External Environment Analysis Of Wesfarmers Company Essay.

Forces of Macro-environment

Question:

Discuss about the Business Environment for Nature and Personnel Policies.

The sum total of all the factors (internal and external) that have an impact on the performance of the business is known as the Business environment (Pailwar, 2014). It is essential to understand the environment in which business operates in order to successfully run the business unit at every place. Because, the impact of every environmental factor is on the business aspects, it can be location, distribution system, nature, personnel policies or product prices (Kew & Stredwick, 2017). This report is being prepared to analyze those external factors which have an influence on the performance of Wesfarmers Company. 

Wesfarmers Company is an Australian multinational; with headquarter in Perth, Western Australia (Wesfarmers Limited, 2017). The company majorly operates in the New Zealand and Australian markets of fertilizers, safety, retail, coal mining, and fertilizers, industrial and chemical products. By revenue, it is the biggest company in Australia overtaking BHP Billiton and Woolworths. The biggest private employer in Australia is Wesfarmers, with about 220,000 employees.

In 1914, the company was established as a cooperative in order to offer services. The company is listed on the Australian Securities Exchange and grown as a big retail corporation (IBIS World, 2018). The company was formed by the Farmers and Settlers which is a Western Australia Association, in order to attain the assets of West Australian Producers Union.

The primary analysis and study of the forces of macro-environment, competitor analysis and industry analysis in the purview of the growth of the organization are known as External Environment Analysis. Forces of Macro-environment are considered as dimensions in the wider society which impact the firm’s performance (MBA Skool, 2017). It focuses majorly on the probability of the future event. The environment of industry involves set of contingencies that directly affect the action and response of the firm. It emphasizes on the aspects that influence the firm’s probability in an industry, whereas competitor analysis majorly focuses on anticipating the dynamics of a competitor in terms of its responses and action etc. (Hiriyappa, 2013).

Government Regulatory: In this factor, it is implied that the role of government is very important in influencing the performance of the company. It can influence in the form of legal regulations and taxes (Fern Fort University, 2018). Coal mining is an essential segment of Wesfarmers, and it is known that Australian Federal Government has mandated that the extraction of the mining industry can only be done after the permission of the state government of the particular state. Along with this political factors generally, have a greater influence on the retail industry of Australia. The increasing dominance of the retail supermarket like Wesfarmers has made competition for small retailers. Therefore the government has implemented some policies in order to restrict this.

Government Regulatory

Economic policy- The economic factors like exchange rates, interest rates, inflation rate highly affects the organization’s growth. The service sector has essential role in the Australian market, and in fact, it is notable that Australia GDP’s 71.1% is contributed by this sector only. Service and Finance are the essential Australian service organizations, keeping this in the mind, it can be said that the Wesfarmers insurance market can gain profitable position in the Australian market. The GDP annual growth rate of the Australian economy is 2.8% by the year 2016 which reflects that the purchasing power of the people in Australia is also increasing. Customers with high purchasing power will invest in quality products, therefore; Wesfarmers should focus more on the quality.

Consumer behaviour- For the Wesfarmers future growth, Australia's social environment plays an important role. Factors of the environment include population, cultural trends and demographics perform a significant role in the organization's success. As per the consumer behaviour of Australia people generally, prefer to buy necessary items in bulk once in a week. Therefore, it is constructive for the Wesfarmers to have their chain of departmental stores and retail stores in Australia.

Technological- The important role performed in Australia is by the viable methods of operating a business. Therefore, Wesfarmers need to depend more on technologically advanced ways of production which can support the country in handling its ecological sustainability in future. By considering this aspect Wesfarmers has implemented those technologies which make use of low emission coal. It is a great change which is important for sustaining in the market for the longer period. Chemicals, Coal mining, fertilizers, and energy production are important segments in which Wesfarmers operate and therefore finding good technology along with regular innovations is required for the enterprise future development.

Legal- Legal factors are those factors which explain the effect of the law on the functioning of any business. In Australia, there are many new laws which are governing the trade system, like resource laws, business laws, labour laws, etc. It is very important for the organization to accept and follow each law while operating the business.

Environmental- The ecosystem in which living being lives offers natural services for all the species that are important for their survival, quality of life and health. Ecological sustainability is an integral part of the business process, and organization like Wesfarmers is continuously trying to create value for its shareholders, customers via solving the environmental issues like energy conservation, prevention from environmental pollution, etc. It is remarkable that company is operating its business activities with 10 environmental and community impact principles that make some guidelines for the company of making efficient ways of energy production. The initiatives were taken by the company in order to confirm the well-being of the community, maintenance of ecological sustainability, or reducing product packaging supports company in smoothly operating the business in Australia.

Competitor- In general terms competition is the rivalry between two or more firms, individuals, social groups, etc. Competition arises when two or more firms try to achieve a common goal that cannot be shared, where one firm’s gain is the loss of other firm (Dennehy, 2012). Wesfarmers operates its business in an extremely competitive retailing industry of Food and Staples, where the company faces strong competition from Woolworths (Australian Government, 2011). It is a well-known leading supermarket in Australia which brings various strategies in order to give strong competition to Wesfarmers. Besides this HS Home, Myer, and Best & Less are the strong competitors of Wesfarmers in this industry (MBA Skool, 2017). 

Conclusion

Environment analysis is called as a strategic tool. The process to recognize the internal and external elements that have a major influence on the performance of the company is known as Environment analysis. The above report has performed the environment analysis of Wesfarmers Company in order to identify the impact of various factors on its performance. The factors which were identified are Government regulations, economic policies, consumer behaviour, technological, legal, and environmental and competition. Along with this recommendations are provided which will help the company in taking corrective actions towards improving the performance of the company and increasing productivity.

References

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Australian Government. (2011). Economic Structure and Performance of the Australian Retail Industry. Melbourne: Productivity Commission.

Dennehy, J. (2012). Competition, Gender and Management: Beyond Winning and Losing. Germany: Springer.

Fern Fort University. (2018). Wesfarmers Limited PESTEL & Environment Analysis. Retrieved from: https://fernfortuniversity.com/term-papers/pestel/nyse4/4814-wesfarmers-limited.php

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Hiriyappa, B. (2013). Strategic Management and Business Policy. Indiana: Booktango.

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Kew, J., & Stredwick, J. (2017). Business Environment: Managing in a Strategic Context. U.K: Kogan Page Publishers.

MBA Skool. (2017). External Environment Analysis. Retrieved from: https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/8566-external-environment-analysis.html

MBA Skool. (2017). Wesfarmers SWOT Analysis, USP & Competitors. Retrieved from: https://www.mbaskool.com/brandguide/lifestyle-and-retail/10269-wesfarmers.html

Pailwar, K.V. (2014).  Business Environment. India: PHI Learning Pvt. Ltd.

Wesfarmers Limited. (2017). About Wesfarmers. Retrieved from: https://sustainability.wesfarmers.com.au/our-report/about-wesfarmers/