Australian Corporations and Securities Legislation - Case Study Example

Draft_ass#3_group case study Student name: Minting He Tutor: Robyn Neeson Course: MGMT19114 Due Date: Executive Summary This paper is a comprehensive report that analyses the pulp industry of Australia, and covers Gunns case study, as one of the companies in this industy. It will consider looking at the strength and weaknesses as well as the PESTLEDG. It will also cover Porters five forces from a macroeconomic’s view. The core competencies are: Findings from situational analysis Gunns’ corporation has a well stated set of objectives, mission and vision statements. It is up to the workers to ensure to work towards a congruent achievement of all these core values of the company. In trying to meet these objectives, the company should also ensure to maintain a good relationship between them and the macro environment, which will translate to a good relationship with the neighbouring community while maintaining a goods rapport in their surrounding. Stakeholders’ analysis In undertaking this report, the company’s core objectives are discussed. This will help better understand the stance from which this particular discussion was born, since the company’s main contributor is the ecology and dealing with forests is in itself a sensitive matter as it may be detrimental to the wellbeing of the company to ignore this crucial factor. It should therefore develop ways to conserve it, avoid conflicts with the macro environment and other forms of conflict that would emerge from the risky undertakings in their workplace. Industry and competition analysis An evaluation of the SWOT analysis also reveals that the company faces certain challenges when it comes to competition from other companies. Competition from Norske Skog, Australia Paper, Kimberly Clark, SCA, Cellulosa and Aktiebolaget would be seen as a threat to the corporation, but positively countering this problem would be very advantageous to the company’s wellbeing. Key success factors Other more sensitive areas would be to evaluate the opportunities Gunns enjoys, which will prove the company’s intention of going to the global market. There are many threats that encompass the view to go global. The substitute threat of timber would not reciprocate inversely to the establishment of overseas enterprises. However, in production of wine, additional feasibility study should be carried out depending on the market situation in the region they are making entry into. Also there should be some evaluation of the quality they are producing due to the high price tag on the wine. Macro environment Gunns has the advantage that it operates in a calm political environment at the moment. This is very promising for them since it attracts a wide array of investors to the corporation. In addition, the economic situation in Australia makes it easy to operate business in the region, and Gunns enjoys that opportunity. Other favourable determinants are the legal framework governing corporations (which is favourable) as well as technology, demographic and the global situation. Tall these are in favour of the operations of the corporation. SW (internal) / OT (external) (about Gunns) Strengths Strengths are the internal factors of a business that give it a strong grip on the ground (Sinclair 2010). These are the factors that many businesses bank on to be able to achieve their objectives. Gunns has a number of strengths, which have enabled it to be among the key players in the industry, as well as keep up with the stiff competition from other business. This section will focus on these issues that give it an upper hand over other key players in the industry. Gunns Limited being an established company in the Australian pulp industry has number key strengths. Since the inception of this company, in the year 1877, it has proved to be in possession of strong connections (Datamonitor 2012). It has had a unique networking ability, which has helped it to grow at a fast rate. The company’s network is a strong platform for expansion, both in terms of establishing a broad client base, and partnerships with other international companies. This company also has a unique blend of human resource, which is well cultivated to handle different levels of difficulty and to provide new solutions for existing problems. With such an elite pool of employees, it is easy for the company to develop and implement new ideas, which earn more revenue (Vroom & Arthur 2007). Recently, it launched a liquor processing firm as subsidiary in a bid to expand its sources of income. Weaknesses Weaknesses of a business are usually the internal factors that form barriers for its success (Sinclair 2010). These are what most competitors would try to bank on. However, the business itself has control over its weaknesses, and can overcome them. Gunn’s major weakness is the small area of concentration. The company has expanded its areas of business operation since its incorporation. There is still much to be done about the area of operation. Currently, it is only based in Australia and part of New Zeeland (Datamonitor 2012). This leaves a chance for another international company to come and occupy the rest of the market and eventually take over Gunns’ clients. In the recent past, the company has also started growing unstable due to poor financial planning (Sanclair 2010). Shareholders are shunning this company due to reduced profits. Research shows that in the year 2011, the company decreased its profits by 11.8% as compared to the previous year. This was a net loss of $351.7 million (Vroom & Arthur 2007). It was a great discouragement to shareholder s and potential investors, and most of them reconsidered their plans for the company. Opportunities There is increased demand of timber products both in Australia and New Zealand (Law Reform Commission of Victoria 2006). This is a major opportunity that any determined timber miller can bank on to raise its profits. Being a major player in the market, it should take of this increasing demand to lure new customers and as well as broaden its area of operation. It should also conduct intense publicity of its products, so as to keep the market aware of its services (Burnett 2003). As more companies show interest in the Australian pulp industry, Gunns has the opportunity to form alliances and partnerships with such companies, in a bid to increase its grip of the market. The World Bank analysis also shows that investors are getting interested with the OECD market (Law Reform Commission of Victoria, 2006). This presents an opportunity for the company to attract these investors, through proposals, which have strong business strategies. Gunns produces wine, apart from timber products, and is also involved in construction, as well as forest conservation. All these responsibilities, when combined, give rise to strong profit making opportunities and chances for growth and expansion. Gunns can base on these channels to produce exclusive products, which fit their customers demand hence win, their trust. It can also hold marketing parties, where it markets all its products, and then offers its wine in the same party (Law Reform Commission of Victoria, 2006). This would be a strong marketing technique that would help it to trap new markets and retain the old ones. Threats As much as Gunns has a lot of opportunities and strengths, it also faces some threats, which may be dangerous to its continued survival. These are external factors, that the business cannot control directly, yet they can affect it adversely (Sanclair, 2010, p.112). New competitors and an increase in legislations are some threats that cannot be ignored. New and Existing Competitors The major competitors of Gunns are Forestry Tasmania, Ruralaus Investment Limited and TFS Corporation. These companies are ever developing new skills and acquiring new techniques, just like Gunns (Sanclair 2010, p.112). They manage huge hectares of land and as well as command a large flock of customers. Forestry Tasmania, unlike Gunns had a net profit of $128 million in the year ended 2011, which was an increase of more than 6% from the previous year (Sanclair, 2010, p113). This already shows that competitors are working tirelessly to take over the market that Gunns commands. There are also new players in the industry who have just joined the market and are also determined to feed from the same cake. Gunns should hence be on the watch out to make sure that it stays ahead of all its competitors, if it has to keep surviving in the market for long. Increased Legislation The high increase in legislation that has been witnessed in Australia and New Zeeland in the recent days is a great threat to the operations of this company, and its future survival (Blake & Mouton 2004). Environmental organisations have come up to condemn felling of trees you produce timber products and as well as the huge amount of carbon emissions that comes from this company. The government has also been forced to increase taxes and other levies imposed on this industry, which amounts to high costs of operation (Greg, 2009, p.110) Industry + Competition analysis (external to Gunns)) Porter’s 5 forces + attractiveness of industry The Porter’s five forces, by Michael Porter, form a framework of industrial analysis, which gives companies the chance to increase shareholder value by implementing strong business operations strategies. According to Greg (111) these forces can help analyse the industry’s attractiveness, hence the ease with which a company can make profits and grow, as it watches against key risks that may arise in operation (Greg 2009). Demand, supply, competitors, margins in the market and the growth rate are among the major factors that determine the attractiveness. Below is a model of the Porter’s five forces. Source: Abonar group.7th Sept, 2012. Porter’s five forces. Retrieved from: http://www.abonarconsultants.com/Assets/Graphics/porters.png Threats to Entry The threats to entry are medium. The flexibility and ease at which companies may enter and leave the industry is a key factor in determining how competitive and attractive it will be (Blake & Mouton 2004). Although the Australian pulp industry does not have many barriers; there are law and regulations that may pose as a barrier to some entrants. First is the issue of environmental laws. With increased demand for timber products, this industry has become very attractive. However, environmental organizations are pushing for laws that will make it difficult for new investor to join the industry. This has led to a rise in the taxes, including the carbon taxes, and the entrance fees (Sanclair 2010). The existing firms have also acquired high technology, which means that any investor willing to join the industry must have enough funds to catch up with the current rate of technological growth (Sanclair, 2010, p. 117). Although some new entrants may be able to pay for all the expenses and acquire high technology, it may still be difficult for them to get even a small proportion of the market share since the current companies have managed to win their customer’s loyalty, as each one of them struggles to retain its clients(Sanclair, 2020, p. 118). Substitute Threat Substitute threat is low. This refers to the ease with which the consumer can substitute a product for another, for example, using glass, instead of aluminum cans (Greg 2009). Although some people have tried to substitute plastic products for wood, many people still believe in using timber products. Also, plastic can only substitute timber up to a limited level, like in for making doors and fencing posts. However, timber is still necessary for many other activities like construction of houses, which gives it an upper hand over its likely substitutes (Treasury 2012). There is hence a very low substitute threat to this industry, Supplier Bargaining Power Suppliers have a low bargaining power. When supplier have a strong bargaining power, then the profits of firms in that industry will be determined by the mercies of their suppliers, who decide the price of the their own supplies (Blake & Mouton 2004). However, in this industry, most companies have resolved to backward integration. They plant their own trees and make sure that their companies are able to cater for themselves in almost everything, so that they do not waste a lot of money hiring. With this system, suppliers are left with no other option but to work with the budget of their buyers. Companies hence dictate the price of their raw material, which means that they can also dictate their profits (Blake & Mouton, 2004). Bargaining Power of Buyers The bargaining power of buyers is high. The higher the bargaining power of customers, the more they can be able to determine the prices at which they get their products (Treasury 2012). Most buyers of timber products are usually not regular. Which means that they have a low bargaining power? As a result they buy the products at the prices that have already been set by the companies. However, corporate customers of Gunns have a high bargaining power, considering that other companies will offer them better rates if Gunns does not listen to their demands. In such cases, the company has to consider offering unique services at a fair rate that will accommodate its clients. Rivalry Among Existing Players There is high rivalry among existing members The pulp industry of Australia is getting stiff competition as time goes by. This is leading to a very high rivalry among the companies it the industry, as each one of them struggles to get the most modest market share in the market. Most companies are going outside the country to seek new technology and form joint alliances and partnerships, which will enable them to be market leaders. The level of services being offered in the industry is continuously increasing in a bid to attract more customers and maintain the existing ones. Conclusion about the Attractiveness of the Industry The attractiveness of the industry is medium to high The pulp industry of Australia is attractive. There are very many opportunities and benefits that come with joining the industry, especially if one can be able to attract a large pool of customers and maintain them (Blake & Mouton, 2004). First, the industry offers very attractive returns to companies that provide unique products to their customers. Since the housing industry is still growing, there are many customers who are looking for unique products for their structures. Most of these customers usually prefer to use one company to supply all their needs from the pulp industry, which gives companies a chance to easily establish long term relationships with their customers. Most investors are starting to join this industry as their speculations increase (Blake & Mouton, 2004). The industry is attractive. Key Industry Success Factors Design is among the major success factors of Gunns. They have unique designs that attract many customers, and a provision for custom designs, which makes many people to prefer their services. In some cases they have offered free repair and maintenance services of their products. Client hence prefer them to other companies since such free services can help them cut on their maintenance costs (Blake & Mouton, 2004). The company also has a well selected team of researchers, who are always in the field trying to acquire new skills and knowledge. This is one of the key factors for the high rate of changing technology and product designs that have been witnessed in this company. Their prices are also well set, in consideration to their different levels of customers (Treasury, 2012). Having products for all levels of consumers is hence a key success factor. Apart from their own cultured raw materials, they also have a wide platform of trusted suppliers who guarantee them perpetual continuity at all times (Greg, 2009). This, therefore, gives them security over their future and satisfaction of the ever growing demand in the market. Competitor analysis Tasmania Forestry, Ruralaus, TFS Corporation, the Red Stag, and McAlpine timber limited are some of the companies that are posing stiff competition to Gunns. Although Gunns has been a long standing company, its competitors are also proving to be in possession of strong business skills. Not all the competitors are a great threat to Gunns. Ruralaus, for example experienced losses of more than 2.3% of the previous year’s income (Datamonitor, 2012). However, Tasmania Forestry had a high profit turn out, which signified it growth. The growth of Tasmania is highly attributed to its customer realtions and prices. It has a variety of products, whose prices are slightly l. Major competitors like TFS Corporation have also started establishing international links with foreign firms, so that they can learn new techniques that will help them to increase their market share. Lifecycle Analysis The Australian pulp industry is one of the oldest industries that have been in existence for more than a century (Vroom & Arthur, 2007). It has grown over time, both in its operation and the use of technology, which has been a key success factor. The Australian pulp industry exhibits different characteristics in its lifecycle. There are three main seasons, which determine the operation of this industry. First is the low season, when the housing industry goes down. This is a time when there is very low demand for timber products, and the competition is very stiff, for the few available customers. As a result, companies are usually forced to use low prices to woe customers (Vroom & Arthur, 2007). The industry is also faced by a medium to high season and a high season. These are seasons when most companies work towards maximising on their profits, as the customer base is large. Macro environment (PESTELDG) trends that will impact on the industry in the near future External Political Political A calm political environment attracts investors while a political climate with unrest will always scare away investors. Australia is one of the countries that enjoy a very stable political environment, which is safe for any investors. It is open and has the policies in place just to protect the interests of investors (Datamonitor, 2012). The government is determined to ensure that investors have the best environment. The country’s political climate is rated the best among the OECD countries. It has shown endured stability, which favors business development and growth. Economic Economic environment is a great determinant of whether investors will be attracted to a particular environment or not (Treasury, 2012). Luckily, Australia hosts a stable economy, and despite the various financial strains that have been experienced in different parts of the world, this country has managed to control its economic resources. Investors prefer investing in such places where the possibility of making great losses is high. The country’s transparency has been cited to be third in the world, something that has helped the country to be ranked among the six best economies of the modern times. It also has a very high growth rate of foreign investments. The image below is a progression of foreign investments in the country, for 2004-2009. Major Markets, 8th September, 2012. Stock of Australia by Major Markets. Retrieved from: http://www.austrade.gov.au/Images/UserUploadedImages/2802/FDItable.gif The country, Australia, is made up of people of different races and beliefs (Data monitor, 2012). These are people with unique and different demands, due to a disparity in their religious and cultural beliefs. This is a good opportunity for a business that is ready to diversify into providing different products to its customers (Greg, 2009). Gunns may find it very easy to operate within such an environment as the company is always customizing its products to fit within the customers wants. Majority of the social class is educated and enlighten, hence most of people in this class have dropped their traditional beliefs and some unhealthy cultures (Blake & Mouton, 2008). However, there are a few who are deeply inscribed in their various beliefs, and hence businesses have to find a way of dealing with them. However, for businesses that produce only standard goods, operating in such an environment of different socio-cultural beliefs may be a bit hard. A lot of branding is hence needed to overcome this situation (Vroom & Arthur, 2007). The Australian pulp industry in thus sense is one that requires companies to be very diverse and creative in the way the deal with their customers. Many companies engage in a lot of branding so that they can be able to win over the diverse market. Technology The level of technology in a country or any other business environment is a very significant factor (Data monitor, 2012). Technology determines the efficiency and effectiveness of work, as well the quality of goods that are produced. Australia is one of the fast countries in adapting to technology. The country has a highly advanced telecommunication network and well developed roads. It has efficient systems of transport and highly computerized systems. The level of technology and infrastructure is generally high and modern (Vroom & Arthur,2007). Legal The legal system in Australia is based on the rule of law. It emphasizes on justice and the independence that judiciary should have (Law Reforms of Australia, 2012). All people in the country, whether Australians or non-Australians, are subjected to equal treatment. It is one of the countries that have set up a very transparent business and legal environment in the world. This has been possible by the use of proactive reforms that are aimed at proving the best environment for businesses. In the year 2006, the OECD identified Australia as having the best business regulatory legal system. It was also cited as the country that had very few on businesses, like capital, which ensures that companies wishing to join the pulp industry are financially stable. It was ranked as the third best place to set up a business in the world. The country’s currency is fully globalised and there are no forex policies. Australia is also the second best country in enforcing intellectual property rights, among the OECD countries, and is eight in the whole world. Natural Environments Australia is one of the most bio-diverse countries in the world (Krien, 2008). It hosts more than one million species of plants and animals. More than half of these have not been described by scientists. Most of these species are also not found anywhere else in the world. The country is not densely populated, hence experiences mild effects of climate change. The soils depend on natural vegetation to generate nutrients (Krien, 2008). However, poor soil conservation and water extraction make the soils unproductive. Demographics Australia is experiencing different changes in demographics. According to the Treasury of Australia (2012), the country has the sixth largest land in the world; however, it is still a young country with a small population of not more than 25 million people. It has a high percentage of young people, with about 68.1% of the population consisting of people aged between 15-65 years old (Australian Treasury, 2012). We can, therefore say, that country has a great purchasing power. Majority of the population is of white ethnicity. The income distribution is concentrated among the middle aged people, who are mostly employed or in their own businesses. Since a huge part of the population is well educated, many people of the middle ages earn a decent income. This also sets up Australia as a strategic business environment, due to a high purchasing power. Global The global business environment is generally growing at a very fast rate as different countries try to establish themselves, after recessions in the past. (Krien 2008). The six major forces shaping the world are emerging markets, shifts in demographics, rapid technological change, and global banking, Cleanthes, and governments ties with the private sector. All these forces have become influential through the ways in which they interact to shape the business world. There are different demographic changes in various parts of the world as countries with little youthful population show slow economic growth. Technology is rapidly evolving as the world grows into a global village where business can still take place despite of any boundaries and distance. Governments are establishing strong ties with the private sector in a bid to boost business (Krien 2008). All these trends show that the global world of business is moving at a very fast rate. Companies that go global are also likely to succeed more than those that remain local. The Six Global Trends Source: Abonars Consultants, 8th Sept, 2012. The six global trends. Retrieved from: 1http://www.abonarconsultants.com/Assets/Graphics/porters.png Possible future strategies (strategies alternative options for Gunns) Any company that intends to succeed in any industry and maintain its success for a long time should be always setting new strategies for business. Gunns has been a market leader for a long time. However, other competitors have also come up and more are still coming. All businesses believe that they will succeed and win over the market. In this case all of Gunns competitors hope to win over Gunns’ market. It is hence important for the management of Gunns to always set up new business strategies and plans for the future. Gunns are likely to focus on product and geographical scope, strategies. This will call for establishment of strong networks, and conducting of extensive publicity and research. The following are the possible future straggles for Gunns. Partnerships and Alliances As the business environment continues to develop and grow complex each passing day, the need for partnership and alliances arises (Vroom & Arthur 2007). In the recent past, Gunns has had to deal with many problems that arise due to the changes in business environment. There is likelihood, therefore, that the company may partner and form alliances with other likeminded businesses, either within or outside the OECD. This will be necessary in order to increase its competitive advantage and bargaining power in the market. It will also increase its influence across its markets, hence more profits. Partnerships and alliances are very essential business strategies (Vroom & Arthur, 2007). Many companies that almost collapsed have gained stability and are now controlling large sections of the market, due to alliances. Sony and Ericson are a good example that joined to form Sony Ericson (Blake & Mouton 2004). The companies have since then been able to produce high quality products and control a large part of the elite market group. Acoording to Blake and Mouton, 2004, Alliances will help Gunns to easily establish itself in new markets, especially foreign markets, which it is considering set its foot. Global Forest Watch would be a good company to consider for an alliance, if Gunns want to expand to countries like Canada, where timber products are in very high demand. Blake & Mouton maintain that alliances and partnerships help to cut down on the cost of operation as the cost is shared. Since Global Forest Watch is conversant with the market in Canada, Gunns will have an advantage of easy marketing, through the help of such firms that have a good grip of the international market (Blake & Mouton, 2004). Advantages of Going Global Going global is a song that should be in the lips of any company that is determined to succeed (Krien 2008). Krien, 2008, maintains that doing global business is very simple in the current world since technology shrinks the whole world into a small village. Going global has very many advantages. First a company that broadens its boarders across the world will have the advantage of increased sales. This is due to a large platform of clients from across the world, which has diverse need. This hence also leads to diversification, which will force the company to adapt to international rather than local trends and skills. Such a company will in return lure very many customers, and automatically win over its local market, due to an international image. If Gunns goes global, its image will change and many clients will want to associate with it, due to the benefits of prestige (Kriens, 2008). The company will also meet different investor from across the world, which will be a major breakthrough for the company. An international company also wins trust of its customers easily. You may give some example, such as in Japan, China, these countries need paper a lots, does any opportunities rise if develop business in these countries? References Consultants Porter’s Five, 7th Sept, 2012. Abonars Consultats) http://www.abonarconsultants.com/Assets/Graphics/porters.png Abonars Group, 8th Sept, 2012. The six global trends. Retrieved from: 1http://www.abonarconsultants.com/Assets/Graphics/porters.png Blake, R. & Mouton, J. 2004. The Managerial Grid: The Key to Leadership Excellence. Houston: Gulf Publishing Company Burnett, B. 2003. Australian Corporations Law Guide, 3rd ed., National Library of Australia Cataloguing in Publication Data, Sydney. CCH Australia Limited. 2001. Australian Corporations and Securities Legislation, Sydney, NSW Law. Datamonitor, 6th, September, 2012. Gunns. Retrived from: http://360.datamonitor.com.ezproxy.cqu.edu.au/Browse?q=Gunns Greg, O. 2009. Gagged: The Gunns 20 and Other Law Suits. New York: Envirobook Publishers. Krien, A. 2008. Into the Woods. Sydney: Black Inc Publishers Major Markets, 8th September, 2012. Stock of Australia by Major Markets. Retrieved from: http://www.austrade.gov.au/Images/UserUploadedImages/2802/FDItable.gif Mallin, C. 2009. Corporate Social Responsibility: A Case Study Approach. Sydney: Edward Elgar Publishing. Reform Commission of Victoria. 2006. The Torrens Register Book, Sydney: Australian Legal Publishers. Sinclair, T. 2010. The Gunns. Ontario: General Books LLC Publishers. Treasury, 2012. All About Australia. Journal of Public Consultations. Retrived from: http://www.about-australia.com/facts/australia-demographics/ Vroom, H. & Arthur G. 2007. The New Leadership: Managing Participation in Organizations. New York: Prentice-Hall Read More