Organizational Structure and Effectiveness: A Case Study of Wesfarmers

This report provides a comprehensive analysis of Wesfarmers' organizational structure and its impact on the company's performance. It begins with an overview of Wesfarmers, its background, and its various business divisions, including retail, chemicals, and resources. The report then delves into the company's organizational structure, highlighting its decentralized, functional approach with separate management for different divisions. It explores how this structure supports the company's strategies, such as developing a strong supply chain and expanding its retail presence through acquisitions like Kmart and Target. The report examines the impact of the organizational structure on management innovation, emphasizing how the decentralized model fosters an environment for innovative practices and strategic decision-making. Furthermore, the report analyzes the effects of the organizational structure on business performance, demonstrating how the company has achieved significant revenue and profit growth. Finally, the report offers recommendations for further optimizing Wesfarmers' organizational structure, including ethical sourcing, innovation, and systems thinking to meet future needs and maintain its competitive advantage. The report uses relevant theories of organizational structure and management to support its findings.

Running head: ORGANIZATIONAL STRUCTURE AND EFFECTIVENESS
ORGANIZATIONAL STRUCTURE AND EFFECTIVENESS
Name of the Student
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Author Note

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Executive Summary
The study focuses on evaluating the organizational structure and strategic design of the
Wesfarmers. The study essentially brings forward all the important factors that have contributed
to the development of effective organizational design within the company. The company was
found to have successfully implemented a decentralized but effective organizational structure.

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Table of Contents
Introduction......................................................................................................................................3
Background......................................................................................................................................3
Organization overview.....................................................................................................................3
Section 1: Overview of the organizational structure, strategies and possible reasons....................3
Section 2: Impact of organizational structure on management innovation.....................................4
Section 3: Impact of organizational structure on business performance.........................................5
Recommendations............................................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Introduction
Background
The study is focused towards the evaluation of the organizational structure and strategies
of Wesfarmers Australia. The organization is one of the largest retail chains in Australia.
However, they also have other important business divisions. The study is focused towards
understanding the most important factors that are necessary for the effective development of
organizations through efficient organizational structures. Moreover, an important focus of the
study is toward understanding the strategic factors that guide organizational development. The
report would depend greatly utilize the relevant theories of organizational structure and
management. The effectiveness of the strategy of Wesfarmers would analyzed in consideration
of the same.
Organization overview
Wesfarmers Limited is one of the largest retail companies of Australia. The headquarters
of the company are in Perth. The main business divisions of the company are retail, chemicals,
coal mining, fertilizers, and industrial and safety products. The current revenue of the company
is 68.4 billion AUD. The company has approximately more than 220 thousand employees. The
company was founded in 1914 as a farmer’s cooperative (Wesfarmers.com.au 2019). The retail
organization is specialized in groceries. The company has a large network of farmers from whom
it sources the majority of its products. Some of the important subsidiaries of the company in
Australia are Kmart, Target and Bunnings Warehouse.
Section 1: Overview of the organizational structure, strategies and possible reasons
The company has vase expansions into various businesses. It has operations in areas such
as home improvement and office supplies, chemicals and fertilizers and departmental stores. This
makes it keep a departmental organizational structure with separate management for all the
different divisions of the company. The company has separate business divisions for Chemicals,
Resources, Energy and Fertilizers, Industrial and safety equipment and retail. The retail business
division can be considered to understand the organizational structure of the Wesfarmers
organization. There are four main divisions of the organization as per the retail business. These
four divisions are Coles, home improvement and office supplies, Target and Kmart. The

4ORGANIZATIONAL STRUCTURE AND EFFECTIVENESS
company has a functional organizational structure. In this type of structure the workers having
similar functions are grouped together. At the same time the organizational structure is
decentralized in the organization. This provides the middle management with a fair deal of
independence in regards to the decisions that are to be taken. The middle tire of the management
hence becomes very important in providing the inputs that help to build the strategies.
The strategy of the organization is to develop better supply chain to provide the best
possible products to the customers. Since it operates in the retail market of Australia with close
competitors like Woolworths and Aldi, it focuses on specialization that can help it to gain
effective competitive advantage. The organization at the same time is focused toward expansion
strategies. They have acquired the Australian organizational division of Kmart and Target. This
has helped them to further diversify their product offerings in the retail sector. The structure is
further aligned with the organizational strategies. The decentralized structure helps the company
to effectively implement the strategic functions. This further enables the company to take part in
various activities that can guide the performance of the organizations. Wesfarmers is focused
towards overall growth in the retail sector of Australia. An important aim is to keep close watch
on the strategies of the other competitors. This makes the company effective in terms of the
targets that need to be achieved. The targets are set in accordance of the competitive factors, the
supply chain effectiveness and the future growth scope of the market.
Section 2: Impact of organizational structure on management innovation
Wesfarmers is a large corporation that has many departments concerned with the various
business areas of the company. This is one of the primary reasons for Wesfarmers to implement
a decentralized organizational structure. This ensures that the organization provides essential
powers to the middle level management to provide inputs that can guide the organizational
strategies of the company. It is important to consider that the strategies of the company are based
on the prevalent market situations. The organizational structure being decentralized helps in
forming better management innovation. The innovative measures taken by the organization’s
retail division are enhanced through the application and effective and efficient technology.
According to Albers, Wohlgezogen and Zajac (2016) organizational design is crucial towards
determining the value of innovation within the management framework. The decentralized

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organizational structure of Wesfarmers in this case helps to create a better and more effective
environment for the development of innovative practices.
The systems theory can be easily applied to the organizational structure of the company.
According to the systems theory, all the parts of the organization are interrelated and the changes
that take place in one part would inevitably affect the various other parts that are present. Hence,
it is important to align the functions of all the parts with the strategies that are most important for
organizational development. According to Macdonald, Burke and Stewart (2018) systems
oriented organizational structures can provide much more effective innovational platforms than
the other traditional management structures. Wesfarmers utilizes the organizational structures to
not only create innovative management frameworks but also create innovative strategies to tackle
the market challenges. It is important to understand that the management of Wesfarmers is
innovative in terms of the technology, the functional flexibility and the creation of goals.
The organization has different management functions for the different retail departments.
The systems like enterprise resource management are used to improve the resource utilization
and the inventory functions. The roles are allocated, managed and strategized effectively through
the usage of proper ICTs (Azar and Ciabuschi 2017). The structural efficiency of the system
helps in the achievement of the most important goals. The middle tier management of the
organization has enough inputs to develop comprehensive strategies that help to overcome
management and organizational challenges. It helps to create better knowledge management
frameworks and better strategy formation.
Section 3: Impact of organizational structure on business performance
Wesfarmers have been able to reap significant rewards from the organizational structure,
strategies and management that are essentially used by the company. The revenue of the
organization has increased by 4.3% in the current financial year. The net after profit has been 1.9
billion AUD. It is a 13.5% increase since the last quarter (Wesfarmers.com.au 2019). The
structure has been effective in determining the overall performance as it has created a better
operational setup for the organization. The decentralized structure has made sure that the
company performs effectively in the retail market. It has been able to make close competition
with the biggest rivals Woolworths. The three major retail outlets, Kmart, Target and Coles have

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been effective in achieving sales and revenue growth. The development can be attributed greatly
to the organizational structure and the strategies that it has helped to create for the organization.
Wesfarmers have achieved effective growth over the last few years. It can be said that the
company has reaped good results from the strategic development that have been brought forward
through the implementation of the more effective organizational design. The decentralized
system of organizational design has greatly contributed toward the growth of the sales and
revenue of the company. The decentralized system has helped the middle management to
understand the market requirement and the competitor behavior (Santos, Pache and Birkholz
2015). This has significantly been responsible for the creation of more flexible operational
strategies for the organization. It can be said that the operational strategies have been effective in
determining the functional flexibility of the organization. The inputs from the middle level
management have been crucial in determining the value of the sales functions. Wesfarmers have
been able to gain better market information better value proposition and more effective insights
into the strategies that are needed to be formed. The organizational development of Wesfarmers
have evolved in accordance of the supply chain functions, the market demands and the growth
requirements (Sullivan and Gouldson 2017). It is important to understand that the organizational
value of the enterprise has increased as the decentralization of the functional areas has created a
much smoother growth framework for the organization.
Recommendations
There are some important recommendations for the organization that can further help to
optimize its organizational structure. The company has been able to perform significantly with
regards to its more important organizational functions. However, there is a need for the
organization to develop even better organizational design that can help it to achieve the more
important goals in the future.
The organization need to provide further consideration to ethical sourcing of its
resources. The organizations are giving more importance to the ethical sourcing of various
products in order to align their growth strategies with sustainable future goals. As an
organization Wesfarmers is able to create a strong CSR presence. However, the same now also
needs to be optimized further towards the achievement of more important future goals. Another
very important strategy that is required at the time is the creation of the stronger innovative

7ORGANIZATIONAL STRUCTURE AND EFFECTIVENESS
framework for the development of the organizational strategies for the future. It is important to
develop strategies that can affect the future needs of the organization.
Positive strategies need to be formed though the better implementation of the systems
approaches to management. It is highly recommended that new and innovative teams are formed
for the creation of better innovative frameworks that can help the organizational strategies in
more ways than one. The company needs more developed plans to cater to the growing needs of
the public. The organizational design should hence mirror the organizational developmental
needs for both the near and distant future. In essence, the aim is to develop strategies that
incorporate within themselves more CSR, innovation, systems thinking and transformational
leaderships.
Conclusion
The implications of the study points towards the fact that Wesfarmers have been able to
implement strategies that have been able to develop the organization greatly over the last few
years. The company has worked effectively as it has given more preference to the development
of strategies that can address all the important growth needs and growth areas of the company. It
is important to remember that Wesfarmers are an organization that have worked effectively over
the year to continue with its dominant market position in the retail sector. The findings suggest
that Wesfarmers have been effective in the development of better organizational design and
focused greatly towards innovation through their strategies.

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References
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