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State-Specific Laws

Discuss about the Legal Regulatory And Political Practices of USA and UK Australia.

In order to adjust with the changes made by government relating to tax and other regulations as necessitated by the Australian Competition and Consumer Commission (ACCC), some political policies and laws are required. Every state of the country have their specific laws which makes it necessary to recognize the respective differences while operating in different states. Similar to the case of USA and UK, Australia also has a variety   of legal, regulatory and political practices.

The interference of the federal government have been witnessed a number of times in order to reduce the entry barriers and giving the consumers with more power in comparison with the two major supermarkets. When 20 cents discounts were being provided to the customers by Cole Express which was subsequently misleading the consumers, there was an intervention of the government. The changes introduced by government such as the $5 note resulted in significant costs for Coles due to the non- recognition of monetary value by self- checkout machines.

The ban on plastic bag enforced by the South Australian Government on all Coles Departmental Stores and Supermarkets necessitated the purchase of plastic bags by the customers in case they do not carry their own environmental friendly shopping bags. This ban on plastic shopping bags was not imposed by other states in Australia.

The changed government budget led to the reduction in sales due to its impact on the students. The sales number also gets impacted as a result of changes in the visa conditions for international students. The regulations of ACCC guide the Officeworks which lead to the promotion of fair trading practices and the legislations of competitive behavior.

The industrial sector is monitored by the government as there are a number of rule and regulations that must be upheld by the organizations for the purpose of ensuring the safety and wellbeing of every employee. There is stability in the political government which assists in providing a desirable market for the businesses.

Diverse rules and regulations are encountered by the commercial property profiles in every state. An agreement has been signed by Wespine with WA Government for the purpose of ensuring that the purchases of saw laws are only created by state owned or private pine plantations over a period of 40 year.

There is low unemployment rate in Australia which can further reduced with the help of increasing store openings in Australia. The interest rates and inflation rate will contribute towards the buying power of the customers.

A vital role is played by trade and investment in the economy which has strong relationships with various countries for the purpose of ensuring the effective maintenance of partnerships and trade agreements. The exchange rates and taxes are considered to be important due to the import of some products Bunnings. There is no volatility in the corporate tax rate which remains steady at 30% after 2006 (The Global Economy, 2017).  The goods and services in Australia suffer from fluctuating tax rates from the past 10 years which have brought uncertainty to businesses.  There is a stable trend in the taxes on international trade in Australia with a maximum of 2.52% and a minimum of 1.81% in the last year (The Global Economy, 2017).

Federal Government Interventions

A strategy has been put in place by the departmental stores for the purpose of ensuring fair wages and long-term employment opportunities. Approximately 1300 people have been employed by Kmart Automatic and Services that contributes towards the economy in reducing the unemployment rate. Increase in units sold and transactions take place with the increase in number of stores opened. The products of departmental stores are sourced internationally and locally which assist in creating overseas jobs.

There is a constant change in Australian economy due to the fluctuations in energy cost, foreign investment, interest rates, employment rates and economic growth. The prices of goods and services are also affected by the economic conditions. Officeworks is capable of providing low costs to the customers by way of sourcing these goods internationally. The entrance of Amazon within the retail business has become a challenge for various retail businesses. An Initial Public Offering has been already held by Officeworks for discussing the future of Officeworks with stakeholders.

Multiple businesses are operated by WesCEF in Australia which in turn provides employment to nearly 1200 people. Skill development and job opportunities are facilitated by ‘Aboriginal Engagement and Employment Plan’. Community contributions equivalent to $310,000 have been provided for ensuring the support to councils and local programs. $30,000 was donated to WA Farmers’ Esperance Fire Appeal for contributing to bushfire damages to businesses. Merchandise is supplied by Workwear group to large overseas organizations which have the capability of positively influencing the Australian economy. Specialized clothing to emergency and defense service are also provided by Workwear Group.

Financial services for other businesses are the center of focus of Gresham Advisory Partners Limited which assists the Australian economy. Long-term relationships have been maintained by Gresham with advisors and clients present in different international and domestic locations. Overseas relations are based in US and Europe. The commitment of the organization to constructing sawmill is ensured by the agreement of Wespine with WA Government that have the capability of increasing sales and positively impacting economies of scale.

The growth in Australian population has led to the increased demand for household goods. (Australian Bureau of Statistics, 2017). Increased demand for fat free foods and gluten-free foods has led to the requirement of adjustment in shelving within aisle for catering the shifting demand within business units that are responsible for selling food products.

Bunning made sustainability commitments by introducing campaigns and offering financial assistance. This includes garden workshops, project assistance and sausage sizzles and makeovers.

Priority is given to training and development programs for ensuring strong culture within organization and safe working environment for employees. Departmental stores such as Room to Read and Salaam Baalak are heavily invested by various community organizations overseas which focus on assisting children and families at the times of need.

Officeworks participates in school activities and charities that focus on the significance of environment and recyclable cartridges. Importance is given to the health and safety of individuals which is reflected from the annual report by the reduced number of injuries in workplace. Leadership roles and team diversity are equally offered to women in the organizations along with providing indigenous employment programs for increasing opportunities.

Bans on Plastic Bags

Safety of individuals is the focus of WesCEF  within the workplace through their “Safe Person, Safe Process, Safe Place” programs, which concentrates on business responsibilities, leadership and support and involvement in environmental activities. Contributions are made by WesCEF to sponsors, community organizations, sporting clubs and local colleagues. WesCEF has sponsored STEM (science technology, engineering, mathematics) project which is a big community investment. Councils and local programs are supported by the community contributions worth $310,000. $30,000 was donated to WA Farmers’ Esperance Fire Appeal for contributing to bushfire damages to businesses. Merchandise is supplied by Workwear group to large overseas organizations which have the capability of positively influencing the Australian economy. Specialized clothing to emergency and defense service are also provided by Workwear Group.

Success of the business is due to its employees for which their safety is important. The improved safety standards have led to reduced injuries in the annual reports of Wesrfarmers. Active involvement of Gresham Advisory Partners Limited along with its employees has been witnessed in foundations, charities and community activities. Disaster relief is addressed by Gresham nationally and overseas.

The combination of digital and retail formats is allowed by business units into one which allows the organization to target larger market which in turn will also provide the customers with online shopping platform. Regular servicing, updating and maintaining is required by equipment that are utilized which includes self- checkout machines, computer units and testing systems. Performance of the business is impacted by the instant communication between consumers and business through social media.

Online shopping experience is provided to the customers by Coles which has changed the way in which goods are provided and delivered to the customers.  Various electronic products and devices are offered by Bunnings which is important to the existing revenue. The Automatic Technology (ATA) performs its work with D&D Technologies for producing a system with the help of which remote access is provided to the garbage gates and doors. Sales can be improved through technological advances in products and equipment. The relationship of Bunning will get influenced with suppliers, employees and customers by technological innovation as it will improve transactions and communications. IMB POWER 7 Technology has been implemented by Bunnings in 2011 for sustaining the expansion and growth in other countries. It will facilitate the communication of Bunning in an effective manner with UK, Ireland and New Zealand at any time. The benefits of technology to business have been identified with Bunning and therefore it has committed to invest in IT infrastructure for ensuring its competitive advantage.

RFID card systems have been introduced for all stores which assist in eradicating long queues. Website has been launched by Officeworks which allows the customers to purchase the products online resulting in high inventory turnover. A dedicated IT team has been installed by Officeworks that ensured functional security across platforms.

Constant maintenance and updates are required for construction building by Wespine’s machinery. For ensuring smooth production, regular maintenance of machinery and equipment is required for completing mining tasks.

Changes in Government Budget and Visa Conditions

Certain practices have been listed by Australian Government within retail industry such as process for waste management, use of plastic bags, sustainability reporting and recycling (department of industry and innovation). Environmental impacts are managed by Bunnings within its business operations.

Energy usage levels are reduced by Coles at specific petrol stations, supermarkets and stores for contributing to sustainable environment. This includes changed refrigeration type for reducing energy, solar panels usage and use of LED lights. The reduction in transportation trucks assist in contributing cleaner air.

There is very limited impact of the products of Departmental Stores on the environment. ‘Better Together’ program focuses on environment, people and working conditions. Global environmental danger is contributed by internationally sourced products and air pollution is contributed by transportation of goods.

Commitments relating to reduction in carbon dioxide emissions and improvement in energy efficiency are essential for Officeworks. Recyclable cartridges collection works alongside with Planet Ark and department of industry and innovation. BringITback program works alongside recycling collection of computer equipment. carbon intensity of products and waste recycled percentage is decreased by the recycling programs. Programs lead to the identification of waste reduction and recycling importance by the team leaders in the organization. Energy monitoring systems installation and implementation of LED lights in stores has contributed towards the environment. Officeworks make the use of paper products that are 100 percent recyclable.

Chemical production is not sustainable for environment. Wellbeing and health of the individuals are affected by all chemicals as they are toxic and harmful. For screening and decking of products, the manufacturing of wood-plastic composite material is emphasized as they are environmental friendly. Wood- plastic is better substitute of timber.   

Pine is created by Wespine which is environmental friendly while producing timber for constructing building. Sustainable business is operated by BWP Trust. Its management and ownership of commercial properties have low impact on the environment such as emissions, waste, energy and materials, etc.

Success of an organization depends on the wellbeing and health of the individuals. The implementation of Health and Safety Standards is necessary across all stores along with the entitlement of the employees to the policies of Fairwork Australia. The change in laws relating to Tobacco and Alcohol provides that it can only be used by individuals over 18 years of age. All the stores across the world has to adjust due to the change in laws of displaying tobacco.

The laws and regulations applicable to the wholesale and retail trade industry must be complied by Bunnings in electrical products, building supplies, hardware and floor coverings. Codes and safety standards are compulsory to be followed by Bunnings as regulated under The Australian Competition and Consumer Commission (ACCC). The products imported by Wesfarmers are subject to licensing and permits under the Australian Business Licence and Information Service (ABLIS). Australian national Fairwork and Health and Safety laws are required to be complied by Wesfarmers for all employees. Retail and wholesale trade industry also suffers from the application of taxation rules such as GST for export and imports.

Legal, Regulatory and Political Practices

Fire and Building Safety has been committed by Kmart in Bangladesh for enhancing the working conditions and empowering its workers. For items such as glues, knives and scissors, age restrictions have been implemented. Ethical sourcing audit program and group- wide ethical sourcing policy have been implemented into organizations for decreasing the risk of practices that are unethical. Regular inspections are conducted by ACCC for ensuring the implementation of Fair Trading in all businesses in Australia.

Hazardous and dangerous nature of working in industrial industry necessitates the requirement of insurance for employees and organization. Extra precautions are required for the health of employees when they are surrounded by chemicals all the time.

Business principles are developed by BWP Trust into their business based the United Nations Principles for Responsible Investment. Business principles are classified into governance, environmental and social issues that are inserted in the policies, procedures and processes.  Rules and regulations are required to be formed for leasing agreements for commercial properties according to the states in Australia.

Portfolio management of Wesfarmer is focused on the diversification of its portfolio across various markets and industries along with making the identification of growth opportunities and business operations that maintains sustainability. Wesfarmers operates in various sections such as household consumables and retailing groceries. Liquor is also retailed through the chain of liquorland, 1st choice stores and Vintage Cellars. It also has convenience stores with petrol outlets through the joint venture of petrol retailer Shell and Coles Express. Coles also has section for financial services with insurance services and credit cards and operates in various hotels under the brand of Spirit Hotels (Wesfarmers Limited 2016). It is difficult to focus on all the strategies at a single time by the organization, therefore, for the purpose of achieving success, the primary target of the organization should be to provide sustained commitment to one of the strategies (Porter, 1980). According to Porter’s Five Forces Analysis, the strategy adopted by Coles is a combination of differentiation and cost leadership strategy. The cost leadership strategy of Coles ensures the value offered to the customers at lowest possible costs (Wesfarmers Limited 2016). Its prices have been lowered by the ‘Down Down’ marketing campaign in comparison with the key brands due to the adoption of superior supply chain and activities that provide economies of scale (IBISWorld 2016). The differentiation strategy is brought by Coles through its brand image which has been developed over decades with the introduction of various products in the market. However, same products are being induced by the competitors that offer fresh food products with high quality as a result of which it is not able to gain competitive advantage. Therefore, both cost leadership and differentiation strategy has been integrated by Coles in order to provide different products at lowest possible prices. In other words, superior quality is offered by Coles to its customers through innovative ways at lowest costs.

Definitions and Recommendations

Downsizing can be defined as the reduction in the operating costs of an organization by way of reducing the number of employees (Nelissen & Van Selm 2008). It occurs due the reason of deficient performance or poor economic conditions. It also occurs due to high expenditures and costs suffered by the company which necessitates reducing the number of employees so that costs can be lowered and profitability can be maintained. It can also be a result of merger between two companies which requires reduction in the operating costs by reducing its employees (Edwards & Patton 2012).

Trade Agreements

The terms mergers and acquisitions are considered as synonyms but have different meanings. Merger takes place when two companies are combined into one entity or when one company buys another company (Bris & Cabolis 2008).

Acquisition always involves a purchase. The takeover of a company is also called acquisition when the existence of the acquired company comes to an end and a new owner is established (Tikhile 2014). Merger takes place between two companies which are of same size and agrees to proceed as a single newly formed company instead of operating with different owners. The manner of purchase also constitutes a difference between two legal figures. It means that hostile purchases are called acquisition and negotiations made in peaceful environment are called mergers (Betton, Eckbo & Thorburn 2008).

Various recommendations have been made for future downsizes acquisition or strategic merger of Wesfarmers Limited business units. The company should analyze the reasons and improvements that can be obtained from downsizing, expanding or selling. Firstly, synergy should be looked for the company which will improve the performance and reduce the costs by way of combining business activities (Kumar & Bansal 2008). Secondly, merger and acquisition will provide benefit of diversification to Wesfarmers which in turn will reduce the impact of industry performance on the profitability of Wesfarmers (Arikan & Stulz 2016). Thirdly, the opportunity of expanding the market share is provided by merger by purchasing the business unit of the competitor for a price. The products and customers are kept by the acquired business unit (Hoberg & Philips 2010). Some business units of Wesfarmers such as Home Improvement through which great profits were obtained on 30June 2016 under Bunnings brand and Chemicals Energy and Fertilizers could obtain benefits of acquiring and merging with the distributors or suppliers. Costs can be eliminated with the help of buying them as the margins can be saved that were added to the costs by the supplier, known as vertical merger (Li, Liu & Liu 2011). Some information should be taken into consideration at the time of taking the decision related to merger and acquisition. As an investor in a company, Wesfarmers should consider the benefits arising from the purchase. First step for consideration is valuation. The target company will be valued as high as possible from the seller’s end and at the lowest price possible from the buyer’s end. Therefore, knowledge regarding various methods should be obtained in order to make the proper assessment of the target company which includes replacement cost, comparative ratio and discounted cash (Gomes et al. 2013). Second step includes proceeding with an offer. After decision regarding merger and acquisition is taken by top managers, the starting of the deal should take place with tender offer. At this stage, it is recommended that Wesfarmers should function with investment bankers and financial advisors. The deal ends when an offer is made by both parties that satisfy both parties after negotiation of the demanded amount (Collan & Kinnunen 2011). Scrutiny is also faced by some companies from regulatory bodies and this should be understood by the company. This happens in cases when big size of the companies enables them to create monopoly or a threat in the industry (Collan & Kinnunen 2011).  After the deal is finalized by the companies, payment is made through cash, stock or both.

Coles and Industrial & safety Business units: downsize

The definition of downsizing provides that the reason behind the downsizing of a company include its deficient economic performance and the need for reduction of costs and maintenance of profitability. The costs and expenditure of Coles can be effectively reduced by downsizing strategy and it will affect profit of Coles. In 2016, highest revenue was earned by Coles for Wesfarmers Limited with $39,242,000 but still it was not as profitable like the other business nits such as Kmart, Home Improvement or Chemicals Energy and is surprising that the company that have made the investment of $22,122,000 on its assets can earn a profit of $1,860,000, while the profits obtained by Home Improvement is $1,214,000 with revenue of $11,571,000 and assets of $6,620,000 which imply that 10.5% profits with respect to revenue as compared to Coles that account for 4.7%. For reducing the gap between profits and revenue, Coles is advised to downsize itself. The costs and expenditures of Coles are required to be reduced that are before profit and after revenue. For increase profit and maximizing efficiency, it is advised to restructure the company. The downsizing of Coles could increase its profitability. The costs and expenditure of Industrial and Safety business units are required to be reduced due to the fact that its profit as % of revenue is low (3.4%) in comparison to other business units.

The ultimate objective of a business is to generate profit. When there is no profitability in the business and there are no hopes for making profit in the future, selling or closing the business is a best option. Two segments are there in the business units of Wesfarmers’: Mineral and Metal Wholesaling in Australia and Black Coal Mining in Australia. The business unit resources suffered a loss of $310,000 on 30 June 2016 and revenue of $1,008,000 which was only 1.5% of the total revenue. Therefore, a major loss is represented by the business unit which was -30.8% as the profit as % of revenue. Moreover, there is a growth in the forecast of this business unit between 2017- 2022 equal to -7.4% which imply that resources as SBU are not going to make profits in future (IBISWorld 2016 pp. 15). Wesfarmers does not occupy the major portion of the market. Its major competitors occupy 38.9% of the market share. This and 420 other companies in the industry face a negative forecast growth rate which requires the development of strong strategy. Another business unit, Target, is also not making profits. In 2016, this business unit was restructured with Kmart for creating a new operational division known as Departmental stores. This was used as a strategy to incentive the performance of Target under the same strategy of Kmart which made an outstanding performance. On 30 June 2016, the revenue of Target amounted to $3,456,000 which was equivalent to 5.2% of Total Revenue. In fiscal year 2016, this business unit was ended with $195,000 loss which made profit as % of revenue to be -5.6%. Attempts are being made by Wesfarmers for making it sustainable and profitable. However, all the resources should be taken into consideration by the organization for the purpose of keeping Target alive instead of concentrating on other business units. This will assist in boosting profitability and growth of the business units. However, the results of Targets are not improving. The half year results of Wesfarmers for the year 2017 provides the deficient performance of Target as its revenue was $1,623 million in December 2016 while it was $1975 million in December 2015. This implies there was negative revenue of 17.7% in 2016. These reasons suggest that the business units of Wesfarmers should be closed or sold off. However, Kmart and Home Improvement have the capability of improving its profitability with the help of acquisitions and future transactions. It is advised that Wesfarmers should sell Resources and Target which will help them in getting cash requested for acquiring business units from other organizations.

Home Improvement (Bunnings) and Kmart are the business units of Wesfarmers Limited that performed outstandingly well on 30 June 2016. The revenue of Home Improvement was $11,571,000 which accounted for 17.5% of the total revenue. The revenue of Kmart was 7.8% of the total revenue. Both the operational divisions concluded with profit with respect to revenue of 10.5% and 9.1%. For the year 2016, these two business units were found to be the second and third most profitable businesses. it is therefore recommended that Wesfarmers should increase its focus on these business units for the purpose of booting them. Any effort made in these businesses has the capability of leading it towards growth. Both Kmart and Bunnings are profitable but still it is recommended for Wesfarmers that the business of Bunnings should be boosted as it appears to be the most sustainable business unit. The historical growth of Bunnings was 6.8% for the operating segment “Hardware and Building Supplies Retailing in Australia” and the forecast growth rate amounted to 2.8%. Such rates were among the highest rates among all the operating segments. After taking into consideration the profit and revenue obtained by Bunnings through its operations along with its outstanding performance of “Hardware and Building Supplies Retailing in Australia” and the forecasts made relating to growth rates, diversification appears to be the most successful way of growing the business of Bunnings. This can be done with the help of acquitting other business unit from a company or corporation itself. By considering the benefit of the fact that the most important operating segment is building of suppliers, investment should be made by Bunnings in acquitting a company belonging to construction industry. The company could be in building or housing urban projects which in turn will allow the expansion and diversification of its operations to the industry of which it is a main supplier. It is the Australia’s third largest industry and it also drives economic activity in a significant manner (Li & Liu 2012). Bunnings can become the supplier of a new company by way of acquiring the company belonging to this sector. This will assist in subsequently reducing the costs of materials and will facilitate the profitability of the new company and creating a sustainable supply chain which will bring advantages to both the companies. Therefore, Bunnings should take steps for acquiring construction companies like AV Jenningsm ADCO Constructions, Burbank, BCI Australia and Cockram, etc.

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