Discuss About The Merchandising Operation Of Global Sourcing?
In the given report the company we have considered is Target Australia. The various factors like size, growth, supply chain etc. of the company will be discussed and accordingly we will provide understanding of the industry in which the company is operational. Through the help of various SWOT and other analysis, the external environment of the company will be judged. We will further provide understanding of the legal environment of the company as well.
Target Australia PTY is an Australian based company. The company is owned by Wesfarmers. The company has been engaged in the business of managing mid-price department stores. It is the largest department chain company in the country. The company is operational through the help of 308 stores spread all across the country. The main purpose of the company is to make fashion available for the entire family as a whole. The company was established in the year 1926 and now the company has been engaged in providing a wide range of multiple products including men and women clothing, toys for kids, latest designs in homewares, including manchester, bed linen, electrical appliances etc. The headquarters of the company was earlier located in North Geelong, Victoria but now the same will be moved to Williams Landing at the end of 2018.
The company is listed in the Australian stock exchange. In the year 2016, the revenue of the company was close to $3.5 billion with a total asset band of $1.7 billion. The company was however suffering from operating loss worth $195 million in the year 2016.
Target Company tends to function as an environmental friendly company. The management of the company believes in carrying out a sustainable, ethical business across all its stores. The management of the company is making investment in reducing the energy consumption at all its units. This will indirectly help in reducing the carbon foot prints which will be very helpful for the environment. The company has set up an audit programme that will carry out energy audits at stores and plants where the energy consumption is on a higher side and will try to figure out remediable action plans that can help in reducing the same. As result of this approach, the company has developed LED lights, AC’s etc. where the consumption of energy is minimal. This will not only help the management to reduce the power cost but at the same time is also environmental friendly.
The audit report of the company is required to be repaired in accordance with the provisions provided and Corporation Act 2001. The company is for the required to consider the provisions of international accounting standard provided in the international financial reporting standards (IFRS) as well.
The investment activities of the company include investment in property plant and equipment. In the earlier years, there were certain other investments made by the company but since last 2 years there has been no such investment. The financing activity of the company includes loan that has been taken by the company and repayment of long term debt. It also includes cash dividend that has been paid by the company in the year so its shareholders.
Target Australia Limited caters a good percentage departmental supply chain industry; It is the largest department chain company in the country. The company is operational through the help of 308 stores spread all across the country. As per experts, being the company outlet not only in the city area but also in regional areas and it has mid-price departmental store market share of the company is expected to increase the coming future. The major players and competitors for the company includes Coles and Wools worth. All the three companies in total nearly capture 90% of the total departmental supply chain market in Australia. The balance market has been captured by small retail houses. The major success factor behind the growth of the company is because of its departmental outlets in regional areas which has started giving major part of its sales. The departmental outlets of the company are mid priced which is again a big factor behind success.
There are certain success factors as well for these departmental stores. Departmental stores in the country have opened at prime locations to cater maximum population. This has helped them to meet out the daily needs as well as the luxurious need of the people at one place.
There are certain threat factors that need to be considered by the management of the company. Amazon and other digital selling are hampering the market of these departmental stores. In the current scenario, the young generation paper are buying goods from online sites rather than going physically to these departmental stores. This is a big hindrance towards the growth of these kind of companies. They are the major threat which has been faced by the departmental stores is the degrading Australian currency in the world market.
The management of the company is required to abide by the government regulations. From accounting perspective they are required two adhere with the Australian accounting standards. They are for the required to meet out the requirement of international financial reporting standards as well. Further they are required to meet the requirements of Corporation Act 2001.
For the purpose of carrying out the wholesale business the management of the company is required to obtain different type of licenses and permits. They are required to meet out requirements of Retail Shop Leases Act 1994. Being in Australia GST is applicable; the company is required to meet the requirement of GST provisions as well. Further, they are required to meet out the requirements of intellectual property rights as well.
Political – The few of the political factor which created impact over the company working is importance of material sectors to the economy and in the country economy and level or corruption especially in relation to the wholesale sector.
Economic – The economic factor include the rate of inflation, interest rate, exchange rate, economic cycle and the demand and supply in the economy
Social factor – The external environment also include Demographic and skill level of the population and the hierarchy and power structure in the society. Also the culture, attitude and leisure interest create the impact over the company working.
Technology – The auditor also needs to look towards the development of technology and the way it create impact over the company working. The recent technological development by the competitor will have huge impact over the company.
Strength: The Company is the largest mid-priced departmental Store in Australia. The business carried out by the company is environmental friendly and sustainable. A company has an effective CSR policy
Weakness: The Company has number of management issues.
Opportunities: The Company has new market open worldwide. They have new opportunities in insurance and Finance sector.
Threats: They have threats from legal regulations. They are facing use competition from competitors. Online sites like Amazon are a big threat to the company.
The porter five forces model is the strategic approach which assists the management in creating understanding of the external environment of the company.
Threat of new entrance – The new entrant in the market bring innovation and new ways of doing business.
Supplier power– The bargaining power of the supplier has turned down to be a threat for the profit making of the company. With increasing competition the profits of the company has started being reducing.
Threat of substitute –Online sites like Amazon has turn out to be a big threat for the management of the company.
The company is a leader in mid priced departmental stores in the country. Is facing stiff competition from the competitors but still the company is able to resist in the market.
Bargain power of the Buyer –The management needs to work to build the large customer base as the demand of the buyer is continuously changing and create huge impact over the company working.
The company also needs to examine the change in the other external factor such as interest rate, inflation and currency revaluation and general economic condition. The change in the interest rate will lead to increase in the company cost of working. Also the rise in inflation in the country in which the company operates has huge impact over the demand of the company. So the company needs to exercise check over all these external factor to smoothly conduct the company operation.
The primary objective of Target Limited is to provide satisfactory return to the shareholders. The company is focusing on dealing in an ethical way to build trust with the customer. The management of Target Limited is focusing on being open and honest in reporting feedback and ideas (King, et. al., 2011). The company is delegate all the authority and decision making to various divisions for the purpose of protecting and anything communication. The company is ready to make bold decision in order to attain growth and sustainability and create the environment free from fear and blame.
The core attribute of the target Limited is to check that each of the business of the company operates with the high degree of autonomy. The company is focusing on its employee by hiring outstanding people and utilizing their talent to attain success. Also the company is working to create a culture which promotes innovative idea and strategy for creating value of the business (da Silva, 2012). The Target Limited is seeking to create the culture that encourages innovation and creativity for the purpose of increasing value of the company in the market. Also the companies effectively meeting is social responsibility and respects the customer, employees, suppliers and other group by providing safe workplace.
The target company is working on stronger financial position to provide comparative cost and assess the capital for creating value opportunity. The company is working over strengthening the existing business through effectively meeting out the need of the customer (Humayun, 2016). Also the company is securing growth opportunities through entrepreneurial initiative and taking the changes in the portfolio through adding the value to the transaction. The company is creating the focus over the long run and is acting sustainably to create the value of the business.
The auditor at the time of creating the planning procedure for audit needs to conduct the analytical procedure which provides the understanding of the key changes in the financial statement during the year (Sheikhi, et. al., 2012). The analytical procedure provide complete understanding of the business and identify the area where there may be possibility of miss statement and should be examine in detail.
|
Computation of ratio of the Target limited |
|||
|
Particular |
2016 ( Amount $ million) |
2015 ( Amount $ million) |
2014 ( Amount $ million) |
|
Revenue |
65,850 |
62,102 |
59,893 |
|
Market price share |
40 |
39 |
43 |
|
EPS |
0.36 |
2.16 |
2.39 |
|
NPAT |
407 |
2,440 |
331 |
|
Current Assets |
9,684 |
9,093 |
9,311 |
|
Total Assets |
41,394 |
41,160 |
40,354 |
|
Current Liabilities |
10,424 |
9,726 |
8,229 |
|
Total shareholders’ equity |
22,949 |
24,781 |
25,987 |
|
Non-current liabilities |
7,410 |
5,895 |
4,875 |
|
Receivables |
2,463 |
2,269 |
1,584 |
|
Creditors |
6,491 |
5,761 |
5,417 |
|
COGS |
54,372 |
51,243 |
49,170 |
|
Quick Assets |
3124 |
3596 |
3975 |
|
Quick Ratio |
0.299693016 |
0.369730619 |
0.483047758 |
|
Current Ratio |
0.893227168 |
0.934916718 |
1.131486207 |
|
Net Profit Margin ratio |
0.006180714 |
0.0392902 |
0.005526522 |
|
Average Account Receivable |
3597.5 |
3061 |
2754.5 |
|
Average creditors |
9371.5 |
8469.5 |
8416.5 |
|
Inventories |
3,937 |
4,168 |
4,335 |
|
Creditors turnover ratio |
0.420103505 |
0.492118779 |
0.515059704 |
|
Receivable turnover Ratio |
26.73568819 |
27.36976642 |
37.81123737 |
|
Average stock turnover of the company |
1.211101302 |
1.211911871 |
1.21808013 |
|
Solvency Ratio |
0.009832343 |
0.059280855 |
0.008202409 |
|
Assets turnover ratio |
1.590810262 |
1.508794947 |
1.484189919 |
|
P/E ratio |
0.008977556 |
0.055813953 |
0.056142824 |
Current ratio – The current ratio is calculated by dividing current assets understand by current liability and helps in ascertaining ability of the firm to discharge its liability in the short run. In the current situation the current ratio of the company as decline to 0.93 in the year 2015 and further to 0.89 in the year 2016 from 1.13 in 2014. This indicates that the company liquidity position is continuously declining thus the auditor needs to examine the reason behind the same during the audit (Titman, et. al., 2011).
Quick ratio – Quick ratio is calculated by dividing quick assets by current liabilities to check the ability of the company to discharge its liability in the short run which is generally 3 month. In the current situation the quick ratio of the company is continuously declining from 0.48 in 2014 to 0.36 in 2015 and 0.29 is 2016 which affects the decision of the lender.
Price – Earnings ratio – The ratio helps in finding the return which the equity shareholder are earning on shares and is calculated by dividing Earning per share with the market price per share. The price earnings ratio of the target limited has declined during the past 2 year to a great extent which create the impact over the decision of the shareholder who have invested money with the company (Almazari, 2012).
Assets turnover ratio – The ratio help in measuring the effectiveness with which the management is utilizing assets of the business. The assets turnover ratio of a company has increased over the past 2 years which indicates that the management operating efficiency has improved. The ratio was 1.48 in the year 2014 and has increased to 1.50 in the year 2015 and 1.59 during the year 2016.
Solvency ratio – Solvency ratio is used to provide information to creditors and lenders that the companies have enough assets to discharge its liability in the long run. Solvency position of the company has improved over the past year which increases the trust of the creditors with the company (Liang and van Dijk, 2011)
Creditor turnover ratio – The creditor turnover ratio the company is continuously declining over the past few years which indicate that efficiency of the company to discharge its creditor has decreased. This will reduce the trust of the creditor with the company thus the audit needs to obtain sufficient evidence to examine the transaction.
Net profit margin – The ratio helps in identify the operating efficiency of the company and the power generated by the company after covering all the expenses. The net profit ratio of the company is declined during the year 2015 from 55% to 39% but company during the year 2016 discovered ratio and showed and net profit margin of 61%.
Debtor turnover ratio – Ratio helps in finding the ability of the company to generate funds from the debtor and is calculated by dividing revenue with the average receivable. Receivable turnover ratio of the company has declined in spite of increase in company sales.
Esteem requirement of trustworthiness and overall communication in the organizational structure of Target Ltd.
While referring to the business structure and venture of Target Ltd. the particular organization has embraced it’s working while implanting open correspondence structure within the team members. The moral values and principles are taken into consideration at a higher level not only as a part of internal working but also while dealing with external customers.
Certain programs are developed by the management of the organization in order to upgrade and enhance the overall capabilities of the team members. Proper training and development programs are being implanted by the management of Target Limited with an overall objective of growth and development within the organization.
The overall arrangement and practices that is been followed by the target Limited are generally taken as per the guidelines and benchmark set up by the industry. The methodology of treating the workforce and other administrative bodies in regards to their remuneration payout, leave, medical facilities are in accordance with the general law and framework set up by the government compliances and law of the land. Besides the legal compliance fulfillment, the organization target Limited also focus on motivating employees by way of awards and rewards to enhance the level of their performance.
The expert within the organization should be allocated with proper authority along with matching the application. The current organization target Limited focuses a lot on the particular issue and distributes the power and obligation as per the range of abilities of organizational experts. Different roles and job models are being set up as a part of management to whom specific duties are being allocated.
The current organization target Limited is working in a progressive behavior and has set up its management distributed among the separate level of Administration. All the work which is to be performed is as per the hierarchal structures which in turns works out as bolsters in uplifting the brand value of the organization. For recording the financial statements both manual and computerized frameworks are utilized. The business organization here in case Target Ltd. concentrates on completing consistence of reports with the accountings models.
Conclusion
In the above case, we have obtained complete information about the company relation with the policies and strategies that has been used by the management of the company. All the information that has been obtained are useful for the stakeholders and shareholders of the company. In the above case we have provided information about the external factors along with the legal regulations that are applicable of the company, this will help in better understanding of the company.Further, we have done various types of analysis including SWOT analysis pestilence & PESTAL analysis for better understanding.
References
Sheikhi, A., Ranjbar, A.M. and Oraee, H., 2012.Financial analysis and optimal size and operation for a multicarrier energy system.Energy and buildings, 48, pp.71-78.
Titman, S., Keown, A.J. and Martin, J.D., 2011. Financial accounting: Principles and applications.
Almazari, A.A., 2012. Financial performance analysis of the Jordanian Arab bank by using the DuPont system of financial analysis.International Journal of Economics and Finance, 4(4), p.86.
Liang, X. and van Dijk, M.P., 2011.Economic and financial analysis on rainwater harvesting for agricultural irrigation in the rural areas of Beijing.Resources, conservation and recycling, 55(11), pp.1100-1108.
da Silva, M., 2012. A broad business challenge-Sustainable Company of the Year.Ethical Investor, (98), p.14.
King, D.L., Case, C.J. and Premo, K.M., 2011. A mission statement analysis comparing the United States and three other English speaking countries.Academy of Strategic Management Journal, 10, p.21.
Humayun, S.H., 2016. Merchandising operation of Woolworths Global Sourcing.
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