Company History and Strategic Development

This report focuses on Business Development strategies of Wesfarmers for the next 12 months. After providing description of the initial company history and the track of strategic development detailed analysis of the internal and external business environment of the company has been conducted in this report. This is to be followed by recommendation for business, corporate and functional level strategy development of the company for the same time period. The business domain of Wesfarmers has spread across various sectors in Australia and outside the country also. Hence strategic analysis of the impact of mergers and acquisitions of the company is crucial to determination the future strategy. The next section the international Alliance strategy followed by Wesfarmers has been analysed. Lastly recommendation regarding organisational control and governance also provided in this report.

The Australian company Wesfarmers Limited was founded in the year 1914 as a Cooperative firm for providing services as well as merchandisers to farmers of West Australia. The company got listed in the Australian securities exchange in 1984 and gradually developed as a major retail conglomerate. The headquarters of Wesfarmers is situated in Perth, West Australia. The business of the company is predominantly spread across Australia and New Zealand in the sectors like retail, Chemicals, Industrial and safety products, fertilizers as well as coal mining (Wesfarmers.com.au, 2018).

In the financial year 2016-17, Thomas Limited generated and annual revenue of $65.98 Billion AUD.

The Westralian farmers Cooperative Limited was established in the year 1914 by the Farmers’ and Settlers’ Association of Western Australia. The farm was initially established for acquiring the Assets of West Australian producers Union and for providing services as well as Merchandise to the rural community of West Australian. Wesfarmers was able to accumulate 65 local Co-operative forms within 5 years of its establishment. Within 1940, Wesfarmers head gained countrywide rights for distribution of wool, livestock skin and other producers (Wesfarmers.com.au, 2018). They have been also acting as green and fruit exporters, insurance underwriters as well as acquisition agents for the Westralian farmers Limited.

In the year 1949, Ashburton Transport was purchased by the company and in the next year they acquired their major competitor Gascoyne Trading, thereby gaining Monopoly of operations in the Northwest of West Australia. In the year 1984 the name Wesfarmers Limited was listed as a public company on the Australian securities exchange.

At present the business divisions of Wesfarmers Limited includes home improvement and office supplies, Kmart, target, departmental stores, supply of industrious like Chemicals, energy and fertilizers, resources Industrial and safety equipment and so on. Wesfarmers has several other subsidiaries working in foreign countries like Australia, India, UK, Indonesia, Hong Kong, China, and New Caledonia and so on. the main subsidiaries of West farmers Limited include BBC hardware, Coles Group superannuation fund, Fosseys, grocery Holdings Private Limited, Howard Smith, loyalty Pacific, Viking direct, Coles Ansett Travel and so on (Wesfarmers.com.au, 2018).

Strengths

• Consistency of brand awareness and corporate value since 1914 shows the excellence of Management and operations of Wesfarmers Limited.
• strong emphasis on taking up initiatives for community development increases the brand equity of the company in the corporate market
• Wesfarmers delivers convenience as well as customer service promptly
• Quality and performance are key metrics of the organisational culture
• Large number of physical stores located in from locations along with experienced in store staff is one of the biggest strength of the company
• with a workforce of 200000, Wesfarmers Limited is the biggest retail chain in South Pacific region
• Along with physical change, the company also have E-Commerce portal. A Coles’ spokesperson reported that their new mobile-enabled website was now live for consumers who wished to shop online from their mobile device (Ausfoodnews.com.au. 2014).
• There is variety in product and pricing which helps to suit every price points for the company and as an outcome they can acquire wide range of consumers also.

Weakness

• The main operations of West farmers are limited to Australia which implies low Geographic presence
• Being a leader in the market, their business decisions are largely criticized in various platforms

Opportunities

• Recently the country has ventured for merger and acquisition with several foreign brands in order to establish the company as a global brand. They have more than 30 subsidiaries operating in countries outside Australia and in Asia also, including UK as well.
• This Rapid expansion rate outside Australia is supposed to give the company a hike of 30% in annual revenue generation within 2 to 3 financial years.
• They are always up to enhancing the quality of service and customer experience, thereby setting Benchmarks across physical retail stores of Australia
• Significant employee and customer loyalty initiatives have been taken which makes the company a high rated employer.

Threats

• New entrants in the Australian business sector is one of the biggest threats for Wesfarmers Limited
• Recent economic downturn and the depreciation of the value of Australian dollars against US dollars has been plummeting the confidence level of customers and brought about a dynamic reduction in demand.

Internal and External Business Environment Analysis

Political factors

• Restrictive hours of trading limit the sales of the company
• Planning and zoning costs is high in Australia because of which the operational costs also become higher
• The Ad-Hoc regulations of Australia also affect the business of West farmers

Economic factors

• market situation of Retail Industry accounts for low growth rate in recent times
• the wage rates in Australia higher compared to the Global market because of which the sales to cost ratio of the company is low
• However, recent increase in strength of Australian and New Zealand dollars is a positive factor for retail firms like Wesfarmers

Socio cultural factors

• the average life expectancy of Australians is gradually increasing which is why the need for domestic products is also enhancing
• Active and increased participation of women in the workforce is helping Wesfarmers to increase Frontline sales
• increase in average education equality among Australians is leading them to prefer packaged and processed products thereby visiting retail stores for their regular purchases
• The brand affinity of Australians has also increased, which is why they visit branded retail outlets more often.

Technological factors

• Increment of online shopping tendency will help to faster sales to E-Commerce channels of the company
• use of disruptive Technology for affecting consumer preferences is also helping Wesfarmers to increase brand loyalty
• using consumer Data Analytics is helping Wesfarmers to cut down advertisement cost and thereby generate more business value
• Technology enabled VAS helps a great deal in customer retention

Legal factors

• Sale of insurance broking division to Arthur Gallagher and company in 2014
• The underwriting division of the company has also been sold to Insurance Australia group

Environmental factors

• The student forms with heavy transport needs, I liable to report the admission rates under the NGER Reporting Act.
• As stated in the annual reports of Wesfarmers, 2018, waste to landfill has been reduced by 6%.

The primary aim of Wesfarmers’ business is to provide satisfactory return to their shareholders. There is little scope for further innovation in the business space of Australia because of high level of market saturation. This is why strengthening of existing business is very important by enabling operating excellence and prompt satisfaction of customer needs (Porter, 1996). For fulfilling these criteria, West Pharma Limited should open up convenience stores for the customers and develop a 24*7 customer grievance reporting agency. This will help the company to gain in depth idea about the needs of the customers. They will also be able to understand what percent of customer needs, they are able to fulfil, thereby also recording the specific requirements of the customers for which they have to avail products of other brands. Entrepreneur initiatives like opening more franchise stores across Australia needs to be done in the next 12 months. Besides that, Wang (2016), states that there should be sustainability maintained through responsible and long-term management body. That is why it is necessary that during the implementation of the above mentioned changes at business level, the management and executive body of the company should be kept unchanged.

It can be estimated that after selling out Curragh call assets followed by demerging o Coles and selling out Bunnings, Wesfarmers are still left with adequate lift capacity for funding acquisition words 12 billion Australian dollars (Blake, 2018). It is expected that Wesfarmers will make for acquisition of potential targets like Oil Search, Caltex BlueScope Steel, all with enterprise value above 10 billion Australian dollars (Mictchell, 2018). However at present, it is recommended that was promised should more likely acquire the unlisted companies because market valuation after the demerging of Coles has become too high.

The acquisition of Bunnings in UK and Ireland has been the greatest foreign expansion of Wesfarmers so far. As stated by Stanton (2016), there is ample scope in the home based services which is why the Business expansion of this acquired company is supposed to be rapid. However, in order to create competitive advantage the home retail service based company have to develop a network of at least 12 to 15 strategic allies within the next 24 months or so. After UK, Wesfarmers is attempting to enter the home retail market of USA as well as Canada through their conglomerate strategy. It is evident that they will be adopting the joint venture technique for development of strategic Alliance. However there are ample risks related to aggressive expansion like unequal distribution of benefits with partner companies.

Recommendations for Business, Corporate and Functional Level Strategy Development

Wesfarmers Richard Goyder has played a significant role in bridging the gap between business and Federal politics. The significance of his role stretches to brilliant handling of the changes in competition laws and Bank levied charges that could have had large impact on the company. His influence on the government has helped to water down company tax cuts and bring about exemption in the energy bill of the company also. as an impact, the resource-based cost to company has been significantly low compared to the other major retailers in the Australian circuit.

The board comprises of nine days at the moment including 8 non executive directors. The mixture of skills, expertise diversity and experience of the deltas help them to discharge the responsibilities and deliver the strategic priorities for the company as a corporation with diversified business. The group managing director of the company is Rob Scott and the company was able to accomplish the successful Bunnings deal under his tenure only. He played a significant role in guiding New Zealand economy out of the financial crisis by initiative tax reforms and implementing partial floats of five government firms (Wesfarmers.com.au, 2018). Hence, his role is a critical to the company. The same is applicable for Archie Norman who has significant experience of Retail Management and is currently the director of Coles and Target.  However it is recommended that David Cheesewrighthaving 19 years of retail and manufacturing management experience with Walmart, should be provided with a more significant role than being a nominee on the Coles Board only (Blake, 2018).

Conclusions

At present the business divisions of Wesfarmers Limited includes home improvement and office supplies, Kmart, target, departmental stores, supply of industrious like Chemicals, energy and fertilizers, resources Industrial and safety equipment and so on. • Consistency of brand awareness and corporate value since 1914 shows the excellence of Management and operations of Wesfarmers Limited. Large number of physical stores located in from locations along with experienced in store staff is one of the biggest strength of the company. With a workforce of 200000, Thomas Limited is the biggest retail chain in South Pacific region. The primary aim of Wesfarmers’ business is to provide satisfactory return to their shareholders. There is little scope for further innovation in the business space of Australia because of high level of market saturation. This is why strengthening of existing business is very important by enabling operating excellence and prompt satisfaction of customer needs. Moreover, Wesfarmers is also destined to expand the scope of their business. It is expected that Wesfarmers will make for acquisition of potential targets like Oil Search, Caltex BlueScope Steel, all with enterprise value above 10 billion Australian dollars. However at present, it is recommended that was promised should more likely acquire the unlisted companies because market valuation after the demerging of Coles has become too high. In order to create competitive advantage the home retail service based company have to develop a network of at least 12 to 15 strategic allies within the next 24 months or so. After UK, Wesfarmers is attempting to enter the home retail market of USA as well as Canada through their conglomerate strategy. It is evident that they will be adopting the joint venture technique for development of strategic Alliance. However there are ample risks related to aggressive expansion like unequal distribution of benefits with partner companies.

Reference List

Ausfoodnews.com.au. (2014). Wesfarmers reveals strategies to grow Coles and other businesses. Australian Food News. Retrieved on 21st March 2019. Retrieved from https://www.ausfoodnews.com.au/2014/05/28/wesfarmers-reveals-strategies-to-grow-coles-and-other-businesses.html

Blake, D. (2018). Shareholders to vote on Coles demerger next month. InsideRetail Australia. (Online). Retrieved on 21st March 2019. Retrieved from https://www.insideretail.com.au/news/shareholders-to-vote-on-coles-demerger-next-month-201810

Mictchell, S. (2018). Wesfarmers’ M&A firepower hits $12b post Coles demerger: Citigroup. afr.com. Retrieved on 21st March 2019. Retrieved from https://www.afr.com/business/retail/wesfarmers-ma-firepower-hits-12b-post-coles-demerger-citigroup-20180606-h110zi

Porter, M. E. (1996). What is strategy. Published November.

Stanton, R. (2016). Corporate strategic communication: a general social and economic theory. Macmillan International Higher Education.

Wang, S. (2016). Corporate Retailing. International Encyclopedia of Geography: People, the Earth, Environment and Technology: People, the Earth, Environment and Technology, 1-12.

Wesfarmers.com.au, (2018). 2018 Wesfarmers Sustainability Report is available atsustainability.wesfarmers.com.au. THE BOARD OF WESFARMERS LIMITED. Retrieved on 21st March 2019. Retrieved from https://www.wesfarmers.com.au/docs/default-source/corporate-governance/2018-corporate-governance-statement.pdf

Wesfarmers.com.au, (2018). Structure and composition of the Board. WESFARMERS SUSTAINABILITY REPORT 2018. Retrieved on 21st March 2019. Retrieved from https://sustainability.wesfarmers.com.au/our-principles/governance/robust-governance/structure-and-composition-of-the-board/