Identification and Analysis of Macro Environment Impacting Wesfarmers Limited

This document discusses the impact of macro environment on Wesfarmers Limited, its challenges and solutions. It identifies and analyzes various macro environmental factors such as change in unemployment, government regulations, inflation, income levels, political, economic growth, international trade policies, foreign exchange rates, legal, foreign investment restrictions, taxations, cultural and social factors. The PESTEL analysis tool is used to understand these factors and its impact on external and internal environment. The solutions for these problems are also provided.

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Business Environment
System04116
3/12/2019

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Contents
Introduction......................................................................................................................................2
Identification and analysis of macro environment...........................................................................2
Challenges and solutions.................................................................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................8

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Introduction
It is essential for every organization to analyze the environment for operating business
effectively and efficiently and achieve definite goals. As earlier discussed about
microenvironment and its factors that have greater impact on the business of Wesfarmers, the
larger company of Australia. Further, there is need to be discussed about macro environment as it
is important to analyze macro environment with microenvironment.
Macro environment is the situation, which exists in the economy as a whole. The
Wesfarmers is affected by various factors of macro environment that have greater impact on
business of Wesfarmers. The various factors that affect the business such as change in regulation
of government, inflation, political, economic growth, unemployment, income levels,
international trade policies, foreign exchange rates, legal, taxation, foreign investment
restrictions, social and cultural factors . All these factors have impact on change in performance
of business, policies, structure, growth, profitability and market share of the company.
The solutions for those problems have been provided to counter the potential risks in the
organization.
Identification and analysis of macro environment
Various macro environment factors affect the business operations of Wesfarmers:
1. Change in regulations of government: Several challenges faced by all the companies
while doing business in Australia that occur at the government level. The cumulative
tendency of governments to accept majority policies counts in contradiction of productive
economic outcomes. For instances the current changes to the Competition and Consumer
Act which covers in section 46 and to the 457 visa regulations. Following changes to the
original form of the last are welcome but the strict rules likely to divest Australia of the
skills it critically requires to operate effectively.
2. Inflation: it maintains the lesser inflationary environment that means less interest rates
and income streams. Investors looking for higher return than those, which are offered, by

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cash and bonds. They are forced to take on larger levels of risk to uphold income streams
as earnings on safer assets.
3. International trade policies: The companies of Australia are currently disrupted by the
certain rise in protectionist measures. These are the consequences of varied nature of
trade agreements. Wesfarmers is well affected by the trade obligations in the areas of
investment, environment and other public regulations.
4. Legal: In several countries, the legal background is not vigorous to keep the intellectual
property rights of the company. The Wesfarmers evaluates those rights before entering
into such markets to reduce the theft of organization’s secrets thus complete competitive
edge. They follow anti-trust law in the definite industry, health and safety law for their
employees and employers, data protection for maintaining private data of the company.
5. Taxation: Taxation policies affect the costs of the business. Businesses can pass the
corporation taxes on to the customers in higher prices. Wesfarmers does not pass
corporation taxes on to their customer in higher prices because they understand it will
also have impact on the bottom line of the business and their sustainability. Wesfarmers
have to reveal their taxes that need to pay in Australia and detail their approach to
planning of tax.
6. Social culture: The culture of society and the manner of doing things affect the
organizational culture. The shared beliefs and people’s attitude play an important part in
what way marketers at Wesfarmers understands the buyers of a markets and by what
means they create the message of marketing for such consumers of business (Wesfarmers
limited, 2018b).
Impact of above these factors on Wesfarmers:
1. Performance of business: due to change in government regulations, the performance of
business is impacted as the competition law implemented by government of Australia has
greater impact on Wesfarmers policies and the way of doing their business in the market.
The company work according to the regulations set by government and if these
regulations changes than companies majorly affected by these variations as some changes
are not in favor of companies and against the policies of the company.
2. Growth: The growth of the business depends on the taxations and understanding of the
social culture environment. If company passes their taxes on to consumers than their

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business cannot grow higher in their industry due to competitors in the market. The social
culture also have impact on growth of the business of Wesfarmers as they have many
employees with different religions which sometimes cause discrimination. All these
social cultural factors affect their attitude, opinion, and interest which impact directly the
sales and services by wesfarmers and revenue earned.
3. Profitability: The economic growth and inflation have greater impact on the profitability
of the business of the Wesfarmers. As they have to suffer the higher interest rates and
income streams. For lower interest rates and income streams, they have to maintain the
lower inflationary environment in their company. It helps in increasing profit for the
organization (Wesfarmers limited, 2018a).
Framework used for analyzing the macro environment:
PESTEL Analysis:
(Source: Kbmanage.com, 2019)

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1. Political factor: Political factor perform a vital part in identifying the issues that can have
impact on the long-term profitability of Wesfarmers in definite market. To reach to
success in such a self-motivated industry across several countries is to expand the
systematic jeopardies of political environment. Wesfarmers analyzed various issues
before investing or entering into the certain industry such as political stability, corruption
level, military invasion risk etc. (Miller, et al, 2011).
2. Economic factor: The Wesfarmers use economic factors such as growth rates, spending
of consumers etc. to estimate the growth of sectors well as organization. The Wesfarmers
considers various economic factors to conduct the PESTEL analysis such as government
interventions, exchange rates, efficiency of financial markets, economic growth,
unemployment rates, inflation rates, interest rates etc. (Fortune global 500, 2018).
3. Social factor: The culture of society and manner of doing things affect an organizational
culture in an environment. The shared beliefs and people’s attitude play a vital part in in
what way marketers at Wesfarmers will know the buyers of a definite market and in what
way they create the message of marketing for such industry customers (Kbmanage.com,
2019).
4. Technological factor: The Wesfarmers not only do the technology analysis of their
industry but they also check the quickness at which the technology interrupts an industry.
Muffled speed invests much time while acute speed disrupt may provide the company
short period to manage and be profitable. It includes various factors to understand the
following impact such as impact on product offering, cost structure, value chain structure
etc.
5. Environmental factor: Before entering into the new market or start a new business in
present market, the company needs to wisely assess the environmental standards, which
are necessary to run in those markets. The various issues that affect the environment such
as law regulating environmental pollution, weather, climate change etc.
6. Legal factor: There are some factors that Wesfarmers need to consider before making
entering into the new market. Those are health and safety law, anti-trust law, consumer
protection, employment law and data protection,

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Challenges and solutions
There are some solutions for the above factors or their impact on the business of Wesfarmers
limited:
1. Address changes in political parties: There is need to address the changes in political
parties as they are for or against their problems. They do not forget to clear understanding
about the changes in policies, taxes, regulations and political stability. It is needed to
know that how these influence the problems.
2. Consider rates: It is needed to assess the present economic landscape and how it affects
the business of Wesfarmers in the market. Before doing business, they require to consider
those rates which are set by the governments for the companies in Australia.
3. Focus on customers: The company should focus on understanding the customer because
without customer they have no business. They require to know where they live, what they
buy and what stops them from spending their earned cash for example housing prices or
unemployment rates.
4. Upgrade technologies: They need to upgrade their technology to keep up with the
demands of the customers. It is require to look at the competition what they should use to
compete in the market and how much it affect them to the greater level. (Market
Publishers, 2016).
5. Aware of laws and regulations: They are bounded by the international regulations and
trade policies. To cope up with those problems, it is essential to keep aware about the
changing laws and regulations.
6. Eco-friendliness: The Company needs to be eco-friendly for not finding themselves
under fire in the media. To become more eco-friendly they take steps now for becoming
ecofriendly. If companies are not ecofriendly then can find themselves under fire in the
media, which cause major problems and challenge for the company (OpenPR, 2018).
Conclusion
It is concluded that every company has to identify and analyze the macro environmental
factors that adversely affect the business of the company. Wesfarmers is affected by various
macro environmental factors such as change in unemployment, government regulations,

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inflation, income levels, political, economic growth, international trade policies, foreign
exchange rates, legal, foreign investment restrictions, taxations, cultural and social factors. These
factors have adverse impact on the performance, growth, policies, structure and profitability of
the business. To understand these factors and its impact on external and internal environment the
PESTEL analysis tool is used which consist of political, economic, social, technological,
environment and legal factors. The solutions for these problems which occurs due to various
macro environmental factors is given which will help to the company to counter the potential or
prevailing risks.

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References
Davidson, P. (2015). Trade policies in Australia. Retrieved from:
https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/
Parliamentary_Library/pubs/BriefingBook45p/TradeAgreements
Fortune global 500, (2018). Wesfarmers global rank history. Retrieved from:
http://fortune.com/global500/wesfarmers/
Kbmanage.com, (2019). PESTEL Analysis. Retrieved from: https://www.google.com/search?
biw=640&bih=571&tbm=isch&sa=1&ei=AMOIXKTdKsvXvASQ4qn4CQ&q=pestel+a
nalysis+&oq=pestel+analysis+&gs_l=img.3..35i39j0l4j0i10j0l4.5110.6484..6991...0.0..1.
306.2092.2-7j1......1....1..gws-wiz-img.EY-p8FFrC8w#imgrc=6URQ9KTbNMsooM:
Miller, F., Vandome, A. & John, M. (2011). PESTEL analysis. Germany: VDM Publishing.
Mvmahon, T. (2017). Effects of inflation on businesses. Retrieved from:
https://inflationdata.com/articles/2017/06/07/effects-of-inflation-on-businesses/
OpenPR, (2018). Ammonium Nitrate Explosive Market Report 2018 Companies included Orica
Limited, Dyno Nobel, Enaex, Yara International ASA, PotashCorp, Vale Fertilizantes,
Wesfarmers Limited, JSC Acron, MAXAMCorp Holding, S.L., UralChem and Others.
Retrieved from: https://www.openpr.com/news/1265332/Ammonium-Nitrate-Explosive-
Market-Report-2018-Companies-included-Orica-Limited-Dyno-Nobel-Enaex-Yara-
International-ASA-PotashCorp-Vale-Fertilizantes-Wesfarmers-Limited-JSC-Acron-
MAXAMCorp-Holding-S-L-UralChem-and-Others.html
Wesfarmers limited, (2017). Wesfarmers annual report 2017. Retrieved from:
https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-
annual-report.pdf?sfvrsn=0
Wesfarmers limited, (2018). Wesfarmers annual report 2018. Retrieved from:
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-annual-
report.pdf?sfvrsn=0

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Wesfarmers limited, (2018, B). Wesfarmers sustainability report 2018. Retrieved from:
https://sustainability.wesfarmers.com.au/our-principles/governance/robust-governance/
governance-policies/
Wesfarmers.com.au. (2018, A). Wesfarmers sustainability report 2018. Retrieved from:
https://sustainability.wesfarmers.com.au/our-report/about-wesfarmers/