Wesfarmers: Financial and Operational Analysis

Introduction

Wesfarmers is one of the popular coal supplying companies in Australia. This company belongs to the Conglomerate industry. This company has been selected for doing this assignment. Hence all the detailed description of this company and the distribution channels will be provided here. In addition to this, some issues of this company in relation to the sales and distribution will be provided here, which will be beneficial for this assignment. Statistical records of the company and the current financial structure of the company will be discussed here in detail. After analysing all the issues, some suggestions will be provided in the last section of this report which will be helpful to solve those issues. Moreover, a proper evaluation of the current condition of the company will be done in this study.

2.0 Description of the company

Wesfarmers Limited is a well-known company in Australia which supplies different kinds of fertilisers, chemicals, safety products, industrial equipment and coal mining products in different regions of the World. The headquarter of this company is situated in Perth in Western Australia. The company serves its products in different regions of New Zealand, India, Australia, Ireland and the UK. The company was established in the year 1914 and from what time the company is delivering different kinds of goods in many countries. So, it can be stated that the company is serving its products from the past 104 years to satisfy its customers. According to the reports of 2017, the current revenue of this company is $68.44 billion. The operating income of Wesfamer is A$4.40 billion, and the total equity amount is A$23.94 billion. As per the recent reports, there are 223,000 employees working in this company. Apart from the main business, the company also has some subsidiary business which helps the company to reduce any kinds of crisis risks. For example, Harris Technology, Burning Warehouse, wespine industry are some subsidiary businesses of this company. The reports of 2017 stated that the net income of their company was A$ 2.87 billion, and the company has assets of A$40.12 billion, which helps to grow the business in different regions. In the year 2016, the company restricted some of its departmental stores and took an approach to get development. The target of this company is to provide employment of 24000 staff and increase its human resources. This is essential to increase the productivity of the company. In addition to this if the productivity of the company is increased, then it will be easy to gain a high amount of profitability and growth (wesfarmers.com.au, 2020).

3.0 Reflection and Analysis

According to the statements of the hierarchy of the company, it can be stated that the company is giving underpayment to their staff members. They stated that the company is paying $24 million in all the employees, which is underpayment. According to the reports, the employees have expected payroll remediation of around $15 million in safety and industrial division, but the target is not achieved by the company authority (Ramos-Almendares et al. 2020). In addition to this, the staff members claimed that from the past six years, the company is paying less to the managers of liquor and supermarket division. They expect that payment will be made around $20 million, but it was not fulfilled by the higher authority of the company. Moreover, Wesfarmers also admitted that there is superannuation underpayment in the burning industry and the other subsidiaries. This is making the business weaker, and the employees are getting demotivated because of the underpayment issues.

According to this image, it can be analysed that Wesfarmers includes different kinds of expenditures in different sectors such as raw materials, employee benefits, impairment expenses and many others. The total company expenses in the year 2019 were 13.72 billion in the year 2019, which is high. The company has invested the maximum amount in getting the raw materials and inventory section. So, around 9.52 billion amount has been invested in this section, and the company only spent 0.2 billion in freight-related functions. According to the graph, it is also clear that the company invested around 7 billion dollars less in the employee benefits sector (Creasey et al. 2019). This is the main issue of the company, and the employees are getting underpayment which is rupturing the brand image of it. The brand value is getting down, which is the main concern of the higher authority of the company. On the other hand, the company invested 0.74 in the amortisation and depreciation sector, which is not necessary for that. So, it can be evaluated that the company is spending a higher amount in raw materials for satisfying the customers and increasing the sales but not focusing on other expenses (Chen, Hu & Smith, 2019). The expenses are increasing rapidly, which is affecting the financial structure of the company.

According to this figure, it can be understood that the company provides 32% of the contribution in the coal industry and 32% in the Buring New Zealand and Australia. On the other hand, the company sold around 8% of resources and 3% of the safety and industrial equipment. Apart from this, the company also supplies 14% of the departmental products and 3% of the Officeworks equipment, and the percentage of WesCEF is only 8% (Kang, 2018). So, it can be stated that the company delivers different kinds of products in different sectors of the market. So, the main motto of this company is to get business in different industries by producing diversified products, and there are many kinds of products supplied in different market regions which helps to increase the revenue of this company.

4.0 Identification of problems

Recently, the sales rate and the distribution channel of this company is getting affected because of different kinds of issues which are affecting the financial condition of the company. The company is investing a huge amount in getting the high-quality raw material from the suppliers, but it is getting a lot of issues related to employee satisfaction and underpayment issues (Arunachalam, Kumar & Kawalek, 2018). Apart from this, the channels are sometimes not cooperating with the subsidiaries of the company, which is affecting the earning rate of Wesfarmers. The management team is concerned because of these issues. Moreover, the detailed issues of this firm have been analysed in the below section.

4.1 Sales

According to the recent reports, the company has increased its coles revenue by approximately $39.4 billion, which is 0.4% in the year 2018. It has slightly increased than in the previous years, and the sector of Food and liquor is also developing. The sales rate of the Food and Liquor sector increased by 2.1% from the previous year, and the company gained $33.6 billion in earnings (Mylnikov, Vershinin & Mikhailov, 2019). Apart from this, the Burning industry stocks sales have increased by 7.8% in the year 2018, which was higher than in 2017. In the year 2017, this sector has gained 7.3% of the profit which was not satisfactory to the higher authority while the total revenue was increased by 8.9% which is around $12.5 billion in 2017. So, it can be stated that the sales rate is increasing but not in an effective manner.

The company is facing issues related to time mismanagement. This is affecting the manufacturing time of different equipment, and the overall sales growth is affecting because of that. According to the graph, it can be evaluated that though the revenue is high but earning per share is low, which is affecting the financial condition of the business (Palmintier et al. 2016). There are many challenges which are negatively affecting the sales growth of the company. Retailers are demanding to get faster delivery, but it is not possible to do that now. The operations of the company are getting slow, and time management is not done properly by the higher authority of the company. So, it is affecting the business in a negative manner. The prices of raw materials are also increasing, and thus the expenses of the company are getting high (Zhang et al. 2019). Moreover, other issues related to the distribution are mentioned and discussed in the following section of this report.

4.2 Distribution

Wesfarmers is getting a lot of issues related to distribution channels, and this is affecting the economic condition of the company. Moreover, the challenges are as follows;

Dependency on the prices of fuel

The company is dependent on the transportation industry because it has to deliver its products to different countries. So, the growing price of fuel is affecting the distribution cost. The operating cost is increasing, which is affecting the overall profitability structure of the company.

Increasing competitors of the manufacturers

The efficiency of the logistic system is helpful for allowing the manufacturers to increase the sales rate (Sales, Lisboa & Freire, 2019). Moreover, the competition is increasing rapidly, and new manufacturers are entering the market, which is affecting the business in a rapid manner.

High demand for fast delivery

The demand to do fast delivery is increasing, which is not fulfilled by the manufacturing department of the company. This is affecting the business in a negative manner. It has become an opportunity for the competitors, and they are capturing the market in a short time. If the demand is increasing, then the company needs to apply different strategies to fulfil the demand by increasing the supply rate. The aim of the company is time allotment (Aleksina, 2020). The company is not finishing its functions on time. Therefore, they failed to provide the needed demand for the market on time. So, it can be attained that the company is facing issues related to slow delivery and the distribution channels are unhappy with the performance of the company. The operating functions are getting close, which is affecting the profitability rate.

Safety concerns

There are many hazardous situations that may arise in the working area. Therefore the company needs to train its employees to be safe while handling the products. On the other hand, the storing process and transportation need to be done properly by the employees, and advanced machines can be used for this (Helmi et al. 2017). The company is facing challenges related to safety concerns which are affecting the business process in a naive manner. The management team needs to train the employees to be prepared for solving potential issues which can arise at any time. So, these are the safety concerns which are affecting the business.

Changing price issues

Prices of different types of goods are falling there for the inventory expenses are also decreasing. There is a vulnerability related to changing the cost of different products. This is affecting the cost exposure of the company.

Retailer and supplier consolidation

The wholesalers are losing purchasing power because of growing consolidation among many manufacturing companies (Nabil, El Barkany & El Khalfi, 2018). The top markets are growing their share prices which is an advantage for the developing companies, but it is affecting the organisation and becoming a threat for this company.

5.0 Recommendation

The company needs to train its employees for enhancing their skills in distribution works. Safety concerns need to be taught to all the workers of this company. Proper training can be helpful for creating awareness about safety issues which will help to develop the distribution process. Innovative strategies can be used by this company for training all the employees and staff members.

Thorough market analysis is essential for understanding customer needs. In addition to this, the company needs to analyse different ways to satisfy the customers. Collecting customer feedback can be helpful for this company to analyse the demand of the customer. Innovative products need to be delivered to all the customers for satisfying them.

The company needs to focus on developing their marketing strategies which will be helpful to attract more customers and increase the profitability rate. In addition to this, social media can be used for communicating with distributors and suppliers. This will be helpful to analyse the requirements of the customers and the suppliers, and the company will try different approaches to satisfy them.

Transaction per consumer needs to be well-managed, and the company needs to make a cost budget plan which will be helpful to analyse the expenses and profitability. Apart from this, the company also needs to make the products affordable for all the customers, which will be helpful to increase the revenue of this company.

All of the suggestions need to be implemented in the correct way by the respective authority of Wesfarmers. So these recommendations can be helpful to solve the existing issues of the company related to distribution and sales.

6.0 Conclusion

This report critically analyses different issues of Wesfarmers and the impact of these issues on the financial condition of the company. Proper evaluation of the current revenue and earning is provided here. According to the above analysis, it can be stated that the sales rate is decreasing and the company is also facing issues related to distribution channels. There is a lack of training provided in this company, and the company is investing less amount to do proper market research. It is essential to understand the current condition of the distribution channels for solving the existing issues of the company. The management team of the company needs to analyse different factors which can affect the performance of the distributors. This is essential to improve the current performance of the distribution channels. There is a need to build a strong relationship with the distributors and the manufacturer's which will help to improve the business functions. The company's service is products in different other countries. Hence it is essential to understand the transport cost and other related services. Addition to this, the subsidiary companies of these businesses need to be improved to reduce the risk associated with the financial condition of the company. The management team needs to take the initiative for reducing crisis risks. Proper support from the distribution channels and the manufacturing department is essential to improve the current condition of the company. However, it can be concluded that by getting proper management support and using modified technologies could be beneficial for this company to enhance its existing services. Using different kinds of business strategies will be helpful for the company to gain more profit and achieve its goal.