Discuss about the Contemporary Strategy Cycle for Text and Cases.
The growth of the business largely depends on the micro and macro environments. The internal operations of the business may influenced by country’s economic conditions. The economic environments are also impacts on the industry specific growth in that particular country. Simultaneously the future industry prospects help to forecast the potential growth of the company. By the help of “Top down analysis”, the company will explore the economic factors of the business. In this report, the Australian automobile industry has been chosen and two companies’ economical and social factors will be evaluated considering the future potentiality of both the company. On the other hand, the “Bottom up analysis” will evaluate the current financial conditions of Ford Australia and Toyota Australia. The company’s financial performances will be analyzed with the help of ratios of the financial. After analyzing both the sections, the researcher will evaluate the potential edge among each other. Lastly, the recommendation steps will also incorporate in the report.
According to Grant (2016), the top down analysis of both the company includes the big picture of the both Ford Australia and Toyota Australia. This is mainly composed of the Global economy, local economy, sector based economy and specific needs of an economy. The analysis is mainly, based on the different types of the inclusion for considering the bigger picture components and at a later stage including the smaller components in the businesses of both the selected enterprises. It is of paramount importance due to the rising demand of the consumers in the automobile sector. It was observed that in the year 2015, Australia accounted for a 1% growth in the economic position since the year 2012 (Shahiduzzaman and Alam 2014). In the recent times, the GDP of the nation is seen to be growing by more than 4.40%.
Graph 1: Australian GDP
(Source: rba.gov.au. 2016)
This is mainly evident with the growing expansion rate of the nation and then dominance of the country in the service sector. Then economic improvement is further seen to be mainly, dependent of the economic expansion based on the mineral resources of the agricultural outputs. In the particular context the different types of the aspects considered for the development the most evident in terms of the increase is seen in the increase in the expenditure if the country by more than 1.9%. The growing contribution to the extended growth is also seen in terms of the service industry as the major source of the GDP with a total contribution of 1.1%. It has been further observed that various types of the other sources of the income of the country is seen to maintain stable position around the globe in the area of market capitalization and growth in terms of the Australian dollar in terms of the International market (Smyth and Buchanan 2013). Most of the automobile companies are associated with component export business in this country.
(Source: Valadkhani and Smyth 2016)
As stated by Murray and Lenzen (2013) the automotive industry in the twenty century of the company is based on the considerations made by the International manufacturers. Ford Motor Corporation is observed to be one of the pioneers as a major carmaker during the 20th century. It was further observed that during the 1948 era Holden manufactured the first mass production car. By the year 1970 Australia became 10th in terms of maximum reduction of automotive sector. In the year 2000 “The theory of Holden”, General Motors was observed to be one of the major importers of the automotive sector including brand such as Toyota Australia and Ford Australia (Nayeem 2012). In the recent times, the international variant maker of the car such as Camry is observed to develop new manufacturing facilities outside Australia. This shows the immense potential of Australia in terms of manufacturers of both local and international variants of the car manufacturers based in the country (Watson 2012).
Ford Australia is one of the major subsidiaries of automotive carmaker based in United States named as Ford Motor Company. Henry Ford founded it in the year 1925. Through the years the company is responsible for manufacturing several variants of the car for all the sections of the society. In the year 2016 some of the budget car models such as Ford fiesta, Ford focus and Ford Mondeo models have shown immense potential in the market through an increasing demand not only in Australia but as well as international market (Kim et al.2015). It has been further able to enhance its range of products by focusing on manufacturing all terrain cars such as for the go sport, Ford territory and Ford Kuga, which is set slightly higher, price than the aforementioned models launched by the company. Some of the presently popular models particularly in Australia include Ford falcon, Ford Ranger, Ford transit custom and Ford transit. The main USP of the car manufacturer has been seen in production of not only family, performance and commercial vehicles but it has shown immense potential in large SUVs for the purpose of carrying heavy transportation, hence it has been able to segregate its demand across all the major buyers in the market (Hensher 2013).
In the Australian market, the Mustang GT is particularly popular with its latest version of power packed 5 liter V8 engine. The CEO of the company has reported that in the month of February 2016 the company sold several equipments with ego boost changing which proved to be full efficient and creates less carbon impact than its V8 siblings create. The increasing demand of Ford is evident with wide number of availability of retailers in the market and due to a stable GDP of the nation, a high amount of demand for the automotive sector has been observed. It has been further observed that the demand for Ford Australia has been consistent for the last five years and it further aims to be a major threat to its competitors by dominating in all the different sectors of car categories.
The Toyota Motor Corporation based in Australia founded in the year 1958, is a subsidiary of the Toyota motor Corporation origin early situated in Japan. The headquarters of the tired Australia is located at Port Melbourne, Victoria. The carmaker has taken part in an active role in marketing, managing and advertising several types of business operational product and services for Toyota Motor Corporation based in Australia (Valadkhani and Smyth 2016). The most popular variant of the car-maker has been through the distribution of Lexus car model, this is evident with its presence across 70 different countries with maximum amount of demand generated from Australia. The tired Australia is observed to consist of a diverse workforce with employee strength of more than 3900 and 79 contractors located in the major manufacturing plants. Although the company has a considerable amount of employee strength in Australia the sex ratio has been observed to be poorly the by the company with only 15% of employees being female and dressed being male. In the year 2014 the company declared to end its manufacturing of vehicles and engines situated in the Australian manufacturing plant, due to the unfavorable dollar from the export was not viable enough. Furthermore it was observed that the high cost of the local manufacturer resulted in a higher competition in a smaller local market. Due to this the workforce of the company is also observed to reduce to only 1300 from 3982. As per the sales record of the company, it has shown steep increase in the units sold by the company from the year 2011 to 2015. The company is known to provide various popular passenger models such as Toyota Aurion, Toyota Camry, Toyota Corolla, Toyota Prius and Toyota 86. Among the different types of ACV models the Toyota FJ cruiser along with Toyota Land Cruiser has been observed to be one of the popular variants of the midsized and large sized is in these distributed in Australia. Among the several types of commercial models launched by the company Toyota coaster and Toyota Hilax has been observed to add a significant amount of revenues in compared to the other models launched by the car. The company is closing down its operation in Australia as the company has faced several issues of after-tax losses with more than $ 437 million. It has been further observed that the provisions for the redundancy in the payments. Continue to degrade its profit for the next three years (Law et al. 2014).
Hence the various types of conclusions drawn from the top-down analysis of both the companies it can be stated that Ford Motor corporations Australia is in a better position to emphasize on a positive change and more potential to increase its share price. Moreover, the company is observed to be in a better position to attract more number of investors due to the several types of macro and micro economic conditions discussed in the top-down approach of both the companies.
“Bottom-down analysis” helps investors to consider the micro-economic factors which are all about discussion regarding the company’s financial health, statements and products and services and other specific indicators of the performance over time. Here, the financial ratios are ascertained to analyze both the company’s financial conditions as well as highlighting the future growth potentialities.
For the analysis there are three perspectives have been considered. Both the company’s ratios are evaluated for assessing the conditions of profitability, liquidity and efficiencies over three last five years. It has been observed that the revenues of Ford Australia have been increased, but the growth rate is slow –moving (Ford.com.au 2016). In the year of 2015, the company has taken a jump in terms of the maintaining the gross profit which is considerable higher (USD 23063) compared to the figure of 2014 (Paik and Melchers 2014). During the expansion of the business across Australia, the volume of cars has been accelerating and results the higher operating income (Ford.com.au 2016). Furthermore, the net profit margin has been quite high in 2015. On the other side, the investors are mainly looking at the amount of dividend the company is willing to share to their shareholders. It ensures the internal profitable condition. However, it is disappointing that the company does not show much interest to share the dividend for their investors over the last five fiscal years. Thus it is definitely an unsatisfactory result for the future returns of the investors. On the contrary, the profitability condition of Toyota Motors in Australia is far more better that the Ford Australia. The all ratios are quite positive in terms of “gross profit margin”, “net profit margin” and “operating profit margin”. It means that the company has successfully generates revenue after it pays all expenses (Toyota.com.Au 2016). Now it can be expected that Toyota Motor would be able to earn a profit for the stable financial condition.
The utilization of assets and liabilities internally is an important consideration for any business. It indicates how the company is using its inventories, machineries for the repayment of liabilities effectively (Correa-Velez, Spaaij and Upham 2012). While the calculation of the efficiency ratio, two ratios are considered for assessing the efficiencies of both the companies. The inventory ratio of Ford Motors is decreasing in 2015, compare to the figure of 2011. This signifies that the company is having weak sales (Ford.com.au 2016). In other words, this ratio clearly indicates that the less number of times the inventory of the company is sold and replaced over a period of time. On the other hand, the deployment of assets for the generation of the assets is all about the “assets turnover ratio”. It is indeed disappointing that this ratio has been decreasing over the last five years which means that the company is less generating revenue against the employing per dollar of assets. In short, this can be said that the company has been showing the less efficient financial position and a lot of improvements can be desirable to maintain the competitiveness in the Australia’s automobile industry. On the contrary, Toyota Automobile Company has been showing their efficiency. The inventories of the company are fast moving and have successfully generated revenue by larger volume of selling cars (Toyota.com.au 2016).
According to Sharma et al. (2012), the liquidity of the company needs to be measured to assess the ability of mitigating short-term obligation for the certain period of time. It is indeed positive that the current assets of the company has been increasing consecutively in the last five years and thus the current ratio represents much healthy balance as well as the quick ratio of Ford Australia. This ensures that the company can manage short-term obligations by utilizing liquid assets of the company over a certain year of financials. On the contrary, Toyota group have also shown the positive liquidity, but the management is concerned about that such liquid position is gradually reduced over the years (Toyota.com.au 2016). In other words, investors could anticipate that the company may find difficulties to mitigate the short term obligations or scare of working capital in the long run of the operation.
The above financial comparison clearly indicates that the Toyota has an edge over Ford Australia in terms of the profitability, the growth of sales, the income of the operation and the net profits in the recent times. Although Toyota Group of Companies needs to improve their short term liquid position to ensure smooth operation for the future period. The above “bottom line analysis” also suggests that the Ford needs to improve their profitability and efficiency position by utilizing assets in a more constructive manner.
The above “top down analysis” covers the environmental factors of Australia. This has been found in the analysis that Australia has the substantial motor vehicle industry two third percent of total cars are sold out within the country where as one third percent of cars being exported. Furthermore, the Australian automotive production is supported by good supply chain and efficient automotive manufacturers like Ford, Holden, Toyota and Mitsubishi. In this discussion, there are two automobile companies are considered for analysis the macro as well as micro environments of the company considering the industry growth opportunities in the longer period of time. The political stability and healthy economic growth provides perfect operational condition for both the companies. On the other hand, Australian people have shown their interest not only for the purchase of car but also the major exports of the Australian components of automobiles. On the financial perspective, both the companies are quite efficient and hold the stable condition in the market. However, both the companies are in search of new design and unique features for delivering better to their customers. In that case, Toyota has an edge over Ford. This further supports Toyota’s stable financial condition in terms of liquidity, profitability and efficiency ratios. Though the company needs to improve their liquid position in the near future, the following recommended steps needs to be followed:
On the other hand, Ford Australia has certain aspects which need to be improved such as:
The company must improve the profitability in terms of selling larger number of cars. For this, the unique manufacturing features need to find out. On the other hand, the company should reduce the COGS figure and use inventories more effectively. Furthermore, the dividend much be paid to their shareholders for the future sustainability of the company.
References:
Correa-Velez, I., Spaaij, R. and Upham, S., 2012. ‘We are not here to claim better services than any other’: social exclusion among men from refugee backgrounds in urban and regional Australia. Journal of Refugee Studies, p.fes003.
Ford.com.au. (2016). Ford Australia – New Cars, SUVs, Utes & Commercial vehicles.. [online] Available at: https://www.ford.com.au/ [Accessed 15 Sep. 2016].
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hensher, D.A., 2013. Dimensions of automobile demand: a longitudinal study of household automobile ownership and use. Elsevier.
Kim, H.C., Wallington, T.J., Mueller, S.A., Bras, B., Guldberg, T. and Tejada, F., 2015. Life Cycle Water Use of Ford Focus Gasoline and Ford Focus Electric Vehicles. Journal of Industrial Ecology.
Law, L., Roy, H., Sidey, C., Grabovac, A., Sullivan, B. and Feldhaeuser, H., 2014. Highly Commended-Consumer Insight: Shifting Gears & Driving Business Change by Engaging Dealers. Market & Social Research, 22(2), p.90.
Murray, J. and Lenzen, M., 2013. The sustainability practitioner’s guide to multi-regional input-output analysis. Champaign, IL: Common Ground Publishing.
Nayeem, T., 2012. Decision-making styles of individualist and collectivist automobile consumers in Australia. International Journal of Business and Management, 7(16), p.44.
Paik, J.K. and Melchers, R.E. eds., 2014. Condition assessment of aged structures. Elsevier.
Shahiduzzaman, M. and Alam, K., 2014. A reassessment of energy and GDP relationship: the case of Australia. Environment, development and sustainability, 16(2), pp.323-344.
Sharma, R., Manzie, C., Bessede, M., Brear, M.J. and Crawford, R.H., 2012. Conventional, hybrid and electric vehicles for Australian driving conditions–Part 1: Technical and financial analysis. Transportation Research Part C: Emerging Technologies, 25, pp.238-249.
Smyth, P. and Buchanan, J., 2013. Inclusive Growth in Australia: Social policy as economic investment. Allen & Unwin.
Toyota.com.au, (2016). New Cars Toyota Australia: Prices, Service Centres, Dealers, Test Drives. [online] Available at: https://www.toyota.com.au/ [Accessed 15 Sep. 2016].
Valadkhani, A. and Smyth, R., 2016. The effects of the motor vehicle industry on employment and research innovation in Australia. International Journal of Manpower, 37(4).
Watson, T., 2012. Global pension assets study 2012. January, London: Towers Watson.
www.rba.gov.au. (2016). [online] Available at: https://www.rba.gov.au [Accessed 15 Sep. 2016].
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