Strategic Analysis of Wesfarmers and Strategy Formulation Report

This report provides a comprehensive analysis of the strategy formulation process for Wesfarmers Limited, an Australian company operating in various industries. The analysis begins with an introduction to strategy and its importance in achieving long-term goals. The core of the report applies Porter's Five Forces framework to evaluate the competitive landscape, assessing the threats of new entrants, bargaining power of suppliers and buyers, threat of substitute products, and rivalry among existing firms. It then delves into competitor analysis, highlighting the importance of understanding competitors' strengths and weaknesses. The report also examines Wesfarmers' application of the resource-based theory, emphasizing the effective utilization of internal resources for competitive advantage, and concludes with a SWOT analysis, identifying the company's strengths, weaknesses, opportunities, and threats. The report includes relevant references to support the analysis.

How the Strategy is formulated

Table of Contents
INTRODUCTION...........................................................................................................................1
PART B ...........................................................................................................................................1
Porter's five force framework......................................................................................................1
Competitor Analysis....................................................................................................................2
Resource Based Theory...............................................................................................................3
SWOT Analysis...........................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Strategy refers to the action plan which is prepared by the high management team of the
organization for the purpose of achievement of the long term goals and objectives.
Wesfarmers Limited Company is an Australian Company which was founded in year
1914. This company is working under so many industries. Its headquarters is in Perth, Australia.
This report will highlight the analysis of industry environment and application of porter's
five forces model in the context of the company (Kock, Heising and Gemünden, 2015). It will
apply competitor analysis, SWOT analysis and resources based theory.
PART B
Porter's five force framework
This model is given by Michael.E.Porter. The main purpose of this model is to evaluate
competitive analyses in the market. It includes five competitive factors that affect business
operations are as follows:
Threat of new entrants
Threat of new entrant bring more competition and gain market share. There are different
barriers that lead to entry of new entrant in the marketplace. Barrier in the market is less that lead
to create differences in selling product into market. This lead to force current marketer to keep
prices down for retaining customers for longer period (Spieth, Schneckenberg and Matzler,
2016). As Wesfarmers is dealing in retail sector so there are chances of new entrant that bring
more competition.
Bargaining Power of Suppliers
This emphasize that supplier is having more power and control over Wesfarmers. As it is
purchasing goods from different suppliers that depend on price of it. Suppliers bargaining power
affect buyer as cost of product is high. Supplier high bargaining power increase competition that
lead to low profit and less growth in Wesfarmers limited company.
Bargaining power of Buyers
In this competitive force consumer is exerting pressure on business to provide quality
products at cheaper rates. This affect objective of Wesfarmers. Lower switching cost lead to
increase consumers bargaining power and through this competition also raise in the marketplace.
Consumers knowledge and price sensitivity increase buyer's bargaining power that affect
Wesfarmers business operations.
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Threat of Substitute products
Availability of substitute product create more competition in the market and becoming
challenging for Wesfarmers to survive for longer term (Cortimiglia,Ghezzi and Frank, 2016).
High substitute threat define that consumers are using alternative product for satisfy their needs
and demands.
Rivalry among existing firm
This shows competitors that are available in the market and provide competition to
Wesfarmers. High rivalry in the market indicate low growth for the future course of action. This
is having an impact on profitability as well as productivity (Porter's Five Forces: Analyzing the
Competition, 2019).
Competitor Analysis
It is the marketing strategy that help in identifying strength and weakness of potential
competitors in the market. As Wesfarmers mainly focusing on purchasing product from
manufacturer that reduce cost of it. It is an important element of corporate strategy. Supply chain
management process in Wesfarmers is efficient that buy product directly from the factory so
reduce time, cost, and space that is required for storing product for future purpose. Through
efficient supply chain help in bringing more opportunities in the marketplace. New competitor
always focus on cost, quality and price (Sarker and Faiz, 2016). The competitive strategy that
will be used by Wesfarmers are as follows:
Market Control:- Controlling market plays an important role as if consumers needs and
demands are fulfilled then it helps in gaining more share in the market. Performance of company
become barrier for old and new marketer that are already exist in the market. Small entrants are
having major focus on making differentiated product.
Cost reduction strategy:- This strategy is followed by Wesfarmers for reducing cost of product
by increasing profit. Selling low cost product help in generating better supply chain management
process. Through this decision of company affect regarding cost that will incurred while
manufacturing product.
Brand value oriented:- It is important for maintaining brand value in the market that attract
more consumers towards Wesfarmers (Paroutis, Franco and Papadopoulos, 2015). So, for
creating it is providing better services, differentiated product and easy availability of product that
help in achieving supply chain management that increase brand value.
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Focus on e-commerce:- This help in increasing market share as by selling product through
online medium. Innovation and development in E-commerce sector help in attracting new
consumers towards the company. Therefore, all these strategies help in gaining competitive
advantage in the marketplace.
Resource Based Theory
This theory mainly emphasize on providing different resources and using them in an
effective manner. This help in taking decision regarding resources that are used for running
business operations in the future. It mainly focuses on internal resources for identifying
capabilities and competencies in gaining competitive advantage. Maintaining sustainability into
business help in proper utilization of resources in Wesfarmers. As it support sustainability,
internal and additional strategy that help in identifying resources and its maximum use in the
future. There are different resources such as human and financial resources that help in gaining
competitive advantage as use technological products that help in increasing efficiency in
Wesfarmers. This theory emphasizes on using effective resources that create development in the
company (Effing and Spil, 2016). It helps in identifying resources that are useful for the
company in earning profitability as well as productivity. If resources are not available on time
then it delays manufacturing of product.
SWOT Analysis
Swot analysis – it is the strategic plan business used to identify the internal or external strength ,
weakness, opportunity and threat of the firm. Therefore. this tool is provide the clear picture of
organization that means which is strength and weakness and which types of weakness firm can
improve to enhance their future growth.
Strength
Good return on capital investment -
Wesfarmers limited is successful they invest
their money on new projects and this project
generate huge profits.
Strong brand portfolio - the brand portfolio
of wesfarmers limited has strong because this
all portfolio generate huge revenue.
Weakness
Mismatch financial planning - financial
planning of the firm is not done properly
because it shows deficit in accounts.
Organizational structure is not according to
the current business activity. Thus, the present
business process is not relate with the structure
as it creates the losses.
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Opportunity
Target New customers from online channel -
Wesfarmers limited target the world wide
customer in order to use the online platforms
for selling their product in world wide.
Lower inflation rate – This rate is create the
opportunity because The low inflation rate
bring more stability in the market, enable
credit at lower interest rate to the customers of
Wesfarmers Limited (Aithal, 2017).
Threat
High competition – High competition
decrease the number of customer because
competitors provide the product and service on
low prices as compare to their competitors.
New environment regulation – New laws and
regulation affects the company performance
because it threat to certain existing product
categories
CONCLUSION
From the above study, it has been summarized that there are various internal, external and
competitive factors which affect the process of strategy formulation and strategies adopted by the
company itself. Analysis of these factors become very important for the company as it helps
organization to get to know about the negative and positive impact of the factors on the
organization.
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REFERENCES
Books and Journals
Aithal, P.S., 2017. An Effective Method of Developing Business Case Studies based on
Company Analysis. International Journal of Engineering Research and Modern Education
(IJERME), ISSN (Online), pp.2455-4200.
Cortimiglia, M.N., Ghezzi, A. and Frank, A.G., 2016. Business model innovation and strategy
making nexus: evidence from a cross‐industry mixed‐methods study. R&D
Management. 46(3). pp.414-432.
Effing, R. and Spil, T.A., 2016. The social strategy cone: Towards a framework for evaluating
social media strategies. International journal of information management.36(1).pp.1-8.
Kock, A., Heising, W. and Gemünden, H.G., 2015. How ideation portfolio management
influences front‐end success. Journal of Product Innovation Management. 32(4). pp.539-
555.
Paroutis, S., Franco, L.A. and Papadopoulos, T., 2015. Visual interactions with strategy tools:
Producing strategic knowledge in workshops. British Journal of Management.26.pp.S48-
S66.
Sarker, B.R. and Faiz, T.I., 2016. Minimizing maintenance cost for offshore wind turbines
following multi-level opportunistic preventive strategy. Renewable energy.85. pp.104-113.
Spieth, P., Schneckenberg, D. and Matzler, K., 2016. Exploring the linkage between business
model (&) innovation and the strategy of the firm. R&D Management.46(3).pp.403-413.
Online
Porter's Five Forces: Analyzing the Competition.2019.[Online]. Available through :
<https://www.businessnewsdaily.com/5446-porters-five-forces.html>.
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