Porter's Five Forces Model for Wesfarmers

This presentation discusses the external environment of Wesfarmers, a renowned Australian corporation, using Porter's Five Forces Model. It analyzes the threat of new entrants, substitute products, power of suppliers and buyers, competitive rivalry, and strategic factors of Wesfarmers.

Porters five forces
model

Introduction
Wesfarmers is a renowned Australian corporation that was
incorporated in 1914 and headquartered in Perth, Australia.
Wesfarmers has diversified business operations dealing in liquor,
convenience stores, hotels, and supermarkets and departmental
stores.
The presentation carries out an impressive discussion of
Wesfarmer's external environment. Mainly, the Presentation has a
discussion of Porter`s five forces model.

Porter five forces model
(Source: Tutorialspoint,
2019)
While creating the business level strategy, Wesfarmers undertake to understand the
external forces that will determine the profits.
Porter`s five forces model argues that all the organisations in the industry faces same
forces which ultimately affects the profitability.

Threat of New Entrants
• If the industry attracts high returns consistently then the
probability of new firms in the market increases. Easy
entering in the market depends on the industry structure.
• For example- In the retail industry, the competition is
strong and organisation such as wesfarmers hesitates to
strive for space on shelves.
• Renowned new entrant named “Aldi” has affected the
profitability. Being a German technology enabled company
“Aldi” has hampered the competitive advantage of
Wesfarmers and Woolworth.
• Although wesfarmers has high obstruction of existing
competitors and the threat of new entrants is low.

Threat of Substitute products
• Availability of such product that can be purchased instead of
industry`s product that performs almost same function.
Switching cost and potential of customers to compare the
quality, price and performance that can affect the power of
substitute goods.
• Woolworth has a well maintained portfolio of products which
are offered by company which gives opportunity to
customers to grab and access from huge variety.
• Wesfarmers is adopting pricing strategies at global market
whereas Woolworths apply differentiation strategies to
attract the customers.

Power of suppliers
• Suppliers provide input to industry and these can be raw
material, financial support, assets and labour. For example-
if the retail industry have substitute inputs than many
manufacturing companies maintain retail outlets on their
own. Therefore, supply dreads of losing the contract with
the giant companies can lower the bargaining power of
suppliers.
• The supplier power depends on brand name of supplier.
Another example can be PepsiCo and British American
tobacco are two strong supplier in the market. When
considering the brand specification, the capacity of
bargaining power of suppliers for supermarket lies between
high to moderate.

Power of buyers
• The Australian supermarket industry offers a wide range of
products which have lower switching cost among the retail
stores.
With the growing number of retail stores, customers can avail from
wide range of products as stores have also customised as per the
target market (The Guardian, 2016).
• Frequently, Wesfarmers conduct a market that helps them to
understand expectation and market trend of buyers. The
company promotes a sustainable approach which ultimately
fetches attraction and recognition to renowned company.
• The power of buyers to bargain is moderate according to the
strategies of Wesfarmers that enforces considerable discount
offers for the daily customers.

Competitive rivalry
• Although, Wesfarmers enjoys the brand name
among the renowned supermarkets in Australia
but it is reported that Wesfarmers dominates the
supermarket industry.
• Whereas, Woolworth suffer from high
competition especially Wesfarmers due to
collaboration of Coles as its subsidiary.
• Wesfarmers enjoys an competitive advantage in
retail supermarkets. Competitors such as
Woolworth, Aldi and other emerging competitors
strives to establish market share (Mitchell,
2016).

Wes farmer's strategic factors
Strength
• Wesfarmers has a large number
of stores and has large
workforce of over 200000. The
main aim of Wesfarmers is to
maintain worth return to the
shareholders (Wesfarmers,
2018)
• Wesfarmers maintains a
relentless focus on providing a
safe workplace (Wesfarmers,
2017).
Weakness
• Wesfarmers is not
successful to merge firms
that have different work
culture.
• Due to the uncommon
inflow of funds into the
private equity, Wesfarmers
is not that big on a global
scale.Threats
• Digital disruption and
operational structures have
damaged Wesfarmers’ brands
(Unicef, 2015).
• Loss of critical supply inputs or
infrastructure, IT systems and
loss of data security, integrity
and also business interruption
which is arising from industrial
disputes, work stoppages and
Opportunities
• To enhance quality, service and
experience benchmarks across
stores.
•Wesfarmers is a conglomerate
model which allocates its capital in
a proper manner that has
produced superior long-term
returns for investors (Wesfarmers,
2017)

Recommendation
• When looking through the shareholders point
of view, the company provides serves
approximately 9.8 percent to the equity
shareholders.
• Wesfarmers should adopt and promote
promotional strategies that can also involve
different culture. Company should start
undertaking to execute CSR activities.

Thank you

References
Tutorialspoint, (2019) porters-5-forces. Available on:
https://www.tutorialspoint.com/articles/porters-5-forces [Accessed on 12/01/19]
Wesfarmers (2017) Annual Report. [online] Available from:
https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-
annual-report [Accessed 11/01/19].
Wesfarmers, (2014) AGREEMENT TO SELL INSURANCE BROKING AND PREMIUM FUNDING
OPERATIONS. [online] Available from: https://www.wesfarmers.com.au/docs/default-
source/asx-announcements/agreement-to-sell-insurance-broking-and-premium-funding-
operations.pdf?sfvrsn=0 [Accessed 12/01/19].
Mitchell, S. (2016) Woolworth’s credit rating, profit forecasts cut as sales continue to slide.
Available on: https://www.smh.com.au/business/companies/woolworths-credit-rating-profit-
forecasts-cut-as-sales-continue-to-slide-20160504-golpuc.html [Accessed on 11/12/18]
The Guardian, (2016) Woolworths to cut 500 jobs and close stores across Australia.
Available on: https://www.theguardian.com/business/2016/jul/25/woolworths-to-cut-500-
jobs-and-close-stores-across-australia [Accessed on 11/12/18]
Unicef (2015) SWOT AND PESTEL: Understanding your external and internal context for
better planning and decision-making. [online] Available from:
https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf
[Accessed 22/05/18].