Analyzing External Environment and Wesfarmers' Performance

The provided report uses the six thinking hats tool to analyze the external environment's impact on Wesfarmers' performance. It considers factors such as government regulatory, economic policy, consumer behavior, technology, legal, and environmental changes. The analysis is done using the six thinking hats methodology, which involves different types of thinking (white hat, red hat, black hat, yellow hat, green hat, and blue hat) to identify and tackle challenges and improve performance. The report provides a detailed analysis of the external environment's impact on Wesfarmers' performance, using real-world examples from the company's 2016 sustainability report.

Business Environment
Wesfarmers

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Table of Contents
Introduction................................................................................................................................2
Factors Influence the Business Environment of Wesfarmers................................................2
Government Regulatory.....................................................................................................2
Economic Policy................................................................................................................3
Consumer behaviour..........................................................................................................3
Technology.........................................................................................................................4
Legal...................................................................................................................................4
Environmental....................................................................................................................5
Six Thinking Hats - Solution for all environmental risk........................................................6
White Hat...........................................................................................................................6
Red Hat...............................................................................................................................7
Black Hat............................................................................................................................7
Yellow Hat.........................................................................................................................7
Green Hat...........................................................................................................................8
Blue Hat.............................................................................................................................8
Conclusion..................................................................................................................................8
References................................................................................................................................10

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Introduction
The environment of the organization consists of internal and external factors. The
environment should be scanned in order to define growth and predictions of the factors that
will affect the success of the organization. The environmental scanning means the ownership
and use of facts or information about events, designs, trends, and associations in the external
and internal environment of the organization (Arthur & Pellerin, 2018). It supports the
management of the company to make decisions for future. Scanning should recognize the
opportunities and threats present in the business environment. At the time of strategy
formulation, the company should take the benefit of the present opportunities and try to
decrease the effect of a threat. A threat to one company is considered to be the opportunity
for another company (Management Study Guide, 2018).
This report is being presented in continuation of the previous report on external
environmental factors affecting Wesfarmers. The report will perform the detailed scanning of
the external environment factors that have an influence on the performance of Wesfarmers
and solutions for all the challenges and environmental risks.
Factors Influence the Business Environment of Wesfarmers
Government Regulatory
This factor is given more importance as it has a major influence on the performance of the
business. Various features of the policy of the government can disturb business. Every firm
should follow all the laws stated by the government in order to reduce the effect of these
policies. The Wesfarmers is also affected by the policies implemented by the government.
Coal mining is a significant subdivision of Wesfarmers Company, and it has been seen that
the Australian Federal Government has made it compulsory that the extraction of mining

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industry should be permitted by the state government of the separate state. Due to this policy
of Australian government, Wesfarmers took the step to support the government decision and
started implemented advanced technology in all the coal mining business units in order to
reduce the emission from coal mines and its exploitation. In 2016, the company released 3.9
million tonnes of carbon dioxide equivalent, which is less as compared to 2015. The intensity
of the Wes farmer’s emission has reduced by 8%. This step by the company is effective as
per the future point of view (Sustainability Wesfarmers, 2016).
Economic Policy
An organization’s growth gets highly influences by the economic policies and factors like
exchange rates, interest rates, inflation rate (Nadtochy, Klochko, Danilina, Gurieva,
Bazhenov & Bakharev, 2016).. In the Australian market service sector has a major part and it
is notable that Australian GDP’s 71.1% is contributed by this sector only (Central
Intelligence Agency, 2009). In 2017, Wes farmer’s financial services developed policies of
general insurance and also accomplished the distribution agreement of 10-year credit card
(Wesfarmers, 2017). Through this, it can be said that the company can enjoy an extremely
profitable place in the Australian market.
Besides this retail business of Wesfarmers source products from various locations. Some of
the locations are India, Vietnam, Malaysia, China, Indonesia, South Korea, Bangladesh, New
Zealand, Europe, and Thailand. Purchasing products from these locations have provided
company to earn economic benefits as this allows business to get products at affordable
prices.
Consumer behaviour
Consumer behavior is very important to be considered for the future growth of the company.
Some of the factors such as cultural trends, demographics, population analytics plays

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important role in the success of the organization (Kee, Lee & Phillips, 2016). In Australia,
people follow one-step shopping method which means they choose to purchase the basic
necessary stuff in large amount once in a week, such that it can serve the whole week.
Wesfarmers has started thinking to offer products in bulk with discounted prices in order to
increase its sales.
Technology
In today’s scenario technology plays an important role in the development of the country as
well as the organization. Hence, an organization like Wesfarmers also needs to majorly rely
on technological means of production as it can support in keeping its environmental
sustainability in the upcoming time period. Considering this aspect Wesfarmers adopted
technology like less emission coal technology an innovative step which is likely to help
business in sustaining in future. Besides this company has invested huge amount and
resources in order to examine conceivable technology solutions to allow an alteration in their
process of production and make use of raw material from various other sources that are
presently inappropriate for environmental or technical reasons (Sustainability Wesfarmers,
2016).
Legal
Organizations need to obey all the laws and regulations formed by the Parliament or
government regulatory. Alterations in the rules concerning consumer and environmental
protection, trade practices reform and industrial relations, occupational health and safety have
key and growing influences on the organization’s conduct (Wiley, 2018). Wesfarmers is
dedicated to obeying the regulations and laws of all the countries in which they operate their
business and perform ethically, reliable with the philosophies of fairness, honesty, respect,
and integrity. The company follows the minimum wages policy formed by the government
and they pay least minimum wages.

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All the employees and suppliers of Wesfarmers follow all the workplace laws adopted by the
company. The company ensures that all the products they provide to the consumer should be
safe and encounter the consumer guarantees under the country’s consumer laws. Wesfarmers
do not vend products that are banned and guarantee that every product fulfills the obligatory
standards before they are offered to the customers for sale. Whenever the safety issues are
faced with the product the company recalls all the products. Along with this, the training
which is conducted for the employees of Wesfarmers is according to the main governance
rules comprising Consumer and Competition Law, constant disclosure, assortment, and
fairness (Sustainability Wesfarmers, 2016).
Environmental
Environmental sustainability work as an essential part in the business process, and therefore
organizations like Wesfarmers is regularly trying to make value for its consumers, for
shareholders through a genuine commitment for an extensive range of environmental issues,
like conservation of energy, prevention of environmental pollution, etc. Diversified structure
of Wesfarmers, in the context of the business range and the geographical spread in New
Zealand and Australia, reflects that the company is accountable for handling an extensive
range of issues related to the environment. Due to its diversity, the complete environment
policy of the company need business to form procedures and policies which are related to the
specific situation along with this these policies should ensure are line with the main
guidelines of the group of placing tough emphasis on the environment protection.
Across the group various important programmes related to environment are formed and
executed, from Bunning’s promise to be carbon neutral in 2015, initiatives to encourage
better energy competence, carbon offsets and renewable energy sourcing, the achievement of
CSBP’s ammonium nitrate development plan which comprises major pollution reduction and
deterrence, decreases in energy footprints and greenhouse in company’s resources unit, and

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positive waste decrease and reprocessing programmes, dedicated mainly in retail businesses
(Wesfarmers, 2008).
Six Thinking Hats - Solution for all environmental risk
Six thinking Hat is said to be a system which is formed by Edward de Bono and defines a
tool for the discussions in the group and individual thinking comprising six colour hats (De
Bono Group, 2018). This system is used to plan and think in a comprehensive and consistent
way. The principle of this system is that the brain of human thinks in various ways that can
be purposely dared, and therefore intended for use in an organized way permitting one to
develop strategies for thinking about specific issues (Bono, 2017). Every thinking hat is a
diverse style of thinking such as:
Source [(Hunger Games, 2018)]
White Hat: As per this hat the more emphasis is given to the available information or data.
With the help of this data past trends are analyzed and solutions are provided (Mind Tools,
2018). The economic challenges that every organization face is inflation rate, exchange rate,
etc. Presently Wesfarmers financial service sector is able to handle all these issues by
gathering required information related to the insurance from the market. Along with this
company has accomplished the distribution agreement of 10-year credit card. Besides this

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company can attract more customers by promoting its insurance products in the market and
can do tie-ups with other country's insurance company to offer Wesfarmers insurance product
to the customers in return for a commission.
Red Hat: This hat looks at the issues by using your instinct, gut reaction, and feeling or
emotions (Liu, Zehtabchi & Liteplo, 2014). The management of the Wesfarmers should have
the empathy feeling as it will help them in understanding the thought, feeling and
expectations of the customers. As specified above that the people in Australia prefer to buy
products in bulk therefore in order to serve the customers Wesfarmers should open its retail
and departmental stores at different locations. This will help the company indirectly
interacting with the customers which will result in better understanding of customer's
expectations.
Black Hat: In this type of thinking the negative outcomes of the decisions are identified
properly and it is recognized that why it did not work? This aspect of the system helps in
identifying the flaws in the company’s process (Mohamed & Ahmed, 2016). Wesfarmers was
affected by policies which were implemented by the Federal Government of Australia in coal
mining sector. According to which company cannot extract coal mines without the
permission of the respective government of the state. At that Stage Company identified what
were the loopholes in their planning and how the emission of coal is affecting the
environment. After this, they decided to reduce the coal emission for their business units by
implementing advanced technologies in their factories. In order to sustain in the market
company should also identify more innovative technologies which can help in reducing the
emission and harm to the environment.
Yellow Hat: The yellow hat shows positive indications. All the employees and suppliers of
Wesfarmers follow all the rules and regulations formed by the company itself and

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government. This reflects that it will help them in surviving for the long term in the market
and will get the support of the government in initiating any program related to environment
or society.
Green Hat: In this type of thinking the management of the company consider whether they
must reform the policies in order to attract the eyes of the society and government.
Wesfarmers has implemented various programmes in order to prevent the environment but
yet there is huge scope for the company to implement new and innovative techniques that can
help them in reducing the exploitation of the environment. Environment-related strategies
will also help the company to improve its image in the eyes of society and government.
Blue Hat: The head of the company wears the blue hat which encourages new and innovative
ideas coming from the employees and implements those ideas into a product or policy. This
motivates the employees and retains them in the organization for longer time duration.
Wesfarmers should also conduct regular meetings involving high management and lower
management to discussing future goals and innovative ideas.
Conclusion
The above analysis of the external environment reflects that all the factors such as
Government regulatory, economic policy, consumer behavior, technological, legal, and
environmental have a significant impact of the performance of organization same as with the
Wesfarmers. Besides being the well-known company in Australia and New Zealand
Wesfarmers face various issues and challenges in the market that are specified above in the
report. All these challenges are tackled by the company very effectively which resulted in
improving the performance of the company, however, all these challenges have a future
impact on the business environment that can be solved with proper analysis and identification

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of the data relevant to the issues. The above report has used Six Thinking Hats tools which
involve 6 type of thinking; it helps in solving the issues and challenges company face. This
tool can be used in a group of people as well as by an individual.

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References
Arthur, J. & Pellerin, B.A. (2018). Environmental Scanning. Retrieved from
https://www.tesu.edu/about/ir/Environmental-Scanning.cfm
Bono, E. D. (2017). Six thinking hats. 8th edn. UK: Penguin.
Central Intelligence Agency. (2009). The CIA World Factbook. New York: Skyhorse
Publishing.
De Bono Group. (2018). Six Thinking Hats. Retrieved from
http://www.debonogroup.com/six_thinking_hats.php
Hunger Games. (2018). Lessons one De Bono’s ‘Six Thinking Hats’. Retrieved from
https://hungergames4b3.wordpress.com/1-lessons-one-de-bonos-six-thinking-hats/
Kee, Y., Lee, S.J. & Phillips, R. (2016). Social Factors and Community Well-Being. 2nd edn.
Germany: Springer.
Liu, Y. T., Zehtabchi, S. & Liteplo, A. S. (2014). Ultrasound and the six thinking hats.
Academic Emergency Medicine, 21(8), 920-921.
Management Study Guide. (2018). Environmental Scanning - Internal & External Analysis of
Environment. Retrieved from
https://www.managementstudyguide.com/environmental-scanning.htm
Mind Tools. (2018). Six Thinking Hats. Retrieved from
https://www.mindtools.com/pages/article/newTED_07.htm
Mohamed, A. S. E. & Ahmed, E. M. (2016). The Effect Of Using The Six Thinking Hats
Strategy In Teaching Health And Fitness Course On The Development Of Creative

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Thinking And The Academic Achievement Level. Ovidius University Annals, Series
Physical Education & Sport/Science, Movement & Health, 16(2). 209-2015.
Nadtochy, Y. V., Klochko, E. N., Danilina, M. V., Gurieva, L. K., Bazhenov, R. I. &
Bakharev, V. V. (2016). Economic factors and conditions for the transformation of
the education services market in the context of globalization. International Review of
Management and Marketing, 6(1S), 33-39.
Sustainability Wesfarmers. (2016). 2016 Sustainability Report. Retrieved from
https://sustainability.wesfarmers.com.au/media/1835/edited-extract-of-wesfarmers-
2016-sustainability-report.pdf
Wesfarmers. (2008). Making a difference together. Retrieved from
https://www.wesfarmers.com.au/docs/default-source/reports/2008-sustainability-
report.pdf?sfvrsn=2
Wesfarmers. (2017). 2017 Annual Report. Retrieved from
https://www.wesfarmers.com.au/docs/default-source/reports/j000901-
ar17_interactive_final.pdf?sfvrsn=4
Wiley. (2018). Corporate Management. Retrieved from
https://www.wiley.com/legacy/Australia/PageProofs/BUS_MAN/3_4/c01Large-
ScaleOrganisationsInContext_WEB.pdf

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