Strategic Analysis: Subsidiary Performance of Wesfarmers Limited

This report provides a comprehensive global strategic analysis of Wesfarmers Limited, an Australian multinational conglomerate. It identifies operational issues impacting the performance of its subsidiary, Bunnings Warehouse, focusing on factors such as safety, production, community engagement, waste management, and ethical sourcing. The report analyzes these issues using facts and figures, including injury rates, community contributions, and waste recycling data. It explores strategies used by multinational enterprises, such as Porter's Five Forces, to address these challenges. The analysis covers industry-based considerations, supplier and buyer power, and competitive strategies. The report concludes with recommendations for improving performance and maintaining sustainability, emphasizing the importance of proactive management, ethical sourcing, and community involvement. The analysis aims to provide insights into strategic decision-making for similar organizations.

Global Strategic
Analysis

EXECUTIVE SUMMARY
This project report include the analysis of business operations and relevant problems
which impact the production as well as profitability. Identify operational issues which explain
the performance of subsidiary organization. Along with this, formulate some strategy in order to
respond these problems which impact business. This analysis will be done with the help of facts
& figures and use appropriate information to resolve operational issues.

Table of Contents
EXECUTIVE SUMMARY ............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Determine some issues which helps in explaining performance of subsidiary company............2
Strategies that used by Multinational national enterprises in order to resolve their problems....6
RECOMMENDATIONS.................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Global strategic analysis is the process which conduced by the organization to analyse
market & environmental condition in order to build strategies. Strategic analysis is different from
business perspective and it include various common factors such as analysing & evaluating
information which relevant to the company's strategies (Ambrosio, 2017). Need to identify
internal as well as external factors which impact productivity and profitability. Along with this,
use competitive analysis which provide effective outcomes to formulate strategy. For the better
understanding of this project, this report select Wesfarmers Limited.
It is Australian based multinational company which founded in 1914 and its headquarter
situated in Perth, Western Australia. This report include the issues of subsidiary performance and
how host company formulate strategy to resolve it. Along with this, how strategic analysis used
by MNC in the host country.
MAIN BODY
Overview of Organization:
Wesfarmers Limited is an conglomerate company which deals in various sector such as
retail, chemicals, fertilizer, coal mining and safety products (Wesfarmers Annual Report, 2019).
It is the largest company of Australian on the basis of revenue and it overtake Woolworths
( Retail company ) & BHP ( Trading entity ). Wesfarmers are the largest private employer firm
which have approximately 220,000 employees across the world. Company listed in Australian
Security Exchange in 1984 and get huge growth in retail conglomerate. Wesfarmers subsidiary
company's are Bunnings Warehouses, officeworks, KMART etc. These subsidiary operated
under the parent company Wesfarmers. Bunnings Group trading as Bunnings Warehouse which
is Australian based household hardware chain company. It was founded in 1887 by Perth and this
chain owned by Wesfarmers Limited or deals in Australian or New Zealand (Chdel Mar Alonso‐
Almeida, Llach and Marimon, 2014). Company deals in various items such as gardening, craft
and woodwork DIY ( Do It Yourself ) workshop for children. Staff members always ready to
assist community group for DIY project. Do it yourself refer to the method of building, repairing
and modifying things without taking any professional help. House brand of Bunnings include
Saxon (Gardening and landscaping product ), Click ( Electronic fittings and accessories ), Eiger
Electrical ( UK & Ireland suppliers of electric items ) etc.
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Determine some issues which helps in explaining performance of subsidiary company
In context of Wesfarmers Limited, Bunnings Warehouse is subsidiary company who
deals in household hardware chain. Organization need to maintain suitability otherwise it
generate issues which impact operational business.
Burnings is the leading hardware developing retail company which produce indoor or
outdoor home products. Mostly they deals in Australia or New Zealand where it is major supplier
in the housing industry. Company try to expand their business across its target market through
opining new stores along with digital engagement with customers. At the time of performing
their task in the organization, company face various issues which discussed below:
People: Members of Bunnings are most important part of the organization and its safety
& wellness are the first priority of company. As per annual report of 2019, 2.3% injuries reduce
in comparison to last year. Reduction in TRIFR about 3.4% and in order to reduce these
numbers, company take safety initiatives which include online ForkSafe Performance Tracker
which manage self-propelled vehicle operator licence and observe safety performance. By using
this tracker, firm able to reduce 35% indicant frequency rate (Destradi and Jakobeit, 2015).
Human resources are very important so organization have to provide proper safety in the
business environment. Because , if injuries or accident will increase then it impact production as
well as productivity.
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In context of Bunnings organization, safety is most important factors which need to
analyse because it will generate more problems which impact production as well as profitability.
After 2015, injuries rate in the organization will reduce where 25% in 2015 and 22.6 in 2014.
Along with this in 2017, injury rate is 18.9 which further reduce and remain 11.6 in 2018. In the
final year, it means 2019 total recovery injury frequency rate is 11.2. Company try to maintain
this progress and in the further years they try to minimise injury rate through providing safety
programs, training and equipment.
Production: Bunnings use proactive approach in order to engage with suppliers and
encourage them in order to provide safety to the employees. Apart from this, company doing
regular audit of their products and monitor all the relevant standards which provide safety on
selected products which meet customer with expectations (GDmitrieva, 2016). Due to change in
the market trends, it become issues for the company to meet market expectation as well.
Bunnings work with suppliers and introduce innovative products which helps in maintain
existing customers as well as attract new potential consumers.
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Community: In 2019, Bunnings increase their contribution amount around $ 50 million
for more than 90000 activities in order to develop community or social welfare. Company
support local groups where it includes the provision of fundraising sausage sizzle facility. Team
members of the company involved in the community project or product contribution in the local
groups for sustainable development of sociality. Contribute in the society will improve
company's image in the society and provide other benefits such as increase customer loyalty,
supplier's trust, brand image, demand or productivity of the company. Bunnings organization
every weekend host sausage sizzles and cake stalls for community group. Due to this program
sausage sizzles get the iconic status among the Austrian people. Along with this, Bunnings
company give their support to the disaster impacted community. Due to extreme weather events
impact several community of Australia (Frynas and Mellahi, 2015). In 2018, team members of
Bunnings organization hosted a national sausage sizzled to raise funds for rural farmers and
those community who impacted. In the Australian, more then $1.25 million people contribute
for this cause and all the collected money donated to Rural Aid's Buy a Bale Campaign which
deliver many items that is essential for farmers.
Total $ 50 million contributed in the society in 2019 for the sustainable development and
it divided into direct or indirect contribution. In 2019, company directly contribute $ 5.4 million
and indirectly $ 44.6 million. In 2018, $ 5 million direct or $ 41.7 million indirect and total
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contribution increase continuously which can be easily understand with the help of above
mention facts & figures.
Waste & Packaging: Managing waste is the biggest issue which faced by the operational
department. Along with this, at the time of packaging huge material waste which increase
product cost as well as selling price. It directly impact the buying behaviour of customer which
can reduce demand and then automatically reduce production and profitability as well. Whole
industry will impacted by the efforts of China National Sword Policy, it has main aim to improve
quality of material and try to reduce contamination rate in recycling streams. Wastage of material
at the time of manufacturing products is very high. On the other hand, at the time of packaging
also material waste or damage. It will increase the cost of goods which further reduce the profit
margin of the company (Hall And et.al., 2017). Bunnings organization signatory to the
Australian Packaging Covenant Organization (APCO) and produce 12 months action plan where
they assist customers through recycling products and take back option also provided. In 2019,
company work with stakeholder and conduct recycling program and it include various items such
as batteries, power tool etc. Basically by suing this recycling method will help in reducing waste
from the society through recycling method. Along with this, they have to spread awareness
regarding impact of waste in the organization as well in the whole community.
Above picture present the wastage of material and how it will used by the Bunnings
company in terms or reducing cost of firm. Organization use the two methods such as recycling
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as well as disposed. Bunnings work with the stakeholders and introduce recycling program for
the various products such as paint, small electrical items, power tools, batteries etc. This
initiatives will provide greater results where customers bringing back with 5800 kg batteries for
recycling. About 200000 kg waste paint will be handover by the customer to the company. As
per above figure, amount of recycling waste will continuous increase from 2017 but in 2019,
disposed item will reduce from 34.1% to 27.8%. It cleanly mentioned that, recycling is better
option to reduce their wastage in comparison to disposed.
Responsible sourcing: Bunnings follow the robust ethical sourcing model which
underpinned by trading terms & conditions, suppliers code, sourcing policies, training,
education, code of conduct etc. Main focus of the company is to address modern bondage during
the period of Malaysian Workers Voice program where they focus on recruitment and provide
education regarding worker's rights in the organization (Kissinger and Scowcroft, 2016).
Bunnings company is confident about their products that which have 99% originating and have
low risk sourcing which verified legal or independent. Company revise their timber policy
which certified by the Forest Stewardship Council (FSC). Ethical activities helps in developing
trust of society in the organization and its all activities as positive.
Above mention issues impact the organization, its production as well as profitability so
business have to develop strategy accordingly. In 2019, all the sustainability issues resolved by
the organization with the help of effective strategy and implementation. In addition, in order to
maintain sustainability for the longer period they have to develop action plan and provide clear
instruction to the each staff member regarding their work. So it is managers responsibility to
ensure that every member should aware about each activity which going to perform in the
business operations in order to achieve organizational goals & objectives. Manager have to
monitor all the activities in the working process or if any improvement required them
implemented immediately without taking any further time.
Strategies that used by Multinational national enterprises in order to resolve their problems
There are some strategies which helps the organisation to resolve organization issues
which further impact the business operations and overall production & profitability. Some of the
strategies discussed below:
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Industry based consideration: With the help of porter's five force model organization
able to analyse whole industry where they determine various factors. In context of Bunnings,
manager done this analysis and it discussed below:
 Rivalry firm: Bunnings organization have huge competitors in all over the word so they
have to analyse the all aspect and formulate strategies accordingly. These are the biggest
competitors such as Home Timber & Hardware, Master Home Improvement, Mitre 10
etc. So Bunnings have to make sure that they offer good price or quality product to their
customer in order to sustain them on their brand (Neumann, Robson and Sloan, 2018).
For example: company give 10% lower price of their products in comparison to their
competitors.
 Suppliers power: Bunnings organization not supply any kind of different products which
have their speciality. Due to this reason power of suppliers are high because they have
power to shift their supply to another institute. Here supply power is high because there
are many competitors available who produce same products for consumers.
 Buyer power: Here consumer have power to demand low price because in the market
there are various business available who provide same goods & services. Due to this
reason, manager of Bunnings have to formulate pricing strategy in order to attract large
number of customer and there are high power of buyers.
 Threat of new entry: Company deals in household items which is very common and
anyone can enter in this market. So there are threat of entry is very high so manager of
Bunnings have to formulate strategy in order to attract consumer and introduce new
product with some innovation which make their goods different from others.
 Threat of Substitute: In the home appliance market there are various substitute available
which force customers to shift. In order to reduce this threat, manager of Bunnings have
to analyse whole market and identify that how they improve their products and increase
popularity among people.
Resource based consideration: In order to conduct resources based analyse, manager of
Bunnings company use VRIO framework to understand key competencies of business operations
and it mentioned below:
Valuable: Strong network with locals are very valuable because not every business has
good relation with their customers or society (Parakhina and et.al., 2017). But Bunnings
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continues engage with community for social development and provide sustainable development.
This very valuable for organization and it make it popular among the consumers & market.
Rarity: Strategies of Bunnings company which helps in attracting customer through
offering huge discount and price comparison challenge. Along with this, contribution of staff
members in the community development is very rare, because only organizations done CSR to
improve their image or increase productivity or profitability. But here, rather business
contribution individual employee also take step for social development or sustainability.
Imitate: Bunnings is very large corporation and subsidiary of Wesfarmers Limited
company so change their operations or production technology not able to imitate. Because it is
very costly which impact the overall production.
Organize: It is very important for organisation to manage their resources in terms of
value for business. Manage whole management system, process, policies, organizational
structure (Pohludka, Stverkova and Ślusarczyk, 2018). When Bunnings organization understand
the potential of Valuable, Rare and Imitate and only after that business able to achieve
comparative analysis and suitability.
Institution based consideration: Under this analysis organization have to consider
various things which impact trade activities, production or profitability. Those factors discussed
below:
Regulatory risk: This risk is related to the change in the regulations which impact the
policy or procedure of the company and it will further impact production or profitability. These
risk come with the changes such as change in the cost structure, change in the material which
used to manufacture goods. So Bunnings face this risk where they have to compliance various
standards regarding product safety, quality assurance, product packaging etc.
Trade Barriers: It is a restriction for trading goods & services between countries.
Operations of Bunnings are situated in many countries specially in Australia or New Zeeland.
There are no such restriction for trade between countries but they have to follow their norms and
perform accordingly.
Currency Risk: It is the major risk which impact business revenue so manager of
Bunnings have to research market and already prepare some strategies (Steven, Dong and Corsi,
2014). Because value of currency is different, so in order to export or import item they have to
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set deal on stable price as per mutual understanding. So manager have to analyse this risk and
consider it for future strategies in order to minimise risk.
Cultural risk: It is the situation where company struggle in the another country due to
change in culture, language, customs, value etc. So before entering in the new market Bunnings
have to analyse whole market and prepare strategy to overcome this risk.
Cultural distance: It is similar to the cultural risk but distance will be appear in the
organization between two people because of communication style and value of individual. In
order to reduce this distance between employees, so Bunnings organization have to conduct
various program for employees engagement.
Institutional norms: It include the behaviour of individual which expected to follow
some norms in order to achieve business goals & objectives by following ethical or best code of
conduct (Weber, 2016). In context of Bunnings, management make sure that each and every
person who related to the organization follow institutional norms which include business ethics,
code of best practice and other norms.
With the help of above mention analysis, manager of Bunnings have to analyse all factors
which helps in providing competitive advantage. These aspect required to consider at the time of
formulating strategy to grow in the market achieve business goals & objectives.
RECOMMENDATIONS
 Management have to focus on employees safety through providing safety equipments.
 In order to provide better customer experience, manager have to provide post purchase
services.
 Talent recruitment & retention helps in hiring skilled people which reduce their training
cost.
 Improve quality control system which helps in developing quality product and meet
customer expectations.
CONCLUSION
From the above discussion, it has been concluded that strategic analysis helps the
organization to formulate strategy with the help of collecting relevant information. It is beneficial
for the business to identify operational issues which impact production and profit margin as well.
In context of organization, manager need to done intense research about the issues which impact
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business operations. After that collecting information help the manager to formulate strategy for
the future and improve further functioning. Employees safety and wastage & packaging both are
main issues which impact the organization. So management have to show their concern
regarding developing effective strategy to reduce problems and improve productivity as well as
profitability.
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REFERENCES
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Online
Wesfarmers Annual Report. 2019. [Online]. Available Through:
<https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2019-
annual-report.pdf?sfvrsn=0>
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