Analysis of External and Internal Environment of Wesfarmers

This report provides an analysis of the external and internal environment of Wesfarmers, an Australian conglomerate. It includes a summary of the current organizational position, analysis of the industry and competitors, identification of key stakeholders, and relevant regulatory, legal, and ethical requirements.

Running head: INTERNATIONAL BUSINESS AND ECONOMY
INTERNATIONAL BUSINESS AND ECONOMY
Name of the Student
Name of the University
Author Note

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Part 1 – Executive Summary
The report has provided an analysis of the external and internal environment based factors of
Wesfarmers. Wesfarmers is an Australian conglomerate which its business based operations
in different areas including retail, clothing and coal mining. The analysis of environment of
the company is helpful in development of the action plan for the implementation of the
suggested business strategies. The report has been able to provide an analysis of the political,
economic and social factors which have been able to affect the levels of profitability in a
huge manner. The existing business strategy has also been analysed in the report.
Further, the analysis is able to provide a picture of the gaps which exist in the strategies
implemented by the organization have been analysed effectively in the report. The internal
environment of the company is also an important part of the analysis which has been made in
the report. The action which is required for the implementation of new business strategies and
for controlling different parts of the process is also analysed. The tracking based systems of
the company which is used for analysing the effects of the implementation of new strategies
and measuring the satisfaction levels of customers have been considered in the report. The
analysis is thereby able to provide a detailed view of the organizational operations currently
and the ways by which the strategies can be modified in order to increase the revenues and
profitability levels.

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Table of Contents
Part 1 – Executive Summary..........................................................................................1
Part 2 – Summary of the current organizational position..............................................4
About the company....................................................................................................4
Statement of business strategy...................................................................................4
Performance of the organization based on current strategy.......................................5
Discussion based on reasons why the company has not met the goals......................5
Current mission and vision based statement..............................................................6
Part 3 – Summary of the external environment.............................................................6
Macro-environment factors affecting the organization..............................................6
Analysis of the industry.............................................................................................7
Analysis of the competitors of the organization........................................................8
Identification of the key stakeholders........................................................................8
Relevant regulatory, legal and ethical requirements in the business.........................9
Summary of the strategic position of the company....................................................9
Part 4 – Analysis of the capabilities of the organization................................................9
Strategic capabilities of Wesfarmers..........................................................................9
Major strategic gaps in Wesfarmers.........................................................................10
Summary of the strategic position............................................................................10
Part 5 – Analysis of gaps..............................................................................................11
Analysis of the internal and external gaps in Wesfarmers.......................................11
Part 6 – Proposed business strategies and functional strategies...................................12

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Reaffirmation of existing business strategy.............................................................12
Supporting quality management and continual improvement.................................12
Reasoning behind the operational and functional strategies....................................12
Part 7 – Action plans....................................................................................................12
Major actions to be taken by operational or functional area....................................12
Ways by which the strategies can be achieved........................................................13
Part 8 – Implementation, evaluation and control based processes...............................13
Considerations to be taken for implementing the plan.............................................13
Brief description of different control mechanisms...................................................14
Statement based on the measurement......................................................................14
Monitoring process...................................................................................................14

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Part 2 – Summary of the current organizational position
About the company
Wesfarmers Limited is a conglomerate which has its operations in Australia. The
headquarter of the organization is located in Perth, Western Australia. The organization
mainly has its business interests in the countries including, New Zealand and Australia. The
different industries in which the company has its operations include, chemicals, retail,
fertilisers, safety and industrial products and coal mining. Wesfarmers has also been able to
acquire the topmost position in Australia based on its amounts of revenues in the year 2016
(Wesfarmers.com.au., 2018).
The organization thereby overtook the large companies like, BHP Billiton and
Woolworths which operate in Australia. Wesfarmers is also considered to be the biggest
private employers in the country with more than 200,000 employees working in different
operating areas. The organization was thereby established in the year 1914 as the co-
operative which was supposed to provide different types of merchandise and services to the
farmers in Western Australia (Wesfarmers.com.au., 2018).
Statement of business strategy
Wesfarmers has acquired the topmost position in Australian market based on the
revenues which have been gained in the year 2016. The company has also developed a new
strategy in the year 2018 which is based on the acquisition required for effective internal
growth. The CEO of the organization had thereby decided to unveil the plans which had been
made by the company based on high levels of optimism. The new strategy based on business
of Wesfarmers was thereby based on the acquisition based activities. The business based
operations of the organization are based on four major divisions which are related to different
types of industries (Barros, Hernangómez & Martin-Cruz, 2016).

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The four major divisions of the company thereby include, Coles, which is liquor,
food, convenience and fuel based retailer. The second business division of the company is
based on outdoor living, home improvement and office products based retailer. The third
business division of the company is Target which is a housewares and clothing based retailer.
The fourth business division is Kmart which is a discounted department based store (Daspit et
al., 2017).
Performance of the organization based on current strategy
Wesfarmers had taken the decision of de-merging Coles from its operations in the
year 2018. Coles would thereby operate as an independent organization from the same year.
The retail division of Wesfarmers which operates under Coles has faced a decline of 13.5% in
the year 2017. However, the year had proved to be quite profitable for the other divisions of
the conglomerate like, Target and Kmart. The profitability levels of Kmart had increased by
144 million Dollars. The overall performance of the conglomerate had thereby gone through
many ups and downs which further led to some major losses and changes in the strategies as
well (Demir, Wennberg & McKelvie, 2017).
Discussion based on reasons why the company has not met the goals
According to Durand, Grant and Madsen (2017), the major issues which are being
faced by Wesfarmers are related to the economic downturn in the market. The downturn
which has been recently experienced by Australian economy has also affected the operations
of Wesfarmers and its profitability levels. The price based war which is faced by Wesfarmers
in the industry has affected the levels of profitability of the company. The conglomerate has
experienced a jump in the share price with the help of proper operations of the different
companies which form an important part. The effective management of the company
operations has proved to be a major support for increase in the revenue levels of Wesfarmers.

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The cyclical nature of Australian economy has acted as a major barrier to increase in
profitability of Wesfarmers.
Current mission and vision based statement
The mission which has been developed by the company is related to the best practice
which is formed based on the ethical considerations. The organization thereby aims to deliver
levels of returns to shareholders. Wesfarmers has also formed an effective reputation based
on the areas of ethical practices. The vision of the organization is thereby based on value
which is provided to the employees, customers, community partners and suppliers. The
effective development of the economy is also considered to be a major concern which is
related to the vision of Wesfarmers (Dyer et al., 2015).
Part 3 – Summary of the external environment
Macro-environment factors affecting the organization
As discussed by Engert, Rauter and Baumgartner (2016), the macro-environment in
which Wesfarmers has its operations can be analysed with the help of the PEST framework.
The four different types of factors which are able to play a key role in the effective operations
of Wesfarmers and other companies operating under the organization are political factors,
economic situation, social condition and technological factors.
Political factors – The political factors are based on the extent up to which
government of the country is able to influence the operations of different
companies with the help of taxes and the legal regulations as well. The
industry of coal mining is considered to be a major department of the
conglomerate which is affected by the federal government. The major focus of
government policies of Australia is based on the trade protectionism based
activities (Ethiraj, Gambardella & Helfat, 2018).

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Economic factors – The major economic factors of Australia are also able to
affect the growth rates of Wesfarmers. The service based sector is able to play
a major role in the Australian market. The two major sectors of the country
which are able to affect Wesfarmers are the service and the financial sector.
Wesfarmers is thereby able to enjoy an effective position in market of
Australia (Frynas & Mellahi, 2015).
Social factors – Social environment of the country is able to play a key role in
future growth of the organization. The different social factors which can have
an immense effect on Wesfarmers include, the cultural trends, population
analytics and demographics. The reliance of Australians on the one-step
shopping method can affect the revenues of Wesfarmers. The departmental
store based chains and supermarkets are an important part of the shopping
method of Australian people (Hill, Jones & Schilling, 2014).
Technological factors – The sustainable technologies play a major role in
conducting effective business activities. Wesfarmers has used many
progressive technologies for the production based activities. The adoption of
emission coal based technology was an important step which was taken by
Wesfarmers in order to sustain the business activities. The major areas in
which Wesfarmers has been able to implement the technologies mainly
include, energy, chemicals, coal mining and production of fertilisers
(Hubbard, Rice & Galvin, 2014).
Analysis of the industry
Wesfarmers Limited is an organization which has achieved the topmost rank among
around 2000 organizations in Australia. The most important part of income was generated
from the Supermarkets and Grocery Stores in the Australian industry. The organization had

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been able to generate huge revenues in the year 2018 with more than 200,000 employees all
over Australia. Wesfarmers has been operating a diverse portfolio of different businesses
which operate in hardware, supermarket, department stores, energy distribution, chemicals,
safety and industrial products, coal mining (Ibisworld.com.au., 2018). The different industries
in Wesfarmers has its business operations mainly include, retail industry which is based on
the operations of different organizations including, Coles, Kmart and Target. The company
faces huge price based wars in this industry. The chemical, fertiliser and energy based
industry is also able to affect the operations of Wesfarmers.
Analysis of the competitors of the organization
The major competitors of Wesfarmers in the Australian market are Woolworths
Limited and Metcash Limited. Woolworths has provided tough competition to Wesfarmers
based on the prices of products and services which are offered to the consumers. Woolworths
further manages many liquor based stores of Dan Murphy and BWS. On the other hand,
Metcash Limited mainly specializes in different items including booze and food. Metcash is a
wholesale based grocery supplier and distributor of liquor. The growth related activities of
Wesfarmers are also affected by the prices (Karadag, 2015).
Identification of the key stakeholders
The stakeholders of Wesfarmers have a major impact on the effective operations of
the company. The feedback which is provided by the stakeholders plays a key role in decision
making process of the company. The various stakeholders of Wesfarmers mainly include the
employees, customers, suppliers, shareholders, government, media, community, non-
government organizations. The diverse stakeholders are able to affect the profitability based
levels of the organization and revenues of Wesfarmers. The consumers, who are major
stakeholders of the company expect effective products and services at affordable prices
(Kasemsap, 2014).

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Relevant regulatory, legal and ethical requirements in the business
According to Meyer, Neck and Meeks (2017), the major objective behind the
operations of Wesfarmers is based on providing satisfactory levels of returns to the
shareholders with the help of exceptional management capabilities and financial discipline as
well. The core values of the company are related to the openness, integrity, entrepreneurial
spirit and accountability. The Code of Conduct which has been set by the company are based
on the ways by which Wesfarmers is able to operate in different countries. The decisions and
the actions which are taken by the Board of the organization are thereby consistent with the
core values and policies which have been set by the management of Wesfarmers.
Summary of the strategic position of the company
The major strategic position of Wesfarmers is based on the ways by which the growth
of the company can be ensured. The organization thereby plans to increase the levels of
investment in retail business sector of its operations which works under the name of Coles.
The pricing wars which take place between the two large organizations in the industry
Woolworths and Coles have affected the strategic position of the company. The organization
also works on the strategy of increasing the support provided to the Australian suppliers
(Michael, Storey & Thomas, 2017).
Part 4 – Analysis of the capabilities of the organization
Strategic capabilities of Wesfarmers
The primary objectives of the Wesfarmers Group are mainly based on four different
strategies which include the following,
 Strengthening the existing business activities with the help of proper
operational excellence and satisfaction of the needs of consumers.

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 Securing the different growth based opportunities with the help of proper
entrepreneurial initiatives.
 Renewing the portfolios with the help of transactions which are able to add
value.
 Ensuring the levels of sustainability with the help of effective long-term based
management (Morschett, Schramm-Klein & Zentes, 2015).
Major strategic gaps in Wesfarmers
Wesfarmers has faced some major challenges which are based on the supermarket
business which has been done by Coles which operates the retail based division. The profit
based levels of the company has also gone down in a huge manner in the year 2015. The coal
division of the organization has also faced some challenges due to the changes which have
taken place in the prices of coal. The changes in weather can also be considered to be a major
reason behind the gaps which have been experienced in the strategy of Wesfarmers (Sakas,
Vlachos & Nasiopoulos, 2014).
Summary of the strategic position
The strategic position which has been developed by the company in the industry is
mainly based on the core values of Wesfarmers. The organization has however faced some
major levels of issues based on the strategic gaps and has faced high levels of losses in
different parts of its operations which are based in various industries (Simon, Fischbach &
Schoder, 2014).
Part 5 – Analysis of gaps
Analysis of the internal and external gaps in Wesfarmers
As discussed by Steinbach et al. (2017), the internal and external gaps in the
operations of Wesfarmers are based on the strengths, weaknesses, opportunities and threats

11INTERNATIONAL BUSINESS AND ECONOMY
which are faced by the company. The SWOT framework can be used for the analysis of these
gaps.
Strengths – Wesfarmers has been enjoying a diverse market and also operates a
diverse range of businesses which include, Target, Coles and other organizations. The
company is considered to hold the highest level of reputation in entire world. An
exceptionally high rate of growth is enjoyed by the company in the market.
Weaknesses – The organization has developed a strong level of presence in the
Australian market. The capacity of profit making of the organization is however not quite
strong. The market in which Wesfarmers operates is highly competitive in nature. The
financial crisis faced by Australia has also proved to be a major weakness of Wesfarmers
(Theaustralian.com.au., 2018).
Opportunities – The global expansion based activities will prove to be a major
opportunity for Wesfarmers. The company can further increase the levels of profitability and
revenues of Wesfarmers. The increasing levels of income of the consumers are considered to
be effective opportunities for the company (Trigeorgis & Reuer, 2017).
Threats – The increasing costs of the raw materials have affected the levels of
operations of Wesfarmers. The high levels of competitiveness in the industry are also
considered to be major threats to the operations of Wesfarmers (Wheelen et al., 2017).
Part 6 – Proposed business strategies and functional strategies
Reaffirmation of existing business strategy
The business strategy of Wesfarmers has always been based on providing the best
levels of returns to its shareholders. The most important part of the mission statement of
Wesfarmers is also to provide return to the shareholders. The levels of discipline which are

12INTERNATIONAL BUSINESS AND ECONOMY
maintained in the business culture are considered to be important in this case. The changes
which can be made in the business strategy of Wesfarmers is based on the levels of
importance the organization can provide to the customers (News.com.au, 2018).
Supporting quality management and continual improvement
The business strategy which can be followed by the company in the future is based on
the support which is provided by the different departments. The human resource based
department of the organization will be able to play a key role in bringing the changes in
strategies. The operational strategy which can be implemented by Wesfarmers is based on
increasing the levels of importance based on the retail businesses (Trigeorgis & Reuer, 2017).
Reasoning behind the operational and functional strategies
The major reason behind the selection of the strategy is related to the increase in
revenues and profitability levels of the organization. The development of competitive
advantage and maintenance of its position in the industry is also considered to be important
reason for the implementation of these strategies (Simon, Fischbach & Schoder, 2014).
Part 7 – Action plans
Major actions to be taken by operational or functional area
The actions which needs to be taken by the different departments of the organization
are based on proper implementation of the business and operational strategies. The
implementation of operational strategies is based in the employees who are a part of business
strategies. The human resource department of Wesfarmers needs to plan for the training
which is to be provided to the employees.
Ways by which the strategies can be achieved
Action Time Staff Status

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Responsible
1. Training
provided to employees
6
months
Human resource
manager
Not
completed
2. In-store
service provided to
employees
6
months
Store manager Not
completed
Figure 1
Source – Created by author
Part 8 – Implementation, evaluation and control based processes
Considerations to be taken for implementing the plan
The major consideration which needs to be taken in order to implement the plan is
based on the ways by which the employees can be involved within the process. The levels of
training provided to employees to satisfy the customers is an important consideration for the
plan.
Brief description of different control mechanisms
Action taken Timeframe Control mechanism Performance
monitoring

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Training provided to
the employees
1 year Employee
performance based
data
Levels of
performance of the
employees
Customer
satisfaction levels
1 year Reviews in the
website of the
company
Satisfaction based
levels of the
customers
Figure 2
Source – Created by author
Statement based on the measurement
The measurement of the success of the plan will be based on the satisfaction levels of
the consumers and the revenues of the company as well. The quarterly results of the revenue
levels of the company also needs to be measured with the help of the plan.
Monitoring process
The customer satisfaction levels of the company can be measured with the help of the
reviews which are provided in the website. The performance levels of the employees on the
other hand can be measured with the help of the increase in number of customers. The
increase of the share of Wesfarmers in the market can also be measured in order to analyse
the effectiveness levels of the plan. The lack of proper levels of performance can thereby be
managed with the help of extra amounts of training which are offered to the employees.

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