BIZ202 Business Environment: Wesfarmers Micro-Environment Report

This report provides an in-depth analysis of Wesfarmers' micro-environment, focusing on the application of Porter's Five Forces model to assess the competitive landscape. It examines the bargaining power of buyers and suppliers, the threat of new entrants and substitute products, and the intensity of rivalry among existing firms. The report details the impact of these forces on Wesfarmers' performance, profitability, and market share. Furthermore, it identifies key challenges faced by the company, such as competition and technological advancements, and proposes practical solutions to mitigate these risks, including product innovation, supply chain management, and customer satisfaction strategies. The conclusion emphasizes the importance of understanding the business environment for strategic decision-making and long-term success.

BUSINESS ENVIRONMENT 0
Business Environment
Student’s Details-

BUSINESS ENVIRONMENT 1
Executive Summary
Business Environment deals with the internal and external forces that affect the business and it is
considered as an important aspect of the business. It is essential for a company to analyze the
changes made within and outside the organization in order to make better plan to cope with the
changes. It helps in identifying the opportunities and resources of the organizations for making
better strategies and plans to increase the profitability and performance of the organization. In
order to analyze and scan the overall business environment Micro and macro environmental
factors are examine to identify the gaps and further actions are taken to fulfill the gaps identified.

BUSINESS ENVIRONMENT 2
Contents
Introduction......................................................................................................................................3
Micro Environmental Factors..........................................................................................................3
Bargaining Power of Buyers........................................................................................................3
Bargaining Power of Suppliers....................................................................................................3
Threat of New Entrants................................................................................................................3
Rivalry among existing firms.......................................................................................................4
Threat of Substitute Products.......................................................................................................4
Impact of the forces on the Business...............................................................................................4
Challenges and Solutions.................................................................................................................4
Conclusion.......................................................................................................................................6
References........................................................................................................................................6

BUSINESS ENVIRONMENT 3
Introduction
Business Environment is a major aspect in every business. It refers to the total of external
and internal forces that affect the business and its operations. These factors are outside the
control of business firms but it influences the performance and productivity of the company
(Hillary, 2017). In this report, the company chosen for the analysis is Wesfarmers which is a
leading Australian company dealing in home improvements and merchandise products.
Therefore, the report discusses the identification of micro environmental factors and the impact
these forces in terms of performance, profitability, growth and market share of the company.
Apart from this, the challenges that the company faces are also highlighted along with possible
solutions to them.
Micro Environmental Factors
Wesfarmers Ltd use Porters Five Force Model to take a strategic decision by analyzing
their current competition of their retailing industry (Jurevicius, 2013). The following are the
factors that are included in this model:
Bargaining Power of Buyers
Wesfarmers have high bargaining power of buyers as it has other competitors like
Woolworth who gives variety of products to customers and Wesfarmers will have to make their
prices low to gain profits (Dobbs, 2014).
Bargaining Power of Suppliers
The bargaining power of suppliers is moderate for Wesfarmers as they maintain a
respectful relationship with the suppliers especially with the suppliers with whom the business
cannot survive.
Threat of New Entrants
Wesfarmers have a dominant place in the Australian Retailing Industry and made
difficult for the new entrants to exist in the market. Therefore, threat of new entrants is low for
the company as they have made necessary innovations and contributed to Research and
Development as well (Wang & Xie, 2011).

BUSINESS ENVIRONMENT 4
Rivalry among existing firms
The company faces moderate competition with the rivalry industries as they are focusing
on the customer engagement by adopting multiple strategies, which differentiates them from
competitors (Yetkin, 2014).
Threat of Substitute Products
Wesfarmers are engaged in producing the retail products, which are cost effective. The
company faces lesser threat of substitute products as they focus on maintaining quality and
customer satisfaction, which enables them to hold their customers.
Impact of the forces on the Business
Porter’s Five Forces model identifies the competitive forces in the microenvironment of an
industry. These factors determine the strength and competitive position of the Wesfarmers. They
have an impact on the company, their overall performance and profitability. The impact of these
forces are discussed as below:
 High bargaining power of buyers will force Wesfarmers to lower the prices which will
impact the profitability and performance of the company.
 Wesfarmers maintain a good relationship with suppliers and distributors and will have a
positive impact on the company. This effective relationship will help the company
increase market share by selling more (Lacoste & Blois, 2015).
 Being dominant in the retail industry, the entry of new firms will not affect the company
and company’s policies, reputation and productivity. The company has stable relationship
with the customers and has lower threat of new entrants.
 The competitors of Wesfarmers will affect the company as they can capture the market
size and will affect the customers as well.
 The substitute products in the market forcing them to change the policies, prices to gain
competitive advantage, can affect Wesfarmers.
Challenges and Solutions
The challenges that the company faces in the microenvironment are discussed as below:

BUSINESS ENVIRONMENT 5
 The company faces challenges from the competitors in terms of technology as the may
get attracted to new technology and the company may lose the customers base (Rickard,
2016).
 Wesfarmers may face the difficulty of decreased number of suppliers, which can lead the
company to invest in the inputs.
 There are changes in consumer taste, preferences and fashion, which forces Wesfarmers
continuously make changes in the product to meet the needs of customers.
 In the retailing industry, there is threat of substitute products for the Wesfarmers because
there are other players as well who are in the same industry and have similar product.
 Wesfarmers has various competitors in the market who perform various promotional
techniques to grab the customers. It can be a challenging part if the competitor’s
promotional plan gets success.
 The technological advancement requires efficient workforce who can do the process of
Research and Development and product innovation. The company faces challenges in the
training and development of the workforce.
The following are the possible solutions to the problems discussed above:
 To beat the competitors, Wesfarmers should do necessary changes into the product. The
company can do innovations in the product and technology to get competitive advantage
(Burton, Story, Raddats, & Zolkiewski, 2017).
 Wesfarmers should maintain a dedicated relationship with the suppliers in order to
maintain an effective supply chain
 The company should analyze the needs, preferences, trends and buying patterns of
customers in order to deliver the quality products in a cost effective manner.
 In order to overcome the problem of substitute products, Wesfarmers can focus on the
customer satisfaction by analyzing their by use of various tools like surveys by which the
company can deliver customer oriented product. In this way, the customers will not
switch to other brand.
 Wesfarmers should involve themselves into promotional techniques where they can
increase brand awareness, attract new and potential customers, and beat the competitors.

BUSINESS ENVIRONMENT 6
 The company should acquire a skilled team who has deep knowledge of technological
changes. This team can be developed through proper training and development.
Conclusion
To conclude, it can be said that business environment is important for every organization
to analyze the internal and external changes in the environment to identify opportunities and
developing a plan for coping with the changes. The report analyzes the micro environmental
factors through Porter’s Five Force model to analyze the competitive forces of the Wesfarmers
retaining industry. This model used by the company for developing strategies for getting
competitive advantage and long-term profitability of the company. Further, the impacts of these
forces are analyzed on the company’s profitability and productivity. Lastly, the challenges faced
by the company in the microenvironment are discussed along with the possible solutions to
overcome those challenges.
References
Burton, J., Story, V., Raddats, C., & Zolkiewski, J. (2017). Overcoming the challenges that
hinder new service development by manufacturers with diverse services strategies.
International Journal of Production Economics, 192, 29-39.
Dobbs, M. E. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
Hillary, R. (2017). Small and Medium-sized enterprises and the environment: business
imperatives. Routledge.
Jurevicius, O. (2013, May 27). Porter's Five Forces. Retrieved from Strategic Management
Insight: https://www.strategicmanagementinsight.com/tools/porters-five-forces.html
Lacoste, S., & Blois, K. (2015). Suppliers’ power relationships with industrial key customers.
Journal of Business & Industrial Marketing, 30(5), 562-571.
Rickard, P. (2016, August 25). Wesfarmers faces some tough challenges. Is it a buy? Retrieved
from Switzer Daily: https://www.switzer.com.au/the-experts/paul-rickard/wesfarmers-
faces-some-tough-challenges-is-it-a-buy/

BUSINESS ENVIRONMENT 7
Wang, Q., & Xie, J. (2011). Will Consumers Be Willing to Pay More When Your Competitors
Adopt Your Technology? The Impacts of the Supporting-Firm Base in Markets with
Network Effects. Journal of Marketing, 75(5), 1.
Yetkin, U. (2014). Revealing the Change in the Maritime Security Environment through Porter’s
Five Forces Analysis. Defence Studies, 1-27.