Analysis Of Wesfarmers Expansion In Germany Market

Background of Wesfarmers

In all around the world, companies are expanding its stretch across borders. This is done as per the requirement of the company’s growth plan. It is essential that a company selects its new market analysing various factors. Evaluating the environment of the country is a very essential part of it. This comprises the fact that companies also need to do competitors analysis so as to understand the nature of the business of their competitors (Bachmann & Braun, 2011). In almost every industry competition is getting higher and higher and hence companies need to streamline their resources in a manner that they could achieve the desired goals. There are various types of opportunities and threats that need to be analysed before making any decision of entering into the market.

Wesfarmers is one of the biggest companies based in Perth Australia. It is a conglomerate type of company and hence producing various types of products like chemicals, industry and safety products, retail, coal mining, fertilisers etc. In the financial year 2016, it generated a revenue of around AU$65.98 Billion and making it the largest company in Australia. On the other hand it’s the biggest private employer in the nation with around 220,000 employees (Vidovich & Currie, 2012). It was found back in the year 1914 and was started as a co-operative that produces merchandises and services. It got its listing on the Australian Securities Exchange in the year 1984. Wesfarmers has number of subsidiaries attached with it.

This report analyse the factors that could the growth of Wesfarmers in the Germany market. Germany is one of the most populous countries in European Union. It generated a GDP of $4.171 trillion dollars. This makes a good base for the bigger companies to have stable business. With per capita income of around $50,425, it is having huge amount of opportunities for the companies like Wesfarmers to expand its business (Kenny, 2011). In the European Union it is one of the biggest country hence it will give Wesfarmers a route to the Europe for doing business. The identification of this opportunity was on the basis of population and stable nature of the market along with huge capacity to grow.

This report also throws light on the environment of Germany and its suitability for Wesfarmers expansion. In the later stage of the report, Along with this it also gives the idea regarding opportunities and threats that could influence their business in Germany.

Growth potential of Wesfarmers in German market

In the competitive environment that is present within the country, it is important that companies like Wesfarmers understand its market. It is also crucial that a proper understanding about the environment present in the country must be done. This is necessary for making of the strategies. It also gives the idea about the internal resources that company has and the demand that market contains. In spite of the fact that Germany is a stable economy and big market in European region, there are certain other factors that could impact the business of Wesfarmers (Campbell, 2017).

For any firm first it is crucial that it understands the external environment of the company before making an expansion. For this analysis PESTLE works as a wonderful tool.

• Political: The political decisions in the European regions have showed a drastic change in the environment. This had an effect on the Germany as well. For Example the decisions like Brexit have affected all the countries in the European region. Germany has a parliamentary democracy. This makes it a suitable market for the companies to expand (Kilroy & Schneider, 2017). The political decisions have ensured that the bigger companies could do an effective business.
• Economic: In spite of the fact that economic condition of whole Europe has seen a gradual downfall, Germany has shown a steep inclination in its growth. Being the fourth largest economy says the story. Wesfarmers need not have to concern about the stability of the market as they will have support from the government policies (Biddle, 2016). There is easy availability of the cheap labour as compared to other European markets makes it suitable for the business. This country has huge amount of resources and hence the sustainable growth will not be a problem for Wesfarmers.
• Social: Society is changing at a very faster rate in Germany. It can also be seen that the number of people in different age groups are also changing. It is having people from every religious background. The cultural variance at the workplace needs to be tackled at most priority. Higher per capita income is higher and hence it is a good opportunity for the expansion of Wesfarmers.
• Technological: Germany is known as a country that is highly advanced in term of technological use. They are known for their innovative and research quality. This will help Wesfarmers in improving their service quality (Biddle, 2017). With the support of strong technical background, it will be easier for the company to reach deep into the market.
• Legal: Legalities in Germany is highly supportive especially in terms of supporting investments. On the other hand the consumer laws are also powerful which companies like Wesfarmers have to comply.
• Environmental: It is one of those European nations that are very strict towards environment misuse. Waste management and carbon emission needs to be properly handled without which Wesfarmers may face serious problems.

Apart from all these factors there are certain micro factors that could also affect the business of Wesfarmers. Some of them are:

• Supply chain management: Wesfarmers is known for its supply chain management that helps in maintaining the balance between demand and supply (Sloan, 2016). There are many suppliers in the European region which will help Wesfarmers to achieve what they want to.
• Human resource: In the European region there are highly skilled workforce. Human resources are technically sound and are capable of improving the overall productivity of the company (Annabel & Scrymgeour, 2018). Germany is known for its research oriented workforce.

It is also crucial that before making an expansion, Wesfarmers understands the market. This can be done by analysing the market. Since this company aims to come in the retail market hence the analysis would be based on the requirements of market (Hartmann, Klink & Simons, 2015).

• German Retail industry: Germany represents 20%of the purchasing power in Europe with a turnover of EUR 512 billion. Its growth rate has been positive over a long period of time. It is giving employment to more than 3 million people. The retail market in Germany is Oligopolistic and is dominated by large number of domestic retailers. The market is considered to be mature at the same time prices are lowest in the Western Europe.
• Customer segments: Wesfarmers has a wide range of variables using which they make segments in the market. Since this company is making investment in retail market hence they can target large number of people under their target market (Watson, 2011).

Type of Segmentation	Segmentation criteria	Wesfarmers target market
Geographic	Region	Domestic/international
Density	Urban/rural
Demographic	Age	15-65
Gender	Males and Females
Life-cycle stage	Bachelors and married
Income	Low, Middle and Upper
Occupation	Students, employees and professionals
Behaviour	Benefit sought	Cost benefit and time savers
Personality	Careless and easy-going
Status	Potential and regular visitors
Psychographic	Social class	Middle and upper classes
Lifestyle	Strugglers, mainstream, cross cultural

Since company is expected to increase its market base at the later stage of the expansion process. Hence a different kind of segmentation plan is required by the wesfarmers. Such a wide segmentation has been possible because it offers a lot of products through supermarkets. People these days want to buy everything at common store like the supermarkets. Germany is a big market and its growth rate is also said to be on the higher side. This will benefit the cited firm at the later stage of their expansion into Germany (Beck & Kenning, 2015). With around 80 million people within the country it can have a huge market size that they can capture.

Who

The occupants of the segments are the people from different sections of the society. The German people of different age group in both genders are the occupants of the cited firm. Products of Wesfarmers are for everyone hence products are purchased by people from age group of 10 years to 80 years. People who have middle or higher incomes are the main buyers of Wesfarmers. On the other hand people from the lower income or the people who support national companies generally buy our competitor’s products. This is due to the reason as most of the retail companies in Germany are from the Germany itself and people love to purchase food from these stores only.

Environmental suitability for Wesfarmers’ expansion

What

The benefit that customers seek is the quality of the product since in retail most of the products are such which gets rotten very soon hence the person who needs fresh food generally buys from our stores. Quality in terms of global standards is the basic criteria used by the company for comparing products. Customers expect that the stores will be easier to find, will have large spaces and give fast services.

Where

The decision about purchasing from their stores is made at the platforms like online stores, social media sites or the stores itself. Customers can seek the Information about the products through online website and social media platforms. Customers buy products through both physical and online mediums. Online stores have become the major source through which most of the sales of the company is done in the past few years especially in those areas where our stores are not available physically.

When

The first decision about purchasing products from the Wesfarmers stores was made at the time when people were surfing through internet sites. The products are repurchased when people gets satisfied with the services and product quality of the Wesfarmers.

Why

Customers buy because they have on faith in the company’s services and products. This also includes in the time of need or when they want to buy large number of products from the same store in a very short time. Customers choose one brand as opposed to another when they find the services of the company to be different or beneficial from the other. This is also the case when the same product is available in other stores at less cost or the quality of that product is better.

How

Customers purchase by coming to the stores and making payments through digital money or buy cash. They have numerous options to select in which they choose anyone. Customer buying process lies till the time they are not satisfied. Marketing mix affects the purchasing at each level as product and price element is the basic thing that is checked at initial levels. Place and promotion suggest them about the ways in which they can buy which product. Customers use their product as per their requirement. Product fit into their lifestyle or operations as per the need. They can spend any amount of money based on the necessity they have regarding the product. They pay as per their ability to pay.

External and micro-environmental analysis of German market

In the German market, there are huge numbers of competitors present in the market. Being an oligopolistic market there are few companies that have captured the market. In the retail sector there are many European giants that exist like Aldi, Tesco, Lidl etc. On the other hand there are many regional companies like EDEKA, METRO, REWE etc. which have captured the larger part of the market.

Wesfarmers is receiving huge amount of competition from the regional players along with local vendors. Even after this there is huge scope for the cited firm in the German market. This is due to various types of trends which consumers fulfil. First is the demographic transition where the demography of Germany is changing especially in terms of the fact that there is Aging population, higher number of immigrants etc. Second, the urbanisation in Germany is at very fast speeds which provide an opportunity for the retailers like Wesfarmers to attract new set of consumers with their products and services (Brockmann, 2013). This company can consolidate the market with the variety that it has in its product range which will help them in capturing the larger market share.

There are various types of resources available with Wesfarmers. Its service quality and huge equity base is one of the best competitive advantages that it can use. Apart from this there are many subsidiaries of Wesfarmers which could help them in availing products very easily. Along with this they have over a century year of experience in the retail sector. It would help them in making strategies as per the requirement of the future retail market in Germany and hence giving them competitive advantage over their competitors. With the help of suppliers they can easily make their way above their competitors. They have been using the highest standards of technology in their operations this would help them in analysing the market especially with the amount of data it has (Hanf & Schweickert, 2014). It gives them competitive advantage over most of their competitors. They have strong strategic management team which would help them in channelizing things in their favour. It also helps in making decisions that is well above their competitors.

Wesfarmers is a very big organisation in Australia and has years of experience in the retail Industry of Australia. They can utilise this experience in capturing the market. In Germany it is seen that in every part of the country some or the other company is a leader. This increases their chance to expand in the market.

Competition analysis

As the retail market of Germany is on expansion hence companies need to understand their own capabilities so as to grow in the market. Since Wesfarmers have large number of manufacturing units that is producing different kinds of products hence it would be easier for the company to avail products. Company has huge amount of capital that can be used for making investments. It is also necessary that company focuses on the process and phases of Internationalisation (Mohr & Batsakis, 2018). They have a highly skilled management team that is capable of evaluating the business situations and take decisions accordingly. It is owner of the big retail firms like Coles which would provide them a base in managing their operations and would also give them assistance in their operations overseas.

It is having big warehouses that are capable of solving their problems related to logistics. In any retail industry, this is one of the biggest problems that they had to face. Apart from this there are people from different parts of the world that are working under Wesfarmers and they have a plan for diversity management. Since the working culture in Germany is entirely different from Australia hence company will also have to adjust themselves according to the German culture. With the skilled management team that Wesfarmers have, it would not be a problem. They also have resources in various other countries which would help them in balancing the situation if in case any problem exists in the later stage of their business in Germany.

Along with the external analysis, it is also essential that company understands its internal capabilities as well as the opportunities and threats available in the market. In the expansion process such analysis helps the company to understand its resources at the same time to understand its capability to access the opportunities. It also enables the company to check the threats they are facing. SWOT is an effective tool in this regards.

Strengths

• Wesfarmers is having an experience of more than 100 years in the industry which gives them knowledge regarding the ways in which they can face different situations.
• Germany is a strong economy having 4^thlargest GDP in the world. This will facilitate Wesfarmers in increasing their market value (Swoboda & Elsner, 2013).
• With more than 80 million consumers in Germany, it is a big market base for any retail company to capture.
• Wesfarmers has a huge amount of financial resources and hence it will not face problems in terms of investment expenses.
• This company has invested a lot in the community development initiatives which has helped them in creating their positive image of the company.
• Effective online services are offered by the Wesfarmers which would help them in serving for the larger part of the market.
• Large product variety is offered by the company that is capable of attracting huge amount of consumers towards their business.

Weaknesses

• There is decrease in the overall sale of the products through stores which has been their major source of revenue.
• In the last few years various stakeholders are not happy with business of Wesfarmers. This can be seen with the example of Coles as they are planning to get demerge from Wesfarmers (Business Sweden, 2015).
• It is having least experience in the European market.

Opportunities

• The rate of Urbanisation in Europe is very high which gives huge opportunity to the companies like Wesfarmers to expand their business.
• As the control of the retail industry is in the hands of few organisation hence making a place in the market will not be such a big issue (Euromonitor International, 2018).
• GDP and per capita income of the nation is expected to increase at much faster rate which is a wonderful opportunity for the company.
• In Germany the ageing population is a challenge but it is an opportunity for the retail industry.
• Food and Apparel retail is growing at much faster rate in Germany hence Wesfarmers need to capture this segment of the market.

Threats

• Financial conditions of the neighbouring external market outside Germany in Europe are not so good.
• Sales in German language is often needed for which cited firm will have to be ready.
• Few dominating retailers with high customer loyalty are a major challenge for the German market (Farfan, 2017).
• Low prices reduce the chances of increasing the profit base of the Wesfarmers.

Conclusion

From the above based report it can be concluded that Wesfarmers is one of the biggest firms in Australia. It is planning to expand their business in the European region. They have selected Germany as one of the major markets in the Europe for expansion. The external and internal environment for the retail market within the Germany is very positive and is expected to increase in the coming years. There are large numbers of variables that are affecting the business of the Australian companies. Wesfarmers with its high amount of resources are able to capitalise the opportunities that are present in the market at the same time facing threats that are present in the market. SWOT analysis of Germany shows its effectiveness as a market for retail industry.

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