Competitive Environment and Corporate Level Strategy for Wesfarmers Limited

This report analyzes the competitive environment and corporate level strategy for Wesfarmers Limited, a highly diversified corporation in Australia. It includes a PESTEL analysis, SWOT analysis, and recommendations for future strategic mergers, acquisitions, or downsizing.

This report aims to analyze the
competitive environment and
corporate level strategy for
Wesfarmers Limited
Investigative,
Authentic Learning
Research
Assignment
Kevin Raju (18829905)
Subject Code: MGT5STR
Subject Coordinator: Dr. Anjum Chaudhry
Subject Facilitator: Dr Jacinta Ryan
Submission Date: 09th April 2018

1
Table of Contents
INTRODUCTION ....................................................................................................................................... 2
CORPORATION IDENTIFICATION .............................................................................................................. 3
DIVERSIFICATION ..................................................................................................................................... 3
CORPORATION REVENUE CENTRES ......................................................................................................... 4
SOURCE OF SUSTAINABLE COMPETITIVE ADVANTAGE ........................................................................... 5
EXTERNAL ENVIRONMENT ANALYSIS ...................................................................................................... 9
PESTEL – AUSTRALIA ............................................................................................................................... 9
POLITICAL ............................................................................................................................................ 9
ECONOMIC ........................................................................................................................................ 10
SOCIO-CULTURAL .............................................................................................................................. 10
TECHNOLOGY .................................................................................................................................... 11
ENVIRONMENT ................................................................................................................................. 11
LEGAL ................................................................................................................................................ 12
SWOT ANalysis ...................................................................................................................................... 13
MERGER, ACQUISITION AND DOWSIZE ................................................................................................ 14
DEFINITIONS AND RECOMMENDATIONS .......................................................................................... 14
CONCLUSION ......................................................................................................................................... 15
REFERENCES .......................................................................................................................................... 16
APPENDIX A ........................................................................................................................................... 18
APPENDIX B ........................................................................................................................................... 22

2
INTRODUCTION
With the new trends emerging in the international and domestic markets, corporations
require outstanding strategies and strong structures to face challenges on new requests.
Therefore, it is of great importance that organizations can find ways to extend and
understand its products and services according to the new market trends (Jensen and
Sandström, 2011). However, when business units of organizations fail to reach their
projected performance, it is then when strategic directions should be reviewed and redirected
to approach all the factors affecting it. In other words, business units individually need to
develop strong and competitive strategies to stay competitive to its internal and external
challenges in order to constantly achieve customer satisfaction (Wiersema and Bowen,
2007). Business units characterizes an overall impression of a diversified corporation.
Consequently, corporations can then redesign their strategy based on the performance of
the business unit, with decisive actions such as merging, acquiring, downsizing or selling in
order to recover or respond to the market and gain greater market share (Haleblian et al.,
2009). This report aims to analyze the competitive environment and corporate level strategy
for Wesfarmers Limited. The research is based on scholarly journals and secondary sources.
Section 1 will aim to identify the corporation with a diagram to represent the relationship of
the strategic business unit (SBU) to the corporation. This report also aims to provide the
summary for the business unit which holds the greatest revenue along with the study of its
sustainable competitive advantage. VRIN model will be used to analyze the source of
competitive advantage. PESTEL analysis will be conducted based on the industry they are
in, followed by a SWOT analysis. Future strategic merger, acquisition or downsize will be
recommended based on the all the analysis and the report will be finally concluded.

3
CORPORATION IDENTIFICATION
“Wesfarmers Limited (Wesfarmers or 'the group') is engaged in diverse business
operations covering supermarkets, liquor, hotels and convenience stores; department stores;
home improvement and office supplies; coal mining, chemicals, energy and fertilizers; and
industrial and safety products. The group classifies its business operations into eight
reportable segments: Coles; Home Improvement; Kmart; Target; Officeworks; Resources;
Industrial and Safety (WIS); and Chemicals, Energy and Fertilizers (WesCEF). Wesfarmers
primarily operates in Australia, New Zealand and the UK. It is headquartered in Perth,
Australia” (MarketLine, 2017). Strategic Business Units (SBU’s) of this corporation will be
studied and discussed in this report.
DIVERSIFICATION
“Diversification is a corporate strategy which seeks to increase profitability through make
and sale of new products or product line in the new markets having no interface with the
existing market of company’s existing products” (Rumelt, 1998). Wesfarmers is a highly
diversified and successful corporation. It employees more than 200,000, making it Australia's
biggest private sector employer. It ranks amoung the top-ten companies in Australia with
businesses in retailing (Coles, Kmart, Target), home and office supplies (Bunnings,
Officeworks), insurance, resources (coal mines), chemicals, energy and fertilizers (includes
plastics), industrial safety, and more. The diagram below shows all the SBU’s relation to
Wesfarmers corporation:
Diagram 1: SBU’s relation to Wesfarmers corporation

4
CORPORATION REVENUE CENTRES
Wesfarmers Limited presented a total revenue of AUD 68.4b at 30 June 2017 (Market
Line, 2017) and the business unit, Coles generated AUD 39.2b (57.29% of the total revenue)
and an increase of which shows that the business unit Coles, has been generating the
greatest revenue compared to the rest and will be considered as the strategic business unit
of the corporation. It was followed by Home improvement generating AUD 13.6b (19.84% of
total revenue) (Wesfarmers Limited, 2017). However, the difference in the rate of return on
capital employed (ROCE) decrease for both Coles and Home Improvement was more than
double with a decrease of 1.5 and 3.6 percent respectively. This shows that Coles could
sustain the impact on the decrease in ROCE better than Home Improvement. However,
Chart 1 shows the segment result (EBITDA) of different business unit, which is a decrease
comparing to other BU’s; projecting Coles to be a weaker BU to the corporation when
comparing it to their main competitor Woolworths who broke its 7.5-year losing streak to beat
arch rival Coles sales growth (Low, 2017). This suggests that Home Improvement has a
higher segment growth in FY2017 compared to FY2016 and Coles has hit the lowest result
in FY2017 after FY2013 while the rest of the BU’s projects a steady increase.
Chart 1: Segment results FY2013 to FY2017 (Annual Report, 2017 pp. 102)

5
SOURCE OF SUSTAINABLE COMPETITIVE ADVANTAGE
The ability gained through attributes and resources to perform higher through the ability gained throu
same industry or market is termed as competitive advantage (Porter, 1985). Organizations who are conside
creating strategy when the strategy is not followed by its current or potential competitors; and when competi
its high-output strategy, it is termed as sustainable competitive advantage (Barney, 1991).
The four criteria of sustainable competitive advantage are; valuable capabilities that helps a
opportunities, rare capabilities that are not owned by the competitors, costly-to-imitate capabilities that can h
and ambiguous cause and non-substitutable capabilities that has no strategic equivalent (Hitt, Ireland and H
below table shows the outcomes from combinations of the criteria for sustainable competitive advantage in r
contracts and agreements, acquisitions/mergers/takeovers that has been derived from (MarketLine, 2017).
Competitive
Advantage
Description Is the
Capability
Valuable?
Is the
Capability
Rare?
Is the
Capability
Costly to
Imitate?
Is the
Capability
Non-
substitutab
?
2017
Plans/
Strategy
In June, the company planned to invest
in Bunnings Warehouse stores across
the UK and Ireland over the next three to
five years with GBP500 million.
Yes No No Yes

6
2016
Contracts/
Agreements
Coles entered into a 10-year agreement
with Citi, one of the leading global credit
card providers, to distribute Coles
branded credit cards. According to the
terms of the agreement, Coles will
continue to distribute credit cards under
its own brand.
Yes Yes No No
Plans
/Strategy
The group announced that it is
evaluating all strategic options for the
resources business with a view to
maximize its shareholder value.
Wesfarmers is looking into a wide range
of options, including operational and
divestment.
Yes Yes Yes Yes
Acquisitions/
Mergers/
Takeovers
The group acquired Homebase, one of
the largest home improvement and
garden retailers in the UK and Ireland,
from Home Retail Group.
Yes No No Yes

7
2015
Acquisitions/
Mergers/
Takeovers
Wesfarmers acquired a 13.7% interest in
Quadrant Energy Holdings
Yes Yes Yes No
2014
Acquisitions/
Mergers/
Takeovers
The group’s Industry segment acquired
the Workwear Group of Pacific Brands.
Yes Yes Yes No
Contracts/
Agreements
The group's Resources segment,
Wesfarmers Resources, agreed to
acquire Mineral Development Licence
162 (MDL 162) from Peabody Energy
Budjero, an Australian subsidiary of
Peabody Energy Corporation, a US-
based private-sector coal company
Yes Yes Yes Yes

8
2013
Contracts/
Agreements
WesCEF division signed an agreement
to sell its 40% interest in the Western
Australian-based industrial gas producer
and supplier, ALWA, and its associated
interest in the Kwinana Industrial Gas
Joint Venture (KIGJV) to Air Liquide
Australia (Air Liquide). On completion of
the transaction, Air Liquide would own
100% of ALWA and KIGJV.
Yes Yes Yes Yes
Wesfarmers agreed to sell the Australian
and New Zealand underwriting
operations of its insurance division to
Insurance Australia Group, an insurer
with a portfolio of brands in Australia, for
AUD1,845 million
Yes Yes No No
Coles formed a property joint venture
with ISPT, a leading Australia-based
property fund manager. As per the terms
of the agreement, ISPT would acquire a
75% interest in an initial portfolio of 19
Coles-owned shopping centers for about
AUD400 million.
Yes Yes No No

9
EXTERNAL ENVIRONMENT ANALYSIS
Operating environment of a firm directly or indirectly corelates to its external
environment. They can derive conclusions that can lead to a more accurate strategic plan
(Ketchen Jr and Shook, 1996). Areas of opportunities and skills can be identified and further
explores the opportunities and threats (Yüksel, 2012). The strategic decision can be
determined as the external analysis of the organization. The external analysis can provide a
better insight on the performance of the organization can be better determined when having a
clear insight on the external analysis (Santini, 2013). Developing internal skills is an integral
part of sustainable competitive advantage and knowledge of the external environment aids
core competencies and new capabilities (O’Regan and Ghobadian, 2004)
Porter’s PESTEL model was discovered to be used as a tool to analyze the external
landscapes of environment in different aspects such as; political, economy, socio-cultural,
technology, environmental and legal (Cook and Barry, 1995). The political aspect analyses
the factors such as political system stability, relations with different regions, employment laws
and trade regulations (Yüksel, 2012; Shabanova et al., 2015; Srdjevic et al., 2012). The
economic aspect analyses factors such as; foreign investment, inflation, unemployment,
energy cost, interest rate, long-term and short term impact on economic growth (Shabanova
et al., 2015) The social cultural aspect analyses the social, cultural and demographics that
includes lifestyle and education (Atighechian et al., 2016). The technology aspect analyses
the areas where the corporation may have various positive and negative impacts on factors
such as infrastructure, infrastructure activities, technology investment policies, and innovative
technology (Aharonson and Schilling, 2016). The environment aspects analyses on the idea
of the future sustainability of an organization, which also includes opportunities to tourism,
weather, geographical conditions (Jondle, Ardichvili and Mitchell, 2013). If the corporation
operates in multiple countries, it should analyze legal aspects and factors such as consumer
rights, judicial system, laws and regulations of the operating country (Yüksel, 2012).
PESTEL – AUSTRALIA
POLITICAL
In order to adjust with the changes made by government relating to tax and other
regulations as necessitated by the Australian Competition and Consumer Commission
(ACCC), political policies and laws are required. Every state of the country have their specific
laws which makes it necessary to recognize the respective differences while operating in
different states. Similar to the case of USA and UK, Australia also has a variety of legal,
regulatory and political practices.

10
The interference of the federal government have been witnessed a number of times
in order to reduce the entry barriers and giving the consumers with more power in
comparison with the two major supermarkets. When 20 cents discounts were being provided
to the customers by Coles Express which was subsequently misleading the consumers,
there was an intervention of the government. The changes introduced by government such
as the $5 note resulted in significant costs for Coles due to the non- recognition of monetary
value by self- checkout machines.
The ban on plastic bag enforced by the South Australian Government on all Coles
Departmental Stores and Supermarkets necessitated the purchase of plastic bags by the
customers in case they do not carry their own environmental friendly shopping bags. This ban
on plastic shopping bags was not imposed by other states in Australia.
Refer to Appendix A for more information on political environment.
ECONOMIC
There is low unemployment rate in Australia which can further be reduced with the
help of increasing store openings in Australia. The interest rates and inflation rate will
contribute towards the buying power of the customers.
A vital role is played by trade and investment in the economy which has strong
relationships with various countries for the purpose of ensuring the effective maintenance of
partnerships and trade agreements. The exchange rates and taxes are considered to be
important as most of the goods and products are imported. There is no volatility in the
corporate tax rate which remained steady at 30% after 2006 (International Monetary Fund,
2017). The goods and services in Australia suffer from fluctuating tax rates from the past 10
years which have brought uncertainty to businesses. There is a stable trend in the taxes on
international trade in Australia with a maximum of 2.52% and a minimum of 1.81% in the last
year (International Monetary Fund, 2017).
Refer to Appendix A for more information on different economic environment.
SOCIO-CULTURAL
The growth in Australian population has led to the increased demand for household
goods. (Australian Bureau of Statistics, 2017). Increased demand for fat free foods and gluten-
free foods has led to the requirement of adjustment in shelving within aisle for catering the
shifting demand within business units that are responsible for selling food products.

11
Bunning made sustainability commitments by introducing campaigns and offering
financial assistance. This includes garden workshops, project assistance and sausage sizzles
and makeovers.
Priority is given to training and development programs for ensuring strong culture
within organization and safe working environment for employees. Departmental stores such
as Room to Read and Salaam Baalak are heavily invested by various community
organizations overseas which focus on assisting children and families at the times of need.
Refer to Appendix A for more information on socio-cultural environment.
TECHNOLOGY
The combination of digital and retail formats is allowed by business units into one
which allows the organization to target larger market which in turn will also provide the
customers with online shopping platform. Regular servicing, updating and maintaining is
required by equipment that are utilized which includes self- checkout machines, computer
units and testing systems. Performance of the business is impacted by the instant
communication between consumers and business through social media.
Online shopping experience is provided to the customers by Coles which has changed
the way in which goods are provided and delivered to the customers. Various electronic
products and devices are offered by Bunnings which is important to the existing revenue.
The Automatic Technology (ATA) performs its work with D&D Technologies for producing a
system with the help of which remote access is provided to the garbage gates and doors.
Sales can be improved through technological advances in products and equipment. The
relationship of Bunning will get influenced with suppliers, employees and customers by
technological innovation as it will improve transactions and communications.
Refer to Appendix A for more information on different technology environment.
ENVIRONMENT
Certain practices have been listed by Australian Government within retail industry
such as process for waste management, use of plastic bags, sustainability reporting and
recycling (department of industry and innovation). Environmental impacts are managed by
Bunnings within its business operations.
Energy usage levels are reduced by Coles at specific petrol stations, supermarkets
and stores for contributing to sustainable environment. This includes changed refrigeration
type for reducing energy, solar panels usage and use of LED lights. The reduction in
transportation trucks assist in contributing cleaner air.

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There is very limited impact of the products of departmental stores on the
environment. ‘Better Together’ program focuses on environment, people and working
conditions. Global environmental danger is contributed by internationally sourced products
and air pollution is contributed by transportation of goods.
Refer to Appendix A for more information on different environmental factors.
LEGAL
Success of an organization depends on the wellbeing and health of the individuals.
The implementation of Health and Safety Standards is necessary across all stores along with
the entitlement of the employees to the policies of Fairwork Australia. The change in laws
relating to Tobacco and Alcohol provides that it can only be used by individuals over 18 years
of age. All the stores across the world has to adjust due to the change in laws of displaying
tobacco.
The laws and regulations applicable to the wholesale and retail trade industry must
be complied by Bunnings in electrical products, building supplies, hardware and floor
coverings. Codes and safety standards are compulsory to be followed by Bunnings as
regulated under The Australian Competition and Consumer Commission (ACCC). The
products imported by Wesfarmers are subject to licensing and permits under the Australian
Business License and Information Service (ABLIS). Australian national Fairwork and Health
and Safety laws are required to be complied by Wesfarmers for all employees. Retail and
wholesale trade industry also suffers from the application of taxation rules such as GST for
export and imports.
Refer to Appendix A for more information on different legal factors.

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SWOT ANALYSIS
Strengths
Strong focus on Coles business boosting
the group's top-line growth
Investments in Bunnings
Strategic options for maximizing
shareholder options
Diversification of portfolio through the
acquisition of Quadrant Energy
Energy usage levels are reduced by Coles
contributing cleaner air
Weakness
Significant reliance on the Australian
market
Product recalls could affect the group's
brand image
Opportunities
Australian national Fairwork and Health
and Safety laws benefits the wellbeing of
the workers
The combination of digital and retail
formats in retail industry boosts
performance
Priority is given to training and
development programs for ensuring strong
culture within organization and safe
working environment for employees.
Threats
Rational changes in the legal, regulatory
and political environment.
Labor costs are rising every year

14
MERGER, ACQUISITION AND DOWSIZE
Definitions and Recommendations
Downsizing can be defined as the reduction in the operating costs of an organization
by way of reducing the number of employees (Nelissen and van Selm, 2008). It occurs due
the reason of deficient performance or poor economic conditions. It also occurs due to high
expenditures and costs suffered by the company which necessitates reducing the number of
employees so that costs can be lowered, and profitability can be maintained. It can also be a
result of merger between two companies which requires reduction in the operating costs by
reducing its employees (Brush, Dangol and O'Brien, 2012)
The terms mergers and acquisitions are considered as synonyms but have different
meanings. Merger takes place when two companies are combined into one entity or when one
company buys another company (Bris and Cabolis, 2004).
Acquisition always involves a purchase. The takeover of a company is also called
acquisition when the existence of the acquired company comes to an end and a new owner is
established (Itoh and Morita, 2016). Merger takes place between two companies which are of
same size and agrees to proceed as a single newly formed company instead of operating with
different owners. The manner of purchase also constitutes a difference between two legal
figures. It means that hostile purchases are called acquisition and negotiations made in
peaceful environment are called mergers (Eckbo, 2013)
Various recommendations have been made for future downsizes acquisition or
strategic merger of Wesfarmers Limited business units. The company should analyze the
reasons and improvements that can be obtained from downsizing, expanding or selling. Firstly,
synergy should be looked for the company which will improve the performance and reduce
the costs by way of combining business activities (Kumar and Bansal, 2008). Secondly,
merger and acquisition will provide benefit of diversification to Wesfarmers which in turn will
reduce the impact of industry performance on the profitability of Wesfarmers (Arikan and Stulz,
2016). Thirdly, the opportunity of expanding the market share is provided by merger by
purchasing the business unit of the competitor for a price. The products and customers are
kept by the acquired business unit (Hoberg and Philips, 2010). Some business units of
Wesfarmers such as Home Improvement through which great profits were obtained on 30 th
June 2016 under Bunnings brand and Chemicals Energy and Fertilizers could obtain benefits
of acquiring and merging with the distributors or suppliers. Costs can be eliminated with the
help of buying them as the margins can be saved that were added to the costs by the supplier,
known as vertical merger (Fronmueller and Reed, 1996). Some information should be taken

15
into consideration at the time of taking the decision related to merger and acquisition. As an
investor in a company, Wesfarmers should consider the benefits arising from the purchase.
First step for consideration is valuation. The target company will be valued as high as possible
from the seller’s end and at the lowest price possible from the buyer’s end. Therefore,
knowledge regarding various methods should be obtained in order to make the proper
assessment of the target company which includes replacement cost, comparative ratio and
discounted cash (Ebner, 2016). Second step includes proceeding with an offer. After decision
regarding merger and acquisition is taken by top managers, the starting of the deal should
take place with tender offer. At this stage, it is recommended that Wesfarmers should function
with investment bankers and financial advisors. The deal ends when an offer is made by both
parties that satisfy both parties after negotiation of the demanded amount (Lai and Van Order,
2014). Scrutiny is also faced by some companies from regulatory bodies and this should be
understood by the company. This happens in cases when big size of the companies enables
them to create monopoly or a threat in the industry (Collan and Kinnunen, 2011). After the
deal is finalized by the companies, payment is made through cash, stock or both.
Refer to Appendix B to find the recommendation of merger, acquisition or downsize of
different business units.
CONCLUSION
Wesfarmers as a corporation have been able to sustain their competitive advantage
through various unique strategies implemented through their business units including
strategies that include low-cost and diversification of its products. Hence it has made itself
competitive to its other competitors in the same industry. The revenue of the strategic
business unit, Coles is the highest among all the other business but has a considerable low
profit percent. The VRIN model analyzed what internal factors are valuable, rare, cost-to-
imitate and non-substitutable for strategic options to maximize shareholder options. The
PESTEL analysis could define the political, economic, socio-cultural, technology, environment
and legal environments of the corporation to remain sustainable in the highly competitive
market. The major strength of the corporation is its ability to strengthen the focus on Coles
business as boosting the group's top-line growth. The major weakness will be that it is
significantly reliable on the Australian market. New technological advancements has given an
edge to find new opportunities and the corporation should be aware of the increase in labor
costs every year as it employees a large number of workers. On the whole, it is recommended
for Wesfarmers to downsize Coles, diversify and acquire new product lines, and merge with
partners in different parts of the world.

16
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APPENDIX A
PESTEL Analysis
Political:
The changed government budget led to the reduction in sales due to its impact on the
students. The sales number also gets impacted as a result of changes in the visa conditions
for international students. The regulations of ACCC guide the Officeworks which lead to the
promotion of fair trading practices and the legislations of competitive behavior.
The industrial sector is monitored by the government as there are a number of rule and
regulations that must be upheld by the organizations for the purpose of ensuring the safety
and wellbeing of every employee. There is stability in the political government which assists
in providing a desirable market for the businesses.
Diverse rules and regulations are encountered by the commercial property profiles in every
state. An agreement has been signed by Wespine with WA Government for the purpose of
ensuring that tools required to saw trees are controlled by the law put forward by the particular
state.
Economic:
A strategy has been put in place by the departmental stores for the purpose of ensuring fair
wages and long-term employment opportunities. Approximately 1300 people have been
employed by Kmart Automatic and Services that contributes towards the economy in reducing
the unemployment rate. Increase in units sold and transactions take place with the increase
in number of stores opened. The products of departmental stores are sourced internationally
and locally which assist in creating overseas jobs.
There is a constant change in Australian economy due to the fluctuations in energy cost,
foreign investment, interest rates, employment rates and economic growth. The prices of
goods and services are also affected by the economic conditions. Officeworks is capable of
providing low costs to the customers by way of sourcing these goods internationally. The
entrance of Amazon within the retail business has become a challenge for various retail
businesses. An Initial Public Offering has been already held by Officeworks for discussing the
future of Officeworks with stakeholders.
Multiple businesses are operated by WesCEF in Australia which in turn provides employment
to nearly 1200 people. Skill development and job opportunities are facilitated by ‘Aboriginal
Engagement and Employment Plan’. Community contributions equivalent to $310,000 have
been provided for ensuring the support to councils and local programs. $30,000 was donated
to WA Farmers’ Esperance Fire Appeal for contributing to bushfire damages to businesses.

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Merchandise is supplied by Workwear group to large overseas organizations which have the
capability of positively influencing the Australian economy. Specialized clothing to emergency
and defense service are also provided by Workwear Group.
Financial services for other businesses are the center of focus of Gresham Advisory Partners
Limited which assists the Australian economy. Long-term relationships have been maintained
by Gresham with advisors and clients present in different international and domestic
locations. Overseas relations are based in US and Europe. The commitment of the
organization to constructing sawmill is ensured by the agreement of Wespine with WA
Government that have the capability of increasing sales and positively impacting economies
of scale.
Socio-cultural:
Officeworks participates in school activities and charities that focus on the significance of
environment and recyclable cartridges. Importance is given to the health and safety of
individuals which is reflected from the annual report by the reduced number of injuries in
workplace. Leadership roles and team diversity are equally offered to women in the
organizations along with providing indigenous employment programs for increasing
opportunities.
Contributions are made by WesCEF (safe work programs at Wesfarmers) to sponsors,
community organizations, sporting clubs and local colleagues. WesCEF has sponsored
STEM (science technology, engineering, mathematics) project which is a big community
investment. Councils and local programs are supported by the community contributions worth
$310,000. $30,000 was donated to WA Farmers’ Esperance Fire Appeal for contributing to
bushfire damages to businesses. Merchandise is supplied by Workwear group to large
overseas organizations which have the capability of positively influencing the Australian
economy. Specialized clothing to emergency and defense service are also provided by
Workwear Group.
Success of the business is due to its employees for which their safety is important. The
improved safety standards have led to reduced injuries in the annual reports of Wesrfarmers.
Active involvement of Gresham Advisory Partners Limited along with its employees has been
witnessed in foundations, charities and community activities. Disaster relief is addressed by
Gresham nationally and overseas.

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Technology:
IMB POWER 7 Technology has been implemented by Bunnings in 2011 for sustaining the
expansion and growth in other countries. It will facilitate the communication of Bunning in an
effective manner with UK, Ireland and New Zealand at any time. The benefits of technology
to business have been identified with Bunning and therefore it has committed to invest in IT
infrastructure for ensuring its competitive advantage.
RFID card systems have been introduced for all stores which assist in eradicating long
queues. Website has been launched by Officeworks which allows the customers to purchase
the products online resulting in high inventory turnover. A dedicated IT team has been
installed by Officeworks that ensured functional security across platforms.
Constant maintenance and updates are required for construction building by Wespine’s
machinery. For ensuring smooth production, regular maintenance of machinery and
equipment is required for completing mining tasks.
Environment:
Commitments relating to reduction in carbon dioxide emissions and improvement in energy
efficiency are essential for Officeworks. Recyclable cartridges collection works alongside with
Planet Ark and department of industry and innovation. BringITback program works alongside
recycling collection of computer equipment. carbon intensity of products and waste recycled
percentage is decreased by the recycling programs. Programs lead to the identification of
waste reduction and recycling importance by the team leaders in the organization. Energy
monitoring systems installation and implementation of LED lights in stores has contributed
towards the environment. Officeworks make the use of paper products that are 100 percent
recyclable.
Chemical production is not sustainable for environment. Wellbeing and health of the
individuals are affected by all chemicals as they are toxic and harmful. For screening and
decking of products, the manufacturing of wood-plastic composite material is emphasized as
they are environmental friendly. Wood- plastic is better substitute of timber. Pine is created
by Wespine which is environmental friendly while producing timber for constructing building.
Sustainable business is operated by BWP Trust.

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Legal:
Fire and Building Safety has been committed by Kmart in Bangladesh for enhancing the
working conditions and empowering its workers. For items such as glues, knives and scissors,
age restrictions have been implemented. Ethical sourcing audit program and group- wide
ethical sourcing policy have been implemented into organizations for decreasing the risk of
practices that are unethical. Regular inspections are conducted by ACCC for ensuring the
implementation of Fair Trading in all businesses in Australia.
Hazardous and dangerous nature of working in industrial industry necessitates the
requirement of insurance for employees and organization. Extra precautions are required for
the health of employees when they are surrounded by chemicals all the time.
Portfolio management of Wesfarmer is focused on the diversification of its portfolio across
various markets and industries along with making the identification of growth opportunities
and business operations that maintains sustainability. Wesfarmers operates in various
sections such as household consumables and retailing groceries. Liquor is also retailed
through the chain of liquorland, 1st choice stores and Vintage Cellars. It also has convenience
stores with petrol outlets through the joint venture of petrol retailer Shell and Coles Express.
Coles also has section for financial services with insurance services and credit cards and
operates in various hotels under the brand of Spirit Hotels (Wesfarmers Limited, 2017). Coles
adopts a combination of differentiation and cost leadership strategy. The cost leadership
strategy of Coles ensures the value offered to the customers at lowest possible costs
(Wesfarmers Limited, 2017). Its prices have been lowered by the ‘Down Down’ marketing
campaign in comparison with the key brands due to the adoption of superior supply chain and
activities that provide economies of scale. The differentiation strategy is brought by Coles
through its brand image which has been developed over decades with the introduction of
various products in the market. However, same products are being induced by the
competitors that offer fresh food products with high quality as a result of which it is not able
to gain competitive advantage. Therefore, both cost leadership and differentiation strategy
has been integrated by Coles in order to provide different products at lowest possible prices.
In other words, superior quality is offered by Coles to its customers through innovative ways
at lowest costs.

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APPENDIX B
Recommendation of merger, acquisition or downsize of different business units
Downsize of Coles
The definition of downsizing provides that the reason behind the downsizing of a company
include its deficient economic performance and the need for reduction of costs and
maintenance of profitability. The costs and expenditure of Coles can be effectively reduced
by downsizing strategy and it will affect profit of Coles. In FY17, highest revenue was earned
by Coles for Wesfarmers Limited with AUD 39.2b but still it was not as profitable like the
other business units such as Kmart, Home Improvement or Chemicals Energy and
Fertilizers. The corporation has made an investment of AUD 21.14b on Coles assets that
can earn a profit of AUD 1.61b while the profits obtained by Home Improvement is AUD 1.24b
with revenue of AUD 13.58b and assets of AUD 6.61b which imply that 9.16% profits with
respect to revenue as compared to Coles that account for 4.10%. For reducing the gap
between profits and revenue, Coles is advised to downsize itself. The costs and expenditures
of Coles are required to be reduced that are before profit and after revenue. For increase
profit and maximizing efficiency, it is advised to restructure the company. The downsizing of
Coles could increase its profitability. The costs and expenditure of industrial and safety
business units are required to be reduced due to the fact that its profit as % of revenue is
6.4%, higher than Coles.
Source: IBIS World, 2017

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Businesses and resources that the corporation can be downsized
To generate profits is the prime objectives of a business. But when there is deficit of
profits over the years without any change, selling or closing the business is an option that can
be considered. On June 2017, the business unit Target has suffered a loss of AUD 10.84m
and has been declining profits over the years. In fiscal year 2016, this business unit was
ended with $195,000 loss which made profit as % of revenue to be -5.6%. Attempts are being
made by Wesfarmers for making it sustainable and profitable. However, all the resources
should be taken into consideration by the organization for the purpose of keeping Target alive
instead of concentrating on other business units. This will assist in boosting profitability and
growth of the business units. However, the results of Targets are not improving. The half year
results of Wesfarmers for the year 2017 provides the deficient performance of Target as its
revenue was $1,623 million in December 2016 while it was $1975 million in December 2015.
This implies there was negative revenue of 17.7% in 2016. These reasons suggest that the
business units of Wesfarmers should be closed or sold off. However, Kmart and Home
Improvement have the capability of improving its profitability with the help of acquisitions and
future transactions. It is advised that Wesfarmers should sell Resources and Target which will
help them in getting cash requested for acquiring business units from other organizations.
Kmart and Bunnings Business units: Acquisition
Home Improvement (Bunnings) and Kmart are the business units of Wesfarmers Limited that
performed outstandingly well during FY17. These two business units were found to be the
second and third most profitable businesses. The revenue of Home Improvement and Kmart
accounted for 19.7% and 8.1% of the total revenue respectively and with profit with respect
to revenue of 9.16% and 9.91%. It is therefore recommended that Wesfarmers should
increase its focus on these business units for the purpose of booting them. Any effort made
in these businesses has the capability of leading it towards growth. Both Kmart and Bunnings
are profitable, but Bunnings appears to be a more sustainable unit and should be more
focused to generate greater revenue. After taking into consideration the profit and revenue
obtained by Bunnings through its operations along with its outstanding performance of
“Hardware and Building Supplies Retailing in Australia” and the forecasts made relating to
growth rates, diversification appears to be the most successful way of growing the business
of Bunnings. This can be done with the help of acquitting other business unit from a company
or corporation itself. By considering the benefit of the fact that the most important operating
segment is building of suppliers, investment should be made by Bunnings in acquitting a
company belonging to construction industry. The company could be in building or housing

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urban projects which in turn will allow the expansion and diversification of its operations to
the industry of which it is a main supplier. It is the Australia’s third largest industry and it also
drives economic activity in a significant manner. Bunnings can become the supplier of a new
company by way of acquiring the company belonging to this sector. This will assist in
subsequently reducing the costs of materials and will facilitate the profitability of the new
company and creating a sustainable supply chain which will bring advantages to both the
companies. Therefore, Bunnings should take steps for acquiring construction companies like
AV Jenningsm ADCO Constructions, Burbank, BCI Australia and Cockram, etc.