Competitive Position and Growth Prospect - Thesis Proposal Example

Analysis Paper THESIS MENT In this term paper the objective is to evaluate the company position in terms of its product and/or services along with its competitive position and growth prospect. Apart from this, the paper will also analyze strategic advantages and disadvantages supported with the financial statement analysis I. COMPANY POSITION Snap-op Incorporation is a public limited company, which is operating its business operation in United States (US). The company has started it operation almost a century back and over the years, it has offered professional hand tools and equipment to its professional customers. Apart from this, the company offers few other products and services such as diagnostics, repair software and solution. The company performs its operation through designing, manufacturing and marketing its products. During the year 1991, the company has started its franchising business and within a couple of decades it has become one of the largest manufacturers of tools and equipment. Recently, it has been observed that the company has more than 5000 stores in global market (Wang, “Snap-on Tools Hits the Nail on the Head”). According to the observation, it has been explored that the company has earned $359.7 million during the year of 2013. It has replicated a steady growth potential in its earning in the past few years (Snapon,” Snap-on Announces Fourth Quarter and Full Year 2013 Results”). Apart from this, the company maintained it competitive advantages through ensuring its product quality, performance and technological innovation in global market. Snap-on has focused on high-end technological considerations in its overall organizational activities to ensure competitive advantages. It has been further observed that Snap-on is leading the market in terms of manufacturing and distribution primarily due to its effective product lines and distribution channels. The company gathers customers’ feedback through telephonic, electronic and online survey in order to make effective strategic business decisions. With regard to competition, the key competitors of Snap-on are Makita Corporation and Stanley Black & Decker (Wyse, “Advantages and Disadvantages of Customer Satisfaction Surveys”). Besides this, it has been also observed that the company has recognized several industries for supplying its products. As per the observation, it has been previewed that several larger dealers and manufacturers have relied on Snap-on in order to arrange their raw materials. Consequently, the company has emerged as one of the leaders in the industry of power tool manufacturing. II. COMMON-SIZE BALANCE SHEET (B/I) AND INCOME STATEMENT (I/S) Snap-on incorporation’s three years common size balance sheets and income statements of are as follow: Source: (Snap-on Incorporated, “2012 Annual Report”) [Amounts in US$ millions] Figure: 1 Common Size Balance Sheet of Snap-on during the year 2011 Source: (Snap-on Incorporated, “2012 Annual Report”) [All the amounts in $ millions] Figure: 2 Common Size Balance Sheet of Snap-on during the year 2012 Source: (Snap-on Incorporated, “2013 Annual Report”) [All the amounts in $ millions] Figure: 3 Common Size Balance Sheet of Snap-on during the year 2013 *N/A= Not Applicable. Source: (Snap-on Incorporated, “2012 Annual Report”) [All the amounts in $ millions] Figure: 4 Absolute Income statement of Snap-on during the year 2011 Source: (Snap-on Incorporated, “2013 Annual Report”) [All the amounts in $ millions] Figure: 5 Absolute Income statement of Snap-on during the year 2012 Source: (Snap-on Incorporated, “2013 Annual Report”) [All the amounts in $ millions] Figure: 6 Absolute Income statement of Snap-on during the year 2013 III. LIQUIDITY RATIOS According to analyse the liquid ratio of the Snap-on, it can asserted that it denotes the ratio between the liquid assets of Snap-on and the liability of Snap-on towards a bank or any other financial institute. It can be asserted that liquidity ratio is the proposition of financial aggregate, which can suggest the overall capability of a firm in order to pay its obligations in the market place. The higher percentage ratio suggests better ability to carry total debt by a company. Source: (Snap-on Incorporated, “2013 Annual Report”) [Amounts in US$ millions] Figure: 7 Liquidity Ratio of Snap-on during the Last Three Years From the above statement, in order to analysis the liquidity ratio; it can be asserted that the company has fortified its liquidity proportion in a massive manner during last few years. Sources: (Stanley Black & Decker, “2012 Annual Report”; Stanley Black & Decker, “2013 Annual Report”) [Amounts in US$ millions] Figure: 8 Liquidity Ratios of Stanley Black & Decker during the Last Three Years From the above figure, it can be commented on the trend that the liquidity ratio is the most essential factor for any organisation. In order to maintain working capital and keep the flow of business operation smoothly Snap-on needs liquidity and has ensured steadily progressive scenario related to this index. Thus, in order to compare the liquidity ratio with a similar industry competitor such as Stanley Black & Decker, it can be evidently asserted that the liquidity ratio of company Snap-on is comparatively much higher than that of Stanley Black & Decker. Apart from this, it can be also evidently affirmed during the year 2013, Stanley Black & Decker Company’s total revenue growth rate around 8%, whereas Snap-on has listed 14.4% growth over the last year performance (Snap-on Incorporated, “2013 Annual Report”; Stanley Black & Decker, “2013 Annual Report”). IV. LONG-TERM DEBT PAYING ABILITY RATIOS Long-term debt ratio linked with a company’s operating cash flow and total debt. The purpose of determining long-term debt ratio is to identify the ability of covering total debt by a particular company with its yearly cash flow. The higher percentage ratio suggests better ability to carry total debt by a company. Source: (Snap-on Incorporated, “2013 Annual Report”) [All the amounts in $ millions] Sources: (Stanley Black & Decker, “2012 Annual Report”; Stanley Black & Decker, “2013 Annual Report”) [Amounts in US$ millions] Figure: 9 Comparison of Long-term Debt Ratio between Snap-on and Stanley Black & Decker during the Last Three Years From the long-term debt trend perspective, the proportion of Snap-on’s long-term debt compared to its available capital is more. Thus, for Snap-on, it can further invest in the future with the aid of this positive index. By using this ratio, investors can identify a specific company and compare it to others in order to analyze the companys risk exposure. From the above figure (9), it can be evidently asserted that Snap-on’s capability of covering total debt is higher than that of Stanley Black & Decker. Moreover, it can be also affirmed that the potentiality of covering debt has been increasing from last three years; whereas Stanley Black & Decker’s covering ratio has been fluctuating. V. PROFITABILITY RATIOS Profitability ratio denotes the performance of a firm, where profit margin is compared with sales volume. The higher percentage of profitability ratio of a company suggests that more dominance over the market for that company. Source: (Snap-on Incorporated, “2013 Annual Report”) [All the amounts in $ millions] Source: (Stanley Black & Decker, “2012 Annual Report”; Stanley Black & Decker, “2013 Annual Report”) [Amounts in US$ millions] Figure: 10 Comparison of Profitability Ratio between Snap-on and Stanley Black & Decker during the Last Three Years From the above figure (10), it can be clearly observed that Snap-on’s profitability ratio is higher than that of Stanley Black & Decker. Thus, it can be apparently affirmed that growing chances of Snap-on has been comparatively better than Stanley Black & Decker. Besides, it can be also highlighted Snap-On possesses greater chances of rendering greater returns to its shareholders which in turn can ensure further growth for it in the long run. Moreover, Stanley Black & Decker’s earning per share was $4.98 during the year 2013, whereas Snap-on’s diluted earnings per share was $5.93 (Snap-on Incorporated, “2013 Annual Report”; Stanley Black & Decker, “2013 Annual Report”) VI. CASH FLOW ANALYSIS It can be asserted that during business operation, an organization need to maintain record of cash inflows and outflows along within timely manner in order to analyse financial issues and for understanding the comparison. Moreover, it can be evidently asserted that cash flow can help an organisation to understand and predict sources of funds for the subsequent time periods. Thus, it can be asserted that cash usually designed by an organisation in order to monitor the accuracy of its business operation. Source: (Snap-on Incorporated, “2012 Annual Report”; Snap-on Incorporated, “2013 Annual Report”; Stanley Black & Decker, “2012 Annual Report”; Stanley Black & Decker, “2013 Annual Report”; Makita Corporation, “2013 Annual Report”) [Amounts in US$ millions and Japanese Yen] Figure: 11 Cash Flow Comparisons between Snap-on, Makita Corporation and Stanley Black & Decker during the Last Three Years From the above analysis it can affirmed that the overall cash flow of Stanley Black & Decker is much higher than Snap-on, but, during the year 2013 the company has seen about 20% decrease on the overall amount comparing to the earlier year. On the contrary, Snap-on cash flow has been comparatively lower than that of Stanley Black & Decker. However, the company has still maintained its competitive advantages through constantly growing its overall cash flow. On the contrary, it has been also observed that Makita Corporation’s recent cash flow is lower than that of Snap-on. During the year 2013, free cash flow amount was ¥ 22,950 million, which suggests that the company’s actual cash flow was $224.96 million Dollar. Thus, it can be asserted that there is a high preference of shareholders investment on the company which in turn is beneficial for its long-term sustainability (Snap-on Incorporated, “2013 Annual Report”; Stanley Black & Decker, “2013 Annual Report”). VII. INDUSTRY ANALYSIS WITH SPECIFIC RATIO AND DATA According to the analysis, it has been identified that the company Snap-on operates its manufacturing operation under the appliance and tool industry. Thus, it can be stated that the company Snap-on has contributed its performance towards the appliance and tool industry in order to raise the industrial performance significantly. The appliance and tool industries several ratios, data and performances are shown below: Source: (CSI Market, “Financial Strength Information & Trends”) Figure: 12 Appliance and Tool Industry Performance During Last Five Quarter VIII. VALUE FIRMS STOCK PRICE AND PROSPECTS During investing money on stock market, generally it has been observed that most of the individuals and organisations have the tendency of evaluating a firm according to its performance, existence and assistance through the return on investment also known as dividend. According to define value stock, it can be apparently asserted that the firm, having commendable financial performance and providing adequate return to investors have greater stock price and prospects. Simultaneously, it can be asserted that investors who are buying value stocks observed to receive high return in their investment. Apart from this, it has been also perceived that values firms stock has been also rewarded those investors by offering dividends in return at least once in a financial year. It has been observed in case of Snap-on as well as in case of its competitor Stanley Black & Decker. Both of these companies market movement for the last one year are illustrated below: Source: (MarketWatch, “Snap-on Inc”) Figure: 13 Market Movement of Snap-on during the Last One Year Source: (MarketWatch, “Stanley Black & Decker Inc”) Figure: 14 Market Movement of Stanley Black & Decker Inc during the Last One Year According to stock movement it can be easily understandable that the company Snap-on has gained its value consistently on the equity market during the last one year. On the contrary, Stanley Black & Decker has gained its value during the end of 2013. But, unfortunately the company has incurred huge down fall on its value in equity market. Moreover, it can be also evidently affirmed that recently during the middle of 2014 Snap-on has been maintaining its stabled growth rate and competitive advantages. IX. CONCLUSION From the above analysis, it has been witnessed that Snap-on has been one of the most experienced tools and equipment manufacturer in the global market. Over the last few years, the company has maintained stable growth rate in terms of liquidity, debt coverage and profitability ratio significantly. Apart from this, according to analysis it has been explored that the company has increased its cash flow and working capital management. Through which the company has contributed towards the growth of the overall industry across the globe. In this regard, Snap-On for the past there years has maintained utmost sincerity with regard to product and service quality which in turn has enabled it to attract larger shareholders and investors preference. This positive scenario is reflected in the company’s steady progress in its stock price. Furthermore, in case of equity market through the help of consistent growth rate Snap-on has attracted the attention of stakeholders and maintained its competitive advantages. Thus, in order to conclude the discussion, it can be recommended that investors should invest in purchasing 10,000 shares in the company Snap-on. It has been recommended as the analysis of the company’s last five years total shareholder return has been constantly rising than any other competitors within the industry. Accordingly, it can be stated that there lays a greater prospects for the investors to acquire fair and commendable return on the amount invested by them. Works Cited “Financial Strength Information & Trends”. CSI Market. 2014. Web. 6 Jun. 2014. “Snap-on Inc”. Market Watch. 2014. Web. 6 Jun. 2014. “Stanley Black & Decker Inc”. Market Watch. 2014. Web. 6 Jun. 2014. “Snap-on Announces Fourth Quarter and Full Year 2013 Results”. Snapon. 2014. Web. 6 Jun. 2014. “2013 Annual Report”. Makita Corporation. 2013. Web. 6 Jun. 2014. “2013 Annual Report”. Snap-on Incorporation. 2014. Web. 6 Jun. 2014. “2012 Annual Report”. Snap-on Incorporation. 2013. Web. 6 Jun. 2014. “2013 Annual Report”. Stanley Black & Decker. 2014. Web. 6 Jun. 2014. “2012 Annual Report” Stanley Black & Decker. 2013. Web. 6 Jun. 2014. Wang, J. “Snap-on Tools Hits the Nail on the Head”. 2008. Web. 6 Jun. 2014. Wyse, S. E. “Advantages and Disadvantages of Customer Satisfaction Surveys”. 2012. Web. 6 Jun. 2014. Read More