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Introduction
Strategic Information System [SIS] is an important feature in the world of Information Technology which helps an organization get a competitive edge in the market (Parsons, G. L.,Fall 1983). This system helps an organization to store in a categorized manner information which can be processed and transferred as per requirement. Through this system organizations can apply analytical tools to the information they possess, to help recognize growth opportunities and to improve operational efficiency. The system helps implement business strategies in response to corporate business initiative and have a direct effect on the growth and profits of a business. For proper use of SIS it is important to understand the internal and external environment which affects the operations of an organization. External analysis refers to the threats and opportunities by and large while internal analysis is all about the organization’s core strengths and weakness. Analysis of both the internal and external environment helps an organization understand where it stands and the decisions to be taken to help growth and expansion.
Business background
Wesfarmers is a multinational conglomerate that is headquartered in Pert, Australia. Their main markets are in Australia and New Zealand. Wesfarmers are currently Australia’s largest employers in the private sector. Some of the industries that Wesfarmers are currently part of are:
- Retails
- Chemical
- Coal mining
- Fertilizers
- Industrial and safety products
We will focus on two broad based analysis, external and internal. The external analysis will be to analyze the factors that affect the firm. Such as the market, competitive environment and industry scenario. The internal analysis will focus on the internal strengths and weaknesses of the firm along with the core competencies.
Part 1: External Analysis
This analysis is an assessment of the environment in which the organization operates so as to help it identify potential threats and opportunities to grab. As the external environment is constantly changing this analysis should be done frequently as an ongoing process.
General Environment Analysis
The environment in which an organization operates includes those over which they have control and those over which they have little or no control. Those factors over which an organization has no control constitutes the general environment. The general environment has a considerable influence over the operations of an organization and its future growth, the management should analyze the same correctly. Decisions which help evolve as also to anticipate the effects of changes in the environment must be understood accurately.
Pest Analysis
This is a part of the external analysis when conducting a strategic analysis so as to understand the macro environmental factors affecting the organization. It helps analyze the organization’s present position as also future growth potential and the threats that need to be considered. This analysis helps an organization to assess the market within a given time frame so as to help improve decision making and efficiency (Richardson, J). This analysis deals with political, economic, socio cultural and technological environment in which the organization functions. Political analysis studies the government intervention in the economy in terms of tax policies, labor laws, tariffs, political stability etc. Economic analysis includes interest rates, inflation, economic growth, exchange rates etc and its effect on the demographic growth of the organization. The growth and expansion of an organization depends to a large extent on the economic analysis. The socio cultural analysis deals with demographic break up of an organization as regards age, population break up and growth rate, career attitudes, focus on health and safety etc. Management strategies have to be made based on these socio cultural factors as they effect the demand for the product or service of the organization as also the manpower available. Technological factors relate to research and development, levels of automation and technological changes which affect production, cost and quality.
Strategic business decision on matters related to marketing, product development and research can be effectively taken based on the PEST analysis. . This analysis helps in deciding quality, cost of products or services and also reveals the problems to enter new markets. It takes into consideration the external factors to help predict and understand the opportunities that will present itself.
| Political | – Political stability
– Corruption and regulation levels in retailing – Legal framework – Intellectual property protection – Pricing regulations – Wage regulations – Restrictive trading hours – Retail tenancy leases – Zoning and planning laws |
| Economical | – Higher value of Australian dollar
– Low growth rate for the retail industry – Economic stability – Exchange rates in countries that they operate in – Inflation rates – Interest rates – Skilled workforce – Economic growth rate – Unemployment rate |
| Social | – Increase in life span
– Decrease in the difference in gender ratio – Increase in educational qualification – High levels of importance to health and environmental factors – Balance of work and personal life – Diverse skill set in the work force |
| Technological | – Increase in use of smartphones
– Increase online shopping and exposure – Increase in big data – Increase in data analytics – Change in marketing research and strategic implementation |
Porter’s Five Forces Analysis
This analysis helps an organization to understand the competition in the market. Michael Porter opines that the micro environment affects the capability of an organization to satisfy its customers while making a profit for themselves. Any change in the micro environmental forces either singly or jointly can affect the profit earning capacity of the organization and it will have to make a fresh assessment of the market (Michael E. Porter, 1979). These five forces are classified as vertical and horizontal. The horizontal forces relate to threat from substitute products or services, threat from existing competitors and threat from new companies entering the market. Vertical forces are refer to bargaining power of the customers and the bargaining power of the suppliers. This analysis studies the structure-conduct-performance and helps handle problems which restrict profit making.
This analysis helps to evaluate the strategic position of an organization and to analyze competition. While new entrants reduce the profitability of existing organizations, so does threat of substitutes. Bargaining power of customers puts pressure on a business and is referred to as market of outputs and affects customers’ sensitivity to price changes. The bargaining power increases when they have more choices which affects the market position of an organization. Bargaining power of suppliers is referred to as market of inputs and is a source of power when there are few substitutes. Competitive rivalry from existing competitors refers to the level of competition within the industry and analyzing the same is important for success of a business. Brand positioning, pricing and marketing strategies are all dependent on these analysis.
New market entrant
The entry barrier for a firm to enter is low, but maintaining the high levels of competitive environment with Wesfarmers is very difficult. This makes the barrier for new entrants as high. Wesfarmers are currently in many sectors and industries. Hence, to be a tough competitor for such a big conglomerate is very difficult. \
Bargaining power of supplier
The bargaining power of the supplier is very high. The reason for this is, the firm Wesfarmers need supplies for their retails, fertilizers, industrial and mining industry. The number of trustworthy and reliable suppliers are few and far between. The negotiation powers of the suppliers are so high that they can bring down the margins of Wesfarmers by getting higher prices for all supplies.
Bargaining power of Buyer
The buyer is a very demanding client. A customer is always looking for a better deal with high quality and lower prices. The buyer have very high power of bargaining. The buyer wants the perfect deal. This is what makes Wesfarmers center their marketing strategies on pricing and price deals. The way that Wesfarmers can maintain some control over this Force is to keep their customer base satisfied. This can be achieved by discounts and deals and also to maintain high levels of brand good will.
Competitive Rivalry
The competition in the industry of retail is very high. But since years, Wesfarmers have maintained and enjoyed the position of the leader in their sectors. They have kept their market lead even with high levels of competition and rivalry. One of the smart moves that Wesfarmers have done is to collaborate with their competition so as to maintain their leader position and also create good will in the industry.
Threat of substitutes
The threat of substitutes is high in the energy resource industry. Wesfarmers are leaders in most of the industries they are currently in. But with the advancement in technology and alternate power sources, some of the sectors are facing substitution. Wesfarmers are still a long way from being substituted, as they have the backing of more than one industry.
Competitive environment
The competition in the retail environment is very high. The biggest competitive rivals remain Woolworths for Wesfarmers. The areas that Woolworths is ahead of Wesfarmers is their groceries and online segment. Woolies were one of the first firms to start in the groceries segment of the market. This means they had the first mover advantage in the industry. They started with the groceries segment and then moved onto other segments in the retail industry.
With the advent in technology and online shopping taking a lead, Woolies have made big strides to be one of the first and biggest online retailers as well. This is an opportunity that can be taken by Wesfarmers as well. The use of marketing analytics and social media, the firm can be ahead of their competition. Online analytics is a cheaper way to know about the customer and analyze current trends in the market. All the data collected can help the firm to know more about the client and help in more micro marketing. This can in turn help Wesfarmers to get a better customer base that will grow more and to garner more brand visibility. One of the negatives that come with competitive rivalry is a price war. In the retail industry, the margins are generally smaller as compared to any other industry. With a price war with competitors, the firms will lose on all profit margins. As the customer now a days is very market aware and price conscious, a price war will only hurt the firms and not make an effect to the customer in a very significant way. With Wesfarmers moving some of their budget and strategies to online marketing and online selling, they will gain a lot of ground which they have lost to Woolies. The online presence is much more budget friendly as compared to any other marketing strategy.
Part2- Internal Analysis & Proposal
| Strength | – Brand legacy
– Large retails store chain – Sales and discounts – Variety and options – Importance to community and sustainable business practices |
| Weaknesses | – Local suppliers
– Some sectors not profitable – Less international presence |
| Opportunities | – Expansion to other countries
– Diversify to other sectors – Grow in the online segment |
| Threats | – Competition
– Economic performance of the country |
Core Competency Analysis
The core competency of Wesfarmers is customer satisfaction and providing satisfactory returns to their shareholders. The firm believes in sustainable business. This means they believe in the growth of the community along with the growth of the business.
Information System Solution & Recommendations
The requirements that are needed as of right now are:
- Point of sale system
- Operating information systems
- Storage devices
- Servers that handle data analysis
- Dedicated ETL processes
With the importance of big data rising, it can help to start investing in data analytics. This means a team needs to be created for data infrastructure and analytics. This team can manage the extraction of data, the analysis of data, the monitoring of the data being mined as well. This can help the firm in understanding the market trends and culture in a more systematic and real time manger. The analysis will help in more targeted marketing. This can lead to more sales and in turn more revenue and profits.
Reference
Richardson, J. A Brief Intellectual History of the STEPE Model or Framework (i.e., the Social, Technical, Economic, Political, and Ecological)
Schmieder-Ramirez, J. and Mallette, L., Using the SPELIT Analysis Technique for Organizational Transitions, Chapter 28 of “Education Applications and Developments” edited by Mafalda Carmo, Science Press, 2015
Parsons, G. L. (Fall 1983). “Information Technology: A New Competitive Weapon”. Sloan Management Review. 25
WISEMAN, C. AND MACMILLAN, I. C. (1984). “Creating competitive weapons from information systems”. Journal of Business Strategy (Fall, 5): 42–49.
Michael E. Porter, “How Competitive Forces Shape Strategy,” May 1979
Michael Porter, Nicholas Argyres and Anita M. McGahan, “An Interview with Michael Porter”, The Academy of Management Executive 16
Wernerfelt, B. (1984), A Resource-based View of the Firm, Strategic Management Journal, Vol. 5: pp. 171-180
