Critical Analysis of Woolworths Limited, Coca-Cola Amital and Qantas Airlines - Assignment Example

Critical Analysis Of Woolworths Limited, Coca-Cola Amital And Qantas Airlines Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Executive Summary It is the desire of every investor to invest in a company which will have a return value on his/ her investment. The company in which one invest in must also be sustainable, it the investor wishes to make a long term investment. To ensure that this is possible, an investor should analyze the finite details of the company. Some of the details which a potential investor must put into consideration include the company’s financial performance, company’s corporate governance performance, the environmental protection strategies and the contextual factors affecting the company. The financial performance f accompany is an indicator of its ability to assure a return on investment. The corporate governance gives a glimpse of the structural foundation of the company; hence it is an indicator of its ability to remain competitive in the market. An analysis of the environmental protection gives the investor a glimpse of the company’s sustainability and lastly, the contextual factors give the investor a chance to know the factors affecting the functioning of the company and how the company is able to adapt to these factors. This report will analyze Woolworths Limited, Coca-Cola Amital and Qantas Airlines with respect to the company’s financial performance and prospects, the company’s corporate governance performance, the environmental protection strategies and the contextual factors affecting the company with an aim of accessing which organization is the most appropriate to invest $500,000 in. Table of Contents Executive Summary 2 Table of Contents 3 Critical Analysis of Woolworths Limited, Coca-Cola Amital and Qantas Airlines 4 1.1 Introduction 4 1.2 Scope 4 1.3 Methodology 4 2.0 Analysis 5 2.1 Overview of the 3 Companies 5 2.1.1 Woolworths 5 2.1.2 Qantas Airlines 5 2.1.3 Coca-Cola Amital 5 2.2 Financial Performance and Prospects 6 2.2.1 Woolworths Limited 6 2.2.2 Qantas Airlines 8 2.2.3 Coca-Cola Amital 10 2.2 Corporate Governance Performance 12 2.2.1 Woolworths Limited 12 2.2.2 Qantas Airlines 12 2.2.3. Coca-Cola Amital 13 2.3 Environmental Protection 14 2.3.1 Woolworths Limited 15 2.3.2 Qantas Airlines 16 2.3.3 Coca-Cola Amital 16 2.4 Contextual Factors 17 2.4.1 Woolworths Limited 17 2.4.2 Qantas Airlines 18 2.4.3 Coca-Cola Amital 19 4.0 Recommendations 20 6.0 Conclusion 20 References 21 Table of Figures 23 Critical Analysis of Woolworths Limited, Coca-Cola Amital and Qantas Airlines 1.1 Introduction Every investor desires to have a high return on his/ her investment. For this reason it is always important to do a comprehensive analysis of the potential investment avenues so as to identify one which will have a high return on the invested capital. Some of the factors which a potential investor takes into consideration while choosing on a company to invest in includes ; the company’s financial performance and prospects, the company’s corporate governance performance, the environmental protection strategies and the contextual factors affecting the company. This report will analyze three companies, Woolworths Limited, Coca-Cola Amital and Qantas Airlines with respect to the four factors identified above with an aim of accessing which organization is the most appropriate to invest $500,000 in. 1.2 Scope The report will be limited to the analysis of Woolworths Limited, Coca-Cola Amital and Qantas Airlines with respect to the company’s financial performance and prospects, the company’s corporate governance performance, the environmental protection strategies and the contextual factors affecting the company. 1.3 Methodology The approach to writing the report is theoretical. It makes use of the financial reports of the three companies and other literature on the factors which are under consideration. Towards the end, a comparison between the three companies with respect to their performance in the four factors will be used to select the most appropriate company for an investor to invest $500,000. 2.0 Analysis 2.1 Overview of the 3 Companies 2.1.1 Woolworths Woolworths limited is the largest retail store chain Australia. The organization was established in the year 1934 and since then the company has grown to a giant company. The company has gone global; with operation is Africa, Europe and Asia. The company stocks a wide range of products in its stores. Examples of such include food and consumables, cloth wear, household items among other products. The slogan of the company is ‘Australia’s Fresh Food people’ (Woolworths, 2012, p.1). The success of the company is based on may pillars, key among them being good management. 2.1.2 Qantas Airlines Qantas airlines are an airline company based in Australia. The company was established in the year 1920. Over time, the airline company has become a market force to reckon with in the aviation industry in Australia and internationally. As at now, the company employs 35,700 people out of which 33201 are based in Australia. The company has various destinations in the world including in Asia, Europe, America and Africa. The success of the company in both the domestic and international market is also based on its good management practices. 2.1.3 Coca-Cola Amital Cocacola Amital company is beverage, food and services company which is based in Australia. The Coca-Cola Company trades in Australia under the name Coca-cola Amital. The history of the company dates back to 190, when the company was trading under different enterprises. Over the years, Coca-cola Amital has indulged in several businesses for instance meat processing, beverage, food and tobacco. Over time it increasingly got the rights and shares to manage the operation of The Coca-Cola Company. The company also has operations in international markets e.g. New Zealand. Just like the other two companies being analyzed, the success of the company in the domestic and international market is attributed to its good management practices. 2.2 Financial Performance and Prospects The main aim of a business organization is to make profits. In fact, if an organization is not able to make profits it cannot grow. On the other hand, if it makes losses, it cannot be able to support its survival in the market. The financial performance of an organization is determined by many factors which can be generally grouped as internal and external factors. Internal factors are the factors which affect an organization from within. They include factors such as management, human resource, sustainability, corporate structure, and corporate values among others. External factors affecting the financial performance and prospects of a company includes such factors such as government policies, market forces and financial environment among others. Taking a financial analysis of the three companies, Woolworths Limited and Coca-Cola Amital are making steady profits while Qantas Airlines has made a loss in the financial year 2010-2011. The following section illustrates this by analyzing the financial performance of Woolworths Limited, Qantas Airlines and Coca-Cola Amital companies. 2.2.1 Woolworths Limited The company has been doing great financially. In fact, it has been increasing its revenue for the last five years. The company operates under a wide range of businesses (Woolworths 2012, p.1). They include supermarkets, hotels, wholesale operations, consumer electronics and general merchandise. Due to its diversification of business, the company is able to spread risks over a wide range of industries. This explains why the company is not largely affected like its competitors when market forces affect some of its prospects. The following table shows the financial performance the company for the last five years. Financial report of Woolworths Limited (Woolworths 2012, p.1). From the financial report, it can be seen that the company has had an increase in its revenue for the last five years in all its business prospects. The supermarket business prospects I the largest business operation for the company. Woolworth’s supermarket is the largest supermarket in Australia. From the financial reports, it can be seen that the supermarket’s operations give the highest contribution to the company’s revenue, contributing 36.176.1 million dollars out of 54,142.9 million dollars in the financial year 2011. Generally, all the business prospects of Woolworths limited have experienced a growth, from a revenue of 42, 477.1 million dollars in 2007 to 54,142.9 million dollars in 2011.the pretax and interest earnings of the company have also grow proportionately in the same time period, from 2,111.3 million dollars to 3276.4 million dollars. The growth rate is also consistent, and there is no single year in which any of the company’s business prospects has failed to grow. 2.2.2 Qantas Airlines Qantas airline has not been doing well financially as compare to Woolworths. The company made a loss of $244 million in the 2011 financial year. Looking at its financial records, there is a lack of consistency in the profitability of the company. The company made a 117 million dollars profit in 2008-2009, 112 million Australian dollars profit in 2009-2010, 250.0 million Australian dollars profit in 2012-2011 and a 245 million Australian dollars loss in 2011-2012. The following financial report indicates the details of the financial performance of the airlines company.       Qantas Airline financial report (Bloomberg Business week, 2012a, p1) The unstable financial performance of the company can be attributed to the varying financial environment in the market. Generally, in the last four years, there has been a gradual increased in the fuel prices and operational costs which have contributed to the financial losses incurred by Qantas. Moreover, the travel patterns of people have changes due to the financial crisis affecting the globe. As compared to Woolworths, Qantas Airlines is performing poorly financially. 2.2.3 Coca-Cola Amital Coca-cola Amital has been experiencing a steady growth, in both its revenue and its income over the years. The company has restructured its operations in the year 1989 to centralize in beverages and food business after selling its prospects in poultry packaging, tobacco and communications (Coca-Cola Amital, 2012, p.1). The financial reports of Coca-Cola Amital are promising. The company has seen a rise in its net income from 385.6 million Australian dollars in 2007-2008, 449.0 million Australian dollars in 2008-2009, 497.3 million Australian dollars in 2009-2010 to 591.8 million Australian dollars in 2010-2011. The following is the financial reports for the company in from the 2007-2008 financial year to 2010-2011 financial year Financial reports for Coca-Cola Amital (Bloomberg Business Week, 2012b, p.1) From the financial reports, it can be seen that the company has been experiencing a steady financial growth over the years. The average profit gains for the company 68.8 million Australian Dollars per year. The total revenues for the company have also increased proportionately from 4,091.4 million Australian dollars in 2007-2008 to 4,801.2 million Australian dollars in 2010-2011. 2.2 Corporate Governance Performance Cooperate governance is involved with all the management practices of an organization . Some of the elements of corporate governance include organization’s culture, organizational cultures, and values among other factors which affect the management of an organization . Corporate social responsibility and organizational ethics also fall under the cooperate governance of an organization. Each organization has a corporate governance structure which is unique to its business operations. The aim of each governance structure is to ensure that the company is able to give a return value for its capital investment. The importance of good corporate governance in determining the success of an organization cannot be downplayed. 2.2.1 Woolworths Limited Woolworths Limited has efficiency corporate governance. It also has a corporate governance policy which contains the company’s constitution which outlines the laws and regulations governing the company. It also has a code of conduct which describes the values, culture and practices of the organization. The company also has a policy for dealing with diversity. It also has a policy for dealing with the securities of the company. Other policies in the cooperate governance of the company includes the shareholders communications, continuous and risk management policy (Woolworths, 2012 b, p.1). All the above policies give shape the organization in that they provide a legal framework on which the organization is based on. 2.2.2 Qantas Airlines Qantas airline is governed by a board of directors who are responsible for establishing an appropriate corporate governance mechanism so as to propagate the business interest of the company. According to Quanta’s, the board of directors of the airline company are responsible for ensuring that the highest level of organizational ethics are upheld in the company. In order town ensure that the company is able to keep up with the market standards, the board of directors ensures that it the corporate governance of the company is updated on a regular basis so as to keep up with the market standards of the company (Qantas Airlines, 2012, p.1). Among other aspects of corporate governance includes Qantas Constitution, which governs the business practices of the company. The organization also has a corporate governance statement which dictates the curse of the governance of the company. Examples of elements of the corporate governance statement includes the frequency of board meetings, the election of the board of governors, the monitoring measures of the performance of the company, the board of directors and the employees, the remuneration of the employees and the internal and external audit of the company. The corporate governance of the company also takes into consideration emerging trends in organizational management. Such includes issues like corporate social responsibility these governance aspects are contained in the Qantas Group Business practices document. The governance board comprises of the audit, nominations, remuneration, health, security, safety and environmental committees. The last aspect of the corporate governance is the Qantas diversity statement which includes governance aspects which affect the operations of the company such as staffing, human resource development and operational flexibility. 2.2.3. Coca-Cola Amital Just as Coca-Cola Amital, Coca-Cola Amital has a board of directors who govern the company. Aspects of the corporate governance of the company are divided into charters, codes & policies and the company’s constitution & governance statement. The company’s corporate governance charter has the following elements. The first one is the corporate social responsibility and compliance charter, which is responsible for managing the organization’s social responsibilities practices. This ensures that the company is able to establish a good relationship with the society. The compensation charter is responsible for the remuneration of the company’s employees. The audit and risk charter is responsible for ensuring that there is transparency in the organization in addition to ensuring that the organization is able to establish policies which are aimed at ensuring theta the company is not exposed to unnecessary risks. The nominations charter is responsible for streamlining the management of the company. It ensures that the most qualified persons are nominated for leadership and management positions in the company. A competent management translates to a productive company which explains the reason as to why the company is currently doing well. Lastly, the company has a code of ethics with which it governs the business practices hence ensuring that the organization is able to keep up with the standards in the market. Some of the elements of the codes and policies of the company includes, purchasing, environmental, gender diversity, risk management, business conduct, communications, share trading and water policies. These cooperate governance policies ensures that the company is able to maintain a smooth flow of processes. All the above governance elements are summed up in the corporate governance statement and constitution which outlines the laws of the company. As compared to the corporate governance of Qantas Airlines, Coca-Cola Amital’s governance is structured better. 2.3 Environmental Protection One of major concerns in modern day business is environmental conservation. This is due to the rising concerns about the adverse effects of environmental degradation. Environmental conservation strategies include adoption of green energy, effective waste management strategies, reduction of gas emissions to the atmosphere and the conservation of natural resources (Nicole, 2011, p.150). Environmental sustainability has is one of the determinants of the success of an organization. This is due to the fact that an organization which is involved in the more environmental protection strategies is due to elicit more positive attention from the society as opposed to an organization which is less involved. This affects the manner with which the market receives the business organization. Involvement in more environmental conservation strategies translates to better organizational performance and vice versa. 2.3.1 Woolworths Limited Woolworths limited s by far one of the most environmental friendly organizations in Australia. The Woolworths’ supermarket’s organizational slogan is ‘Australia’s Fresh Food People’. This explains a lot about the organizations strive to ensure that the organization is able to provide environmentally friendly products and services. The organization has signed the Kyoto protocol, hence affirming it allegiance to environmental conservation. The company has an environmental sustainability strategy 2007-2015 dubbed ‘Doing the Right Thing’ which contains ways in which the organization intends to conserve the environment businesses (Woolworths 2012, p.1).. The ‘strategic plan contains six targets which the organizations wishes to achieve by 2015. The first one is reducing the carbon emissions levels by 40% by 2015. The second strategic target is reducing the amount of carbon emission by 25% per meter squared for all news stores which are opened in comparison to the existing ones. The third target is reduction of carbon emissions by 25 % per carton delivered to Woolworths by the company’s owned automobiles. The forth strategy is conserving water usage by about 200 million liters per year. The fifth target is reducing food waste to zero by 2015. The last target is to introduce reusable crates so as to manage wastes due to the use of single waxed crates. This upholds recycling which a key factor is of environmental sustainability. 2.3.2 Qantas Airlines Just as Woolworths Limited, Qantas Airlines is also concerned with environmental conservation due to the various benefits associated with it. The environmental conservation strategies of the company are outlined in the Qantas environmental policy of the company. The following strategies are included in the company’s environmental policy (Qantas Airlines, 2012, p.1). The first one is fly carbon neutral. This strategy is aimed at ensuring that the amount of flight emissions is reduced at much as possible. The second strategy of the company is the use of sustainable aviation fuel. This further reduces the amount of carbon emissions from the aircrafts. The company has also invested a lot in the development of biofuels which will go along way into reducing the amount of emissions and also reducing the overdependence of natural fuels. The company has also engaged in strategies aimed t reducing water and electricity consumption. The company has also engaged in environmental conservation measures aimed at ensuring that adverse climate changes do not occur. Other environmental friendly measures which the company is involved in include fuel efficiency strategies, noise management and sustainable tourism measures. 2.3.3 Coca-Cola Amital Coca-Cola Amital is also in environmental protection strategies (Coca-Cola Amital, 2012, p.1). This is with an aim of increasing the sustainability of the company. Just as the other companies discussed above, Coca-Cola Amital, is also concerned with environmental conservation policies. The various strategies which the organization has established are included in the sustainability programs and the company’s social responsibility foundations. The environmental conservation strategies which the company has established are stated below. The first one is its engagement in sustainable packaging practices which ensures that the company packages its products in environmental friendly packaging material. The company is also involved in water and energy conservation strategies in many locations in the world. Apart from the environmental conservation measures, the company is also involved in other cooperate sustainability practices such as health services, irrigation and enhancement of food security. Taking an analysis at the environmental conservation practices of the three companies, the ranking of the order of their environmental sustainability practices from the most sustainable to the least is Woolworths Limited, Qantas airlines and Coca-Cola Amital. 2.4 Contextual Factors Contextual factors are the factors which affect the external environment of a busiess organization. They affect the efficiency with which an organization is able to function in a given market. As indicated earlier, the success of a business organization is affected by both the internal and external environments of the business. Some of the contextual factors are includes market forces, political environment, global and regional financial pressures among other external factors affecting a business. The type of contextual factors affecting a business is determined by the type of business in which an organization deals with. However, there are some conventional factors which affect every business. 2.4.1 Woolworths Limited One of the major contextual factors affecting a Woolworth’s limited company is competition. In its major business in the supermarket’s line, the organization faces stiff competition from other major retailers for example Harris and Scarfe and Coles. In order to ensure that the organization is able to remain competitive in the market, it employs a competitive advantage generic business strategy which gives it an edge over its competitors businesses (Woolworths 2012, p.1). This explains the reason as to why the company has the largest retail store chain in Australia. The global financial crisis has also affected the company in a big way. This is due the rise in the operational costs and a tremendous reduction in the purchasing power in the market. The diversification of business by Woolworths Limited has done the company good since it is able t spread risks over a range of business prospects. Lastly, the organization has gone international, with business prospects out of Australia. This has enabled the company to explore new markets and consequently reap benefits from them. 2.4.2 Qantas Airlines Just like Woolworths, Qantas airline has also had its fair share of effects of contextual factors. The major contextual factors affecting the company include the following: Regional and global financial crisis have largely contributed to the financial performance of the airline (Qantas Airlines, 2012, p.1). With the crisis affecting the purchasing power of people and in this context leading to a reduction in the number of air travelers has had a very bad effect on the airline. The reduction in the number of travelers has led to reduced revenue hence reduced incomes. The high cost of fuel is also a contextual factor affecting the company and has also contributed to the bad financial performance of the company. The rise in fuel levels has led to an increase in the operation costs hence leading to an increase in the flight fees which leads to a negative implication on the ability of travelers to use air transport. Human resource factors have also affected the airline by a great extent. As it is with other airline companies in the world, the company has had to reduce the number of workers so as to minimize operation costs. There has also been a rise in the cost of competent labor which has further increased the operating costs of the company. Lastly, the company has also faced stiff competition from major airlines in the world for example British airways, Emirates airways, Qatar airways and Kenya airways. This has had a negative implication on its revenues since it has had to share the market with competitors. 2.4.3 Coca-Cola Amital Just like Woolworths and Qantas airlines, Coca-cola Amital has also had its fair share of effects of contextual factors. The company has not been adversely affected by competition since it deals with well known bran, Coca-cola. However, the company has also been faced by problems associated with the financial crisis facing the world. As a result of this, the company has had to reduce its operation costs so as to maximize profits (Coca-Cola Amital, 2012, p.1). The human resource factor has also affected the company. Over time it has had to part with a lump sum amount so as to retain its competent workforce. The company has also diversified its business prospects so as to spread its risks. 3.0 Which Company Is Appropriate To Invest $500,000 in on a Long Term Basis According to the analysis of the three companies with respect to financial performance, contextual factors, environmental protection and cooperate governance performance, the business organization which is appropriate for an investor to invest $500, 000 in is Woolworths . This is due to the following factors. Firstly, the company is doing well financially, with a consistent growth, hence it is more predictable hence secure to invest in. Coca-cola Amital is also doing well financially but its profitability is hampered by the limits of its business operations. On the other hand, Qantas airline is not stable financially. Taking a look at environmental sustainability, Woolworths is doing better than the rest of the companies. With respect to corporate governance, it has a well structured system which assures it of good management. Lastly the company’s sustainability mechanisms are well laid so as to enable it face the contextual factors affecting it. Lastly, the diversification of business practiced by Woolworths is great. It gives the company a chance to spread its risks over a wide range of prospects. If one industry is affected, it can rely on the others for survival. This is a major factor contributing to its stability. 4.0 Recommendations Taking into consideration the financial performance, environmental sustainability strategies, cooperate governance and contextual factors of the 3 companies under analysis in this a paper, it is inevitable to acknowledge their importance on the success of a business organization., while looking at a business organization to invest in, it is important to choose a company which is sustainable, meaning that it will remain relevant in the market in years to come. Long term investments are meant to return value on the investments, hence it is important to invest in accompany whose vision is long term. Woolworths Limited is chosen over the other 2 companies since it takes into consideration the emerging issues in business, it’s financial performance is great, its environmental protection is awesome, it is able to deal with the contextual factors affecting it and lastly its has a good corporate governance. The main contention was choosing between Woolworths and Coca-Cola Amital. Woolworths was chosen because of its diversified business prospects and its potential to venture and grow in other markets. 6.0 Conclusion In conclusion, it is important that an organization engages in appropriate business practices so as to remain competitive in the market. This repot has analyzed the performance of 3 companies, Woolworths Limited, Coca-Cola Amital and Qantas Airlines with respect to their financial performance, environmental protection, corporate governance and contextual factors. The importance of ensuring that all the three factors are put into maximum consideration cannot be underrated as seen in the report. Bearing in mind that all the three companies are international, it is important that a company has the best practices so as to be able to manage the various markets on which the organizations operate in. The report has recommended that the $500,000 million should b invested in Woolworths Limited due to its efficiency in the four aspects under consideration References Bloomberg Business , 2012 Qantas Airlines , Viewed on 28th September from week,2012.http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=QAN:AU  Bloomberg Business week, 2012. Coca-Cola Amital, Viewed on 28th September from http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=CCL:AU Coca-Cola Amital, 2012. About Coca-cola Amital, Viewed on 28th September from < http://ccamatil.com/AboutCCA/Pages/CompanyOverview.aspx > Nicole, C.(2011). Social Responsibility, crisis and sustainable Development. The Business Review, Cambridge. 17 (1); 149-158 Qantas Airlines, 2012. About Qantas Airlines, Viewed on 28th September from < http://www.qantas.com.au/travel/airlines/about-qantas/global/e > Woolworths 2012 a. Woolworths Limited, Viewed on 28th September from http://www.woolworthslimited.com.au/page/Invest_In_Us/Financial_Performance/> Woolworths, 2012 b. Woolworths, Viewed on 28th September from < http://www.woolworthslimited.com.au/page/Who_We_Are/Corporate_Governance/ > Table of Figures Financial performance of Woolworths limited (Woolworths 2012a, p1)   Qantas airlines Financial Performance, (Bloomberg Business Week, 2012a, p.1 )   Coca0cola Amatil Financial Report (Bloomberg Business week, 2012 b, p.1) Read More