PEST analysis:
Political:
The company is operating in a stable political environment with all its resources are being used to achieve organizational objectives. The recent governmental rules and regulations have increased the pressure on the firms in the industry to provide top quality coffee machines. The place of business operations of the company allows it to achieve organizational sustainability with increasing its demands of the customers (Grant, 2016).
Economic:
The company is looking to improve its quality of products by using advanced and modern technology and innovation. The increase in cost of business operations however expected to be made good by increase in sales revenue of the organization. The company however, should use all of its resources in a manner which help it to optimize the use these resources to reduce the operating costs of business operations. The raising Australian dollar is also not a very good sign from the economic view point as the tourism business is expected to be adversely affected as a reason of this which has a direct connection to the business of Macville (Taylor, Doherty and McGraw, 2015).
Social:
Moving into Sydney will challenge the management of the company to adopt to the changing environment. The social dynamics are different at different places. Thus, adjusting to the social requirements shall be helpful in achieving the organizational objectives of improving the overall sales of the company in the future (Haines, 2016).
Technological:
The products of the company will be improved significantly with the use of advanced technology. It is important to improve the quality of products of the company in order to be relevant in the market as its competitors are continuously improving their products quality to attract customers in the market.
Home Espresso Traders have been able to successfully increase its sales over the years since 2007. In 2007 Home Espresso earned a gross revenue of $1 million from sales which has increased each year since then to $1.6 million in 2011. Thus, within a period of 5 years the sales of Home Espresso has increased by 60%. The ability of the organization to achieve sustainable growth in its business operations is very much evident from the following graph showing its sales over the years.
Ambrosia Coffee Roast on the other hand has struggled to achieve sustainable growth in its business. In 2007 Ambrosia earned a gross sales revenue of $3.2 million which reduced to $3 million in 2008 and further $2.9 million in 2009. However, in 2011 the business has managed to increase its gross revenue from sales to $3.3 million. The graph below shows the continuous fluctuations in the amount of gross revenue of the business (Jeston, 2014).
The above graph does not paint a pretty picture of the operating performance of Ambrosia Coffee Roast. Inability of the business to achieve sustainable growth in business is clear from the above graph.
Java Estate has been outstanding in its performance as the business has achieved significant growth in each and every year since 2007. The company which merely earned a gross revenue of $8.2 million in 2007 increased its revenue from sales to $9.1 million in 2008 and $12.2 million in 2009. In fact the growth in sales has been even more encouraging in recent years with sales touching $14.6 million in 2010 and $16.3 million in 2011. The sales graph of the business provided below shows the huge upsurge in the sales line over the last five years.
It is clear from the above graph that Java Estate has been very successful in increasing its gross revenue from sales in each succeeding years.
The table below will be helpful in understanding the performance of three different businesses to critically appraise the performances better.
|
Years |
Home Espresso |
Ambrosia |
Java Estate |
|
|
2007 |
$1.00 million |
$3.20 million |
$8.20 million |
|
|
2008 |
$1.30 million |
$3.00 million |
$9.10 million |
|
|
2009 |
$1.50 million |
$2.90 million |
$12.20 million |
|
|
2010 |
$1.60 million |
$3.00 million |
$14.60 million |
|
|
2011 |
$1.60 million |
$3.30 million |
$16.30 million |
It is clear from the above table that except Java Estate none of the three businesses have been able to achieve sustainable growth in business over the years. In fact Ambrosia Coffee Roast has struggled to even maintain its revenue over the last five years. The inability of Home espresso and Ambrosia Coffee Roast to achieve significant growth in its revenue is due to the inability of the management to attract customers. The inability of the management to effectively use the scare resources of the organizations to manufacture the products in the market to achieve organization objectives have severely hampered the performance of both Home Espresso and Ambrosia. The revenue and operating profits are the two most important indicators of performance of a business organizations and in both these indicators Home Espresso and Ambrosia have failed significantly with both these either not improved or declined since 2007 (Martin, 2014).
In order to improve the performance of the business organizations the management first have an effective business management strategy. The business management strategy shall include operating and marketing strategies in addition to the other aspects of businesses. The employees and staffs of the business shall be trained properly to ensure that they are capable of improving their performance for the business organizations. Improvement in the performance of the employees and workers shall be helpful in improving the overall performance of business organizations. Apart from that Ambrosia and Home Espresso should use aggressive marketing strategy to market their products and services to attract new customers to the business. Often pricing the products below the prices of the competitors is an effective method to attract new customers in a perfectly competitive market. Both Ambrosia and Home Espresso shall concentrate on product differentiations to increase the gross revenue from sales (Argenti, 2018).
The systems and processes of respective businesses shall be reviewed on regular basis to improve the quality of business operations. The business organization must have an effective review system in place e to review the business operations of the company to improve the operating revenue in the future. Use of new and innovative technology to improve the quality of products in the future for product differentiation shall be helpful in improving the gross sales of business and improve the overall profitability of business. The current time required to process an order in BA Toy Warehouse is 80 minutes and in order to improve it to 72 minutes the employees shall be trained extensively along with introduction of advanced technology in manufacturing process in the warehouse of the organization. At present it costs B&A toys on average $200 to process each order. The company is looking to reduce the processing cost to $180 per order. Again introduction of new and improved technology shall be helpful in improving the quality of products as well as cost of processing. The objective should be to make optimum use of resources of the company in manufacturing and other processes of the company. Quality error is very high at 10% and the company is looking to reduce it to 1%. This will require the employees to improve their learning while operating different processes within the organization. Thus, the employees and workers must be trained extensively to improve their skills and knowledge while working for the company. Reducing the quality error to 1% will improve the operating and financial performance of B&A Warehouse significantly in the future.
References:
Argenti, J., 2018. Practical corporate planning. Routledge.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Haines, S., 2016. The systems thinking approach to strategic planning and management. CRC Press.
Jeston, J., 2014. Business process management. Routledge. Available at: https://www.taylorfrancis.com/books/9781136172984 [Accessed on 19 November 2018]
Martin, R.L., 2014. The big lie of strategic planning. Harvard business review, 92(1/2), pp.3-8.
Taylor, T., Doherty, A. and McGraw, P., 2015. Managing people in sport organizations: A strategic human resource management perspective. Routledge. Available at: https://www.taylorfrancis.com/books/9781134709052 [Accessed on 19 November 2018
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