Wesfarmers (WES) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Department & Discount)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Wesfarmers (Australia)
Based on various researches at Oak Spring University , Wesfarmers is operating in a macro-environment that has been destablized by – wage bills are increasing, technology disruption, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , increasing transportation and logistics costs,
digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Wesfarmers can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wesfarmers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wesfarmers operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Wesfarmers can be done for the following purposes –
1. Strategic planning of Wesfarmers
2. Improving business portfolio management of Wesfarmers
3. Assessing feasibility of the new initiative in Australia
4. Making a Retail (Department & Discount) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wesfarmers
Strengths of Wesfarmers | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wesfarmers are -
Learning organization
- Wesfarmers is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Wesfarmers is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Wesfarmers emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Wesfarmers in Retail (Department & Discount) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Wesfarmers has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Digital Transformation in Retail (Department & Discount) industry
- digital transformation varies from industry to industry. For Wesfarmers digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wesfarmers has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to recruit top talent
– Wesfarmers is one of the leading players in the Retail (Department & Discount) industry in Australia. It is in a position to attract the best talent available in Australia. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Wesfarmers has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Wesfarmers is one of the most innovative firm in Retail (Department & Discount) sector.
Strong track record of project management in the Retail (Department & Discount) industry
– Wesfarmers is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Wesfarmers has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wesfarmers has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Low bargaining power of suppliers
– Suppliers of Wesfarmers in the Services sector have low bargaining power. Wesfarmers has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wesfarmers to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Wesfarmers has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Department & Discount) industry. Secondly the value chain collaborators of Wesfarmers have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Wesfarmers has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wesfarmers to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Wesfarmers | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wesfarmers are -
Employees’ less understanding of Wesfarmers strategy
– From the outside it seems that the employees of Wesfarmers don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring in Retail (Department & Discount) industry
– The stress on hiring functional specialists at Wesfarmers has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to strategic competitive environment developments
– As Wesfarmers is one of the leading players in the Retail (Department & Discount) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Department & Discount) industry in last five years.
Low market penetration in new markets
– Outside its home market of Australia, Wesfarmers needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Wesfarmers is slow explore the new channels of communication. These new channels of communication can help Wesfarmers to provide better information regarding Retail (Department & Discount) products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee of Wesfarmers is just above the Retail (Department & Discount) industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Products dominated business model
– Even though Wesfarmers has some of the most successful models in the Retail (Department & Discount) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Wesfarmers should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Wesfarmers is dominated by functional specialists. It is not different from other players in the Retail (Department & Discount) industry, but Wesfarmers needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wesfarmers to focus more on services in the Retail (Department & Discount) industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Wesfarmers, it seems that company is thinking out the frontier risks that can impact Retail (Department & Discount) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High operating costs
– Compare to the competitors, Wesfarmers has high operating costs in the Retail (Department & Discount) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Wesfarmers lucrative customers.
Interest costs
– Compare to the competition, Wesfarmers has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Wesfarmers Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Wesfarmers are -
Manufacturing automation
– Wesfarmers can use the latest technology developments to improve its manufacturing and designing process in Retail (Department & Discount) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Wesfarmers to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wesfarmers in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Department & Discount) industry, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Wesfarmers to increase its market reach. Wesfarmers will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wesfarmers is facing challenges because of the dominance of functional experts in the organization. Wesfarmers can utilize new technology in the field of Retail (Department & Discount) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Wesfarmers can develop new processes and procedures in Retail (Department & Discount) industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Wesfarmers can use these opportunities to build new business models that can help the communities that Wesfarmers operates in. Secondly it can use opportunities from government spending in Retail (Department & Discount) sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Department & Discount) industry, but it has also influenced the consumer preferences. Wesfarmers can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Wesfarmers can improve the customer journey of consumers in the Retail (Department & Discount) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Use of Bitcoin and other crypto currencies for transactions in Retail (Department & Discount) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Wesfarmers in the Retail (Department & Discount) industry. Now Wesfarmers can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Wesfarmers to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Leveraging digital technologies
– Wesfarmers can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Building a culture of innovation
– managers at Wesfarmers can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Department & Discount) industry.
Threats Wesfarmers External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Wesfarmers are -
Easy access to finance
– Easy access to finance in Retail (Department & Discount) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Wesfarmers can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Wesfarmers is facing in Retail (Department & Discount) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Wesfarmers needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Wesfarmers can take advantage of this fund but it will also bring new competitors in the Retail (Department & Discount) industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Wesfarmers business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Wesfarmers can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Retail (Department & Discount) industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Department & Discount) industry are lowering. It can presents Wesfarmers with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Department & Discount) sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Wesfarmers.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wesfarmers in Retail (Department & Discount) industry. The Retail (Department & Discount) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Regulatory challenges
– Wesfarmers needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Department & Discount) industry regulations.
High dependence on third party suppliers
– Wesfarmers high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Wesfarmers may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Department & Discount) sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Wesfarmers in the Retail (Department & Discount) sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Wesfarmers Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Wesfarmers needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Wesfarmers is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Wesfarmers is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Wesfarmers to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Wesfarmers needs to make to build a sustainable competitive advantage.
