Political Economy and International Business: Industry Analysis Report

This report delves into the intricate relationship between political economy and international business, using Wesfarmers as a case study. It examines the company's history, structure, and key firms, highlighting its significant role in the Australian market and its global presence. The report explores industry structure, global production strategies, marketing orientations, and ownership and financing models. Furthermore, it analyzes the application of international business theories, particularly the global value chain theory, to understand the industry's dynamics, strengths, and weaknesses. The report provides a comprehensive overview of how political and economic factors influence international business operations and offers insights into the challenges and opportunities within the industry.

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Running head: POLITICAL ECONOMY AND INTERNATIONAL BUSINESS
Political economy and international business
Institution
Student name
Date

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Political economy and international business
Executive summary
The dynamics in international business are inevitable. Changes are experienced in marketing,
production mechanism, ownership, financing, government policies and technology in production
information and the consumer needs. This article is a report on the theories that explain the
internal structure and history as well as the trend in the industry setting.

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Table of Contents
Executive summary.....................................................................................................................................2
Introduction.................................................................................................................................................3
History.........................................................................................................................................................3
Structure......................................................................................................................................................4
Key firms.....................................................................................................................................................5
Industry structure.........................................................................................................................................6
Global production........................................................................................................................................8
Marketing orientation..................................................................................................................................9
Ownership and financing...........................................................................................................................10
Monitoring.................................................................................................................................................10
Theory of the international business..........................................................................................................11
Global value chain theory..........................................................................................................................12
The analytical power of the theory............................................................................................................13
Strength.................................................................................................................................................13
Weakness...............................................................................................................................................13
Conclusion.................................................................................................................................................13
Reference...................................................................................................................................................14

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Political economy and international business
Introduction
Wesfarmers is likely the most prominent business in Australia in terms of revenue
generation. Research and evaluation claim that Wesfarmers is likely to be the biggest employer
in consideration of the human resource installed in the organization. The number of labor force
employed is estimated to be about half a million. This is a massive number of employees
compared to other organization in existence. Accounting on the fact some sole proprietorships
and cooperative society have a labor force of fewer than twenty employees suggest that
Wesfarmers has a complicated and a variety of activities the management has to ensure are in
good running compared to other competing business.
History
Wesfarmers was found in early 1914 in the Western part of Australia where headquarter is
located today (Doh, Rodrigues, Helmhout, & Makhija, 2017). Wesfarmers was started as a
cooperative but later assumed a different form of a business organization as it grew more
significant and more substantial. On its initialization, the business aimed to offer merchandise
services to the farmers of the western part of Australia. The organization growth was first and
exponential to the point of managing to establish a public radio station only ten years later. The
fundamental organization objective was to provide the farmers of Western Australia with a
market for its products ranging from vegetables, wheat, among other cultivated crops produce.
On animal farms, Wesfarmers provide the farmers with a lady market for the livestock and their
products including; milk, skin, meat, and wool. Later, Wesfarmers secured a mechanism of
providing the farmers with reliable farm inputs like the fertilizers, machinery, and education on
the most efficient and global technological production methods to maximize the profit they

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generate. The success of the business attracted a variety of investors from both private and public
wings. Individuals and other cooperative societies joined the organization and contributed to
further exponential growth that has contributed to the listing of Wesfarmers as the biggest
employer in the continent (Wurfel, & Burton, 2016).
Structure
The management and leadership of the society comprise of both executive and non-executive
director that assumed the role of the group of managing director. As per the research conducted
in the middle of the year 2018, the board comprises of nine executive directors and eight non-
executive directors. The directors are of a significant and substantial mix of skills from
experience gathered from the past positions of work in different organization and learning
institutions and an excellent expertise level to the mandated duties. The board mains task is to
make decision cutting across all the field and department of the organization. The high-level
skills and expertise of the board members are the main contributors to the success of the
organization today. The board members have; strategy and risk management, stable governance,
resources, and industrial management, marketing, finance and banking, and community
engagement and management skills in common (Falkner, 2017).
Although the directors are supposed to work together and support each other in the duties of
management and decision making when an issue of concern is raised, the directors are expected
to solve it independently, and the most appropriate choice is arrived to through consensus. This
has helped the organization in reducing the biases in decision making where one director may be
deciding on the organization solely in the presence of the others resulting to the dominance of his
ideas in the organization which could lead to inefficiency. Also, it has helped in increasing the

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creativity skills of all the directors involved hence the running of the organization is assured a
smooth running in both the presence and absence of a particular director, thus the organization
does not depend on one director in decisions making (Kline, 2010).
Key firms
Wesfarmers high output is attributed to by the close collaboration it has instantiated between
it and other firms in existence both within the boundaries, and outside the boundaries of
Australia in ensuring an offer of viable and substantial knowledge to livestock farming members,
the organization has a close association with the department of veterinary service of the
government. The close association with critical firms benefitted the farmer with proper education
on breeding, feeding, and animal keeping strategy. It also provides the livestock adequate
medication and vaccination in case of suffering any disease. In the same note, the organization
works closely with the firms making and designing leather products like the shoes, bag, belts to
name a few in the long list of the items produced. This provides s the farmers with a ready
market of this product hence encouraging volume production (Abdelal, Blyth, & Parsons, 2015).
The organization also has a close association with several restaurants in Australia providing a
stable market for the meat and dairy products for the farmers. The restaurants offer both the
exchange and advice on what product has a bigger market in terms of consumption rate at a
given time. The knowledge enhances the farmers to shit their line of products to the most paying
and efficient production.
Further, the organization brings together the financial assistance offering firms in one table.
This has played a significant role in the offering of funds to the farmers enhancing them to pay
their workforce on time hence boosting their morale that has a direct reflection on the volume of

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production. The farmers are also able to acquire the necessary inputs in time which could have
been hindered by lack of finance.
Wesfarmers has a close association with the machinery dealing firms which makes and sells
farm machinery and products for both direct and indirect consumption. They enable the farmers
to acquire the mechanism of the latest technology thus easing production. The use of
technologically improved machinery has enabled the farmers to facilitate the production process
hence allowing them to operate in budget and meet their targets within the timeline of their
objectives. Meeting production objectives within the timeline set and the ease in the production
process has a direct implication to the profits made by the farmers thus boosting their well-being.
Wesfarmers also has a close relationship with the law firms of the land. The law firm ensures
that the member of the organization abides by the laws of the area and follows the regulation
from the initial step of registration and conducting of the business activities. It also provides the
organization with the security and representation of the organization in the court of law in case
the organization has been summoned or has summoned by other firms individuals or the
government as well as the workers or the shareholders. The law firms protect the organization as
an entity but also represent and handle laws and regulation related matters of the shareholders
(Cohen, 2017).
Industry structure
The organization owns several diverse structures that enable to thrive well in the industry and
counter competition effectively. The organization has a structural department that facilitates and
implements the supplies of home-based products both for the near and far located customers. The
products in this scenario are offered and provided in a retail-based program where the product

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bulkiness is broken into small sizes to ensure that buying the product in small quantity is
ensured. The buying of the product in low volume could be on the bases of the perishability level
of the product or the lack of buying the power of the customer. Or even the possibility that the
product in question is only required in small and enough quantity and no need to store the
product for use in the future date (Hill, 2008). This basic setting enables the organization to
counter the competition exerted by other firms in the industry that only offer and provide similar
or complementary products of the same. Research has it that, retail buying of a product has a
higher probability of resulting in high volumes of sale without breaking the bulk at the end of a
trading season. This aspect has helped the organization to counter competition effectively
(Picciotto, & Mayne, 2016).
Transport structure of the organization is also well established and stable. Transport structure
of the organization is well set and established. The organization manages most of its supply by
the roads with the use of high volume containers. The transport mechanism is cheap in terms of
labor and fuel consumption hence saving much of the expenses that could eat into the profit of
the organization. The transport mechanism is said to be cheap in comparison of other transport
mechanisms like the use of aircraft which are expensive to buy, man, operate and service in case
of faults as compared to tracks transport (Graham, & Tucker, 2019).
The organization structure also consists of another independent figure which deals purely
with facilitation and supply of farm product including the fertilizers, chemical and insect’s sides
to farmers. This division enables and eases the farmer’s procedure of obtaining the services and
the goods they need. If on the other hand all these services were offered under the same roof, the
efficiency of the organization could have adversely been affected thus affecting the number of
customers visiting the facility for the service. Likely the potential customers will seek refuge to

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the nearest and competing firm, and the implication will profoundly affect the relevance of the
organization in the industry.
The need for the division of the structure of the organization and specialization in the
services offered has also facilitated the establishment of another structure in the organization
which provides products of industrial and safety. The organization's department of safety and
maintenance products in general offers product that ensures the safety of the working and
operation environment, these include; safety boots and clothing and firefighting and control
equipment’s and products (Boddewyn, 2015).
Global production
Besides being based in Australia, the organization has made a great significance in the global
economy. Going global narrative in the organization is deeply rooted in the section of production
to the consumption of its products. The management has brought in the labor force from overseas
to the organization in search of the competent and experienced labor force to propel the
organization revenue generation. The hiring of the labor force doesn’t only involve machinery
and the physical labor force but also a list of the advisory and decision-making panel. Shipping
this workforce from overseas provides the organization with the most advanced technology of
production and running of the organization by bringing together people of different background,
knowledge, and experience and hence talents. The combination of these skills results in a robust
strategy to deal with production and management issues.
The organization has also gone global in consideration of lack of limit in the consumption of
the organization's product. The less perishable goods from the organization either directly or
indirectly have proofed a significant value of use in the global market. Most of these products

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include prepared foods for tourist, shoes, and belts as well as the farm inputs and the chemicals
(Yeung, 2017).
Marketing orientation
The organization has placed the needs of the customer’s satisfaction as the primary goals of
its establishment. Wesfarmers offers products that the customers need for their pleasure rather
than what the organization’s management may think would be competent to deliver through
evaluation of various factors and the changes in the level of technology and government policy.
The organization has a well-established research team that evaluates the probability of the
products offered to satisfy the human wants and recommendations for changes to make the
product more effective. Also, the management has set the board for conduction questionnaires to
the customers on the experience and the effectiveness of the product of the organization and
encourages suggestion on the ways the product can be improved or substituted to improve the
efficiency in the human wants satisfaction (Uhlig, 2017).
Wesfarmers management appreciates the fact that the changes in technology may lead to the
discovery of a more satisfying product than the existing one in the market. Henceforth, it has a
well-equipped technology and production team that facilitates the development of more efficient
products, and the customers are not aware of its existence.
The market orientation and the need to satisfy the demand of the customers helps the
management to maintain a soundtrack of the production process to ensure the requirements are
met. Failure to meet the demands of the customers implies a decline in the volume of sales
should be expected and hence the revenues generated (Tchamyou, 2017).

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Ownership and financing
The organization is owned by a variety of individuals from all setting of life. To become a
member of the organization, you have to buy shares in the organization and be registered in the
list of the owners hence sharing the dividends and losses in the agreed manner according to the
policy of the organization. Financing of the organization is mainly from the shares bought by the
new members of the organization and compulsory contribution set by the organization
management to finance the running of the organization. In times of financial crisis, the
organization seeks loans from the financial lending institution. The government has also
facilitated the financial stability of the organization through indirect means and initiatives. The
government has given the organization waivers and tax-free trading period. Further, the
government has been engaged in close education forums with the organizations on the discussion
for the offer of incentives and lowering of the value-added tax on raw materials to reduce the
cost of production (Worth, 2017).
The civil societies are the main contributors of the labor force and the market and hence they
organization can’t go without appreciating them. They also provide an answer to the
questionnaires that help the management to make the most appropriate decisions on what and
how to produce when.
Monitoring
The organization that thinks of it being the best in the market stands the chances of losing the
competency in the market. This is attributed to the possibility of the discovery of a more
efficient method of production or product that is more satisfying than the existing one without
the awareness of the so-called competitive organization. The organization in discussion

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maintains a close monitoring and evaluation procedure on the products of the competitors and
their method of production. If the process is efficient, the organization adopts it and perfects it to
counter the competition posed, if it is not practical the organization seeks for a mechanism to
kick the competitor out of the market (Draper, 2017)
Theory of the international business
Before the 1980s, the number of international trade was limited and hence their knowledge.
The implication of this was treating of these businesses with some level of exception. The local
organizations that went global were only through the enjoyment of effective production cost. If a
country experiences an excellent or favorable climate to the production of a particular
commodity, there is a high likelihood of producing that product at a lower price than the
countries experiencing a hostile environment. This gave the states the advantage of cost-
effectiveness in the production process hence dominating in the global markets.
Suddenly, the business organization and structure was going through global changes,
countries forming a joint venture, the establishment of business under partnership ownership, the
formation of strategic alliances franchising and outsourcing. These factors altered the initial
organization of the local firms in the industry, and the international product became a standard
product. Since then, with the high technology transport mechanisms and information, rarely
countries enjoy the benefit of dominating the global market on the favor of the climate of the
country. Contrary to the initial time, some countries are the leading exporters of the raw material,
but the cost of importing the finished product from the countries they exported the raw materials
to is lower than the price of processing (Gilpin, 2016).

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Theories explaining the dynamics of the international business have been put forward in an
attempt to explain factors that would affect and favor or maintain an organization at a level of
significant competency level in the international market. These include; the global value chains,
global production networks, and the platform economy theory. This report has a foundation and
basement in the philosophy of the global value chain (Meyer, & Peng, (2016).
Global value chain theory
The theory was developed in early 1990 at Sussex University. The theory development was
motivated by a close look at the international business framework and value in consideration of
the fact it cuts across both developed and underdeveloped countries. The theory addresses the
ineffectiveness of international trade on account of production technology and cost (Rowley, &
Lewis, 2018). The approach first appreciated the fact that the cost of producing a product is
partly tied to the raw material, labor force, technology among others in the list but not entirely to
one aspect. This theory was found on the fact of the differences in the location of making value
and its realization. It argues that the developing countries are favored in the development of
value but never realizes it and instead it is realized in the developed countries.
Taking a good example of the favor of the climate and the soil in the growing of tea in the
developing countries has facilitated the developing countries to dominate in the export of tea.
The contradiction of the trade between the developing and the developed countries comes in
where importation of the processed tea becomes more expensive than the locally processed tea
creating an imbalance on the geography of where the value was created and realized (Gray,
2015).

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The analytical power of the theory
Strength
The theory analyzes the issue of technology, knowledge, and finances in developing
countries. This has attracted the intervention of the national bank to provide financial and
machinery aid to ensure the realization of the value where it was developed. Most of the
countries that export specific raw material later import the consumer goods of the same at a low
price than the locally processed ones (Hamilton, & Webster, 2018).
Weakness
It is weak for the theory to assume the value of a product is only realized in the developed
country accounting on the development of the given processing country as it could have been
attributed to by other factors like; government policies and availability of labor force (Whalen, &
Minsky, 2015).
Conclusion
International business has contributed to the high rate growth of the local market. The
international business provides the goods to the local business; the exportation of the raw
products has led to the intervention of the World Bank in the production sector thus leading to
development in the underdeveloped countries.

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