Attractiveness of Investing - Origin Energy Limited - Case Study Example

INVESTMENT COMPANY REPORT Student Name: Student P number: Module: Module code: Submission deadline: Executive summary This is a company report via an account of attractiveness of investing with the origin energy limited particularly in the next two to three years. It is developed within a realistic methodology on the influential perspectives of the company’s investment opportunities. Through an analytical approach, the paper provides an analysis of the factors that add value to investing with origin energy limited. From this perspective, the report advocates on bringing out key driving factors in investment and accesses the accountability of those factors in bringing out a clear picture of the company’s future investment opportunities. Expected outcome of this report is provision useful data about attractiveness of investing in origin energy limited. That is, availability of better investment opportunities in the company and the guarantee of better future investment potentials. Particular emphasis is to aid the investment company’s board in decision making as regards to investing with origin energy limited. Table of Contents Table of Contents 3 Introduction 4 Political or regulatory factors 5 Main arguments about the regulatory factors influencing the Origin 6 Interpretation of arguments 6 Economic factors 7 Main arguments about the regulatory factors influencing the Origin 7 Interpretation of arguments 8 Socio-cultural factors 9 Main arguments about the socio-cultural factors around the Origin 9 Interpretation of arguments 10 Technological factors 11 Main arguments about the technological factors influencing the Origin 11 Interpretation of arguments 12 Corporate Social Responsibility (CSR) issues 12 Main arguments about the corporate social responsibility of the Origin 13 Interpretation of arguments 13 Recommendations 14 Conclusion 15 References 15 Australia's RBA Cuts Rates, 2012. “The wall street journal on Australia’s Interest rates” 16 Dorsch, G 2012. “Analyzing the Australian Dollar - Up, Down, and Under.” 17 Introduction Investment is one of key business activities that have made companies gain essential resources to enhance productivity in their specialized industry. Most organizations and companies prefer achieving more investors in their operations thus immensely maximizing their production or operation (Mayo 2011, P.105). In actual sense, investment refers to outlaying of cash or capital to a certain company, individual, or organization under a certain agreement mainly with an aim of gaining an income or profit. However, in circumstances where a thorough analysis of investment opportunity has not been done, investment companies experience extreme losses (Salacuse 2008, P. 88). Balancing of the company’s investment opportunities against the risks is highly crucial for an investment company. In addition, this should include analysis of the corporate social responsibility issues of the company such as accountability of its stakeholders. These are most influential factors to the attractiveness of investing in a company. As stated earlier, this report focuses on attractiveness of investing with Origin Energy limited particularly in the next two to three years. Origin energy limited is one of the leading incorporated energy Production Company in Australia (Taranaki 2011, p. 111). It mainly deals with exploration and production of gas and oil products. It also focuses on generation of power and retailing of energy in the Australian region (Rojey 1997, p. 24). Specifically, Origin energy limited is the leading gas production company in the Eastern part of Australia. It is also the prevalent retailer of green energy in the country and has great reserves in renewable energy technologies (Reade 2003, p. 203). Although Origin appears to be providing fantastic investment opportunities, there are specific uncertainties that every investment company has to put into close consideration. One of the major risks experienced at the Origin include, volatility in energy prices. The markets for Origin’s sells of energy products are highly competitive leading to descending price pressures and losses in client accounts thus affecting the company’s profitability (Australia 2010, p. 56). However, the company’s management does a lot in ensuring that the business does a well in this severe business competition environment. This report begins by outlining the subject matter of the investment opportunity. The next section analyzes the influential factors for attractiveness of the company’s investment opportunities. It addresses factors such as the country regulations, economy, socio-cultural effects, technology, and corporate social responsibility. Finally, the paper provides some recommendations and a conclusion based on the attractiveness of investing with Origin energy limited. Political or regulatory factors A country’s political system or regulatory policies are exceptional essential in determining performance of any business entity (Culpepper 2010, p.34). In reality whenever, a government’s policy is laid out, it creates a scenario whereby a business has to adapt to that policy for it to undertake its operations without any interference else, those policies can lead to great failure in the company’s operations (Lucas 2000, p. 59). Therefore, it is always vital that the company finds a way of meeting those regulations and still maintain its business objectives. Main arguments about the regulatory factors influencing the Origin The Australian government has been keenly evaluating the effect of energy production to the country and the globe at large. This has included introduction of carbon tax policy, which ensures that every company pays for the carbon emitted. In ensuring this, it means Origin either has to reduce its production so that to lower the charges paid. If it takes this move, then its productivity will be getting low. The other option is to increase prices of energy products to balance with the carbon tax required by the government. However, since the year 2005, Origin energy limited has made the chief objective of its operations is to aid in avoiding environmental degradation by reducing the amount of poisonous gases emitted (Sustainability report, 2005). This means, the Origin is well prepared to adhering with the government regulations. Interpretation of arguments From the outset of Australian political regulations, it is clear that it imposes a great risk in the success of the company. However, it clearly comes to every one’s mind that Origin energy limited is well prepared to maintain its operations while adhering to the policy. Since its main aim to lower emission of these gases, the reputation of the company to the government is very concrete (Schrems 2004, p.10). This is an extremely significant move for every company’s success. In fact, it shows that Origin foresees issues that can affect its operations and hence make earlier moves. In addition, it makes it easy for the Origin gain earlier updates of any expected government regulations thus prepare themselves as early as possible (Directors report of the year, 2012). It further means that its competitors will face great challenges since they had not taken an earlier way of balancing with the policy (Beder, S 2006, p. 70). In this sense, Origin’s ability of attracting more customers is highly in the rise. Therefore, it is essential to foresee the investment opportunity available at the Origin energy limited (Mullerat and Brennan 2011, p.80). Economic factors The success of every company is usually determined by the status of its economy (Kriesler 1995, p.43).Furthermore, for a company to have a fantastic economy, the whole country’s economy is a major determinant of a particular company’s success in stabilizing its economy. Most significant country issues that affect a company’s success are the Gross Domestic product, interest rates, and the value of the country’s currency and the general country economy system (Menger et al. 2007, p. 94). When these factors are moving as per a country and company’s organization goals, the economy of a country will be characterized by high value employment opportunities, comprehensive interest rates and interest rates that are manageable to an organization. Main arguments about the regulatory factors influencing the Origin Origin energy has been largely making sure that it empowers its economic status and that of the country is kept at the forefront of its goals. The country’s gross domestic product has been experiencing positive advancements seasonally. On a yearly basis, the gross domestic product has been increasing by 3.7% (Australia GDP Growth Rate, 2012). Consumer prices are well placed for the business operations in the country thus leading to a valuable domestic economy. Major cause of this growth is because of household consumption of which a large part came from use of energy products such as electricity. In addition, the country’s currency, Australian dollar, is one of the major currencies in the world. It is the fifth most actively traded currency in foreign exchange markets (Dorsch, 2012). Although the country faces variable determinants of its economy by factors such as international downfall of market for its exported products, the inflation rate in Australia is exceptionally low. In the second quarter of the year 2012, the inflation rates were as low as 1.2% (Australian inflation rate, 2012). These figures make the economy of the country at good a position thus creating a fantastic business environment for the Origin. Lastly yet importantly, the country’s central bank has lowered its interest rates imposed on business operations conducted in the country (Australia's RBA Cuts Rates, 2012). This has been because of reduction in cost of commodities in the country and the fact that investment rumble has been highly vanishing. Interpretation of arguments In actual sense, it is clear that, the economic status of a country is a great determinant of a company’s success. Availability of an excellent gross domestic product in Australia provides the origin with a good business environment. Furthermore, since the inflation rates in the country are remarkably low and that the currency of the country is highly recognizable, it is clear that the country’s economy is well balanced. All these factors clarify that the Origin has a good future in its business operations thus providing attractive investment opportunities. It also ensures that the Origin maintains a large number of valuable employment opportunities to the citizens. However, the major risk running in any investor who pays attention to details is that, since commodity prices are going low, there is a fear that Origin’s business operations are affected. In addition, the fact that mining investors are running away from the region, it creates several question marks. Although, this may sound as a huge a predicament, the reality is, the country is well prepared for, and that is why it lowered its interest rates to aid companies balance their accounting books. Thus, this is maintains the Origin’s business activities and clarifying that the company has immense opportunities in ensuring its success (Sloman, Norris and Garratt 2010, p. 60). Socio-cultural factors For any business entity to meet its goal of being a competitive business, it is exceptionally vital that socio-cultural factors influencing its success are put into close consideration (Blackburn 2007, p.88). To be specific, it entails the effect of communal cultural practices to the culture and performance of a company (Edwards 2010, p. 180). The socio-cultural interaction between the society and a company is therefore vital for operational success of a company. Through connection with the community and the company’s employees, a company should do its best and gather the major cultural practices in a specified community. It aids in ensuring cooperation between the company and the society evolving around it thus creating a promising future (Stern 2007, p. 54). Main arguments about the socio-cultural factors around the Origin Origin energy limited has developed a well-organized socio-cultural environment in its general operations. A major culture of the Aboriginal heritage communities is that their heritage management beliefs are employed within any company that invests in their region. The Origin management allowed for to impose these agreements and involved traditional owners. This ensured preservation of indigenous cultural heritage thus motivating the communities in giving their best while working with the company. In addition, this ensured that they clearly address the importance of sustainability to the organization (Sustainability report, 2005). That is, for the company to be sustainable then all cultural beliefs are kept at the forefront so that to win the support of indigenous Australians. In addition, at the end of every year, the Origin management provides its culture of holding a ceremony of celebrating its achievements. Furthermore, whenever a new plant is opened, a ceremony is held. Indigenous Australians, traditional owners, community heads and the whole group of stakeholders usually attend these ceremonies. This culture by the Origin to include the society in its major activities has greatly influenced them into buying products from the company. This immensely provides a positive view from both government agencies and Australian citizens thus increasing its chances of making great sales. Interpretation of arguments Clearly, the outset of Origin’s socio-cultural environment is well strategized to ensure better business of the company. It provides a bird’s eye of the status of the organization in the next two to three years. That is, there is almost a hundred percent guarantee that origin energy limited has a positive future of its business operations (Parr 2009, p.50). Whenever the society and government agencies are positively minded about a company’s business operations, then it can greatly aid in ensuring the success of the company. Considering the fact that the Australian citizens are given a chance to provide their traditional leaders to take part in major company activities, it provides a wide room for attraction of large number of customers. In addition, developing a culture of involving the society and government agencies in the company’s ceremonies greatly enhances a converged connectivity between the company and its major stakeholders (Willard 2009, p. 20). Generally, Origin has a great future in terms of gaining more clients and at the same time upgrading its socio-cultural environment. From this sense, it is clear that the Origin adhering to the socio-cultural requirements thus providing great opportunities of marginalizing its business operations in the next two to three years. Technological factors In the current speedy revolving business world, keeping in touch with technological advancements is vital for the success of any business industry. It is the main way of achieving sustainable competitive advantage between competing businesses (Rodenburg 2008, p.203). A company that keeps technological advancements as key to its operations has great chances of doing well in any competitive business environment. However, sluggishness in being touch with technological advancements leads to great downfall (Cruise 2001, p. 112). Particularly, in development of energy related products technological advancements are highly on the increase (Clean energy future 2011, p. 204), therefore, whenever a company is left behind technologically, it becomes more prone failure. Main arguments about the technological factors influencing the Origin Origin energy limited has been trying its best in ensuring that it remains in touch with current and future expectations of technological advancements specifically in the energy sector. This is to ensure that it maintains its competitive advantage of delivering quality products and in due time. The company has employed the technology of combined cycle gas turbine in its production. This technology uses gas and steam turbine cycles. These turbine cycles are done on a single plant to produce quality electricity under high conversion efficiencies and yet low poisonous gas emissions (Sustainability report, 2005). In addition, the Origin has introduced a new technology of SLIVER solar cell. This technology reduces amount of silicon that is used in solar panels thus allowing innovation in solar applications (Origin energy, 2012). This is essential in ensuring that, it provides diversity in production of energy by meeting the requirements of those customers who prefer solar energy. These technologies are greatly reducing amount of carbon emitted thus meeting government requirement of lower carbon emission. It increases company’s reputation to the government and its citizens thus increasing its sales. However, the major risk in these technologies is that, implementation and advancement are extremely costly. Interpretation of arguments It is clear from the above analysis that the Origin is highly on advancement of its production strategies. It is greatly making sure that it uses the potential available in the current available technology plus providing room for more innovations. This ascertains that Origin energy has a great future in its operations and attraction of both investors and customers. Although there is a significant risk in full adoption of the technology, the reality is that, if fully implemented, the company will provide quality products in due time and thus attracting more customers to its available products (A Report to stakeholders, 2002). This is a great opportunity thus cancelling out the risk. The essential part is that more capital is poured to the technology sector and results into great profits and providing room for innovations in the energy sector. Corporate Social Responsibility (CSR) issues Corporate Social Responsibility is a major determinant that enhances the performance of a company. When respective corporate members of a company work together in ensuring achievement of a company objective, it creates great chances of it gaining great profits in its business transactions. This increases integration between company stakeholders and the company itself (Banerjee 2007, p. 207). Good corporate social responsibility bolsters internal communication thus streamlining productivity of a company. In addition, it engrosses principle controlled decision-making process thus ensuring a joint decision is made whenever addressing an issue concerning an organization (Effross 2010, p.90). However, if corporate members have contradictory views on how to run company operations, it exposes the company to great losses in its business transactions. Main arguments about the corporate social responsibility of the Origin As stated earlier, Origin energy limited has a fantastic Corporate Social responsibility mechanism. It has been made a voluntary need for an employee to conduct the company’s corporate social responsibility needs (Sustainability report, 2005). Employees are largely motivated to play a significant part in community interaction activities. This forms a great part of the company’s corporate community involvement (Research and markets, 2006). To promote corporate social responsibility, the origin has included an offer to its employees where great discounts are offered for employees consuming products of the company (CSR limited staff offer, 2012). However, a key risk is that the offer is has limited to specific employees thus making other employees question the corporate social responsibility of the company management. This issue is highly vital to be addressed earlier so that to ensure all groups of employees give their best without any bad feeling to the management (Effross 2010, p.90). Interpretation of arguments From the above argumentation, it is vital to note that if Origin Energy limited maintains the status of its Corporate Social Responsibility, then there is a clear view that the company has a great future of its business activities. When all stakeholders are positively working together, the company’s business actions provide success opportunities (Stilwell and Jordan 2007, p.50). However, a great corporate social responsibility issue encompasses the idea whereby a corporate social responsibility offer is made only to a limited group of its employees (CSR limited staff offer, 2012). Clearly, the other groups of employees who do not enjoy this offer are at a bad thought about the company’s management. Conversely, with some few reviews of the corporate social responsibility policy, the Origin is highly on the verge of attracting great investment opportunities in the future. Recommendations Based on analysis of all the above influential factors related to the origin, the following are most essential recommendations to aid the investment company board in its decisions. The whole board should make a thorough evaluation of the report and take close consideration of the risks and opportunities available at the Origin (Siddayao 1993, p.98). Immediately after analysis, contact should be made to the origin for any available investment chance since there is a possibility of great competition among investors. Time to time analysis of the status of the company should be conducted since there great chances that the investment opportunity at the company is going to be immense. Investing in the technology sector should be placed at the forefront of the investment objective because great determinant of the companies energy productivity (Burke 1999, p. 246). Finally yet importantly, it should be ensured that investment in provision and maintenance of machinery to the company is kept as a major objective. Conclusion Clearly, several factors influence the attractiveness of investing in the Origin energy limited. However, a thorough evaluation of the risks associated against the available opportunities shows that the Origin has great strategies to cancel out the risks. It is therefore vital, that investing in the Origin is conducted as early as possible to ensure that an early chance is never lost because in the near future, more investors will be interested in the Origin (Mallon 2005, P .156). References A Report to stakeholders, 2002. Origin energy limited Sustainability report 1-38. 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