age range of 15 to 64 years. Since the majority of the Chinese residents are office goers, the tendency to u goods from retail outlets in high in China. Since China is a developing country, Chinese consumers are getting more conscious of a healthy lifestyle.
Moreover, Chinese consumers have grown more concerned about the product safety due to the recent incident of poisoned milk. Hence, Wesfarmers have to maintain its quality of products in order to successfully establish the business in the Chinese retail sector. Considering the fact that Chinese residents are highly concerned about their tradition and are often fond reluctant to accept changes associated with their culture, there prevails a risk of getting rejected in case the company fails to adopt Chinese culture (Swoboda, Pennemann and Taube 2012). Hence Wesfarmers needs to be extra attentive about adapting the culture of China and implementing the same while training its staff in order to successfully develop and maintain its business in the mentioned sector.
Technological factors
Technological advancement in China is poorer than that of Australia, UK and US. As a result of this, there prevails a lack of warehouses and strong distributing network that is highly required to deliver the product to the consumers properly. Finding suppliers with necessary IT capabilities is another challenge in the mentioned nation. As a result of this, Wesfarmers will have to invest time and money in finding an efficient supplier so that the product quality of the organization can be maintained (Zhang and Pan 2013). Lack of refrigerator will make it more difficult to shift the tendency of consumers from daily shopping to weekly shopping.
Legal Factors
The government policy of monopoly control and limiting the power of the buyers have got greatly reduced in the recent years due to globalization. Currently, in order to enhance the number of international retail sectors, the government has loosened several rules and regulation. This has imposed an appositive impact on Wesfarmers since the trade barrier have got reduced.
Environmental factor
In order to control environmental degradation, the government of China has recently abolished the usage of plastic bags. As a result of this biodegradable jute bags have been introduced . However, the cost of Jute bags is much higher than that of the plastic ones. Moreover, various recycling programs have been introduced by the government in order to enhance waste management through National progress plan. China has implemented strict control of organizations due to increased international pressure (Shao, Feng and Liu 2012). Thus it can be understood that Wesfarmers needs to abide by all the rules and regulation in order to successfully establish its business in the Chinese retail sector.
Consumer market Assessment
Market Segmentation of China
Chinese retail market can be segmented into four parts namely demographics, geographical, behavioral and psychographic segmentation.
Demographic segmentation
In spite of being a developing country, the literacy rate of China is as high as 96.4 percent. The percentage of attendance in Chinese primary school is 99 percent. The high literacy level of Chinese can be considered as one of the chief reasons behind the rapid development of China. The income level of China is 6.3 percent and the GDP of the china in the year 2018 is 1562.61 USD (Zhang and Pan 2013). The development of the Chinese economy can be considered as an opportunity for Wesfarmers since more will be the per capita income, more will the chance to enhance revenue for the company
Psychographic and Behavioral segmentation
Chinese consumer can be segregated with respect to their psychology in the following factors.
- The brand conscious shoppers: The brand conscious shoppers of China prefer shopping from renowned supermarkets instead of street markets. The percentage of brand-conscious shopper is considerably less in China since the majority of the residents prefer shopping in traditional shops. However, these types of shoppers can be considered as an opportunity for Wesfarmers.
- The traditional shoppers: More than 55 percent of Chinese residents are traditional shoppers. They prefer marketing from tradition street shops than international supermarket outlet. Cultural and language barrier can be considered to be the chief reason behind this (Shao, Feng and Liu 2012). Thus, the high percentage of traditional shoppers can be considered as a threat to the company.
The chief strategy used by Wesfarmers to gain competitive advantage includes the provision of products to the consumers at a lower rate than its consumers maintaining the quality of the products.
New venture proposal
Considering the fact that agriculture is a vital industry in China, Wesfarmers has the opportunity to expand its business to the agriculture industry. The company can collaborate with the government and export high-quality fertilizers. This will be highly beneficial for both the country since for China, growth in the agricultural industry will ensure enhancement in the revenue of the nation.
Reference list
Akbar, S. and Ahsan, K., 2014. Analysis of corporate social disclosure practices of Australian retail firms. International Journal of Managerial and Financial Accounting, 6(4), pp.375-396.
Camillo, A.A., 2012. A strategic investigation of the determinants of wine consumption in China. International Journal of Wine Business Research, 24(1), pp.68-92.
Li, C.G., Dong, H.M., Chen, S. and Yang, Y., 2014. Working capital management, corporate performance, and strategic choices of the wholesale and retail industry in China. The Scientific World Journal, 2014.
Shao, Z., Feng, Y. and Liu, L., 2012. The mediating effect of organizational culture and knowledge sharing on transformational leadership and Enterprise Resource Planning systems success: An empirical study in China. Computers in Human Behavior, 28(6), pp.2400-2413.
Shauki, E., 2016. Is this a case of self-enlightened interest or genuine accountability: a study of different reporting media in the Australian retail industry. Asia Pacific Journal of Accounting and Finance, 2(1), pp.51-76.
Swoboda, B., Pennemann, K. and Taube, M., 2012. The effects of perceived brand global and perceived brand localness in China: Empirical evidence on Western, Asian, and domestic retailers. Journal of International Marketing, 20(4), pp.72-95.
Wesfarmers., 2018. Home. [online]
Zhang, X., van der Lans, I. and Dagevos, H., 2012. Impacts of fast food and the food retail environment on overweight and obesity in China: a multilevel latent class cluster approach. Public health nutrition, 15(1), pp.88-96.
