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 – central banks are concerned over increasing inflation, technology disruption, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, geopolitical disruptions, increasing commodity prices, there is backlash against globalization,
talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
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.
Ability to lead change in Retail (Department & Discount)
– Wesfarmers is one of the leading players in the Retail (Department & Discount) industry in Australia. Over the years it has not only transformed the business landscape in the Retail (Department & Discount) industry in Australia but also across the existing markets. The ability to lead change has enabled Wesfarmers in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Diverse revenue streams
– Wesfarmers is present in almost all the verticals within the Retail (Department & Discount) industry. This has provided Wesfarmers a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Innovation driven organization
– Wesfarmers is one of the most innovative firm in Retail (Department & Discount) sector.
Analytics focus
– Wesfarmers is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Department & Discount) industry. The technology infrastructure of Australia is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Organizational Resilience of Wesfarmers
– The covid-19 pandemic has put organizational resilience at the centre of everthing Wesfarmers does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Weaknesses of Wesfarmers | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wesfarmers are -
High dependence on Wesfarmers ‘s star products
– The top 2 products and services of Wesfarmers still accounts for major business revenue. This dependence on star products in Retail (Department & Discount) industry has resulted into insufficient focus on developing new products, even though Wesfarmers has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Retail (Department & Discount) industry, Wesfarmers needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Lack of clear differentiation of Wesfarmers products
– To increase the profitability and margins on the products, Wesfarmers needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– From the outside it seems that Wesfarmers needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Department & Discount) industry have deep experience in developing customer relationships. Marketing department at Wesfarmers can leverage the sales team experience to cultivate customer relationships as Wesfarmers is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Wesfarmers, in the dynamic environment of Retail (Department & Discount) industry it has struggled to respond to the nimble upstart competition. Wesfarmers has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Wesfarmers has a high cash cycle compare to other players in the Retail (Department & Discount) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Wesfarmers supply chain. Even after few cautionary changes, Wesfarmers is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Wesfarmers vulnerable to further global disruptions in South East Asia.
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.
Wesfarmers Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Wesfarmers are -
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Wesfarmers can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Wesfarmers to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wesfarmers can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
Creating value in data economy
– The success of analytics program of Wesfarmers has opened avenues for new revenue streams for the organization in Retail (Department & Discount) industry. This can help Wesfarmers to build a more holistic ecosystem for Wesfarmers products in the Retail (Department & Discount) industry by providing – data insight services, data privacy related products, data based consulting services, 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.
Using analytics as competitive advantage
– Wesfarmers has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Department & Discount) sector. This continuous investment in analytics has enabled Wesfarmers to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wesfarmers to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Wesfarmers can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Department & Discount) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Wesfarmers can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Wesfarmers can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Wesfarmers External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Wesfarmers are -
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
Technology acceleration in Forth Industrial Revolution
– Wesfarmers has witnessed rapid integration of technology during Covid-19 in the Retail (Department & Discount) industry. As one of the leading players in the industry, Wesfarmers needs to keep up with the evolution of technology in the Retail (Department & Discount) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
Consumer confidence and its impact on Wesfarmers demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Department & Discount) industry and other sectors.
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 level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Wesfarmers needs to understand the core reasons impacting the Retail (Department & Discount) industry. This will help it in building a better workplace.
Increasing wage structure of Wesfarmers
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Wesfarmers.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Wesfarmers can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Wesfarmers prominent markets.
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.
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.