Management of the Bunnings Warehouse Property Trust - Essay Example

INTERNATIONAL BUSINESS ORGANISATION MANAGEMENT REPORT (Bunnings Warehouse) Executive Summary Bunnings warehouse is one of Australia and New Zealand's leading warehouse chains for home and garden improvement products. Today there are over 142 Bunnings warehouse stores across Australia and New Zealand and around 84 small format shop fronts. The Bunnings Warehouse Property Trust (BWPT) was established in 1998. It focuses on retailing properties with particular attention to Bunnings Warehouses which are leased to Bunnigs Pty Ltd., a wholly owned subsidiary of Wesfarmers Ltd. In 1994 the first Bunnings Warehouse was opened in Sunshine Victoria, some 52 years after becoming a public company. The Bunnings Group Ltd is Australia and New Zealand's leading retailer of home and garden improvement products and is also a major supplier of building products. Its home building section especially targets small - medium builders. It became a public company in 1952 and in 1994 Wesfarmers acquired it. (Bunnings Warehouse Property Trust - BWPT website, 2006). The trust was listed on the Australian Stock Exchange (ASX) in September 1998. The BWPT properties are on long-term leased to Bunnings Pty Ltd. typically for a period of 10 - 15 years. (BWPT History Overview 2006) 2001 was the year of extensive growth for Bunnings as Wesfarmers took over Howard Smith Ltd, which resulted in Bunnings fully integrating Howard Smith's Australia and New Zealand's BBC hardware operations known as Hardwarehouse, BBC and Benchmark. The Bunnings brand was to replace all three previous brands (Wesfarmers website 2006). Bunning's is in the pursuit of sustainability within their operations by striving to making the operations socially responsible, environmentally aware and economically viable. Leadership Bunnings took shape in 1886 when Arthur & Robert arrived in Perth, WA from London and soon won a government building contract and soon founded the group of companies known as Bunnings Bros Pty Ltd. The company has since seen many milestones. In 1952, Bunnings became a public company and expanded into retail. In 1994 Wesfarmers Ltd., one of Australia's largest public companies acquired Bunnings and Wesfarmers has given an able leadership and direction to the company. All the departments and divisions are being managed very professionally with. Organisational Structure Bunnings is structured around a team-based belief in providing the best service alongside the widest range of home improvements at the lowest prices. On a company level, they are structured to pursue sustainability in all its departments and through all their supplier relationships. A manager is manages the trust which in turn is run by a board of directors. These directors and management control the general everyday activities of the business. The management chain goes down to the state manager followed by the regional manager and then individual store managers. A store manager controls the business which has his/her group of employees broken into teams depending on their department or specialty. For example, there may be up to 5 different teams, with a team leader in control of the employees of that team. The team leader has an important role as he/she has to manage and motivate the employees. Each Bunning's store has a strong emphasis on teamwork and each employee is valued in the business. A key factor that all team leaders have at every Bunnings warehouse stores is that they have "reward power". This is where they have the ability as a manager to give or withhold tangible and intangible rewards such as pay rises, bonuses and verbal praise. As a result members of the organisation are more motivated to perform at a higher level; managers will have a highly motivated workforce as efforts are appreciated. This is a fine example of the 'path goal theory' model. Bunnings Encourages empowerment by expanding employee's tasks and responsibilities, giving employees authority to take decisions, be responsible for their outcomes, improve quality, and cuts costs - and provide feedback from the employees to management. Organisational Culture Bunnings has taken good care to see that each individual department functions under similar environment and work-culture. The importance of working as a team while having fun and helping the community is an unwritten rule. Team work and the ability to work together in order to achieve exceptional customer service is the key motivator in all departments. Bunning's emphasis on employee empowerment is part of strengthening the team culture. Through providing employees with a sense of responsibility and power they allow them to take decisions that affect the business which in turn affects. Bunning's also provides incentives for certain tasks and targets that have been met by the team. These incentives are offered to everyone and not just an individual employee, for example a $50 gift voucher for meeting October's budget. The team emphasis is not just at a department level or shop level but it is also encouraged at the business level. The working environment of Bunning's is also a relaxed one in which employees are encouraged to complete their work in a fun loving environment. This can be seen through dress up days and the organising of employee events and competition. The relaxed management style also affects this culture. Bunnings Operational Analysis Bunnings has employed in excess of 23.000 team members and the largest Bunnings Warehouse stores carry over 100,000 product lines again living the ambition of providing the biggest range. In 2005-06 Bunnings Warehouse recorded operating revenue of $4.4 billion, which is a 5.2% rise on last year. Bunnings also prides in community involvement and in the financial year ending 2006, Bunnings stores nationally donated $1.4 million to local community groups (figures from 2006 Westfarmers Annual Report). This involvement in community affairs also helps in building trust and a brand identity for the company. Some salient features about Bunnings are; Its staff is very friendly with some of them having qualification and specialization done in specific departments. This provides the customers with a unique shopping experience where they can shop for goods and also ask for help and advice from a professional. Each store has a standardised design format, where each store is set out in a similar way, creating a consistent environment consistent. In line with spacious inside Bunnings has a planned approach towards the parking of vehicles, having plenty of parking and vehicle access. SWOT Analysis Strengths Across Australia and New Zealand Bunning's operates 144 warehouse stores and 70 smaller format Bunnings stores. In August 2005, the Trust had control of over 200 properties, mostly Bunnings Warehouse stores and smaller stores. This was a significant increase since its acceptance into the Australian Stock Exchange in 1998, when the Trust owned 20 properties. Bunnings gains its strength from the fact that they are Australia and New Zealand's leading retailer of home and garden improvement products and a major supplier of building materials. A big work force of around 24000 employees working in well synchronized teams. So far the company has shown keen interest in addressing the task of corporate social responsibility by way of meeting community and shareholder interests and accountability in such affairs. Bunnings is a key supporter and advertiser on the Channel Seven television show, 'Better Homes and Gardens' which enables Bunnings a direct access to the consumers. Bunnings' well informed employees are known for their helpfulness and eagerness in assisting customers. Bunning's sites are visible and accessible from a major road, highway or freeway. The average size of the sites is three hectares compared to other hardware stores which are much smaller. Bunning's advertises of their huge sale space, stating customers get lost since the site is so big. As part of a strategic merger the parent company Wesfarmers Limited has conglomerated with its strong competitor Harvard Smith Limited in 2001 This resulted in ending the bitter rivalry and the competitive threat. Weaknesses Low gearing level of the Trust: The Dividend Reinvestment Plan which was introduced in 2000 was postponed until further notice in 2005, due to the Trust's less than healthy leverage, or Debt to equity ratio. This indicates that there's enough room for the Trust to ensure that the costs which are used to control its assets are efficiently minimized. Wesfarmers has been criticized for "lack of imagination" by a Merrill Lynch analyst, predicting that this, together with falling profits from its coal export business, would see Wesfarmers struggle to maintain healthy profit growth in the near future. Wesfarmers is known to have a culture of intense focus on long term shareholder returns and having disregard of outside disapproval or differing opinions. A dissenting note gives ideas and scope for improvement. Therefore such opinions need be respected by major interest groups in the company. Opportunities As a result of the merger with Harvard Smith Limited in 2001, the parent company Wesfarmers Limited can now focus on further avenues for strengthening the business operations. Sustainability in growth and development: The journey from 20 to 200 warehouses has been quite convincing for the company. There's still some scope for diversifying in some more areas through out the Australian territory. Its commitment to social and community interests: More and more involvement in community programmes helps in establishing the brand image of the company. So far the company has made sure that in addition to its monetary achievements it also takes care of community's interests For example, the company was seen in helping those struggling families affected by fire accident in Norply factory in Kyogle recently. Such acts earns the all important goodwill of the community. Excellent customer satisfaction: The customer representatives are well versed with product details and explain in simple manner to the customers. Satisfied customers bring in more footfalls to the warehouse. Diversified business activities: To compete with big firms like K Mart and Big W, it has entered in to garden and nursery services in addition to its hardware activities. Its parent organization Wesfarmer has been earning considerable net profit from coal mine business. The recent revision of coal export prices has made this business more attractive and profitable. There are now enough opportunities for investing good amount in renovating the business of Bunnings warehouse property. Threats It is really worrying to find that the rate of jump in net profit of the company has been restricted to 1.1 % against 24 % jump in previous year. The company could not maintain optimum debt to equity ratio due to economically unviable exercises. This may well prove to be a dent in its brand image. It could not maintain its word of introducing new schemes of reinvestment of dividends which may take the customer confidence away and poses a severe threat. Another threat is in the form of absence of proper plan to invest in options and futures market. Down turn in the housing or property market in Australia severely affects the prospects of this trust. Threat also operates in the form of difficult trading conditions in Victoria, Queens land and NSW made its trade sales diminished by 1.9 % against the previous year. Maintaining a prudent interest rate hedging position may not be feasible in long run. Acquiring properties with long term leases to substantial tenants is risky and may result in poor liquidity and capital evasion. Unusual Aspects Which Contribute to Bunning's Success: Bunnings focuses on the three primary areas of community involvement; Family - activities that support the health, wellbeing and welfare of families Community - activities that enhance the local communities in which we operate Sustainability - activities that demonstrate our commitment to the environment and sustainability The company works under the belief that its operations are sustainable when they are socially acceptable, environmentally sound and economically viable. Besides documenting the financial figures the company has also come out with its 2005 community report card which summarises the company's contribution to the community and its initiatives to improve the sustainability of its business. Team members of the company have supported community projects such as: Conducting workshops for special needs children and seniors groups; Painting rooms at children's hospitals and community buildings; Building flower beds and vegetable gardens at primary schools; Doing makeovers of community facilities Performing backyard or room makeovers for needy members of the community; and Clean Up Australia Day. Recommendations 1. For 'lack of creativity for the future' weakness: Bunnings may consider further market segmentation to meet more specialized customer needs. Currently, Bunnings warehouse has a wide range and variety of home-ware and leisure products available. Bunnings could be more creative in targeting specific types of customers, such as developing a team of specialist consultants on home decoration, outdoor leisure makeover, or garden redesign. This way, Bunnings would be able to meet the more general needs of an average person while also offering more customised service by knowledgeable project teams. 2. Introspection for Improvement: Bunnings need to take the constructive criticism in the right spirit and instead of just throwing such criticism out of the window, the company would do a world of good if it tries to investigate the reasons behind such criticism. 3. For 'Organisational Culture of Ignoring External Criticism: Bunnings/Wesfarmers could continue to focus on long term shareholder returns while acknowledging the changing environment of the business and homemaker warehouse industry. 4. Monitoring and Research: An 'update team' could be created to monitor, research and advise the company on the current trends of the industry, new strategies or techniques used by industry rivals, changes in customer preferences etc. This team would be a permanent fixture, with interdepartmental coordination encouraged to cover occurrences in areas outside the group. The company could also conduct more regular customer research to monitor any changes in customer trends and needs. This would enable Bunnings to remain updated about the market in which they are operating, while continuing to pursue their organisational objectives. Implementation Plan 1. In order to further assess the market needs Bunnings may take up the help of Market Research Analysts. And since the company itself is in direct touch with a range of customers, it can ask for suggestions for improvements etc. from the masses, by distributing leaflets, online requests or mailers. 2. The company may consider setting up of a separate Suggestion and complaints division to establish a communication link with the masses and to take up such complaints on priority basis. Or the company can form teams in different divisions. 3. The nitty-gritty of financial figures has to be taken up seriously from the very beginning itself. And commitments once made to shareholders/ other stakeholders must be honoured for retaining the market position. 4. Periodical investment in R&D activities is a must for remaining in tune with the times and to monitor the pulse of the customer. Bunnings would do a world of good for itself if it sets up a separate R&D wing for taking care of research and monitoring. References: 1. Bunnings. (2006), Bunnings - Who We Are, [Online], Available from: http://www.bunnings.com.au/aboutus/100/Who_We_Are.aspx. [16/09/2006]. 2. Bunnings Warehouse Property Trust. (2006), Bunnings Warehouse Property Trust - History Overview. [Online], Available from: http://www1.bunningspropertytrust.com.au/company.aspID=1. [16/09/2006] 3. Westfarmers. (2006), Wesfarmers Bunnings, [Online], Available from: http://www.wesfarmers.com.au/default.aspxMenuID=42 [16/09/2006]. 4. Bunningss. (2005), Bunnings-2005 Community Report, [online], available fro: http://www.bunnings.com.au/files/File/PDF/Community%20Report%20Card%202005.pdf [24/10/2006] Since I have done the report with inputs from 12 files uploaded by you, so you'll be in be in a better position to write the references. Read More