Background of the company and topic
Wesfarmers Limited is one of the leading retail company located in Australia. The headquarters of the company is located in Perth, Western Australia. The company deals with not only providing retail facilities to the customers but also provides fertilisers, chemicals and industrial safety products. The company was established in 1914 and currently is popular on an international basis. The areas served by the company include Bangladesh, Ireland, New Zealand and the United Kingdom. The previous year saw Wesfarmers gain financial revenue of AUS$465.98. This helped the company in overtaking BHP Billion as the leading company in the Australian market. Wesfarmers is considered as the largest private employer in the country. It has been reported that the company has over 205,000 employees working across various sectors on an international basis. Wesfarmers is a conglomerate has various companies in its subsidiaries such as Coles, Kmart and so on (Wesfarmers.com.au, 2017).
The report analyses the type of industry and competitors that exist in this type of industry. According to He, Zha & Li (2013), the analysis of the competitors is an important factor that every manager needs to consider before setting up a business. The type of industry determines the level of competitors it may attract depending upon the preferences of the people. Apart from this, another topic that the report analyses are the global resources and capabilities that the company possess in order to gain a competitive advantage. Maintenance of proper resources can help an organisation to undertake decisions that add as a competitive advantage for a company. The report focuses on these topics and the analysis of the topics related to Wesfarmers. The competitors, resources and capabilities of the retail industry, as well as Wesfarmers, are analysed in order to understand the significance of the chosen topic.
The issues that have been analysed in the report include the external as well as the internal analysis of the factors that may affect the successful working of an organisation. The competitive analysis helps to identify the main competitors that exist in the retail market of Australia (Fleisher & Bensoussan, 2015). In this regard, it can be said that the main competitors of Wesfarmers include Woolworths, Metcash and Myer. Hence, the analysis of the strategies that are adopted by these companies is conducted in the report. The issues that may arise without the proper analysis of the competitors can lead to a bad investment for a company. In the case of Wesfarmers, the main reason for the success of the company is the fact that it conducts a thorough analysis of the main competitors and improves its policies in the organisation. Apart from this, the report also deals with issues related to the industry.
According to Liu & Tyagi (2017), the analysis of the industry is an important factor as based on the success that the industry faces, managers decide to invest in setting up a company based on the industry. This includes proper analysis of the customers and the factors that lead to the success of the industry. Analysis of the customers, the tastes and preferences and the responses of the customers can be analysed by gaining the feedback of the people. Industry analysis is considered as a major issue as it helps in identifying the factors that cause the success of an industry. In the case of Wesfarmers, this is important as the retail sector in Australia have a significant development in the market. The popularity of the sector can sometimes pose a threat as customers expect uniqueness from the companies. In this regard, Wesfarmers have an advantage over other companies due to the variety of products it sales in the Australian market.
Issues being analyzed
Other issues that the report focuses on are the resources and capabilities of a company. According to Wright (2014), the resources of a company determine the potential success that a company can attain. The resources can be in the form of tangible, intangible and physical resources. Physical resources include the employee and the facilities that are required for conducting a business in a successful manner. The tangible and intangible assets include the assets as well as the legal documents and procedures that help in the smooth functioning of a company. In the case of Wesfarmers, the resources possessed by the company can help it to become the leading retail sector in the country. This is mainly because of the fact that the company sells varieties of products that need the existence of the resources. The resources used also increases the capabilities of success among the employees as well as of the organisation.
It has been observed by Riasi (2015) that the capabilities of an organisation are formed based on the resources it possesses. This is mainly because of the fact that with the proper number of resources in an organisation the capabilities can also increase. The skill sets of the employees can improve and the organisation can benefit with the contribution made by the employees. An excess number of resources can also help in improving the facilities of an organisation. This can help in improving the standards of an organisation and make it competitive in the market. In the case of Wesfarmers, the competency of the company determines the level of competition it can provide in the market. The number of employees that the company have outlined the competency it can possess. Thus, based on the understanding of the issues, it can be said that the analysis of the issues can lead to the improvement of Wesfarmers and ensure that it can maintain the reputation it holds in the retail market of Australia.
The issues can be analysed based on the application of theories and models proposed by scholars. In order to conduct an analysis of the industry and competition, an organisation needs to undertake the theories related to an external analysis of the business environment. According to De Brentani & Kleinschmidt (2015), one of the best theories that can be applied in order to conduct such an analysis is Porter’s five forces analysis. Porter’s five forces help to understand the intensity of the competition that exists in the business market. The intensity and the attractive nature of the business can determine the profitability of a business. Hence, in the case of Wesfarmers, the use of Porter’s five forces can be used to determine the external factors of the business. These five forces include the threats that exist from new entrants, substitute, the rivalry of the industry along with the bargaining power of suppliers and buyers.
The threat of new entrants- The threat of new entrants signifies the emergence of new companies in an industry. This threat can be considered as a high or low-level threat depending upon the type of industry. According to Cavusgil & Knight (2015), the threat of new entrants can face certain barriers concerning the interference of the Government. Apart from this, the new companies need to have exceptional potential in order to give a tough competition to the existing companies. At the same time, it can also be said that the existing companies may face similar threats owing to the emergence of new companies. In the modern day, innovation and technological advancement are the main success factors for most companies (Silva & Marcondes, 2017). Hence, in some cases, it may also prove challenging for the companies. In the case of Wesfarmers, the threat of new entrants is medium owing to the fact that the Government of Australia poses restrictions to the emergence of new business in the market. Hence, the barriers to entry need to be overcome in order to enter the market business of Australia. At the same time, the reputation that the market holds in the business cannot be relinquished due to the emergence of new companies of the same industry.
Analysis of the issues
The threat of substitutes- The threat of substitutes indicates the alternate choices that the customers can make. This is mostly done if the customers find the prices or quality of products fluctuating a lot from the market standard. The threat of substitutes can also be flexible depending on the company and the reputation it has in the market. Leonidou et al., (2013) criticised that the threat of substitution can be mitigated easily with proper strategic management. The substitutes need to be less costly with a better quality in order to gain an advantage in the market. In this regard, it can be said that Wesfarmers need to analyse the substitutes that exist in the market. The retail market of Australia has a variety of companies that provide similar products like Wesfarmers. However, other retail stores do not provide the additional products such as the safety equipment provided by Wesfarmers (Beske, Land & Seuring, 2014). Hence, it can be said that threat of substitutes is low in the case of Wesfarmers. The company have various products that they sell in order to maintain a competitive advantage over its rivals. Customers need to analyse the market before deciding on the choice of a store in order to purchase the product.
The threat of rivals- According to Chatfield (2017), a threat of rivals is the most high profile threat that exists in the market. Every company have rivals that provide proper intensity in the market. The reason behind conducting the external analysis is to gain an advantage over the rivals and ensure that the companies maintain the edge in the market. Hence, it can be said that this threat always remains high for any company as the strategies of the rivals cannot be determined. The prediction of the rivals needs to be done based on proper analysis of the market (Lai et al., 2014). In the case of Wesfarmers, the company faces threats from rival companies like Myers and Woolworths. These companies manufacture the similar product like that done by Wesfarmers. Hence, the threat from the rivals is high for the company. In order to mitigate this, it is important that Wesfarmers develop proper strategies to maintain its dominance in the Australian market. The rivals can be both existing as well as new entrants in the market. Hence, a proper market research can help the managers develop strategies in order to maintain a competitive edge in the market.
Bargaining power of suppliers- The bargaining power of suppliers indicates the number of sellers that are available in the market. According to Jain, Aguilera & Jamali (2017), every company need suppliers to help in gaining the resources and required materials to continue the manufacturing of products. The role of suppliers is an important factor for retail companies as most of the companies have to rely on purchasing products from the suppliers. Hence, it can be said that suppliers have an opportunity to claim their own price while selling products to the companies. This can provide a disadvantage for the companies, as there may be chances of losing potential suppliers. In the case of Wesfarmers, the threat of suppliers is low because the company focuses on manufacturing fresh products. With the existence of subsidiary companies covering the products they sell, Wesfarmers does not have to maintain negotiations with the suppliers in order to gain raw materials required for manufacturing their product. Thus, Wesfarmers does not face much threat from the suppliers owing to the reputation it holds in the market and the fact that the company manufacturers produce in the company itself.
Bargaining power of buyers- Mihet (2013) stated that the bargaining power of buyers reflects the purchasing power of the customers. The factors that affect the purchase of customers need to be analysed by a company. The customers are a major stakeholder of a company and can help in increasing the reputation of the company. Hence, it is necessary for every company to ensure that the satisfaction of the customers is maintained. With an increased number of substitutes, customers can select the company that provides satisfaction. The factors that affect customer satisfaction include price, quality and reputation of a company. In this regard, it can be said that Wesfarmers face a similar threat from the customers that purchase products from the store. The existence of high profile competitors makes it difficult for Wesfarmers to increase the prices of the product. Hence, without proper justification or compensation, it can be difficult for the company to impress buyers with an increased price of the products. Hence, the bargaining power of the buyers of Wesfarmers is high. Thus, it can be said that the external factors identify the issues that exist in the business market and help to analyse the ways by which it can be mitigated. Hence, recommendations can be provided to Wesfarmers in order to minimise the high threat in the market and create an opportunity for improvement.
The analysis of the resources and competencies of Wesfarmers can be done by conducting a SWOT test. According to Nag, Han & Yao (2014), SWOT analysis helps to identify the weakness of a company and ensure that it can be converted into the strengths. The threats to a company are also analysed in order to find opportunities to improve in the future. Based on the external analysis of the competitors faced by Wesfarmers, the SWOT analysis about the existing resources of the company can help in identifying ways to improve the internal factors that affect the business of the company.
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Strength · Strong brand legacy · Involves in community development · Huge amount of workforce |
Weakness · Limited opportunities for growth · Decision taken are always made public · Inexperienced workers outside Australia |
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Opportunity · Expansion into other territories · Enhance the service quality · Become number brand in the Australian market |
Threat · Rival companies like Myers, Woolworths · Economic crisis in most countries · Non-specialised products as compared to competitors |
Table: SWOT Analysis
(Source: Created by author)
The table shows that Wesfarmers can create opportunities based on the strength of the company. The brand legacy that the company holds can act as a strong point for the success of the company. As commented by Shockley & Fetter (2015) reputation of a company brings about faith in the minds of the people. Apart from this, the community service provided by the company can help in increasing the reputation of the company around the world. Another biggest advantage that the company has is the fact that the human resource of the company is large. It has over 205,000 people working in different sectors in different locations. Thus, the workforce required for the success of the company can help in eliminating the weakness. The limited opportunity for growth is a weak point for the company. This is mainly because of the fact that the manager does not venture in international borders. This is mainly due to the inexperienced workers that the company have outside Australia. According to Vogel (2014), in the age of technology and media, secrets of a company cannot be maintained. The decisions taken within a company can leak out owing to a small change in the attribute of a company. Similarly, being a reputed organisation, Wesfarmers face a similar challenge.
The biggest threat to the companies comes from companies such as Myers and Woolworths, two most reputed companies in the retail industry of Australia. Apart from this, owing to the expansion of the market, the company often faces threat from the dip in an economy in most countries. Countries like Bangladesh have a continuous fluctuation in the economy. The competitors also have specialised products that help them to gain a competitive edge over Wesfarmers. Wesfarmers sell many products without any specific item in its artillery. Hence, the customers looking for a specific type of product prefer the rivals of Wesfarmers (Armstrong & Taylor, 2014). However, with the resources that the company have and the competencies that are built because of the resources, Wesfarmers can become the leading company with the highest revenue in the overall Australian business market. The service quality can be enhanced and more opportunities for expansion in international borders can be brought about after converting the threats. In order to do so, the company need to make certain changes.
After conducting the internal as well as the external analysis, it can be said that Wesfarmers need to formulate certain strategies that can help in improving the company and create an opportunity for improvement. In order to mitigate the threat from the competitors, Wesfarmers need to conduct proper market research. The company can train the marketing experts in trying to gain information about the strategies that are adopted by the rivals. They can do so by communicating with the customers and reading reviews left in the social media. This can also serve the purpose of the threat that arises from the bargaining of the buyers. The analysis of the reviews of the customers can help the company to make their products unique so that it can be differentiated from the others. The weakness of the company can be mitigated by the use of the competency that Wesfarmers posses. The amount of workforce that exists in the company can be a huge positivity for the company. Hence, proper training of the employees can increase the experience level and make the employees competent to take new challenges. Thus, it can be said that the solutions provided can provide Wesfarmers with an opportunity to expand further and continue the dominance in the Australian market.
In the future, the researcher can analyse another form of human resources management topics such as staffing, organisational structure and culture. These topics also contribute to the success and the work process of an organisation. This can help in the proper development of the managerial skills and the possibilities of enhancing a future career in management. The study of management and the issues faced by organisations can also help in analysing several organisations. Comparisons about the difference in the managerial strategies adopted by the companies can also be analysed with the help of the analysis of these topics.
Reference
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