Discuss about the Unit Project: Wesfarmers and Management Strategy.
IT (information technology) and IS (information systems) as well as management structures have become important interlinked assets for organizations to drive their operations and achieve their business objectives and goals. It has also become an important tool for ensuring competitiveness of the organizations. The kind and type of IT and IS systems used by an organization are crucial for its success and ability to effectively compete in an increasingly competitive business environment. Further, it is an important tool for innovation and decision making. In this paper, the IT and IS systems used by Wesfarmers is described in detail. The paper starts by describing the nature of business Wesfarmers engages in, followed by a description of its IT and IS governance structures, policies and processes. The corporate and governance structures are also described. An analysis is done on whether the governance structures and policies reflect the regulatory requirements and how the organization handles and mitigates risks. Possible improvements as well as impacts of external and internal changes are suggested within a two to three year horizon.
The company operates as Wesfarmers limited; it is an Australian Conglomeration with its headquarters in Perth. The company has its rots in 1914 when it was formed as a farmers’ cooperative and has since grown into one of the largest firms in Australia in the Western region, with diverse business interests mainly in Australia and new Zealand. The company has interests in diverse areas that include retail, fertilizers, chemicals, coal mining, industrial products, as well as safety products. As of 2016, Wesfarmers became the largest company in Australia having revenues of some $ 66 billion; it is also the biggest private employer in the whole of Australia and is listed with the ASX (Australian Securities Exchange). The company took over Coles in 2007 to enter into the retail business with its chain of stores specializing in fuel, hotels, liquor, supermarkets and convenience stores.
Wesfarmers is also in the office supplies and home improvement business through its fully owned firm, Bunnings warehouse based in Australia and Office Works, based in New Zealand. It also runs department stores business in Australia that include Kmart and Target. Its industrials business include energy, chemicals and fertilizers. The firm operates coal plants in Australia where it mines and produces metallurgical coal that is exported to other countries. The firm also produces steaming coal that is used in the generation of power in Australia as well as some for export. It is also involved in industrial and safety business in both Australia and new Zealand. Other business activities that the company is involved in include investments where it owns 505 of Gresham Partners, an investment firm as well as in Wespine which deals in timber. As such, Wesfarmers is a company involved in many business sectors and with a large footprint in the Western hemisphere which has made it the largest company as well as the largest private employer.
Being a conglomerate with several business interests, the company has a complex governance structure characterized by cross directorships, especially in forms that it has acquired. The company has a board of governors, below which there is the company senior management. The board has various committees that include a risk committee , an audit committee, a remuneration committee, and a nominations committee. The role of the board is the approval of strategic policies and directions for the group, and monitor and guide how Wesfarmers and its businesses are managed with the goal of achieving its strategic plans and ensure practice of good governance. The key responsibility of the company’s board is to enhance and protect the interests of its shareholders while also taking into consideration interests of other stakeholders that include customers, employees, the wider community, and suppliers. The Wesfarmers board is committed to the highest standards of governance practices and is also committed to enforcing a culture of compliance. The company has senior managers for each of the divisions/ units; their responsibility is to ensure that the companies objectives are met through the use of the company’s assets and resources to deliver returns.
They are in charge of the day to day running of the company. Below the senior managers are other managers and then heads of departments, followed by supervisors and employees at the base of the organization (‘Wesfarmers’, 2017). The board is headed by a chairman, currently Michael Chaney who has been chair since 2015. The overall corporate management is under the Chief Executive Officer who is presently Rob Scott who is the managing director. Prior to being appointed the MD, he was appointed the Deputy Chief Executive Officer in early 2017. he had served as the MD of Wesfarmers Industrials since 2015. Rob, being the MD is the company’s chief executive officer and is responsible for the company’s business and financial performance as dictated by the board. The MD reports to the board of directors and the chairman of the board. The MD formulates company policy and ensures they are successfully implemented to achieve business and company objectives. Other roles include directing strategy to achieve profitable business growth and company operation, developing strategic plans of operation that reflect the company’s long term objectives and priorities as set by the board, maintaining constant dialogues with the board chair, and implementing adequate financial control and operational planning systems. The MD/ CEO also ensures that operating standards and objectives of the company are understood and owned by other employees and management of the company (‘Wesfarmers’, 2017).
The MD also monitors the financial and operating results of the company and benchmarks these against the budget as well as taking remedial steps where there is need to realign performance with set objectives. The MD monitors actions of functional board teams and members and ensuring the operational performance of the firm is maintained. The MD is fully accountable to the board for all operations of the company and represents the firm to major customers. Importantly, the MD builds and maintains an executive team that is effective I delivering company performance objectives
The company fully complies with the Corporate Governance Principles and Recommendations put forth by the ASX Corporate Governance Council. The company has an elaborate Corporate governance Statement which provides direction for its corporate governance. The statement is a commitment to offering satisfactory returns to the company’s shareholders and fulfilling corporate governance responsibilities and obligations in the best interests of the firm and stakeholders. The document details the company’s governance framework and practices and this framework is reviewed regularly, with the last review having been done 2017. Under the corporate governance document, the key points include the roles and responsibilities of the board, which in addition to those already discussed, includes overseeing the succession planning for the Group MD, approving appointments of leaders such as the Chief Financial officers. The board monitors the cash flow operations of the group as well as its business and financial performance. The board also monitors the safety performance of the firm as well as monitoring and evaluating any opportunities for growth and development. Further, the board reviews how talent is managed and developed at the company and approves revisions of committee and board charters while also reviewing relevant policies and reporting processes (‘Wesfarmers’, 2017).
In its code of conduct policy, the company requires all her staff to act with integrity, honesty, and fairness, and be accountable for all decisions made. All staff are required to observe the responsibilities of Wesfarmers to financial markets and shareholders and act in compliance with the law and the policies and procedures of Wesfarmers in addition to being required to identify and effectively manage all forms of conflicts of interest. The policy requires all staff to seek to make sustainable positive social, economic, and environmental contributions to communities n which the company operates. All staff are required to maintain and respect the privacy and confidentiality of accuracy of business records and company information. This extends to IT and IS resources and infrastructure; selling off company information or misusing It and IS resources is strictly prohibited and the whistle blower policy defines and explains how suspected misuse of It and IS resources should be handled and reported for further action (‘Wesfarmers’, 2017).
The corporate governance statement details the qualifications required for board members, including having experience of having been a CEO, experience in running a company listed by the ASX, knowledge of risk management and strategy, have experience in corporate governance, financial acumen, international experience, and knowledge of government and regulatory policy. The board members need experience with financial markets, finance and banking, e-commerce, HR and executive remuneration, corporate sustainability, resources and industrial knowledge, as well as marketing and customer service or knowledge of the retail sector. According to the document, the chairman and board members retain independence. The board has various committees and board succession planning is also documented in the governance document. The method for remunerating senior executives and board members is also well defined as well as how senior executives performance is evaluated under the key Executive Equity Performance Plan. The governance document defines governance policies which are based on recommendations of the ASX Principles of 2014 (‘Wesfarmers’, 2017).
The company’s corporate governance policies deal with conflicts of interest, the general code of conduct and obligations of every director, the whistle blower policy, anti bribery policy, market disclosure policy, and securities and trading policy. The governance policy document also defines investor engagement policies, gender diversity policies, ethical sourcing policy, as well as environmental policies. Ethical and responsible behavior is clearly defined and is a guiding policy for the company. The company has a constitution that also guides its operations and how it conducts business as well as its objectives. Apart from the governance policy document, the company has charters that include the board charter, the audit risk committee charter, the nomination committee charter, the remuneration committee charter, and the Gresham mandate Review commitment charter. Having evaluated its corporate governance structure ad policies, the paper concludes that they are in conformity with general corporate governance principles as well as with statutory guidelines, including recommendations for policy set fort by the ASX (‘Wesfarmers’, 2017).
Wesfarmers uses information systems (IS extensively, especially in its retail,m industrials, and department store businesses. The IS infrastructure is at the core of how operations at the company are run and managed to attain efficiency, and to meet the set policy objectives. The IS strategy is developed and managed by its CIO (Chief Information Officer) and each department or business sector has a CIO, for instance, Coles has its CIO (Conrad Harvey). The company’s overall IS strategy is to embrace change as technology advances and needs evolve/ change (Cameron, 2014). The IS policy is to be more innovative and strategic within the organization to attain competitiveness in the industry. The IS strategy is to use information systems or business transformation with IS being used to add value to operations and business transformation as well as operational transformation. The IS strategy is to use IS resources for operations, including supply chain management, stock management, sales management,and customer service as well as for managing data and using big data approaches to make better use of collected data. Te merchandising systems are fully computerized, with innovative approaches including use of hybrid clouds and data centers to manage operations.
The IS strategy is aimed at ensuring customer objectives ad satisfaction is met, as well as corporate objectives. The IS and It systems and resources are useful in management and decision making at Wesfarmers, with data and reports generated from the various IS systems such as the retail system, energy management system, supply chain systems, and financial system among others being used to evaluate business and financial performance and make decisions (‘Wesfarmers’, 2017). As such, Wesfarmers have a strategic information system approach to operations that are developed as a response to corporate business initiatives and need to continuously improve customer experiences. Wesfarmers therefore use its strategic IS as a competitive advantage to enhance operational efficiency, reduce costs, and meet customer expectations better. The IT department, for instance at Coles, acts as a consultant to the division, working based on a project oriented company where it evaluates existing systems and needs and constantly updates and innovate to keep up and gain a competitive advantage. The IT divisions of various units are parts of the business rather than just providing services and the goal is to work in a synergistic way with other departments and divisions to realize strategic IS goals. For instance, Coles uses automated replenishment system in its supply chain management system which has improved the availability of stocks and improved the supply chain efficiency at the division.
Consistent with its governance policy of code of conduct, security is at the center of the company’s IS strategy; all its resources are given protection against misuse and external threats, such as using enterprise level security products to protect the IT system and IS resources. All its IS resources are managed using Symantec managed security services where instead of handling such issues in house, the firm gets best value by letting the experts handle them. As such, Symantec will offer this as a professional service to Wesfarmers, a good move given the knowledge, skills, and expertise that the company has in IS resources resource (‘Symantec’, 2017). It bases its IS policy and IT strategy on its governance policies and uses the best providers and vendors to source these services; for instance, its main vendors for IT products and systems are reputable companies that include A10 networks, a leader in applications networking to provide high performing solutions for application networking. To this end, the company (Wesfarmers) aims at ensuring safe, secure, and high availability of its data centers. Other vendors include Customer Monitor to measure customer experience, and Jedox, a planning and analysis as well as reporting vendor (‘Featured Customers’, 2018).
Given the rapid development and growth of the retail sector in Australia and new Zealand, ad increasing competition form rivals such as Aldi and Woolworth’s, Wesfarmers needs to undertake certain approaches and strategies to remain competitive ad continue to grow. The company’s vision Is to ensure customer satisfaction and good returns to shareholders, while taking into consideration other stakeholder needs. To become more successful, the company needs to become more innovative, especially in the highly competitive retail sector where it is facing increasing and stiff competition from rivals Aldi and Woolworth’s. Already, there are indications that the company will divest from retailing, with the expected sale of Coles, one of its flagship businesses (Dickson, 2017). However, in its department store division, the company should adopt an aggressive model of guaranteed lowest price at the highest quality, a strategy Wal-Mart, another retailing giant, has successfully used over the years. This will help the company meet one of its objectives of providing customers with goods and services competitively and professionally. The world has become digital and convenience is a major aspect of modern society; the company should re-engineer its business process and use e-commerce as the foundation of its retail business.
To this end, the recommendation is to have a model similar to other giants such as Amazon, only this time, by selling usual store products. It will have a wider reach and likely increase earnings while lowering costs. The company needs to implement a comprehensive work place health and safety policy, with a policy document across all its business sectors; this way, it will fulfill its strategic objective of providing a working environment that is both safe and fulfilling. This can also be achieved through setting up a supervisory unit to look into the welfare of employees that will measure performance levels, evaluate talent and skills, and identify areas where improvements are needed. Efforts should be placed in increasing efficiency and reducing its carbon footprint; one of its objectives is to contribute to the growth of the nation (Australia) through achieving efficiency in conducting its operations. The company is already in the energy, chemicals, and fertilizers business; it should look at the future and adopt a green strategy. The world, and Australia as well is faced with a increasing challenge of energy, climate change, and global warming. While being in heavy energy sectors like coal mining and processing is good, other alternatives exist. Australia has vast solar resources that the company can tap to reduce its own carbon footprint and also invest in the lucrative green energy sector. This can be done through significant investments in renewable energy sources such as solar where the company generates and sells electricity generated using solar. The market is there for such a venture and it is a future growth area (Heinberg & Fridley, 2016, p.7).
Achieving sustainable development and sustainable environmental ventures is among the key strategic objectives of the company; renewable energy generation is one way they can achieve this objective. Companies rely on talent to grow; Wesfarmers should take a unique initiative and develop its talent pool, right from the youths. This can be done by sponsoring bright and talented students to college and them employing them and taking them through training and mentorship programs in order to develop talent suited to ts strategic and objective needs. The organization structure as is is good, however, the organizational culture can be improved further by the company adopting the project oriented approach to running its operations. A project-based organizational structure and project oriented operations and use a matrix based structure rather than a strictly hierarchical one, especially because it has several units and divisions. This way, essential company functions will be run using a management structure, but work is undertaken by focused project groups using project management methodologies and principles. This will help reduce costs, help achieve goals better, and increase profitability as well as productivity in employees (Markgraf, 2018; Thiry, 2007). This approach will also give the firm greater flexibility in assigning work and executing tasks.
References
Cameron, N. (2014, July 9). Inside Coles’ technology transformation. Retrieved from https://www.cio.com.au/article/549604/inside_coles_technology_transformation/
Dickson, J. (2017, December 13). Wesfarmers leaders bullish in the face of increased competition – Inside Retail. Retrieved from https://www.insideretail.com.au/blog/2017/06/14/wesfarmers-leaders-bullish-in-the-face-of-increased-competition/
‘Featured Customers’. (2018). Business Software used by Wesfarmers Limited. Retrieved from https://www.featuredcustomers.com/customer/wesfarmers-limited/reviews
Heinberg, R., & Fridley, D. (2016). Our Renewable Future: Laying the Path for One Hundred Percent Clean Energy. Washington, WA: Island Press.
Markgraf, B. (2013, January 23). Project-Based Organizational Structure. Retrieved from https://smallbusiness.chron.com/projectbased-organizational-structure-60902.html
‘Symantec’. (2017). Wesfarmers Limited Protects its Resources with Symantec Managed Security Services. Retrieved from https://www.symantec.com/region/au_nz/press/au_040218.html
Thiry, M. (2007). Creating project-based organizations to deliver value. Retrieved from https://www.pmi.org/learning/library/project-based-organizations-deliver-value-7330
‘Wesfarmers’. (2017). Governance policies. Retrieved from https://sustainability.wesfarmers.com.au/our-principles/governance/robust-governance/governance-policies/
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