Case Analysis Of Wesfarmers

I. INTRODUCTION

In achieving the corporate objective to deliver long-term shareholders return, Wesfarmers businesses is encouraged to be more aware of financial risks that each of its businesses may exposed. The objective of this report is to give financial advices for Wesfarmers based on the issues and strategies analysis in Part A. First it begins with financial analysis, which cover the macro-economic analysis and the assessments summary of the company current financial performance. Furthermore, we examine and identify the impact of business acquisition strategy to the corporate financial. Finally, the report will conclude with recommendation.

II. FINANCIAL ANALYSIS

a. Macro-economy

Economy condition in Australia shows upward trends proven by the 3% increase of its economic growth (Figure 1) and decrease in the inflation (Appendix 1). Meanwhile,

However, it seems their portfolio diversification of businesses are becoming their major problems and not really give the benefit of diversification for its investor. This issue arises because Wesfarmers has some weakness in managing its business as collective portfolio, they instead assume to be more focus on Coles. As for improvement and support the corporate objective to deliver long term shareholders return, we advice Wesfarmers to manage collectively its businesses, keep maintaining its financial management aligned with its objectives and value. Furthermore, acknowledging its exposure to financial risks, we motivate the company to be strategic in using different types of derivatives instrument to mitigate or prevent financial risks, such as options, forward contracts and swaps (e.g. commodities swap contract). Regarding the business acquisition plan, Wesfarmers may also consider to use deal-contingent derivative contracts to hedge risk that may occur during pre-acquisition