Dissecting the Business Failure of Wesfarmers: An Environmental Analysis

Running head: CONTEMPORARY BUSINESS MANAGEMENT
Contemporary Business Management
Name of the Student:
Name of the University:
Author’s Note:

1CONTEMPORARY BUSINESS MANAGEMENT
Table of Contents
Introduction................................................................................................................................3
Overview of Wesfarmers...........................................................................................................4
Business failure..........................................................................................................................5
Environmental Analysis.........................................................................................................5
Political Factors..................................................................................................................5
Economic Factors...............................................................................................................6
Social Factors.....................................................................................................................7
Technological Factors........................................................................................................8
Legal Factors......................................................................................................................8
Environmental Factors.......................................................................................................9
Industry Environment...............................................................................................................10
Threat from new Entrants.....................................................................................................10
Threat from Substitutes........................................................................................................10
Bargaining Power of the Suppliers......................................................................................11
Bargaining Power of the Buyers..........................................................................................11
Industry Rivalry...................................................................................................................11
Competitive environment.........................................................................................................12
Extensive Growth.................................................................................................................12
Failure to embrace e-commerce model of business.............................................................13
Fierce Competition...............................................................................................................13

2CONTEMPORARY BUSINESS MANAGEMENT
Loss of customers to rivals...................................................................................................14
Unsuccessful strategies............................................................................................................14
Financial Resources.............................................................................................................15
Technological Resources.....................................................................................................15
Organizational Structure......................................................................................................16
Human Resources.................................................................................................................16
Capabilities of Wesfarmers..................................................................................................18
VRIO Analysis.....................................................................................................................19
Value Chain Analysis...........................................................................................................20
SWOT Analysis...................................................................................................................20
Strengths...........................................................................................................................20
Weaknesses......................................................................................................................21
Opportunities....................................................................................................................21
Threats..............................................................................................................................21
Current strategies.....................................................................................................................22
Conclusion and Recommendations..........................................................................................23
References................................................................................................................................25

3CONTEMPORARY BUSINESS MANAGEMENT
Introduction
As opined by Grant (2016), globalization or internationalization and the widespread
use of different types of technologies have positively affected the world of business in the
contemporary times. Ansoff et al. (2019) are of the viewpoint that this has enhanced the
competition faced by the different business enterprises in the business world because of the
number of choices that are available to the customers. Different organizations are thus
required to conduct a thorough analysis of the business environment in which they are
operational and develop effective strategies so as to take advantages of the opportunities
presented by the business market and also to mitigate the threats presented by the same
(Morschett, Schramm-Klein & Zentes, 2015).
Wheelen et al. (2017) have articulated that the overall organizational prospects of an
organization depend greatly on the kind of strategies that the organization is using for the
process of its business operations. However, it is often seen that the organizations take the
help of strategies which are not in synchronicity with the key competencies or the capabilities
of the organization and also the requirements of the external business environment in which
the organizations (Rothaermel, 2015). More importantly, the organizations also fail to take
into effective consideration the requirements or the demands of the customers or the changing
needs of their business and this can have catastrophic results for the concerned organization.
This paper will analyze the manner in which disregard of the requirements of the external
business environment can disrupt the business prospects of an organization in the particular
context of the organization Wesfarmers and the recent losses faced by it.

4CONTEMPORARY BUSINESS MANAGEMENT
Overview of Wesfarmers
Wesfarmers Limited, founded in 1914, is an Australian conglomerate business
enterprise with extensive business interests in the retail, chemical, hardware, fertilizers, coal
mining, safety products and others (Wesfarmers.com.au, 2019). More importantly, the
organization offers a wide range of products or services to the customers starting from
groceries, retail products, safety products, fertilizer to insurances and other kinds of financial
services (Forbes.com, 2019). Furthermore, the organization although headquartered in Perth
is currently operational in Australia, New Zealand, United Kingdom and other nations of the
world (Wesfarmers.com.au, 2019). Moreover, the organization as of 2018 was the largest
private recruiter in Australia with more than 220,000 employees from the different regions of
the nation (Forbes.com, 2019). In addition to these, the organization with an annual profit of
more than $37.7 billion was the largest business enterprise of Australia with the closest rival
being Woolworths Limited (Forbes.com, 2019). The acquisition of various Australian
companies like Bunnings Warehouse, Coles Supermarket, Liquorland, Vintage Cellars and
others in the recent times has contributed much towards the growth of the organization under
discussion here in the recent times (Wesfarmers.com.au, 2019). However, in the year 2018
the organization faced a substantial decline in its revenue and in order to cover up for the
losses had to take the help of divestment and give up many of its enterprises like Coles
Supermarket and others which formed the backbone of the conglomeration under discussion.
The organization Wesfarmers faced a substantial amount of backlash in the year 2018
because of the business practices used by it for the process of its business enterprises. For
example, the brick and mortal business model followed by the organization under discussion
faced a significant amount of criticism in 2018 in UK for the hardware business that it was
conducting in the concerned nation (Abc.net.au, 2019). More importantly, the organization
also faced a substantial amount of loss in the second quarter of 2018 and its market share

5CONTEMPORARY BUSINESS MANAGEMENT
declined by 87pc although the organization has seen a significant amount of profit in the first
quarter of the same year (News.com.au, 2019). In this regard, it needs to be said that although
the organization reported a gross profit of $212 million for the second quarter of 2018 yet
because of the losses that it faced in the business market and the organization also lost a
substantial part of the monopoly that it once held in Australian business market (Abc.net.au,
2019). More importantly, the organization faced a 58% decline in its profit margin after
paying the bank loans and debts that it had taken for the purpose of the management of its
business operations (News.com.au, 2019). In addition to this, Bunnings Warehouse which is
considered one of the most profitable companies of organization ended the year with a loss of
$1.3 billion and to cover up the loss Wesfarmers had to withdraw the organization from the
UK market (Abc.net.au, 2019). Apart from this, Target also ended the year with a loss of
$300 million and in order to cover for these financial losses, the organization had to divest
Coles Group (News.com.au, 2019).
Business failure
Environmental Analysis
Political Factors
Hill, Jones and Schilling (2015) argue that one of the most basic demands of business
enterprises is a stable political environment wherein they can conduct their business
operations in an adequate manner. The nation of Australia is a “federal parliamentary
constitutional monarchy” and follows the principle of representative democracy
(Australia.gov.au, 2019). As opined by Saebi, Lien and Foss (2017), one of the most essential
aspects of Australia is the fact that the nation not only has a stable government but at the
same time is free from various kinds of political struggles and turmoil. In addition to this, it is
seen that the national government takes active initiatives for the growth of trade and