2 Workforce And Culture Concept example essay topic

A Strategic and Financial Analysis of Concept Contents Page 1.0 - Introduction 2.0 - SWOT Analysis 2.1-Strengths 2.1. 1-Established, Major Global Company 2.1. 2-Workforce and Culture 2.1. 3-Cash Reserves 2.2-Weaknesses 2.2. 1-Post-Standardisation Decisions 2.3-Opportunities 2.3. 1-Consultancy for Enterprise Solutions 2.4-Threats 2.4.

1-Overseas Entrants 2.4. 2-New CEO and Staff 2.5-Summary 3-PESTEL 3.1-PESTEL Framework Diagram 3.2-Political 3.3-Economical 3.4-Sociocultural 3.5-Technological 3.6-Summary 4-Porter's Five Forces Framework 4.1-Threat of New Entrants 4.2-Threat of Substitutes 4.3-Bargaining Power of Buyers 4.4-Bargaining Power of Suppliers 4.5-Competitive Rivalry 4.6-Summary 5-Financial Analysis of Concept, 1999-20025.1-Calculations Sheet 5.2-Gross Profit Margin (GPM) 5.3-Expenses Ratio 5.4-Return on Total Assets (ROTA) 6- Bibliography 1.0- Introduction This report has been produced to give consultancy to Kent Andrews, CEO of the computing company Concept. I will use literature theory models to analyse Concept. Using this analysis Kent should be in a stronger position to reinstate Concept to market leadership in its industry. To closely study Concept strategically I will use the SWOT and PESTEL frameworks and Porter's Five Forces model. I will use accounting calculations to assess Concept's financial state and then comment on my findings.

2.0-SWOT Analysis Johnson et al (2005) state that a SWOT analysis "summarises the key issues from the business environment and the strategic capability of an organisation that are most likely to impact on strategy development". 2.1-Strengths: I would describe the three strengths below as being Concept's 'Core Competences' (Hamel, G and Praha lad, C.K. ). I felt it unnecessary to elaborate on the competency theory additionally. I feel these strengths support the definition Johnson et al (2005) give Core Competences: .".. activities that underpin competitive advantage and are difficult for competitors to imitate or obtain"2.1. 1-Established, Major Global Company Despite recently losing market leadership, Concept is still a prominent global player. It has reacted well to competition in the past 30 years and this experience and knowledge of the industry should aid its recovery to the industry's forefront.

Concept has established itself as a leading brand name, and governmental decisions to assign Concept's operating system as the industry standard shows potential buyers the professionalism and expertise of the company. 2.1. 2-Workforce and Culture Concept has a well structured and experienced workforce, complete with Product and Country managers. Key staff was poached from competitors at the end of the 1970's. This would suggest to me that firstly these employees may still be with Concept, indicating it has competent employees, and secondly, it cements the notion that Concept was, and still is, an attractive company to be involved with. The organisational culture and structure is described as being the base of its success. Concept has adapted to a changing climate on a few occasions throughout its long history, especially when reacting to customer needs, such as by manufacturing palm tops and developing enterprise software.

This indicates Concept has the foresight and ability to respond similarly again. I am told that Concept's team of software engineers and its Research and Design department regularly outperformed competitors. This is an extremely beneficial strength for a company based in a technological industry to possess. 2.1. 3-Cash Reserves In 2002, Concept had the benefit of $250 Million in cash reserves.

Not only does this underline the size and power of the company, but also shows it has the finance to expand and adapt yet again to serve new computing trends and to reclaim its position as number one. 2.2-Weaknesses: 2.2. 1-Post-Standardisation Decisions In the late 1980's, Concept's operating system was chosen by the Government as the industry standard. Consequently, the operating system and microchips suppliers, AMSoft and ChipTec, began supplying every computer manufacturer. As a result, Concept rapidly lost market share. I feel Concept should, if possible, have taken action to limit this inevitable surge in competitors's ales.

This could have been achieved by incorporating the manufacture of AMSoft and ChipTec's computing components into Concept's business activities, through either training or acquisition. Alternatively, Concept could have acquired some of the smaller competitors. As the market matured, several major acquisitions and mergers occurred, threatening Concept. By doing nothing, Concept has demonstrated a possible weakness in strategic planning. It should have been apparent that the standardization would increase sales for the other companies.

2.3-Opportunities: 2.3. 1-Consultancy for Enterprise Solutions Concept's designers are very skilled, but Concept could not seem to break this market significantly as, unlike other entrants to this market, it did not have a top consulting alliance to help 'sell' into organisations. I believe it still does not have such a partner, but should try and advance into this market. 2.4-Threats: 2.4. 1-Overseas Entrants Many overseas companies entered the market in the 1990's.

Using cheap labour and by sourcing cheap components, they were able to supply computer products cheaper than Concept and the other main companies could. I believe this will continue to be a threat, particularly owing to the continual growth of worldwide electronic manufacturers, particularly in Germany and Japan. I believe that with most companies, competitors are the biggest threat to success; this will be explored later in section 4 in Porter's Five Forces model. 2.4. 2-New CEO and Staff consider the appointment of a new CEO to be very significant. Although some would see this as a potential strength, I thought it more to be a threat.

There is never a guarantee that employing a new senior manager will benefit a company. It will be imperative for Kent and the 'new talents' he brought to embrace and maintain the existing culture at Concept. Although it is likely that Kent will revitalize Concept and bring fresh ideas with him, he must ensure he does not cause any disruption. 2.5-Summary SWOT seems a good analysis model, exploring internal strengths and weaknesses and external opportunities and threats, although I believe it can lack depth and substance in order to make a professional and informed judgement on a company's situation.

However, I feel that even with limited information, it is possible to list at least one example for each of the four sections. I feel SWOT is apt for strategic decisions as it can help concentrate efforts on areas where the company is particularly strong and identify sound opportunities for expansion. 3-PESTEL The PESTEL framework explores six environmental influences affecting a company. I have produced overleaf a PESTEL framework for Concept (3.1).

Below I have explored each point in detail. 3.2-Political In the late 1980's, the Government decided to standardize personal computers with one operating system type, making them compatible with each other. This shows that companies can be at the mercy of political decisions which significantly change the way companies operate. Concept must be capable of quick responses to any future governmental decisions. 3.3-Economic Lesser developed countries, particularly in the Far East, are becoming increasingly wealthier, and their inhabitants better educated.

Cheaper labour and material costs have resulted in companies manufacturing cheaper technological products and selling them internationally. Despite the possibility of the brand name not being as strong, the cheap price tag is popular with many consumers. Many countries' citizens now have a high level of disposable income. Consequently, more people are able to purchase 'luxury' items such as computers and interactive televisions. Concept should use this to its advantage. The dot com crash on the turn of the millennium saw hundreds of internet companies folding.

Although their collapse was beneficial to Concept, Concept should be aware of the potential dangers of operating in such a volatile market. Industry experts have in fact recently predicted wireless solutions to be the next 'dot com crash'. 3.4-Sociocultural People in the Western World are becoming increasingly more technologically capable. This is supported by the rising figures of personal computers and laptop owners. Naturally this should provide Concept with a greater volume of sales.

Technology moves in trends. The enterprise solution software is a relatively new product and organisations are realising the benefits of integration. Concept must be adaptable to such changing trends. 3.5-Technological The cost of producing computer components is beo ming cheaper and cheaper. With competition between the increasing number of suppliers fierce, the cost of assembling a high specification computer is constantly dropping.

Businesses' increasing dependency on technology means that the need for computers is something that may change in context but will surely never vanish. It is essential that Concept can anticipate and satisfy businesses needs. 3.6-Summary could not find any relevant legal or environmental factors that may affect Concept. Although this is acceptable, I feel the model is limited by legal and political sections being similar. Crossovers also occur with the economic and sociocultural groupings. I accept this is inevitable but it seems flawed to use this framework when limited information is available, as half of the categories may end up blank.

4-Porter's Five Forces Framework Source: Adapted from M.E. Porter, Competitive Strategy: Techniques for Analysing Industries and Competitors 4.1-Threat of New Entrants The threat of new entrants to this market is real and likely, and has occurred in recent years. We have heard how the new entrants to the computing industry targeted both new products demanded by the consumer such as palm tops and interactive televisions and by producing low cost products. Concept must be very conscious of new entrants emerging, especially those offering cheaper products. The financial backing required to enter this market is substantial, but many dot com and technological businesses exist who could grow significantly or decide to enter this market.

It seems new entrants generally distribute their products with ease, especially in a business to consumer sense, but, like Concept, would struggle with selling enterprise software without support from consultancy companies. 4.2-Threat of Substitutes There are no substitutes to Concept's products. 4.3-Bargaining Power of Buyers Buyer power is presumably high when an order is in bulk. Organisations wishing to upgrade computer systems or software will seek to equip everyone with the same product.

I would imagine such orders are purchased at a discounted or negotiated price, and Concept may be wary of the buyer looking elsewhere for a cheaper quote. However, it could be argued that because Concept is a large global company, it is likely to have a broad range of customers. This effectively reduces its dependency and reliance on dealing with any particular company. Consumer purchases such as notebooks and personal computers would carry little bargaining power. If Concept's products are original or unique, then a buyer may consider the effect of switching suppliers to or from Concept too great to consider. Training employees to operate new software or hardware would be undesirable.

4.4-Bargaining Power of Suppliers Although there are undoubtedly suppliers other than AMSoft and Chiptec, the standardization of computers conforming to a benchmark specification would have shifted much power to AMSoft and Chiptec, controlling Concept's decisions. I imagine that 15 years later Concept can now choose which components are used in its computers; power has shifted back to Concept. I do not believe the cost of Concept switching supplier would be significant, as different companies' components would be very similar. However, changing the operating system which Concept's computers use could result in training and support issues. If Concept found suppliers' prices too expensive, it could, through backward integration, either acquire a supplier's business, giving Concept full management of production, or compete directly with it. It seems Concept has the money to do this, and it would of course strengthen its power within the industry.

4.5-Competitive Rivalry Johnson et al (2005) describe Competitive Rivals as "organisations with similar products and services aimed at the same customer group". This is very true here. In the late 1980's, Concept controlled 50% of the market share, while 2 other companies had 12% and 13% market share. The fact that Concept has recently lost its market leadership indicates a closer fight for market dominance.

I believe the computing industry, particularly business to consumer, is very price sensitive, which allows overseas imports to prosper. As new trends and technology emerge, it is essential for Concept to adapt to and cope with consumer demands, not just to secure sales but to avoid conceding market share to competitors. Because Concept failed to partner itself with a consultancy firm to best distribute its enterprise software, it lost valuable ground to its competitors. Naturally, there are substantial sums of money invested in the larger companies within the industry. This high exit barrier suggests a likelihood of increased and more sustainable competition. As mentioned earlier, Concept has a strong global brand image.

Differentiation is very important in this industry, especially when competitors are marketing similar products. Porter devotes the second section of his Competitive Advantage model to this. 4.6-Summary This for me is the best model out of the three I have used. It describes well the key forces impacting on any company, 'outside-in'. The disadvantage with this model is that for a lot of industries, including this one, there is no substitute product.

I do of course understand why it is included in the model though. Also, this model excludes the government, which exercises strong control over many industries. I feel all 3 models have good and bad points, and they all explore related routes, so I would say it is preferable to use more than one model to analyse a business so different approaches and view points are examined. 5-Financial Analysis of Concept, 1999-20025.1-Calculations have looked at Concept's accounts from the last few years and have made a few calculations. Please see the following pages for the results (5.1).

5.2-Gross Profit Margin (GPM) Sales - Cost of Goods Sold (COGS) x 100 Sales This calculates the money left after paying for the cost of a company's goods sold, providing a profit. The GPM for laptops and computers has dropped dramatically over 4 years. Although sales have dwindled during this period, the COGS is ridiculously high. It is obviously natural for the COGS to be proportionate to the volume of sales, but for some reason the production is costing Concept far too much. This needs to be addressed quickly.

The GPM for Concept's servers and storage products is much better, showing a steady climb over this period. The value of sales has tripled in 4 years, and the COGS has increased accordingly. This is the strongest aspect of Concept's business. Despite decreasing slightly each year, the GPM for Enterprise Solutions is also extremely good. Sales have grown each year, as has the COGS accordingly.

It seems if Concept had a consultancy firm to help with sales, it would prove extremely profitable. 5.3-Expenses Ratio Operating Expenses x 100 Sales This is calculated by dividing the cost of Operating Expenses by Total Sales and is expressed as a percentage. It calculates how efficient or costly it is to produce a company's products. The figure for each of the 4 years is extremely high, but for the type of industry that Concept is in, is not too bad. I think it is good that the Operating Expenses figure has stayed fairly constant each year. This would aid financing strategic planning and perhaps make it easier to study why the expenses are so high.

5.4-Return on Total Assets (ROTA) Operating Profit x 100 Net Assets This is a measure of how effectively a company uses its assets. The return on Concept's assets has been poor for the last four years, partly because of the industry it is in. Manufacturers traditionally have poor returns against their assets because their equipment (e.g. the plant and machinery) is so expensive. The 13% in 1999 is adequate, but subsequent years' return is negative. Part of the reason for this is that the net assets have grown in value; I would presume this is because of the purchase of new technology in order to manufacture up-to-date products, and also to fund its quality research and design team. However, the main reason why from 2000 onwards the ROTA is so poor is because Concept's operating profit has been so bad.

Operating Expenses have stayed reasonably flat; it is the Gross Profit that Concept has struggled with. This is not a huge surprise however, as I had been told that huge losses had occurred, which is partly why Ray Phillips was dismissed. 6-

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