Strategic Business Unit Analysis: Bunnings - Coursework Example

Strategic Business Unit Analysis: Bunnings Student’s Name Professor’s Name Course Date A. Corporation Identification According to Prahalad, and Hamel (2006, p. 273), a corporation is defined as an organisation that is directly engaged in the mobilisation process of resources for productive utilisation and, also for purposes of creating even more wealth and other related benefits for its immediate constituents and stakeholders. A corporation should not focus its entire operations in intentional destruction of wealth, increase in the level of uncertainties or even cause possible levels of harm for its stakeholders. This definition provides a distinctive and accurate description of reality and provides a favourable guidance for management as well as directors in their day-to-day discharging of their duties (Hammer & Champy, 2009). The definition most important implication lies with the fact that corporate-based performance should likely be appraised from myriad sources of perspectives. It further calls for the managers to make proper efforts to come up with a significant and legitimate level number of stakeholders especially those that are non-contractual and involuntary and can this be easily ignored, while making sure to listen and come up with solutions focusing on their immediate interests and concerns. Corporations are fairly defined by their immediate two fundamental principals that include; first, the size and socioeconomic power, which postulates that a leading international corporation always must have access to a great level of resources that includes; specialised knowledge; overwhelming bargaining power in regards to most of the stakeholders’ interest as well as extensive capacity to influence the operational environment (Devinney, 2009). Secondly, a corporation focuses on the inaccuracy of the ownership model and, also it relative underlying implications. It should be noted that shareholders are tasked with the responsibility of holding securities however; they do not provide a framework for conducting the day-to-day operations of the company (Bakan, 2012). A product portfolio is the immediate collection of all the underlying products or services being offered by a corporation within any given moment in time. While a product portfolio is made up of all the products offered within an organisation; a service portfolio is made of up of basically the kind of services that are being offered for profits (Johnstone, Dainty, & Wilkinson, 2009). Both product and service portfolios consists of different types of product or service categories; product or service lines as well as the product or services that are offered at a point in time (Johnstone, Dainty, & Wilkinson, 2009). The focus of this paper is examining the competitive environment and business level strategy of a given a corporation. B. Business Unit Analysis A strategic business unit is basically a profit centre that is focused on activities related to product offering as well as practices market segmentation. For most times, strategic business units possess a distinctive marketing plan; trading campaign and an independent analysis of competition despite the fact that they form a part of a larger business entity (Vorhies, Morgan, & Autry, 2009). It is important to note that large corporations will mostly be made up of a great number of strategic business units as each of them will be responsible for their profitability levels within any given operational year that is devised and dictated by the larger corporation group. Strategic business units (SBUs) are merely focused on the supply of both goods and services for a unique set of operations. They are mostly identified by way of a market-based criterion where such important aspects as customers; channels and competition are analysed and defined; as well as identified by their capabilities-based criteria whereby SBUs are noted on their similarity of their respective strategic capabilities (Parmigiani & Holloway, 2011). Some of the purposes of SBUs include; decentralisation of underlying initiatives to relatively smaller units positioned within a corporation so that SBUs can enhance its own distinctive strategy; it provides an opportunity for significantly larger corporations to vary their immediate business strategies in accordance with different needs of external markets as well as fosters the aspect of accountability given that each of the SBU is certainly held responsible for the success or even failure of their respective strategies. Sammut-Bonnici and McGee (2015, p.2) notes that a strategic business unit would certainly share its parent’s organisation overall corporate identity or in some cases; formulate its overall brand identity- a factor that depends on allowance provided by the management of the division. It is further argued that the essence of conducting operations through SBUs lies in the fact that can develop a strategically focused management structure that cannot be overlooked by wider product portfolios of the corporation (Sammut-Bonnici & McGee, 2015). The only setback of conducting operations under SBUs rests in the presumption that it can result to the creation of an additional layer of top management that poses a challenge and costly to sustain. For the purpose of this paper; the analysis will be based on Wesfarmers Corporation and narrow down to Bunnings-Home Improvement, which is one of its fundamental business unit. Bunnings is a strategic business unit for Wesfarmers. It is identified in relation to merchandise category offered as well as trading region for where it operates. Currently, Bunnings is the sole leading retailer of Home Improvement as well as outdoor products in both Australia and New Zealand markets. It is also a well-known supplier of project builders; commercial tradespeople as well as the overall housing industry as a whole. A product or service line is a distinctive group of interrelated products or services that are generated or executed under a similar and sole brand that is being offered by a given company (Parmigiani & Holloway, 2011). A product or service line is considered to be an effective way of evolving an existing set of products or services into a distinct product line; replace existing set of products or services for a particular line; as well as evolving or developing a new product or service line (Parmigiani & Holloway, 2011). Bunnings is focused on provision of outdoor products in both Australia and New Zealand (Wesfarmers, 2017). It is also a well-known supplier to project builders to overall project builders; commercial tradespeople as well as the overall housing industry as a whole. In both of these markets; Bunnings ensures to provide these products to both light and heavy commercial customers within the home improvement and outdoor living markets as well (Wesfarmers, 2017). C. Business Unit Revenues Revenues refers to the level of income or rather money that a specific company receives in the course of a given period; including discounts and deductions for all returned products that had been sold already (Zott, Amit,& Massa, 2011). It forms the major foundation of gross income upon where operational costs of a company are lessened and thus, determine net income. It is noted that a corporation would always a distinct stream of revenues that can be divided according to division or business units. Existing investors will more than often consider revenues as well as net income for purposes of determining the overall health of a given business unit (Zott, Amit,& Massa, 2011). There is a high level of possibility for net income to grow significantly while revenues remain stagnant due to cost-cutting; such a circumstance does not augur well with a corporation’s underlying long-term growth. As at 2016, Bunnings business revenues had grown to $11,571M up from $9,534M in 2015. The table below shows how the business unit’s revenue growth has increased over time amongst other notable accounting items related to revenues D. External Environment Analysis A corporation’s operating environment is the immediate external space for which it executes its overall operations. An external environment is basically the factors that have a direct influence on how a company executes its operations within a given space. For most cases, a corporation does not enjoy a control over this environment as most of these factors cannot be manipulated overtime to portray specific favourable results. Political factors; is the immediate political factors like government intervention; possibility of political stability; taxes and industry overall practices that affect how a corporation conducts its operations Jurevicius, O., 2013). Currently, the political stability is guaranteed under the PM leadership; taxation imposed on this retailer conforms to a fair government framework for all businesses. The industry policies are also favourable. Economic factors; is the immediate economic progress of the market in regards to how well or poor they can afford to purchase products or services offered (Yüksel, 2012). Bunning’s economic environment has been faced with a recent recession crisis that resulted to a higher level of unemployment amongst buyers due to reduced disposable income. However, the current economic environment is slowly regaining its prior capacity with the level of disposable income for people increasing overtime. As a result, the corporation is set to enjoy immense sales growth in future operations. Technological Factors; refers to the possible advancements in the current technology aspects of executing tasks (Yüksel, 2012). The modern forms of technologies that has enhanced the activity related to shopping especially adoption of RFID has resulted to the retail stores’ attaining efficient management of inventories while sustaining the level of stock for potential and existing Bunning store visitors. Recently, Bunnings through its parent company; Wesfarmers adopted a self-service check-out that has gone ahead to elicit lots of mixed reactions from different customers. Environmental factors; refers to the presence and adoption of environment friendly business practices as well as provides an ability to participate in those operations that reduce imminent harm to the environment (Ross, McGowan, & Styger, 2012). Bunnings has made necessary efforts to grow support from the community; sustain a stronger processes to ensure that its operations meets the international standards as well as adopt industry policies aimed at reducing and recycling wastes in a bid to conform to the carbon footprint. The firm has also been positively affected by the sustenance of a rather positive safety performance framework that serves to protect both employees and customers in its numerous stores across the markets. Legal factors; refers to the underlying legislation frameworks put in place that relates to recruitment and employee management sector (Ross, McGowan, & Styger, 2012). Corporations are mandated to adhere to all legal frameworks set within a market. For the case of Bunnings, the legal framework that currently affects its operations is related to quality of products offered for home improvement purposes. The recently acquisition of Home Base is also perceived to have adhered to the underlying governmental framework related to business acquisition. E. Sources of Sustainable Competitive Advantage First, it should be difficulty to emulate or copy; meaning any product or service that is being considered to be easy replicated then it loses the capacity to be unique and sustainable (Kumar et al, 2011). Secondly, research indicates that it should be asset driven so that it can only focus on such important foundational assets like loyalty in customers or even efficient operational systems. Third, a sustainable competitive advantage is a concept that should be enduring in nature (Harrison, Bosse, & Phillips, 2010). This means that the value posed to customers should be perceived as being enduring in nature. This can be efficiently done through impacting patents and trademarks as well as formulate benefits that go past selling hopes on a given breakout product or service. In essence, a sustainable competitive advantage should focus entirely on the concept of unique branding (McWilliams & Siegel, 2011). It is important to note that the overall effects related to brand-building through rigorous advertising go further to contribute heavily to sustainable advantage (D'Aveni, Dagnino, & Smith, 2010). It is a very difficult for any given corporation to copy the brand of its competitors (Knight & Kim, 2009). The ability to formulate favourable associations to one’s own brand product and services is considered to be a fundamental aspect in business operations. The source of sustainable competitive advantage for Bunnings lies in the fact that it has managed to avail to its immediate customers a broader range of home improvement and outdoor living products and while do so, it has managed to remain committed to providing the very best of service as well as lowest prices in each and every operational day (Wesfarmers, 2017). To be effective in bringing out quality service, Bunnings has ensured to only recruit and retain the best of its team members and avail them with a rather safe and rewarding working environment at all times. F. Strategic Direction A strategic direction is a paramount enabler for governance purposes given that the development project can easily formulate and trace their stipulations all the way to the already underlying strategic goals and objectives (Horn & Brem, 2013). Research ascertains that the process of aligning a distinctive portfolio task to strategic objectives provides a favourable framework for a business to engage in doing only the right and beneficial activities (Dragoni & McAlpine, 2012). To effectively attain its competitive advantage, Bunning should engage in the following; It is suggested that the business unit focus on exercising a greater brand reach by way of opening even more trading locations; expand possible digital ecosystems while still ensuring to focus on reinvesting more resources to the current trading stores. It is recommended that in order to improve on its customer experiences then it should direct its efforts towards achieving consistency in basic services to customers; make sure that there is always stock availability at all times. The staffing personnel and especially the salespeople should possess a greater level of product and service knowledge. It is further recommended that there should be more merchandise innovation through improving a wide range of products and focuses more on coming up with DIY (do-it-yourself) technologies for customers. References List Bakan, J., 2012. The corporation: The pathological pursuit of profit and power. Hachette UK. Devinney, T.M., 2009. Is the socially responsible corporation a myth? The good, the bad, and the ugly of corporate social responsibility. The Academy of Management Perspectives, 23(2), pp.44-56 D'Aveni, R.A., Dagnino, G.B. & Smith, K.G., 2010. The age of temporary advantage. Strategic Management Journal, 31(13), pp.1371-1385 Dragoni, L. & McAlpine, K., 2012. Leading the business: The criticality of global leaders' cognitive complexity in setting strategic directions. Industrial and Organizational Psychology, 5(2), pp.237-240 Hammer, M. & Champy, J., 2009. Reengineering the Corporation: Manifesto for Business Revolution, A. Zondervan Harrison, J.S., Bosse, D.A. & Phillips, R.A., 2010. Managing for stakeholders, stakeholder utility functions, and competitive advantage. Strategic Management Journal, 31(1), pp.58-74 Horn, C. & Brem, A., 2013. Strategic directions on innovation management–a conceptual framework. Management Research Review, 36(10), pp.939-954 Johnstone, S., Dainty, A. and Wilkinson, A., 2009. Integrating products and services through life: an aerospace experience. International Journal of Operations & Production Management, 29(5), pp.520-538 Jurevicius, O., 2013. PEST & PESTEL Analysis. Strategic Management Insight, 13, p.2013 Kumar, V., Jones, E., Venkatesan, R. & Leone, R.P., 2011. Is market orientation a source of sustainable competitive advantage or simply the cost of competing? Journal of Marketing, 75(1), pp.16-30 Knight, G.A. & Kim, D., 2009. International business competence and the contemporary firm. Journal of International Business Studies, 40(2), pp.255-273 McWilliams, A. & Siegel, D.S., 2011. Creating and capturing value: Strategic corporate social responsibility, resource-based theory, and sustainable competitive advantage. Journal of Management, 37(5), pp.1480-1495 Prahalad, C.K. & Hamel, G., 2006. The core competence of the corporation. In Strategische unternehmungsplanung—strategische unternehmungsführung (pp. 275-292). Springer Berlin Heidelberg Parmigiani, A. & Holloway, S.S., 2011. Actions speak louder than modes: antecedents and implications of parent implementation capabilities on business unit performance. Strategic Management Journal, 32(5), pp.457-485. Ross, P., McGowan, C.G. and Styger, L.E., 2012. A comparison of theory and practice in market intelligence gathering for Australian micro-businesses and SMEs Sammut-Bonnici, T. & McGee, J. 2015. Strategic Business Units. Wiley Encyclopaedia of Management. 9:1 Vorhies, D.W., Morgan, R.E. & Autry, C.W., 2009. Product‐market strategy and the marketing capabilities of the firm: impact on market effectiveness and cash flow performance. Strategic Management Journal, 30(12), pp.1310-1334 Wesfarmers. 2017. 2016 Annual Report. Retrieved from https://www.wesfarmers.com.au/docs/default-source/reports/2016-annual-report.pdf?sfvrsn=4 Yüksel, I., 2012. Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), pp.52-66 Zott, C., Amit, R. and Massa, L., 2011. The business model: recent developments and future research. Journal of Management, 37(4), pp.1019-1042 Zhou, K.Z., Brown, J.R. & Dev, C.S., 2009. Market orientation, competitive advantage, and performance: A demand-based perspective. Journal of Business Research, 62(11), pp.1063-1070 Read More