General Environment

This report aims to provide a detailed strategic analysis of the company, WesFarmers Limited. The essential analysis is completed with the help of PESTLE analysis, Porter’s Five Forces analysis and the threats and opportunities of the company is discussed.  A detailed report of a discussion about the resources of the firm is discussed. The capabilities of the organisation is discussed and the capabilities are elaborated to understand what the company does. A report of the Core Competency Analysis is provided. An information system for the company is recommended, which can meet the needs of the company. Lastly, an evaluation of the proposed system is provided and suitable endorsements are provided.

WesFarmers, formerly known as Western Australian Farmer’s Cooperative, is a protruding Australian company with business sector in retail market in Australia and New Zealand (Campbell 2017). The headquarters of the organisation is located in Perth, Australia. The production of industrial products, chemicals, coal mining, fertilisers and safety and industrial products. The company was established with the purpose of providing merchandise and services the farmers of Western Australia. The industry of WesFarmer’s Limited is retail industry. The majority of the income that the company generates is from the Grocery stores and Supermarkets in the industry of Australia. Over 2, 23,000 employees are under the control of the company including many employees from several subsidiaries (Kilroy and Schneider 2017). 

PESTLE analysis

Political factors:

Long-term profitability of Wesfarmer’s limited are majorly determined by the political factors whose impacts play a substantial role in any market or country. The retail industry of Australia becomes severely affected by the political factors. There is a growing competition among the small retailers due to the increase in dominance and business of supermarkets dealing in retail industry like Wesfarmers, which have led the government to bring out required policies (Beech and MacIntosh 2017). Laws controlling monopoly in the market and the right of the shareholders have been introduced. Similar decisions like lucrative perspective within coal industry, interest rate applied on electricity have been eliminated. These laws are acting as a benefit for the company in doing business more effectively. Importance and political stability of staples and food industry Retailing sector in the economy of a country needs to be determined. 

Economic factors:

Performance and marketing growth of Wesfarmers Limited are effected by buying behaviour of the customers and consumer demand with respect to the condition of economy of Australia. Decrease in disposable income was the result of a global crisis in 2009, which lowered the behaviour of consumption of the customers. Similarly, natural calamity and climate change are the factors, which affected the businesses involving fertilisers and chemical.  Aggregate investment and aggregate demand of an economy are determined by economic cycle and some macro factors of environment like savings rate, rate of inflation, rate of interest and rate of foreign exchange (Everingham and Franks 2014). Economic factors of a country such as rate of growth, inflation and economic indicators of industry like the rate of growth in food and staples industry of retailing and average spending of customers can be helpful for Wesfarmers Limited for forecasting growth trajectory.

PESTLE analysis

Socio-cultural factors:

Wesfarmers has a huge base involving several shareholders and employees in the organisation, which makes them a major employer. The company have been taking a number of initiatives and duties for the upliftment of society. Mutual beliefs and approaches involving the population and Wesfarmers Limited plays a major role in the process of understanding the potential customers of a market and the process of how to design the marketing communications for Food and Staples retail industry customers (Jones, Comfort and Hillier 2014). Skill level of population and demographics needs to be analysed. Power structure, class structure and hierarchy of a society needs to be examined. Culture of the society where the organisation is planning to set up their market needs to be considered. The thoughts and beliefs of a society towards the approach of entrepreneurship needs to be considered. Interests in leisure needs to be analysed.

Technological factors:

A major factor involving the success of businesses in Australia is the aspect of technology. Technology is growing in various industries across the world. An analysis must be conducted by the organisation to understand the swiftness of the growth of technology and understand the extent at which technology is disrupting the industry. Industries need to cope up with the speed of technological disruptions as fast as possible because there will not be much time if there is a swift growth of technology in the market of Australia (Li et al, 2014). The technological advancements of the competitors of Wesfarmers limited need to be analysed and suitable developments must be implemented in the system of the Wesfarmers Limited. The impact of technology on a product offering must be analysed to understand the demands of the customers.

Environmental factors:

The board of Wesfarmers Limited has implemented special protocols and preventive measures to ensure the protection of environment. Different rules and protocols have been implemented by different markets, which can affect the profits of a company in those marketplaces (Caldecott, Tilbury and Yuge 2013). Considerable investments have been made to prevent depletion of resources, improve flexibility of climate alterations, suitable water supply. An evaluation of the environmental values that are essential to conduct business in such markets must be conducted before starting a fresh business. Environmental factors like weather, climate change, needs to be analysed. Environmental pollution laws implemented by the government needs to be examined. The laws and regulations in the retailing industry of Food and Staples involving Air and Water pollution needs to be considered (Jones, Comfort and Hillier 2014). 

Political factors:

Legal factors:

Due to weak and frail legal framework and organisations in several countries, the intellectual possessions rights of a company is not protected. Production of various industries across Australia including Wesfarmers Limited have been restricted due to the legal insinuations in form of Carbon Emission extent implemented by the Australian government (Liu 2014). Production and performance of Wesfarmers limited has been affected by the introduction of Carbon Tax, which is a fair tax rule. Any firm should carefully evaluate the markets to prevent the possibility of theft of the competitive edge of the organisation. The laws of Anti-trust in the retailing industry of Food and Staples as well as in the whole country must be analysed. the laws of discrimination must be examined. Patents/ copyright, intellectual law of property must be examined. E-commerce and Consumer protection acts needs to be studied before entering into business in various markets. The laws involving safety and health must be examined. The major legal factor that needs to be ensured is the protection of data in the business. the details of every customer and transaction history needs to be protected for securing the future of the company.

Porter’s Five Forces Model

Bargaining power of the buyers: High

As the company is in the sector of retail business, the power of buyers will be ominously higher. There is a tendency of buyers to buy items, which fulfil most of their needs at a minimum cost. An organisation in the retailing sector, Woolworth is a potential competitor of Wesfarmers Limited (Rahim and Brady 2015). This competition leads to an increase in the power of bargaining of buyers. Wesfarmers Limited will be able to tackle this problem by developing a large and strong base of buyers. The problem of higher power of buyers will be eliminated by the introduction of this scheme. It will help in streamlining the production process and sales, which can be an opportunity for the firm to expand the business (Corones  2015).

Bargaining power of suppliers: Moderate

The power of bargaining of suppliers is considered to be moderate for Wesfarmers Limited. The organisation maintain a steady and strong mutual relationship with the suppliers and long-term cooperative partnership. Suppliers are in high demand for the retail industry as the organisations working in this sector buys several products from the suppliers. The suppliers who are positioned in a dominant position in the market can reduce the profits earned by Wesfarmers Limited. These suppliers use their power of negotiation to extract higher prices for the products from the buyers. the higher bargaining of the suppliers results in decrease in overall profits in the retailing industry of Food and Staples (Dixon, Hattersley and Isaacs 2014). This problem can be tackled by creating efficient and effective supply chain with several suppliers.

Economic factors:

Threat of new entrants: Low

Innovation is introduced in the sector of retailing Food and Staples with the entry of a new organisation. New methods of doing the similar things are presented. With the help of diverse collection and multiple-operations, Wesfarmers Limited has made the possibility of entry of new entrants significantly difficult (O’Connor 2017). This difficult situation can be tackled by Wesfarmers Limited with the help of the innovation of new products and introduction of new services. The fixed price per unit can be reduced by developing new scale of economies. This is another effective method to confront the problem.

Rivalry among existing firms: moderate

The impact of rivalry in the retailing industry is significantly higher as any existing rivalry will lower down the prices and the whole profitability of the company will decrease. Wesfarmers Limited have a moderate amount of threat from different companies in several industries. The company is trying to eliminate this problem by introducing new products a lowest prices and by increasing the range of products they possess (Biddle 2016). Developing a sustainable differentiation will help in eliminating this problem. A scale designed to improve the competition needs to be built to decrease the competition. 

Threat of substitute products: low

The products of retail industry are consumed regularly, so there is no chance of alternatives of the products in this sector. Consumers tend to consume a regular product and there is no shifting of customers to new products (Deshmukh. and Mohan 2014). The method to tackle this problem is by conducting business with the intent of orientation of service rather than product oriented. The customer needs have to be understood and as study of the products that the customers are generally buying needs to be done. Switching costs can be increased for the targeted customers.

Opportunities

• The opportunity for apprehension of new buyers and increasing the market share has emerged for Wesfarmers Limited, as there is an economic fluctuation and increase in spending of customers, after several years of inflation and leisurely growth in such industry.
• The advantage of the competitors will be diluted due to the development in the market and Wesfarmers Limited can increase the competitiveness with comparison to other competitors.
• Investment in nearby product segments provides some opportunities for stable free flow of cash.
• The new environmental strategies creates a common playing field for every player in the retailing industry. This represents a great chance to Wesfarmers Limited for driving home the advantage in different technology and the new product can expand market share for the company.
• Another opportunity for Wesfarmers Limited emerges with the decrease in transportation costs due to decrease in shipping prices. The company can channel the extra profits further use in the company or provide benefits and discounts to the customers to gain significant market share (McCauley et al. 2013).

Threats

• The rising of the prices of raw materials poses a threat to the profits of Wesfarmers Limited.
• A growing trend towards isolationism leads to parallel reaction and negatively affecting global sales.
• There can be a threat to the profits of the company due to fluctuations of currency as it operating in various countries. The unstable political climate of markets across the world can pose a threat to the company.
• The tendency of simulated counterfeit and bad quality products is a threat to the products of the company in the low revenue markets and specially in emerging markets.
• In some cases, Wesfarmers Limited can be liable to the various liability laws in various countries and the changes to the policies in these markets (WEINSWIG  2016).

The resources of the firm can be divided into two groups, which are tangible resources and intangible resources. Tangible assets of a firm are the physical assets like vehicles, land or equipment. These resources are the means to produce services and goods, which makes these resources the backbone of Wesfarmers Limited (Kent and Zunker 2013). The risk involved with these resources are that they can cause considerable trouble due to any natural calamity such as storm or any other phenomenon and there are risky due to fact that they are easily subjected to accident or theft. These kinds of assets are fixed or current. Intangible assets are the assets which are non-physical assets. These include trademarks, patents, copyrights and goodwill. A significantly large company like Wesfarmers Limited has the resources of licensing agreements, blueprints, software, domains in the internet and trade secrets. Intangible resources are valuable to the company in securing the future of the company.

Socio-cultural factors:

The four simple principles that act as building blocks for an organisation and are essential to be identified for strategizing, also known as core competencies, are as follows:

• Is significant value provided?
• Is market share dominated or increased?
• Does imitation by the competitors becomes difficult?
• Is competitive advantage provided?

Value is the alleged benefit to the customers from the product or the services of the company. Identification of competencies, which are essential to increase the market share of the organisation are becoming very appreciated as the complexity of the markets are increasing and with the help of globalisation and internet facility in modern times, an organisation is not limited by geographical boundaries. The third competency lies in the fact that efficient productivity leads to the elimination of competitors who are trying to imitate the products of Wesfarmers Limited. When a product is more difficult to replicate then the product holds more value as core competence. Core competence is analysed in Wesfarmers Limited is tested by the help of competitive advantages of the products (Kenny 2013). This is achieved by extremely accurate combination of capabilities and resources and the approaches by which the company exploits these assets. 

The proposed accounting information system for Wesfarmers Limited is Xero. This is a public software organisation, which is domiciled in New Zealand and this software offers cloud based platform for accounting software for small or medium businesses. The products of this company are based on SaaS (Software as a service) model and they are sold using subscription. The features of Xero are invoicing, expense claims, purchase orders, automatic  account feeds of bank and credit card (Insight 2017).

Therefore, it is recommended to Wesfarmers Limited to implement Xero software in their company for the modified accounting system. The organisation will be benefitted from this software as it provides:

1.  Support to more clients in a short period using automation,
2. It provides financial reporting in real time, which is the developed ability of efficient managing cash flow,
3. It provides easy collaboration which means the business owners and the advisors have the access to all the information of the business whenever they need it. In addition, this information can be easily accessed using internet.
4. The backup of data is automatic. This diminishes the time that is spent on manually backing up data and it provides a better security to the data.

Conclusion

Therefore, it can be concluded that the profitability of the company Wesfarmers Limited depends of the political, social, economic, technological, environmental and legal factors. The company has some opportunities in the markets where there is a lower rate of raw material and the transportation costs are significantly lower. The threats involving the company are in the markets where there is a fluctuation in the economy of the country and the laws implemented by the government are significantly strict. The threats of new entrants in this industry is lower, the bargaining power of the buyers are higher, the bargaining power of the suppliers are lower, the rivalry among the existing companies is moderate and the threat of substitute products is lower. The company has both tangible and intangible resources, which the company utilises during the tough period when it is required to maintain a growth stability. 

References

Beech, N. and MacIntosh, R., 2017. Managing change: Enquiry and action. Cambridge University Press.

Biddle, I., 2016. The Wesfarmers/Woolworths duopoly war: The Bunnings vs. Masters battle. Busidate, 24(3), p.3.

Caldecott, B.L., Tilbury, J. and Yuge, M., 2013. Stranded Down Under? Environment-related factors changing China’s demand for coal and what this means for Australian coal assets.

Campbell, J., 2017. Insights from the company monitor: Wesfarmers. Equity, 31(8), p.16.

Corones, S., 2015. Regulating unilateral supermarket misconduct as customer/acquirer of goods and services. Australian Business Law Review, 43(5), pp.400-419.

Deshmukh, A.K. and Mohan, A., 2014, December. AN INTERPRETIVE STRUCTURAL MODELING APPROACH TO DEMAND CHAIN MANAGEMENT PRACTICES IN RETAILING. In PAST CONFERENCES.

Dixon, J., Hattersley, L. and Isaacs, B., 2014. Transgressing retail: supermarkets, liminoid power and the metabolic rift. In Food Transgressions: Making Sense of Contemporary Food Politics (pp. 131-153). Routledge Abingdon, Oxon.

Everingham, J. and Franks, D.M., 2014. 16 Development of miningaffected regions Theinfluence. Rural and Regional Futures.

Insight, O., 2017. Xero Accounting & Bookkeeping Outsourcing Services.

Jones, P., Comfort, D. and Hillier, D., 2014. Environmental and Social Programmes and Rapidly Growing Retailers. Economia Seria Management, 17(1), pp.5-17.

Kenny, G., 2013. The stakeholder or the firm? Balancing the strategic framework. Journal of Business Strategy, 34(3), pp.33-40.

Kent, P. and Zunker, T., 2013. Attaining legitimacy by employee information in annual reports. Accounting, Auditing & Accountability Journal, 26(7), pp.1072-1106.

Kilroy, D. and Schneider, M., 2017. Valuing the Current Strategy. In Customer Value, Shareholder Wealth, Community Wellbeing (pp. 109-141). Palgrave Macmillan, Cham.

Li, B., Stork, T., Chai, D., Ee, M.S. and Ang, H.N., 2014. Momentum effect in Australian equities: Revisit, armed with short-selling ban and risk factors. Pacific-Basin Finance Journal, 27, pp.19-31.

Liu, A. (2014). Climate Change Securities Disclosures in Australia.

McCauley, C.D., DeRue, D.S., Yost, P.R. and Taylor, S., 2013. Experience-driven leader development: Models, tools, best practices, and advice for on-the-job development. John Wiley & Sons.