Business Plan Case Study For Business Economic Value

Effect of Australian Dollar Exchange Rates on Business Plan

Discuss about the Case Study for Business Plan of Business Economic Value.

1. The effect of high economic value of  the Australian Dollar in terms of the exchange rate on business plan.

According to the Australian Bureau of Statistics (ABS), Australia’s GDP growth over the 12 months to October 2015 was just 2.50%. Inflation is just 1.50% and our cash rate  is at a historical low of 2.00%. With that, there has been an increasing demand for the Aussie dollar over the past year and a half with more foreign investors feeling the need to keep their money here. Thus, the value of the dollar is falling. A falling Australian dollar can have negative impacts on certain consumers and businesses in Australia. As mentioned above, overseas goods become more expensive to buy, so Australian businesses and consumers needing to pay for international products/services will be hurt. Also, Australians making trips overseas will have less spending capacity for their dollar (Bryman and Bell, 2015, p.12).

Australia stands out in getting the currency boost it needs at a time when economies the world over are grappling with exchange rates considered undesirable. The Aussie is in line with economic fundamentals, after being 25 per cent or more overvalued in 2013. China is struggling to curb yuan declines and Saudi Arabia is burning through reserves to maintain its peg to a strengthening greenback. Policymakers in Europe and Japan have pushed interest rates below zero, risking accusations of competitive devaluations (Wild et al. 2014, p.34).

Accordingly the Business plan prepared for G V farms Pty Ltd ,located at 25 Channel road, Shepparton East has been made. It will be a project build around businessman and development of skilled staff in hydroponics. To carry out intensive and high turnover production off a small area the company must be able to supply produce all year round. The produce will be healthy free from pests and diseases. Expected outcome from business is expected between  $140,000 to  $150,000 within a year. Adjoining with glasshouse a retail shop would be managed in this time span to maintain high quality, efficient food technology and production. G V Farm will concentrate on wholesale live vegetable markets that sell hydroponic produce, fresh farmers’ markets and local customers in the following 6 months. In the next 6 months it should enhance their premium services and products to the customers (Smh.com.au, 2016).

Exorbitant Labor Costs and Business Plan

Industrial relations is the management of work-related obligations and entitlements between employers and their employees. On 1 January 2010, Queensland’s Industrial relations for the private sector moved from a state system to a national system, legislated through the Fair Work Act 2009 ( Chwolka and Raith, 2012, p.385). The Industrial Relations Act is an act to provide for the regulation of the relations of employers and employees and the prevention and settlement of trade disputes by collective bargaining, conciliation, arbitration and tripartite mediation of individual disputes. Labour costs in Australia have grown at twice the pace of other OECD countries over the past decade, adding weight to claims by Holden boss Mike Devereux that Australian wages are out of line with the rest of the world. But the OECD figures show that the difference in growth in labour costs between Australia and its peers is less significant than the dramatic rise in the dollar’s value over the same period (Massa and Tucci, 2013, p.420).

An effective exchange rate (EER) provides a better indicator of the macroeconomic effects of exchange rates than any single bilateral rate. A nominal effective exchange rate (NEER) is an index of some weighted average of bilateral exchange rates. A real effective exchange rate (REER) is the NEER adjusted by some measure of relative prices or costs; changes in the REER thus take into account both nominal exchange rate developments and the inflation differential vis-à-vis trading partners (Rideout and Gray, 2013, p.329).

In both policy and market analysis, EERs serve various purposes: as a measure of international competitiveness, as components of monetary/financial conditions indices, as a gauge of the transmission of external shocks, as an intermediate target for monetary policy or as an operational target.Therefore, accurate measures of EERs are essential for both market policy and business plan of the G V farms Pty Ltd.

Cash Flow:        

Expected cash flow	Jan	Feb	Mar	Apr	May	June	July	Aug	Sep	Oct	Nov	Dec	Total (All in $)
Op. balance	0	1660	1694	1728	1762	1796	1830	1864	1898	1932	1969	2000	20133
Cash inflow
Credit sales	633	633	633	633	633	633	633	633	633	633	633	633	7603
Debtor receipts	30	70	50	40	80	75	75	86	86	99	120	140	951
TOTAL CASH INFLOW (a)													8554
Cash outflow
Purchase	100	120	130	140	150	180	200	210	250	290	300	320	2390
Accountant fees	50	20	10	15	30	40	52	23	40	77	30	60	447
Marketing & advertising	20	52	55	40	74	33	30	65	60	30	45	45	549
Superannuation cost	15	50	60	88	46	79	80	53	70	63	78	20	702
Labor charges	69	75	95	30	54	30	78	90	61	90	90	100	762
Plant & machinery charges	30	50	55	80	75	96	20	69	75	41	75	20	686
Cost of production	50	88	95	67	71	74	23	75	40	75	87	89	834
Export import cost	91	20	41	75	56	83	52	20	86	25	50	53	652
TOTAL CASH OUTFLOW (b)													6520
NET CASH FLOW (a-b)													2034
Closing balance	1660	1694	1728	1762	1796	1830	1864	1898	1932	1966	2000	2034

Table 1: Cash Flow for 2016-17

(Source: developed)

Cash flow after changing the values:

Expected cash flow	Jan	Feb	Mar	Apr	May	June	July	Aug	Sep	Oct	Nov	Dec	Total (All in $)
Op. balance	0	180	202	224	246	268	290	312	334	356	378	400	3190
Cash inflow
Credit sales	690	690	690	690	690	690	690	690	690	690	690	690	8280
Debtor receipts	30	70	50	40	80	75	75	86	86	99	120	140	951
TOTAL CASH INFLOW (a)													9231
Cash outflow
Purchase	100	120	130	140	150	180	200	210	250	290	300	320	2390
Accountant fees	50	20	10	15	30	40	52	23	40	77	30	60	447
Marketing & advertising	20	52	55	40	74	33	30	65	60	30	45	45	549
Superannuation cost	39	132	158	231	121	208	210	139	184	166	205	53	1846
Labor charges	124	135	171	54	97	54	140	162	110	162	162	180	762
Plant & machinery charges	30	50	55	80	75	96	20	69	75	41	75	20	1551
Cost of production	56	99	106	75	80	84	26	84	45	84	98	100	937
Export import cost	46	10	20	38	28	42	26	10	43	12.5	25	26.5	327
TOTAL CASH OUTFLOW (b)													8809
NET CASH FLOW (a-b)													422
Closing balance	180	202	224	246	268	290	312	334	356	378	400	422

Table 2: Revised Cash flow for 2016-17

(Source: self-developed)

A: Financial, production and scheduling:

Strategic Assessments has surfaced as an increasingly common approach to analyzing and understanding the best financial or strategic alternative. Strategic assessments use facts and data (both quantitative and qualitative) to develop and then build support for the plan. As companies become more distressed, their future becomes more uncertain, which ultimately impacts various stakeholders, including shareholders, banks, management, employees, suppliers, customers, etc. The strategic assessment is a living document that is current and relevant. Information collection and analysis in support of the assessment must be ongoing and include problem profiles, trends and developments (Lussier and Corman, 2015, p.22). Opportunities for public consultation should also be considered. A range of staff and partners should be involved in the production of the strategic assessment. Their knowledge and expertise will improve recommendations, and lead to better decision making.

Cash Flow Analysis

Strategic assessment in marketing means the SWOT analysis which is a straightforward model that analyzes an organizationÂ’s strengths, weaknesses, opportunities and threats to create the foundation of a marketing strategy. To do so, it takes into account what an organization can and cannot do as well as any potential favorable or unfavorable conditions related to the companyÂ’s products or services.

In case of Human resource (HR) management practices are essential for retaining effective professionals in hospitals. Given the recruitment and retention reality of health workers in the twenty-first century, the role of HR managers in hospitals and those who combine the role of HR managers with other responsibilities should not be underestimated (Schutz et al. 2013, p.89). The objective of this study is to assess the perception of HR managers about the challenges they face and the current strategies being adopted. The study also aims at assessing enabling factors including role, education, experience and HR training.

Natural resource management (NRM) is about managing the way in which people and natural landscapes interact. NRM brings together the planning, allocation, conservation and use of all natural resources (land use planning, water management, biodiversity conservation, agriculture, mining, tourism, fisheries, aquaculture and forestry). NRM recognises that people, their wellbeing and their livelihoods rely on the health and productivity of our landscapes; and it understands that community stewardship of our land, water, air and sea is critical to maintaining that health and productivity (Davidsson and Gordon, 2012, p.854). Achieving the plan’s Vision requires everyone involved in natural resource management across South Australia to work together to achieve the Goals.

GOAL 1:

People taking responsibility for natural resources and making informed decisions Individuals, communities, industry and all levels of government working together, able and willing to manage our natural resources.

GOAL 2:

Sustainable management and productive use of land, water, air and sea. We all use resources productively, respecting limits and balancing economic, social and environmental sustainability, for the long term.

GOAL 3:

Improved condition and resilience of natural systems We care for natural systems to ensure that they can sustain us in the long term.

5. Medium to long term goals, Risk and mitigation options: Business owners develop plans to reach their overall goals, and they usually find it useful to separate planning into phases. This allows you to track immediate improvements while    evaluating progress toward eventual goals and targets (Evans, 2015, p.40). The different time frames of the planning process place the focus on time-sensitive aspects of the company’s structure and environment. You can differentiate planning based on the time frames of the inputs and expected outcomes.

Short-term planning looks at the characteristics of the company in the present and develops strategies for improving them. Examples are the skills of the employees and their attitudes. The condition of production equipment or product quality problems are also short-term concerns. To address these issues, you put in place short-term solutions to address problems. Employee training courses, equipment servicing and quality fixes are short-term solutions. These solutions set the stage for addressing problems more comprehensively in the longer term.

Medium-term planning applies more permanent solutions to short-term problems. If training courses for employees solved problems in the short term, companies schedule training programs for the medium term. If there are quality issues, the medium-term response is to revise and strengthen the company’s quality control program (Davidsson and Gordon, 2012, p.854).. Where a short-term response to equipment failure is to repair the machine, a medium-term solution is to arrange for a service contract. Medium-term planning implements policies and procedures to ensure that short-term problems don’t recur.

In the long term, companies want to solve problems permanently and to reach their overall targets. Long-term planning reacts to the competitive situation of the company in its social, economic and political environment and develops strategies for adapting and influencing its position to achieve long-term goals. It examines major capital expenditures such as purchasing equipment and facilities, and implements policies and procedures that shape the company’s profile to match top management’s ideas (Schutz et al. 2013, p.89). When short-term and medium-term planning is successful, long-term planning builds on those achievements to preserve accomplishments and ensure continued progress.

A:Productivity enhancement:

Good management practices can enhance and help maintain employee productivity.If plans are thoughtfully executed with those concepts in mind, the business is on the right track. A good manager will find ways to carefully observe the work environment in search of problem areas that adversely affect employee motivation (Kautonen et al. 2015, p.665). Typical motivation killers include toxic people, abrasive personalities, lack of organizational vision, absence of opportunities for professional development, poor communication systems, autocratic management styles, and the feeling of lack of appreciation. Addressing each of these requires a variety of approaches but there are ways to kill these motivation-killers.One effective way of motivating employees is through the use of gamification techniques. Tasks like completing reports or contributing ideas for projects and policy changes can be gamified to make them more appealing, exciting, or interesting.

To some, sustainable development and environmental stewardship are synonymous. In the short term, sound environmental performance is probably a reasonable objective for most businesses, with sustainable development as a longer term goal. However, this can lead to confusion. In the developed world, the focus is on environmental management, while in developing countries, rapid and sustainable development is paramount. The role of business in contributing to sustainable development remains indefinite. While all business enterprises can make a contribution towards its attainment, the ability to make a difference varies by sector and organization size (Industrialrelations.nsw.gov.au, 2016).

The relevance of strategic plan recommendations, usefulness of proposed initiatives, and progress toward the achievement of operational objectives will be reviewed annually. Such personal commitment will facilitate the implementation process. It is important to explain the principles and goals of strategic planning to everyone in the organization. One needs to assure each person that although he or she may not be on the committee, everyone can have input and evaluate their commendations (Evans, 2015, p.34).

Reference:

Books

Bryman, A. and Bell, E., (2015). Business research methods. Oxford University Press, USA.

Evans, V., (2015). The FT Essential Guide to Writing a Business Plan: How to win backing to start up or grow your business. New York: Pearson Higher Ed.

Wild, J., Wild, K.L. and Han, J.C., (2014). International business. New York: Pearson Education Limited.

Journals

Chwolka, A. and Raith, M.G., 2012. The value of business planning before start-up—A decision-theoretical perspective. Journal of Business Venturing,27(3), pp.385-399.

Davidsson, P. and Gordon, S.R., 2012. Panel studies of new venture creation: A methods-focused review and suggestions for future research.Small Business Economics, 39(4), pp.853-876.

Kautonen, T., Gelderen, M. and Fink, M., 2015. Robustness of the theory of planned behavior in predicting entrepreneurial intentions and actions.Entrepreneurship Theory and Practice, 39(3), pp.655-674.

Lussier, R.N. and Corman, J., 2015. A business success versus failure prediction model for entrepreneurs with 0-10 employees. Journal of Small Business Strategy, 7(1), pp.21-36.

Massa, L. and Tucci, C.L., 2013. Business model innovation. The Oxford Handbook of Innovafion Management, pp.420-441.

Rideout, E.C. and Gray, D.O., 2013. Does entrepreneurship education really work? A review and methodological critique of the empirical literature on the effects of universityâ€Âbased entrepreneurship education. Journal of Small Business Management, 51(3), pp.329-351.

Schutz, J., Rezg, N. and Léger, J.B., 2013. An integrated strategy for efficient business plan and maintenance plan for systems with a dynamic failure distribution. Journal of Intelligent Manufacturing, 24(1), pp.87-97.

Website:

Industrialrelations.nsw.gov.au. (2016). Legislation. [online] Available at: https://www.industrialrelations.nsw.gov.au/oirwww/About_NSW_IR/Legislation.page [Accessed 11 Jul. 2016].

The Sydney Morning Herald. (2016). How Australia has come out on top in this currency war. [online] Available at: https://www.smh.com.au/business/markets/currencies/how-australia-has-come-out-on-top-in-this-currency-war-20160131-gmida4.html [Accessed 11 Jul. 2016].