Macro and Micro Analysis - Porter\'s Five Forces PDF

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Introduction This essay seeks to conduct a strategic analysis for the client company, Bunning Warehouse, an Australian houseware hardware retail chain. Bunnings Group, which trades as Bunnings Warehouse, is an Australian home hardware chain. The chain has been owned by Wesfarmers since 1994 and has stores in Australia and New Zealand; Bunnings was founded in Perth, Western Australia in 1886. The assessments presented in the Bunnings Warehouse case study include information about the organization, along with references to the industry's major competitors list as well as notable changes recently observed in the industry where Bunnings Warehouse operates.

Other important factors to be included in this Bunnings warehouse case study include external and internal analysis that helps with industry analysis, as well as critical analysis of the important factors mentioned in the characteristics and strategies of various strategies in the organization:. This Bunnings warehouse case study reflects the three-way earnings performance concerns through strategy execution processes and strategies, as well as recommendations for future strategic development of the analysis presented in Bunnings, as well as the major challenges facing the organization.

External Analysis

To carry out an external analysis, the PESTLE framework would be used. This framework observes the company’s political, economic, social, technological, ecological and legal environment and identifies potential opportunities and threats facing the company.

Political barriers can exist essential to the hardware industry and have been observed in the serious instability of Australian politics and frequent changes in government regulations. Meanwhile, support from the Australian government to foster Australian domestic hardware companies to increase the number of jobs and promote technological improvements may also be explicitly observed (Iyer & Dutt, 2016). However, it should be noted that in the case of an

economic crisis, the government can impose unfair tariffs on imports including building and home improvements.

The economic aspects of the external environment are particularly influenced by economic instability and market crises that could have a detrimental effect on Bunnings operations. The global financial crisis that has affected the economy of many countries is a profound example of the impact of economic instability on companies. The crisis has led to a decline in disposable income for families worldwide and could have a devastating impact on the hardware and home improvement retail sector (Kumthekar, Burke & Arora, 2015). In consumer behavior reform, its impact can be observed because it refrains from home improvements and hardware product purchases and is heading towards product purchases that are essential for survival. This is especially true in the age of COVID-19, where people are in general seeking to spend less in anticipation

of

uncertain

income

in

future.

The social aspect of the external environment is characterised by the sociocultural factors. Due to the culture of farming and carrying out home improvement work independently, Australian hardware consumption per capita is the highest in the world. This is also in part due to its high garden size, dry weather and high home ownership levels. The changes in Australian lifestyles over time, and in particular the increase in wealth in recent years, has played a significant role in improving the demand for Bunnings Warehouse's products and services, such as custom kitchen installations and new air conditioning installations (Li & Rama, 2015).

In terms of technological factors, technology in equipment is recognized as a key component of the hardware industry; for Bunnings, technical aspects were clearly expected in terms of how to install products as well as in the approach for design innovation. The quality of building products can be greatly improved because the development of new materials is supported by technological development (Oliver, 2014).Technology development can also help reduce maintenance costs for new product use. Furthermore, with the global pandemic, the importance of e-commerce integration in products has become further pronounced. Hardware outlets are increasingly needing to adopt new technologies in their sales channels in order to maintain the level of sales they have enjoyed before.

Next, with regards to factors pertaining to the ecological environment, Environmental impact is considered the most important issue in the external environment of Bunnings Warehouse in the current scenario:Stringent environmental regulations and plans could be established as Australian government concerns about environmental protections increase. Therefore, companies in the hardware and home improvement retail sector are essential to strengthen recycling initiatives and reduce carbon emissions and energy consumption. This is especially true given the recent Australian bushfires, which have turned the public attention to the endangerment of the environment.

Finally, Legal aspects of the external environment would include regulations relating to forest operation management, given that hardware items typically involve the manufacture and sale of products with forestry as a factor input. The organization must also comply with the licensing and compliance framework for the Transactions Act enacted in the state (Sengupta, Balaji & Krishnan, 2015).Bunnings' presentation of Bunnings' commitment to achieve carbon neutrality by 2015 could be considered to demonstrate the need for organizations to comply with legal and environmental

issues

in

the

macroscopic

environment

of

the

organization.

Porter’s Five Forces Analysis

The Bunnings Warehouse's industrial analysis is described in the range of Porter's five force models: Porter's Five Forces framework assesses the degree of competitiveness of the industry in terms of the intensity of competition, supplier’s bargaining power, consumer bargaining power, substitute threat and new entrant threat.

First, the bargaining power of suppliers is likely to be high. The power of the supplier is considered to be strong in the housing renovation and hardware retail sector: This is particularly due to the fact that many retailers in the hardware retail market are likely to procure factors of production such as Timber from a relatively small number of suppliers. Suppliers may thus favour procurers who pay higher prices for their materials, and would thus be able to bargain for higher prices if Bunnings would prefer priority treatment from suppliers.

Next, the threat of substitutes is also likely to be considerably high. Australia’s housing renovation and hardware retail sector is a monopolistically competitive market, with as many as 15,040 businesses operating in the industry and presenting actual or potential competition (Ibisworld, 2020). This means that Bunnings may have to adopt a competitive pricing and promotions structure in order to win new clients from other businesses, as well as to retain its current customer base.

The threat of new entrants is relatively weak for Bunnings. Bunnings has a significant reputation in the industry and considerable market share (Weber & Tarba, 2014). Furthermore, start-ups in the industry will also face concerns that they need to develop brand value within a limited time frame. Aside from the large capital outlay of having to purchase large batches of inventory for hardware stores from wholesale suppliers, the brand value also consists of items such as supplier relationships and customer relationships built over time, which are difficult to replicate for a newcomer due to the high time and marketing costs involved.

One may consider the bargaining power of consumers to be moderately high for the case of Bunnings. For home improvements and hardware retail, customer bargaining power is quite high because demand for products and services is dependent on customer preferences. This is especially true for built-to-order quotations such as custom kitchens or renovations, wherein a client may explore pricing from different providers before making a decision on the purchase. As such, Bunnings should not only adopt a competitive pricing strategy, but include additional perks and gimmicks that differentiate their service from others, and may help better sell the product to the customer.

Finally, for Bunnings, the intensity of competitive rivalry is moderate because while it has a large market share in the industry, the company nonetheless participates in competition with a wide range of businesses ranging from prominent competitors such as Home Depot to smaller upstarts that may be local to certain areas of Australia.

Conclusion

With growing competition, high supplier and customer bargaining power, and technology making setting up a retail presence easier for hardware retailers in the midst of a COVID 19 world, the above analysis has demonstrated that despite the high market share Bunnings enjoys today, this position of strength is built upon tenuous relationships between suppliers and consumers, who may easily choose to demand Bunnings serve their interests better, or switch to competitor firms. To stave off competition, Bunnings may need to carry out greater innovation in its soft product such as service quality, along with consider expansion of its online presence and e-commerce platforms.

References Iyer, K.N. and Dutt, G., 2016. The Impact of Product Disposal Strategies on Triple Bottom-Line Performance in Supply Chains: The Role of Relational Resources. In Celebrating America’s Pastimes: Baseball, Hot Dogs, Apple Pie and Marketing? (pp. 723-724). Springer, Cham.

Kumthekar, N., Burke, G. and Arora, A., 2015. An Integrated Index for Triple Bottom Line Performance of the Big Three Firms in Logistics and Shipping Services Industry.

Li, Y., & Rama, M. 2015. Firm Dynamics, Productivity Growth, and Job Creation in Developing Countries: The Role of Micro-and Small Enterprises. The World Bank Research Observer, 30(1), 3-38.

Oliver, R. L. 2014. Satisfaction: A behavioral perspective on the consumer. Routledge

Sengupta, A. S., Balaji, M. S., & Krishnan, B. C. 2015. How customers cope with service failure? A study of brand reputation and customer satisfaction. Journal of Business Research, 68(3), 665-674.

Weber, Y. and Tarba, S.Y., 2014. Strategic Agility: A State of the Art Introduction to the Special Section on Strategic Agility. California Management Review, 56(3), pp.5-12.

Ibisworld (2020). IBISWorld - Industry Market Research, Reports, and Statistics - Hardware Building

Supplies

Retail.

[online]

www.ibisworld.com.

Available

https://www.ibisworld.com/au/industry/hardware-building-supplies-retailing/1877/.

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