Critical Analysis in the Real World - Nissan Motors Company - Assignment Example

Student’s Name: Professor’s Name: Subject Code and Name: Date Submitted: Critical Analysis in the Real World Introduction An investment is a sensitive step in the life of an individual or an organisation since it is an important aspect that one can not predict the results. Taking the step of an investment is a great risk as there is the threat of failure and the prospects of success. For a company like Ethical Investments making the right choices on the companies they want to invest on is natal decision. This may not be an easy process as they will have to be conduct research on the prospective companies to determine which will best suit their interests. Hence, this report is going to focus on the three prospective companies being considered by the Ethical Investments, which are; Nissan, Rio Tinto and Vestas. The report on the three companies will be able to cover the important factors that will guide Ethical Investments on the decision making process. The financial merits and the environmental merits will be greatly reflected in the report. This always reflects the business performance and in turn it will help the company forecast on the future results. Looking at this two can be rather conflicting but will be rather important in the decision making process. The financial merit will clearly indicate that the company is keen on making profits and there is progressive improvement. On the other hand environment merits will help determine the social status of the company. This will also help define the salary increment process of the companies. This report aims to cover the business performance on the three companies to help determine their future in the economic market. The report will mainly focus on the achievements and the progress a company is making. F the company has had a strong trait in the market for a while then it is likely to be more suitable for the investment purposes. Methodology Conducting this research will require both primary sources and secondary sources. Primary sources will include applying methods such as interviews and questionnaires. Collecting first hand information is equally important as it tends to clear up some situations that appeared rather vague (Creswell and Clark 21). Secondary information from journals and books is also relevant for the study. This is mainly because related case studies have been conducted on the companies and such information may be relevant for this report. Looking at the financial status of the company, one will have to refer to such records to get the information required. Information about the success and failures of the companies is likely to be recorded in form of articles or journals. Secondary information also provides information that one is no likely to find in primary sources. Nissan Financial Performance and Prospects Nissan Motors Company has been in existence since 1933 and the progress it has been making has been impressive. Its progress has also caught the eyes of other well known companies such as Renault S.A of France since there has been an alliance between the two companies since 1999. The strategy applied the company covers the financial strategy as well (Shaikh 5). Reports conducted by other firms show that the financial structure of the company is strong and quite stable. Paying attention to the financial highlights presented from 2007 to 2009, the financial report is well maintained (Bloggy Business Today 2). The consumption tax is not included in the net sales and the presentation is done in balance sheets. This will clearly indicate the financial progress that the company has been making over the years. It is also relevant when the net assets are being calculated. 2007 was the best year for the company in terms of net sales since they had achieved a lot by then but afterwards the sales started deteriorating. However, this has not killed their determination as they are still working on strategies moves that will make them recover their losses. They have already started making moves by hiring a new CEO and so far his work has been commendable. The graph above indicates how the net sales of the company have deteriorated since 2007. Corporate Governance Corporate governance is an important aspect in every successful organisation as it will determine how things will be run. In 1999, Nissan Company went into alliance with Renault S.A of France, meaning that they hold 44.3% of Nissan’s shares. This was due to the financial problems that Nissan was going through then. The governance process does not involve Renault due to some restrictions in France. When new CEO Carlos Gosn, was introduced the situation at Nissan improved in a manner that was shocking to all. The losses started to get recovered and the profits indicated good governance (Kay 5). This is not a situation that is often experienced and it was rejuvenating to the Company. Innovation was the driving factor is still being used to date, this includes; the use of technology in the development of cars. This shows a promising future for the company as they did not let their losses slow them down but on the other hand they are slowly picking up the pace (Myers and Douglas 2). Environmental Protection Credentials The company does not have environmental records that are rather special since other competitive firms and companies have such records. However, this is about to change for the company as they are looking at introducing electrically controlled automobiles. The introduction of the Nissan Leaf into the US market is bound to be very successful as the car can navigate at 100 miles per charge. This is an eco friendly development and is bound to be embraced by most individuals (Estrin 15). Contextual Factors Although the company is partly owned by Renault S.A, they do not share fully on the governance process. This is because the French government has certain restrictions towards this and they cannot b represented in the board of directors. To help solve this problem, Renault decided to use their own CEO to run their side of events at Nissan Company. Rio Tinto Financial Performance and Prospects Rio Tinto is an internationally known company known for mining and processing the earth’s natural mineral resources. Looking at the balance sheet presented by the Company, it clearly shows that 2006- 2008 have been by far the best years for the company (Rio Tinto 1). The earnings and the revenue generated were at their highest peak and business was doing great. However, in 2009, the rates earned appeared to be less and there was a decline in the earnings. This problem was attributed to the fact that the company had a debt to settle. They are looking at approaching the situation from a different strategic view (CSANAD par. 6). This is the putting together of the asset sales and the equity combination. This is a bold move being made by the company but it is bound to produce the expected results if executed properly. Corporate Governance and Performance The organisation is quite different from what is usually observed in other large organisations. Considering the large size of the company then it is only normal that they have divided it into five sections that are very functional according to the product they deal with. The company is listed twist in what is known as dual- listing, in the London Stock exchange under the name Rio Tinto Plc and in Australian Securities Exchange as Rio Tinto Limited. The shareholders are not affected by this as they all have equal rights and everything is proportional. The company is managed by senior managers, which are made up of a board of directors (Vinten 6). This has proved to work out quite well and the company has been stable for quite a while as they have been working together to ensure they deal with their financial problems. Environmental Protection Credentials How mining affects the environment has always been a controversial issue since environmentalists are fighting to stop the process of mining (REP 3). They claim the mining activity affects the environment negatively. With the current issue of global warming taking place, it has led to more arguments and fights (Wiles par.4). Some of the investors even had to withdraw from the company due to environmental issue. This was done by the Group of Norway since they could not continue with the company since the environment was greatly being affected by activities being conducted by the company. Some of the operations conducted by the company caused great damage to Indonesia. This was at the Grasberg mine and this damage caused the withdrawal of good investors. This contributed to financial problems in the company but they are taking care in solving them. Contextual Factors When it comes to legal issues, the activities conducted by this company are restricted by legal issues. This company is mostly affected by labour or human rights mostly; this is mainly because the work is intensive and revolves around human labour. The company however has not yet had cases concerning human labour and ethical issues. Moreover, the company has even been awarded for observing ethical behaviour. However, the company may face other problems such as global or economic issues. This is because the mining activity does not take place in one region only but in many regions. Securing agreements other with countries to conduct mining in a specific region may take time. Although the mining activity is a good investment, there may be other related problems that may lead to losses. Vestas Financial Performance and Prospects Vestas is a company well known in the energy market its products and services are globally appreciated. Due to the services that it has been rendering to people, it is known as the largest in the world (Vestas 1). The financial structure and progress of the company has been quite impressive. However, competition has made the company fall back in the market. There has been a gradual decrease in the market share from 20% to 12.5% between the years 2009, considering the current state of the economy; this is not a good thing. They have been working at an expansion strategy that aims to regain its market share and so far the progress has been impressive. The operating income and revenue has been quite substantial and the profit satisfying. Corporate Governance Performance The governance of the company mainly relies on the principles laid out by the board of directors and the executive management managing the company. This management system involves two parties and has been quite effective over the years (Blair 16). Vestas is a large company with many employees to manage and stations to run that it requires a strong system to govern it (Infrastructure Europe 1). The company has had various problems considering the fact that the competition has been gaining an advantage over Vestas. This did not stop the company but rather they cam up with a strategy that involved expansion, this has been working out well for awhile. Hence, the corporate governance of the company has been quite stable delivering a promising future for the company. Environmental Protection Credentials Environmentally, the company does not engage in any activity that causes harm to the environment. The company is involved in the production of energy by using wind. The wind used is renewable and can therefore, not be exhausted easily (Kollmeyer par.2). Other ways of production of energy can be quite harmful to the environment but the use of wind is quite profitable and harmless. Considering the current trend of going green initiative, it is important to observe the importance of the environment and its protection. Vestas Company has many branches around the world and in all those areas it is keen to observe environmental protection. Contextual Factors The company might have experienced some legal and regional issues at some point in their business since it involves other international countries as well. This has been evident especially since the company has been facing strong competition from other companies. Vestas has invested in international countries and has to follow their regulations in order to market itself properly. Conclusion After reviewing the four companies carefully, I recommend that Ethical Investments invests its money in Nissan Company. Looking at their performance, they have been stable for quite while despite the fact hat their net sales have reduced in the past year. Challenges will always be present in large companies but how they approach the problem is most important. The introduction of a new CEO in the company has improved the company greatly. The progress has been so evident that economists applaud the new leader greatly. The company has the prospects of a great future since their ideas are based on innovation and they work closely with the trend being observed. Therefore, the future of Nissan Company is quite bright and would be a good place for one to invest in. Works Cited Blair, Margaret. Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century. Washington: Brookings Institution Press, 1995. Bloggy Business Today. The Importance of Financial Statements. Web. 4 October 2010. http://bloggybiz.com/business-news/the-importance-of-financial-statements/ Creswell, John and Clark, Vicki. Designing and Conducting Mixed Methods Research. Arizona: Sage Productions, 2006. CSANAD. The Importance of Financial Statements. Hub Pages. Web. 4 October 2010. http://hubpages.com/hub/The-Importance-of-financial-statements Estrin, David. Business Guide to Environmental Law. Canada: Carswell, 2002 Infrastructure Europe. Hamburg – European Green Capital for 2011. Web. 4 October 2010. http://www.euinfrastructure.com/article/Hamburg--European-Green- Capital-for-2011/ Kay, Carolyn. Institutional Investors and Corporate Governance: Best Practices for Increasing Corporate Value. California: Irwin Professional Publishing, 1996. Kollmeyer, Barbara. Vestas, REC Trade in Opposite Directions After Results. Market Research. Web. 4 October 2010. < http://www.marketwatch.com/story/vestas- profit-climbs-70-while-rec-records-loss-2009-10-27 > Myers, Patricia and Douglas Ziegenfuss. Audit Committee Pre-Enron Efforts to Increase the Effectiveness of Corporate Governance. International Journal of Business Studies. 6 (2006): n.pag. Web. 4 October 2010. Republicans for Environmental Protection. Campaign for Change Action Plan 2006- 10. Web. October 4, 2010. http://www.repamerica.org/CampaignforChange.html Rio Tinto. Financial Strength. Web. 4 October 2010. http://www.riotintocoalaustralia.com/ourapproach/1408_financial_strength.asp Shaikh, Junaid. Financial Accounting. International Journal of Managerial and Financial Accounting. 4 (2007). Web. 4 October 2010. Wiles, Angie. A Look At Pharma’s Credentials. Web. 4 October 2010. http://community.prweek.com/blogs/healthconversations/archive/2009/06/08/a- look-at-pharma-s-eco-credentials.aspx Vestas. Corporate Governance. Web. 4 October 2010. http://www.vestas.com/en/investor/corporate-governance.aspx Vinten, Gerald. The Corporate Governance Lessons of Enron. International Journal of Business Studies. 2 (2002): n.pag. 4 October 2010. Read More