Macro-environmental analysis
Wesfarmers limited is a renowned retail supermarket that is engaged in several business operations such as liquor, convenience stores, home improvements, coal mining, energy and fertiliser, office suppliers, supermarkets and hotels. Wesfarmers operates its business through eight reportable segments named as Coles, Kmart, Resources, WIS (Wes farmer industrial and safety groups), Chemical, fertilizers, and energy of the same group. The company operates in Australia, UK, and New Zealand and it is headquartered in Australia. The report is based on the given case study. According to case study, several competitors in the retail industry are compared and this case study explains how Aldi (a German outlet) outperformed Coles and Woolworth by attaining a competitive advantage through technology (Marketline, 2018).
Political and legal factors- Legal implication imposed on the emission of carbon has restricted the production of certain products across Australia. Carbon Tax (fair tax policy) affect the performance of Wesfarmers. Political stability in the country is necessary that have impact on Australian supermarkets. Wesfarmers has increased competition among small retailers, different businesses, and created dominance of individual retail supermarkets. Rights to the shareholders and laws has restricted monopoly in market. Similar decisions such as removal of barriers on interest rate for electricity and lucrative side in coal industry was favourable for Wesfarmers. Although among the competitors, Woolworth enjoys political stability in both New Zealand and Australia. Various governmental campaigns urged big companies such as Wes farmers and Woolworth not to affect small existing supermarkets by conducting any unfair competitive activities (Australian food news, 2014).
Economic factors- economic conditions has affected the performance of Wesfarmers due to buying decision and customer demand. Global crisis is still being affecting the consumption pattern of market due to less disposable income. The GDP of the Australia has been increasing with an annual rate of 2 percent. Unemployment remains between the range of 5.4 to 5.6 percent (Beveridge, 2015).
Social factors- Wes farmers has the large base of employers and employees working with it. Moreover, it also has enough shareholders when as compared to other competitors. Wesfarmers acquired Coles and started targeting large population of around 22 million. The company undertook various initiatives especially for Torres islanders to uplift the society. Social factors such as cultural trends, population analytics, and demographics plays a crucial role in success of the organisation. Citizens generally rely on one-stop shopping and prefer to purchase the necessary products in large number in a week (Greenhalgh, 2018).
Technological factors- technology advancement plays an important role in the success of the organisation in Australia. With the increasing competition in the retail stores, it strived to invest in making it store smarter by promoting One-shop. Wesfarmers are required to focus on technological progressive means of production, which will further help in maintaining ecological sustainability (ProcessPolicy.com, 2018). Wesfarmers should undertake the use of low emission coal technology that will assist to sustain in business. Nevertheless, Woolworths was the first retailer who subscribed electronic marketing and merchandising network. As per the case study, it can be said that Coles and Woolworth may start simplifying their supply chains and building a strong relationship with the stakeholders. The competition is undoubtedly cut-throat as these companies strive to improve the online sales process which is based on data collection in a system (Zalengera, Blanchard, Eames, Juma, Chitawo, and Gondwe, 2014).
Porter’s five forces model
Environmental factors- In the entire retail industry, range of products offered as per portfolio keep a preventive measure that do not harm to the environment. Moreover, among its competitors, it has already made considerable investment in employing the technology that can avoid resources, adequate usage of water, and improve the flexibility of climate changes.
Threat of new entrants- Wesfarmers remained a popular company among Australian supermarkets. It deals with production and retail dealing of several items like industrial, energy, fertilizers, insurance, and safety chemicals. It can be easily predicted from the case study that Wesfarmers has become a highest obstruction to all its competitors. As far as recognition is considered among the competitors, the threat of new entrants is low to the Wes farmers (Karupaiah et al., 2014).
Bargaining power of suppliers- Wesfarmers provides its resources to different markets. Due to diverse variety of products, it can be said that it bear a limited competition among the supplier market. Limited, restricted, and particular suppliers of the Wesfarmers can create major obstruction to the operation of Wes farmers, as the company is dependent on many suppliers.
Bargaining power of customers- Wesfarmers conducts a market research to understand the expectation and relative trends of the buyers. Wesfarmers promote a sustainable approach that conducts business, which automatically fetches recognition to the renowned company “Wesfarmers.” Although, the bargaining power of buyers is moderate as per the strategy of Wesfarmers as it keeps offering a considerable discount offers among the regular customers.
Threat of competitors- Although, Wes farmers is one of most renowned supermarket in Australia. It is understood that Wesfarmers dominates the retail market of Australia. On the other hand, Woolworth can suffer from the competitors especially Wes farmers because another competitor “Coles” has collaborated with Wesfarmers and Coles is subsidiary. Wesfarmers enjoys a competitive advantage over all these retail supermarkets. As it only operate as a food product retailers, it deals in several businesses. Competitors such as Woolworth, Aldi, and Coles keep fighting to establish a considerable market share. Nevertheless, in regards to retailing, Coles helps the Wesfarmers to conduct a proper market research and build its products more efficient. As per the case study, the profitability of the Woolworth was reduced as Aldi started offering more quality efficient goods and fast services. Among all the competitors, financial position of Wesfarmers is most favouring as its return on equity is quite high. As of now, among service staff and price reduction strategy, Coles uses met mash that involves effective marketing to remain competitive and continue the market share (Chhabra, and Kiran, 2015).
Threat of substitutes- the threat to Wesfarmers is undoubtedly high and it is emerging in these last few years because of emerging Woolworth and Aldi. Aldi is a German company that is well known for its technology as it stroked the existing share of Coles and Woolworth in the Australia with its competitive advantage in technology. Wesfarmers adopt energy efficient and environment friendly method. Moreover, it has introduced high quality consumer services, which provides competitive advantage for the organisation. Therefore, the substitution threat is low to Wesfarmers.
Company analysis
It is a complementary model to PESTEL analysis. It is used to assess the internal environment of the organisation. This framework considers the resources, possible improvement, and competitive implication. Managers use this framework to focus on decision-making, especially how external and internal process can be advantageous to organisation further.
Value- undoubtedly Wes farmers offer value added products to its customers. The company enjoys reputation among all the retail supermarket competitors because it has wide range of products and services in its portfolio offering, which is even more than Woolworth, Coles, and Aldi. Moreover, Coles who is already a strong competitor in this industry has become a subsidiary unit of Wesfarmers (Oraman, 2014).
Rarity- Cut-throat competition among the retailers is rising the rate of inflation. Therefore, it is trying to fight for its existing market share by offering products at low prices. On the other hand, Aldi offers weekly special, which heavily are marketed with the help of catalogues in retail stores. Moreover, the application of Aldi is very well liked among the customers. Although, Wesfarmers started using the low carbon emission technology from the very beginning following this Aldi has committed to reduce the carbon footprint, efficiency and maximising the energy efficiency (Knott, 2015).
Cost to Imitate- the company has succeeded in maintaining and regulating the operations through data-based human capital. Nevertheless, Wesfarmers cannot operate only though data based human resource due to operation in different sectors. Wesfarmers have to engage such technology, software, invest in training of HR team that can be costly in initial years but finally employees will adapt the new system (Knott, 2015).
Organisation- Wesfarmers operates with highest number of employer and employee base in the whole industry. Wesfarmers is able to capture the value through its capable workforce. Technology is very efficient while collecting data and conducting market research. HR manager, IT department, and various team leaders use the efficient online test and group discussion to conduct selection and recruitment process to manage, improve, hire, and promote the performance of the employees (Management mania, 2018).
As per the case study, Wesfarmers has increased its fame within the retail industry. Other competitors Woolworth, Coles, and Aldi has been trying to establish new retail stores in populated areas. Coles is a giant player in the industry, which is a subsidiary of Wesfarmers. No other market player can get over others because of collaborating hand of Wesfarmers. Coles have well established supply chain with tight contracts that are agreed to sign the minimum loss incurred due to perishable nature of its products. Whereas, Woolworth has suffered a market struck due to emerging state of Aldi. Poor executing of marketing strategies, lack of restructuring and their implementation has poorly affected that led to reverse sales and profit (Chatzoglou, Chatzoudes, Sarigiannidis, and Theriou, 2018).
While forming the business level strategies, Coles proved that it has already achieved low prices, targeted loyalty programs, rolled out the new format for the retail store, and developed several categories. The business need to strategize the growth plans that delivers a better-networked store, which can focus on fresh food. Moreover, Coles extended its supply chain and its operations through value leadership to promote more channels that are new and improve its liquor business. The business level strategies undertake to promote growth strategies that accelerates the density of sales, drives strong fresh food growth, improves the supply chain, differentiate its retail supermarket through its several growth channels, transformation of liquor business, and finally extending the valuable leadership (Oraman, 2014).
Although, it enjoys a considerable value among all of its competitors but every organisation has some point left that can drag them to failure at any time in such a risky external business environment. According to case study, Wesfarmers should keep evaluating the opportunities in order to add value to its transaction. Apart from this, it is important to develop the capabilities of human resource and drive it ultimately to achieve the goal. It will lead to continue to get success by strengthening the corporate infrastructure that can develop effective divisional support. It is seen from the Annual reports that it succeeded in reducing the interest cost and raising equity through refinancing the debt. When best thinking of recommendation, Bunning (a subsidised part) can position itself that can led to continuous growth through strong levels of investments. Moreover, it should build strategic agenda that can enhance the customer offerings. Wesfarmers should focus on strengthening the leadership team by targeting the execution of transformational plan.
Conclusion
From the above discussion, it can be concluded that Wesfarmers will acquire the market as it already enjoys a considerable good market share. Although, entry of Aldi has affected the business of Woolworth and Coles. Nevertheless, Wesfarmers has been affected due to Aldi technological attack that promoted innovation due to low business operation of Coles. Moreover, Wesfarmers already operate in other business sectors, which has not affected its market share and its profitability. The report analysed the external environment that affects the business of Wesfarmers. Apart from this, it has also undertaken VRIO analysis to find internal and external processes of the organisation. The report mainly focuses on competitor and their analysis on the basis of technology, VRIO, and Porter`s five forces model. In a concluding way, Wesfarmers will undoubtedly have a good standing among all the competitors and Coles too by the support of collaboration Wes farmers.
References
Australian food news, (2014) Wesfarmers reveals strategies to grow Coles and other businesses. Available on: https://www.ausfoodnews.com.au/2014/05/28/wesfarmers-reveals-strategies-to-grow-coles-and-other-businesses.html [Accessed on 20/12/18]
Beveridge, J. (2015) Wesfarmers to reveal strategy for future. Available on: https://www.heraldsun.com.au/business/wesfarmers-to-reveal-strategy-for-future/news-story/49d4a02806a5316e248fd6b11af2a342 [Accessed on 20/12/18]
Chatzoglou, P., Chatzoudes, D., Sarigiannidis, L. and Theriou, G., (2018) The role of firm-specific factors in the strategy-performance relationship: Revisiting the resource-based view of the firm and the VRIO framework. Management Research Review, 41(1), pp.46-73.
Chhabra, S. and Kiran, R., (2015) An Empirical Analysis of Total Factor Productivity in Food and Beverage Sector. Productivity, 56(2).
Greenhalgh, J. (2018) Wesfarmers gets its priorities right. Available on: https://www.intelligentinvestor.com.au/wesfarmers-gets-its-priorities-right-1893101 [Accessed on 20/12/18]
Karupaiah, T., Tan, H.K., Ong, W.W., Tan, C.H. and Sundram, K., (2014) Trans fatty acid content in Malaysian supermarket foods: a field-to-laboratory approach in assessing food risk. Food Additives & Contaminants: Part A, 31(8), pp.1375-1384.
Knott, P.J., (2015) Does VRIO help managers evaluate a firm’s resources?. Management Decision, 53(8), pp.1806-1822.
Management mania, (2018) VRIO Analysis. Available on: https://managementmania.com/en/vrio-analysis [Accessed on 20/12/18]
Marketline, (2018) Wesfarmers Limited – Strategy, SWOT and Corporate Finance Report. Available on: https://store.marketline.com/report/ml2731420sa–wesfarmers-limited-strategy-swot-and-corporate-finance-report/ [Accessed on 20/12/18]
Oraman, Y., (2014) An Analytic Study of Organic Food Industry as Part of Healthy Eating Habit in Turkey: Market Growth, Challenges and Prospects. Procedia-Social and Behavioral Sciences, 150, pp.1030-1039.
Oraman, Y., (2014) An Analytic Study of Organic Food Industry as Part of Healthy Eating Habit in Turkey: Market Growth, Challenges and Prospects. Procedia-Social and Behavioral Sciences, 150, pp.1030-1039.
ProcessPolicy.com, (2018) WHAT IS PESTLE ANALYSIS? Available on: https://processpolicy.com/pestle-analysis.htm [Accessed on 20/12/18]
Zalengera, C., Blanchard, R.E., Eames, P.C., Juma, A.M., Chitawo, M.L. and Gondwe, K.T., (2014) Overview of the Malawi energy situation and A PESTLE analysis for sustainable development of renewable energy. Renewable and Sustainable Energy Reviews, 38, pp.335-347.
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