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Wesfarmers case study
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DescriptionStrategy case study about wesfarmers in Australia
Question 1: What is Wesfarmers current strategy?
Wesfarmers take advantages of many strategies over organization structure, leadership management, organization control, capital allocation and investment control. This case involves corporate strategy, acquisition strategy, business strategy and implementation strategy.
Wesfarmers’ long-term objective was to provide a satisfactory return for its shareholders. And there were 4 main corporate strategies according to case (Wesfarmers in 2010). Corporate strategies will be assessed in question4.
Wesfarmers also use diversification strategy. It has 9 divisions and business units including home improvement and office supplies, coal and energy, industrial and safety, insurance, Coles, Kmart, and Target. And each division was governed by a board of executive members, usually comprising executives from its corporate office, the division, and business in the division. Each division was autonomous in its operations and responsible for developing strategies for its division and business. BCG matrix (Appendix diagram 1) indicates the nine divisions with growth rate.
Their acquisition strategy includes 2 types. There are additional business (add-on business) to its existing division and additional division. Howard Smith (hardware retailer) was acquired as additional business and it was added to Wesfarmers’ existing business (Burnings). Coles was acquired as additional division as it is a add-on division to the group.
Business- level strategy is deferent in Wesfarmers. Since Wesfarmers have 9 divisions and each division or each business unit could have a different business strategy. And each division also had several corporate service departments at divisional level. However, all divisions need to meet the goal which is measured by return on equity (ROE) and return on capital (ROC). And all divisions need to have individual balance sheet since Eastwood became CEO in 1984. Wesfarmers also set a minimum rate of return as one key performance indicator (KPI) for managers at its divisional and business unit level.
Question 2: What factors impact/are likely to impact Wesfarmers?
From PESTEL analysis of the macro-environment, we can identify what factors are likely to impact Wesfarmers. Appendix (table 1) includes the macro analysis and industrial analysis of Wesfarmers. It analysis factors might impact Wesfarmers.
PESTEL analysis assesses 6 factors which are political factors, economic factors, social factors, technological factors, environmental factors and legal factors.
Australia central government establish legislative framework of mining environmental, and the states government can make different laws in their concrete situation. Exploitation is controlled by state government’s agreement. What is more, carbon tax law has been published. Thus, Wesfarmers’ energy division and resources business unit is impacted. Mining company should concern the state government agreement and carbon tax cost.
Due to global economic recession, Coles, Target and Kmart’s sales were impacted. More unemployment might leads decrease of revenue of office supplies and insurance.
However, Coles group was the second largest supermarket chain in Australia with 745 stores. Coles start to corpora with Shell for petrol services. It could increase the sales. Coles also has large market share of Australia, which can provide good return for shareholders.
In Australian culture, it is reasonable for a family spend lots of money in supermarket. And house wife is likely to buy more than $100 once per week for family in the supermarket. Thus, Coles group could make money from most families in Australia.
People in Australia are likely to do the one-stop shopping. Burnings provides large range of home hardware and good price. Target and Kmart both sell cloth and electronics at low price. All these factor increase revenue return of Wesfarmers.
Australia is one of the world's best mining countries, Australia's mine resources and mining industry both are better that many other countries in the world. Mining firm combines the most advanced technology, equipment, products and services; creating the world's highest production effectively, promote the safe and mineral processing, environmental protection and new technology. Wesfarmers’s diverse business operations cover coal mining, energy, chemicals and fertilizers and industrial, good technical foundation is an important guarantee for enterprise development.
Australia's legal system is very sound, including labor law, natural resources law and a range of business law. As a large enterprise, these laws provide for Wesfarmers’ management of important criteria.
Australia government always focuses on the environment protection. Environment is essential for Australia and air pollution is controlled by related laws and department. Natural rescues are maintained very well in Australia.
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