MALAK HELBAWI

BUSINESS STUDIES
Bunning’s warehouse
Role of business
Bunning’s is the leading retailer of home improvement
and outdoor living products in Australia and New Zealand
and a major supplier to project builders, commercial
tradespeople and the housing industry.

Type of business
Bunning’s is a private subsidiary company of the conglomerate, Wesfarmers. It is
a global chain, which caters for consumer and commercial customers across
Australia, New Zealand, Ireland and United Kingdom. It is a tertiary industry
company specialising in hardware. As 31 December 2017 there was 253
warehouses, 77 smaller format stores, 33 trade centres and three frame and
truss centres operating across the two countries. At 30 June 2017 Bunnings
employed over 40,000 team members. Revenue across the 2017 financial year
totalled $11.5 billion.

Influences in the business environment

External influences that affects the business

Competitive situation
Bunnings has a market share of approximately 20% in the Australian retail
hardware sector. Its major competitors include Home Timber and Hardware,
Mitre 10 and other independent retailers. At present, Mitre 10 employs
approximately 16500 employees whilst Bunning’s has far more locations and
employees at approximately 40000.

Legal

Legal influences could affect the business, as it has previously done so. From
2004 to 2008, Bunnings bought and re-branded five Mitre 10 stores in NSW. In
2008 the Australian Competition and Consumer Commission looked into its
acquisitions of these Mitre 10 stores, as it deemed the purchases would be anti-
competitive. However in February 2009, the ACCC allowed the purchases,
finding that the acquisition did not significantly change the level of competition
in the relevant market. In the future, expansion by purchasing any stores
belonging to a competitor will also be subject to ACCC review.

Internal influences that affects the business

Social
Bunning’s is known for it’s strong social contributions to Australian charities
through it’s regular sausage sizzle and cake stall events. It donates the profits to
community groups and causes and has reached somewhat of an iconic status
amongst the public. They also frequently have DIY sessions in stores for children
and school groups, nursing homes and hospitals allowing various community
groups to be involved. Their sense of social responsibility affects the business by
creating a positive image in the public and makes customers feel like they are
contributing to the community by supporting Bunnings.

Business management and format

Bunning’s currently has two operational formats: Bunnings and Bunnings
Warehouse. The smaller “Bunnings” stores often stock a limited range of
hardware and garden supplies and many of these stores have been closed with
more looking to be shut down due to less demand. The shift in format from
smaller stores to warehouses could bring about greater profit and customer
traffic, however Bunning’s will need to account for costs of closing small stores
and opening larger warehouses.

Stake holder 1
General public/ customers – greater convenience, greater access with expansion,
more locations. Also potentially more jobs created for general public.

Stakeholder 2
Shareholders – the expansion of Bunning’s, particularly internationally, may
drive share prices up meaning greater dividends and returns for shareholders.
However if the international expansions do not prove to be successful, this could
result in great losses for shareholders.

Business growth and decline

In Australia and New Zealand, the company has reached the stage of maturity.
However, in the new and expanding market of UK and Ireland, Bunning’s is still
in its growth stages.

In late February 2016, Bunnings expanded beyond Australia and New Zealand
with the acquisition of Home base, the second largest home improvement and
garden business operating in the United Kingdom and Ireland. Home base’s
sales, on a rebased comparative annualised base, were £1.2 billion for the 12
months ended 29 August 2015. In February 2017 the first Bunnings Warehouse
opened in St Albans with a further nine pilot stores planned to open during the
year. As at 31 December 2017 there were 15 Bunnings Warehouses and 234
Home base stores operating across the United Kingdom and Ireland. At 30 June
2017 Bunning’s employed 12,000 team members.

Current or potential challenges that Bunning’s faces

With international expansion, stocking stores with Australian stock and products
may be a costly task. Especially transporting large volumes of stock to other
parts of the world such as Ireland and the UK. To overcome this challenge,
Bunning’s may choose to develop and source products locally from the countries
where they are expanding. Additionally, there is also the issue of competition
overseas, with other hardware chain stores that have more control over the
market.