Environmental Analysis of Wesfarmers

THE BUSINESS ENVIRONMENT
(PART – A)

CONTENTS
INTRODUCTION .....................................................................................................................................3
TASK – 1.................................................................................................................................................3
Porters five force analysis .................................................................................................................3
Micro-environmental factors.............................................................................................................4
Strategies to counter potential risks .................................................................................................4
CONCLUSION ........................................................................................................................................5
REFERENCES ..........................................................................................................................................6

INTRODUCTION
The significance of macro and micro environmental analysis of the firm cannot be
overstated. It supports the firm in understanding and analytically analyse the strategies
required for growth and survival of the company. In this current research report, Wesfarmers
is being taken under consideration. It is one of the leading Australian organization and
dominating the retail (Hubbard, Rice, and Galvin, 2014). The company is headquartered in
Perth, Western Australia dealing in production of chemicals, fertilizers, industrial products
and lot more things. It has given employment opportunities to more than 2 lakh people all
across the nation and have greater prospect to flourish in future. Keeping this in account, the
environmental analysis of Wesfarmers will be carried out. Here, Micro-environmental factors
affecting the operations, performance and profitability of the firm will be analysed and
suitable strategies to counter potential risks will be proposed significantly.
TASK – 1
Porters five force analysis
For the purpose of adopting effective and powerful strategy, there is a need to
enhance the competitiveness of the business of Wesfarmers. For this, porter’s five force
analysis is quite needed: Threat of New Entrants – Talking in relation with Wesfarmers, it is quite popular firm
in Australia dealing in retail trace of different items like safety chemicals, industrial
and energy chemicals, hardware, production of fertilizers, insurance and many more.
With these diversities in place, it can be well attributed that the firm has higher entry
obstruction in relation with its competitors (Dobbs, 2014). The threat of new entrant is
relatively low due to the company’s brand awareness, recognition and diverse market. Bargaining power of Suppliers – The company takes resources and raw-materials
from various markets because they have different variety of products. This should be
noted that there is limited competition in the supplier market of the firm and thus, this
can prove as a main barrier for Wesfarmers, as they are majorly dependent on too
many suppliers. Bargaining power of buyers – The company performs market research on a regular
basis for comprehending the changing preferences and taste of the buyers. They also
engage in promoting sustainable approach for carrying out business that raises further
recognition to an already popular firm like Wesfarmers. Thus, it can be said that the
bargaining power of buyer is quite moderate (Wesfarmers, 2012).
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 Competitive Rivalry – Focusing towards Wesfarmers, it is one of the leading firms in
Australia and it is pointless to state that the firm is dominating the retail market of
Australia. Wesfarmers has attained competitive advantage in the region and thus the
risk of competitive rivalry is relatively low for the firm.
 Threats of Substitutes – Threat of substitute products is for the obvious reasons quite
high from the last few years. But the organization has taken into account
environmental friendly as well as energy efficient techniques for manufacturing their
products. They have also introduced high quality customer service i.e. quite sure to be
offered by the firm with competitive advantage. Therefore, the threat of substitute
products is now relatively low (Reuters, 2016).
Micro-environmental factors Customers – It is vital for the company to evaluate its stakeholders; they are being
regarded as one of the most important assets for Wesfarmers. The customers of the
firm play a vital role and thus insufficient involvement of customers can be highly
damaging for the growth of the firm. Wesfarmers carries out market research on a
regular basis and this has helped the firm in evaluating the expectation of the
customers in this dynamic and competitive business environment (Kenny, 2013). Suppliers – The Company have wide variety of products and thus they have around
18000 suppliers all across the group and all plays an important role. They have
maintained close relationship with the suppliers to have long term outcomes. There is
less competition in the supplier market and thus, this can prove negative for
Wesfarmers, as supplier will have more power
 Shareholders – Wesfarmers listen to the voice of their shareholders through number
of channels. They also carry out survey to seek feedback from them regarding any
crucial decisions. However, sometimes due to huge amount of shareholders, problems
related management may arise. In addition to this, the company also holds investors
briefings for their shareholders (Delivering value today & tomorrow, 2018).
Strategies to counter potential risks
The micro-environmental factors indirectly influence the profitability, growth,
business performance and market share of the company. But, by analysing these factors
beforehand and to devise strategies will help Wesfarmers to counter these risks and issues
significantly. The intensity of competition prevailing in the market will help the company in
assessing the market conditions and the firm can than easily devise strategies accordingly.
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For improving the base of customers and level of satisfaction, Wesfarmers is required to
invest huge amount in providing services via online channels. Further, they also need to make
improvement in retail sales through introduction of online shopping platforms (Delivering
value today & tomorrow, 2018). As suppliers of Wesfarmers have high bargaining power, it
can be mitigated by building strong relationship with them. For the purpose of delivering
responsibly sourced products to the customers, collaborative relationship with the suppliers is
the key to success. Moreover, the success and profitability of the Wesfarmers can be affected
in long run if the shareholder’s demands raise in profits. Thus, to counter this potential risk, it
is important on the part of top level management of Wesfarmers to keep better as well as
strong relations with their shareholders to have successful business (Stakeholder engagement,
2018).
CONCLUSION
It can be concluded that organisation is vitally influenced by business environment.
Micro-environmental factors are directly related to the firm though they are external. It
significantly includes the suppliers, customers, intermediaries and competition. After carrying
out competitor analysis of Wesfarmers, it was found that the company has strong position in
the Australian retail market and the firm also has huge prospect to flourish in the market in
future as well. It is important for the firm to conduct micro-environmental analysis so that it
can bring desirable improvements within the organization and can sustain in this highly
competitive and dynamic business environment.
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REFERENCES
Books and journals
Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review. 24(1). 32-45.
Hubbard, G., Rice, J. & Galvin, P. (2014). Strategic management. Pearson Australia.
Kenny, G. (2013). The stakeholder or the firm? Balancing the strategic framework. Journal
of Business Strategy. 34(3). 33-40.
Wesfarmers. (2012). Reconciliation Action plan progress report. Australia: Reconciliation
Australia.
Online references
Delivering value today & tomorrow. (2018). [Online] Available through:
<http://www.wesfarmers.com.au/>.
Reuters. (2016). Wesfarmers Ltd (WES.AX). [Online] Available through:
<http://www.reuters.com/finance/stocks/WES.AX/key-developments>.
Stakeholder engagement. (2018). [Online] Available through:
<https://sustainability.wesfarmers.com.au/our-report/stakeholder-engagement/>.
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