Business Context For Wesfarmers – Objectives, Operations, Risks And Strategies

Introduction to Wesfarmers

Discuss about the Business Context for Wesfarmers.

Wesfarmers was formed in 1914 as Western Australian Farmers Cooperative and since then it has reached to one of the largest listed companies in Australia. It has the headquarter in Western Australia and their assorted business operations involves convenience stores, hotels, liquor, supermarkets, departmental stores, office supplies and products used for the improvement of homes. Wesfarmers are one of the biggest private sectors for the employers that are employing around 220,000 and shareholders amounted to 530,000 (Wesfarmers.com.au, 2017).

The main objectives of the firm is to offer a satisfactory service to their customers and return to their shareholders through fulfilling the requirements of their consumers by providing services and goods on professional and competitive basis, offering safe working atmosphere for the staffs and rewarding the good performers and offering opportunities for career growth. Furthermore, they want to contribute to the prosperity and growth of the nations in which it operates through existing operations in efficient way and placing more emphasis on the environment protection factor. Operation with honesty and integrity in carrying out the dealing both outside as well as inside the entity is their main aim.
Over the past few years, they were able to reduce the injury rate from 15.2% to 33.4% and promoted diversity in their workplace with more than 3,300 employees that were identified as indigenous (Zentes,  Morschett & Schramm-Klein, 2017).

As there are continuous changes in the global environment, various nations are going through the impact of increasing temperature, shortages of water and scarcity in food supplies. These changes have serious impact for the employees, communities, customers and economies. They are proactive regarding managing these issues as reacting to climatic changes will provide considerable environmental, social and economic benefits to all. Wesfarmers respond towards the climatic changes in 2 ways, primarily, actively managing and monitoring the emissions of their greenhouse gas and decrease them wherever possible and secondarily, through working to recognize the risks that take place due to changes in climate for the business and identify those risks (Chapple & Humphrey, 2014). They are aware about the risks associated with their operation and importance of identifying, managing and monitoring the risks. They are facing the strategic risks from the increased competition, digital interference within the structure of industry, ineffective implementation of strategies and loss of the efficient key managerial personnel. While operating, they face various challenges for loss of important deliveries or infrastructures that involves IT systems, fear of data security loss and integrity, business interference from the disputes in the industry, accidents and stoppages in work and inherent risks involved in sale and distribution of products. Further, the company faces risks from the regulatory authorities with regard to non-compliance of standards, regulations and applicable laws. Financial risks that are faced by the organization are reduction in access of fund, adverse movement in commodity prices and currency volatility (Hubbard, Rice & Galvin, 2014).

Objectives and Operations of Wesfarmers

The board of the Wesfarmers are committed towards providing the satisfactory return to their shareholders and satisfying their corporate governance responsibilities and obligations for the best interest of the stakeholders and the organization. Their operations are aligned with the ASX Corporate Governance Council’s recommendations issued on 27^th march of 2014 and the Corporate Governance Principles (Sullivan & Gouldson, 2016).

To provide value to their customers and employees over the long run, Wesfarmers are committed to manage their environment and community proactively. Ten principles that are related to the sustainability issues and recognized as the most material fact to the organization are through: (1) Providing consistent focus for making the workplace safe (2) offering opportunities to the employees to improve their performance and career development (3) continuously trying to create an environment for work that is inclusive in nature with special attention to gender diversity and including the peoples from Torres Strait Island and aboriginal people (4) promising for respectful and strong relationship with the suppliers (5) promising to offer the customers with safe goods and services (6) continuously working towards reducing the intensity of emissions and improving the resistance level against the changes in climate (7) trying to reduce the waste from water and landfill and using that wherever is possible (8) maintain strict policies for corporate governance in all of their businesses (9) creating a positive involvement to the people, wherever they operate and (10) striving to generate products in responsible way when working with the suppliers to develop their environmental and social practices (Adams, 2016).

Wesfarmers take advantages of various strategies over the leadership management, organizational structure, investment control, capital asset calculation and organizational control. They also use the diversification strategy. They have 9 business units and divisions that involves various products related to safety, coal, energy, Kmart, Target, Coles and each of the divisions are looked after by the board of members that include executives from their divisions, corporate offices and business divisions. Each of the division has its own rules and regulation for the operation and is responsible for implementing the strategies for the business and divisions. The acquisition strategy of Wesfarmers is mainly of 2 types, that is, add-on business or additional business and the additional division. The Howard Smith that deals in hardware products was acquired as an additional business and added to their existing business of Burnings. Moreover, Coles was also acquired as an additional division to this group as add-on division.

Risk Management in Wesfarmers

The strategy of Wesfarmers at business level is different from others as they have 9 divisions and each of the division can have its own strategy and each division also had different departments for corporate services. However, all the divisions are required to attain the goal that is calculated in terms of return on equity and the return on capital. Furthermore, they require to provide their individual balance sheet. They have a set for minimum return rate at their division as well as business level.

From analysis of their operation, structure and environment, it is identified that the factors that have an impact on the company are the political factors, sociological factor, economic factor, technological factor, environmental factor and legal factors (Rowe et al., 2014).

The government of Australia has established a legislative framework for the mining operation and the state government can implement various laws depend on the situation. The exploitation activity is looked after by the agreement of state government. Moreover, the law regarding the carbon tax is also been issued. Thus the resource business and energy division is governed by the regulations and the company shall be concerned about the cost of carbon tax and the agreement of state government (Sullivan & Gouldson, 2016).

Owing to the recession in global economy the sales of Kmart, Target and Coles were highly impacted. Increase of unemployment level may lead to reduction of revenue from the insurance and office supplies. However, the Coles group was the second biggest in the supermarket chain from Australia having more than 745 stores (Klettner, Clarke & Boersma, 2014).

In the Australian culture, it is very common for a family to spent large amount of money in supermarkets and the housewives from Australia are more likely to purchase products costing more than $100 per week for their families from supermarket. Therefore, the Coles group has good opportunity of earning good money from the Australian family (Akbar & Ahsan, 2014).

One of the best mining nations around the globe is Australia. Their mining industry and mine resources are better than many countries around the world. Their mining firms make the combination of most innovative technologies, products, equipments and services with a view to create the production more efficiently while promoting the safety in processing of mineral, new technology and environmental protection (Farivar et al., 2016).

The legal system of Australia is very sound and involves the laws for natural resources, labour related laws and various business laws. These laws must be followed by Wesfarmers strictly to assure the implementation of crucial management criteria (Jones, Comfort & Hillier, 2014).

It is concluded from the above discussion that Wesfarmers is conducting their business in well manner and comply all the necessary rules and regulations of Australia. To increase the revenue, Coles started cooperating with Shell for providing petrol services. Coles also have big market share from Australia that can offer the shareholders with high return. Australian people are more likely to prefer the one-stop shopping, Burnings offers wide range of hardware products with competitive prices while Kmart and Target sell electronics and cloth at minimum price. All these factors will contribute for earning high revenue. Their diverse business involves energy, mining, coal, fertilizers and chemicals. They must utilize a good technical foundation for assuring the development of the enterprise. They should also focus more on environment protection as the natural resources in Australia are managed very well and the government of Australia always focuses on protection of environment.

References:

Adams, M. A. (2016). Contemporary case studies in corporate governance failures. Governance Directions, 68(6), 335.

Akbar, S., & Ahsan, K. (2014). Analysis of corporate social disclosure practices of Australian retail firms. International Journal of Managerial and Financial Accounting, 6(4), 375-396.

Chapple, L., & Humphrey, J. E. (2014). Does board gender diversity have a financial impact? Evidence using stock portfolio performance. Journal of Business Ethics, 122(4), 709-723.

Farivar, F., Farivar, F., Scott-Ladd, B., & Scott-Ladd, B. (2016). Growing corporate social responsibility communication through online social networking in Iran. International Journal of Organizational Analysis, 24(2), 274-290.

Home. (2017). Wesfarmers.com.au. Retrieved 15 April 2017, from https://www.wesfarmers.com.au/

Hubbard, G., Rice, J., & Galvin, P. (2014). Strategic management. Pearson Australia.

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

Klettner, A., Clarke, T., & Boersma, M. (2014). The governance of corporate sustainability: Empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics, 122(1), 145-165.

Rowe, A. L., Nowak, M., Quaddus, M., & Naude, M. (2014). Stakeholder engagement and sustainable corporate community investment. Business Strategy and the Environment, 23(7), 461-474.

Sullivan, R., & Gouldson, A. (2016). The Governance of Corporate Responses to Climate Change: An International Comparison. Business Strategy and the Environment.

Sullivan, R., & Gouldson, A. (2016). The Governance of Corporate Responses to Climate Change: An International Comparison. Business Strategy and the Environment.

Zentes, J., Morschett, D., & Schramm-Klein, H. (2017). Corporate Social Responsibility. In Strategic Retail Management (pp. 207-226). Springer Fachmedien Wiesbaden.