Business Environment: Micro Factors Impacting Wesfarmers

This report offers a comprehensive analysis of the microenvironmental factors influencing Wesfarmers, an Australian listed company. It identifies and examines key elements such as customers, investors, competitors, and suppliers, highlighting their impact on profitability, business performance, and value-adding attributes. The analysis utilizes Porter's Five Forces model to understand the competitive landscape and the bargaining power of various stakeholders. The report further explores challenges faced by Wesfarmers, including the need for innovation, economies of scale, and effective supply chain management. It proposes several solutions, such as investing in research and development, collaborating with competitors, and understanding customer needs. The conclusion emphasizes the importance of understanding and addressing these factors to ensure the company's growth and success in a competitive market.

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Business Environment
System04116
3/9/2019

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Contents
Introduction......................................................................................................................................2
Identification and analysis of micro environmental factors............................................................2
Challenges and solutions.................................................................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

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Introduction
This project is about identifying and analyzing the micro environmental factors of an
organization. For this project, the large company of Australia is chosen that is “Wesfarmers”.
Wesfarmers is a listed company of Australia and headquarter is in Western Australia. The
different business operations of the Wesfarmers covers office supplies, outdoor living and home
improvement, general merchandise and apparel and industrial divisions with businesses in
energy and fertilizers, chemicals and safety and industrial products (Wesfarmers limited, 2018a).
The various factors of microenvironment affect the business of Wesfarmers such as
behavior of the consumer, competitors, social suppliers, intermediaries, entry of new company or
personnel, opinion of public and many more. All these factors have impact on the performance
of business, policies, structure, attributes of value adding, profitability, market share and growth
of the business (Nordmeyer, 2019).
The solutions for those problems or challenges have been provided to counter the
potential or prevailing risks in the organization.
Identification and analysis of micro environmental factors
There are various factors that affect the business operation of Wesfarmers:
1. Customers: Wesfarmers main aim is to satisfy the needs or requirements of the customers
and buyers. They provide good quality products or services to buyers at the preferred
prices. They knew the fact if they fails to do so it may results in failure of the business.
They listen to customers and value their feedbacks (Wesfarmers limited, 2018b).
2. Availability of investors: investors invest in Wesfarmers, but they are actually not the
investors. They own those shares of the company and get a say in the in succession of the
company. Wesfarmers provide better returns on investor’s investment. They are under an
obligation to earn profits and pass benefits to the investors. Wesfarmers maintain stability
between the health of their company and welfares to the investors (Wesfarmers limited,
2018a).

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3. Competitors: Wesfarmers keep on check on their competitors. Its biggest competitor is
Incitec pivot limited, ORICA, AECI and many more. They try to make their product
distinct and unique to their market. They offer products, which are set according to the
affordability powers of buyers, which are better and cheaper than their competitors
(Owler, 2019).
4. Suppliers: They make amenable and healthy relations with their suppliers for efficient
production process. They try to make sustainable growth for their suppliers. They build
collaborating and strong relationships with suppliers to responsibly produced products to
their buyers that safeguard animal welfare and reduce impacts of environment.
5. New entrances: As Wesfarmers is a major Australian company. it has several number of
competitors. They have low risk of new entrance as they focus on brand awareness,
recognition and varied markets (Kokemuller, 2019).
Impact of above factors on business of Wesfarmers:
1. Profitability: The above factors have greater impact on profitability of Wesfarmers as
they have to set a lower price of their products due to high level of competition in its
industry and for the satisfying the customers and their needs and wants.
2. Performance of business: The factors have positive impact on performance of business of
Wesfarmers as new entry of companies in the existing market affect the market place and
they work hard to maintain their business at high level, which increase their performance
(Wesfarmers limited, 2018d).
3. Value adding attributes: due to competitors, they have to add something extra to their
products and services before offer to buyers or customers. But it helps in increasing their
number of customers for those products and services.
Frame work for analyzing micro environmental factors of an organization:
Porter’s five forces model-

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(Source: Visualparadigm.com, 2019).
1. Bargaining powers of customers: Wesfarmers is the most recognized company in
Australia. It conducts regular research of market to know the changing expectations
and modern trends of the customers.
2. Bargaining powers of suppliers: Wesfarmers avails its resources from distinct markets
as a result of dealing with different variety of products. It can be bigger obstruction
for it as the company depends on several suppliers at a time (Westfarmers.com.au,
2018).
3. Threat of substitute: The threat of substitute is high for the company from last few
years however the company has adopted environmentally friendly, efficient energy
production methods. Hence, the threat of substitute is very low.
4. Competitive rivalry: Wesfarmers is one of the recognized company in Australia and it
is needless to state that the company is dominating the retail market in Australia. The

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organization enjoying the rivalry of competition and hence the competitive rivalry
risk is low for the company.
5. Threats of new entrance: Wesfarmers has a higher threat of new entries as far as its
competitors are concerned. Owing to its brand awareness, recognition as well as its
different market, the threat of new entrance is low (Harvard business review, 2019).
Challenges and solutions
1. Innovating new products and services: By innovation new products and services, the
threats of new entry can be solved or faced. New products and services not only bring
new patrons to the crease but also provide exiting patron a reason to purchase its
products.
2. Economies of scale: By building economies of scale so that they can lower the fixed cost
per unit.
3. Research and development: Invest more on research and development so that the problem
occurs from those factors in business can be solved. New entries are not expected to enter
into a vibrant industry where established companies keep outlining their regular
standards. Thus, discourage new companies in the market.
4. Building supply chain: By building supply chain with multiple suppliers can also solve
the definite problems occur due to those factors.
5. Understanding the essential needs of the customers: By knowing, the core needs of the
customers instead of understanding what the customers are buying (Wesfamers limited,
2010c).
6. Collaborating with competitors: it is needed to collaborate with the competitors so that it
helps in increasing the market size rather than competing for small markets (Miller, et al,
2011).

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Conclusion
It is concluded that every company has to identify and analyze the micro environmental
factors that adversely affect the business of the company. Wesfarmers is affected by various
micro environmental factors such as customers, suppliers, competitors, investors and new
entrances. These factors have adverse impact on the performance, value adding attributes and
profitability of the business. To understand these factors and its impact on internal environment,
the porter’s five model framework is used which comprises threats of substitution, new entry,
bargaining power of customers and suppliers and competitive rivalry. The solutions of these
problems which occurs due to various factors is given which will helps in enhance the growth of
the company and productivity in competitive market.

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References
Kokemuller, N. (2019). Microenvironmental factors that affect businesses. Retrieved from:
https://smallbusiness.chron.com/six-microenvironmental-factors-affect-businesses-
78023.html
Miller, F., Vandome, A. & John, M. (2011). Porter five forces analysis. Germany: VDM
Publishing.
Nordmeyer, B. (2019). What is microeconomics?. Retrieved from:
https://smallbusiness.chron.com/microenvironment-marketing-22920.html
Owler, (2019). Wesfarmer’s competitors, revenue, number of employees, funding and
acquisitions. Retrieved from: https://www.owler.com/company/wesfarmers
Visualparadigm.com, (2019). Porters five force model. Retrieved from:
https://www.google.com/search?
q=porters+five+forces+model&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiUr92O1
f7gAhUZ4XMBHVIaCAEQ_AUIDigB&biw=640&bih=522#imgrc=dYBDs_rKFHjZg
M:
Wesfamers limited. (2010c). Wesfarmers Sustainability report 2010. Retrieved from:
https://www.wesfarmers.com.au/docs/default-source/reports/2010-sustainability-
report.pdf?sfvrsn=2
Wesfarmers limited. (2018a). Wesfarmers annual report 2018. Retrieved from:
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-annual-
report.pdf?sfvrsn=0
Wesfarmers limited. (2018b). Wesfarmers shareholder review 2018. Retrieved from:
https://www.wesfarmers.com.au/docs/default-source/reports/wes18-048-2018-
shareholder-review.pdf?sfvrsn=6

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Wesfarmers limited. (2018d). Corporate governance statement. Retrieved from:
https://www.wesfarmers.com.au/docs/default-source/corporate-governance/2018-
corporate-governance-statement.pdf?sfvrsn=2
Wesfarmers.com.au, (2018). Wesfarmers sustainability report 2018. Retrieved from:
https://sustainability.wesfarmers.com.au/our-report/about-wesfarmers/