Strategic Analysis of Johnston Press Plc Business Environment - Essay Example

? Strategic Management Inserts His/Her Inserts Grade Inserts 16 May Johnston Press Plc is one of the top print industry players in the United Kingdom. The company suffered from the economic depression of 2009. Johnston Press Plc strategically searched for ways to hurdle the economic depression of 2009. Specifically, the company is strategically located in Edinburgh Scotland. The company is one of the top newspaper publishers in the United Kingdom. Johnston Press was able to profitably recover from the 2009 economic debacle by generating profits in 2010. Strategic analysis of Johnston Press Plc business enviroment using PESTLE and SWOT analysis; PESTLE Political. Besley (2008) emphasized the company’s political environment is stable. The United Kingdom government is one of the most stable and easily predictable governments in the world today. Economic. Economically, the year 2010 is characterized by retrenchment. The company’s Limerick plant at Leader Print Ltd has finally closed shop after several years of trying to keep its revenues higher than the company’s daily operating expenses. Social. Gibson sings (2010) The company has been in the forefront of the United Kingdom society. The society has been used to reading the news from the Johnston Press printing plants for several years. In fact, Johnston Press is the second largest printing company in the United Kingdom today. Technological. The company has incorporated digital advertising as one of its biggest revenue generators. Digital advertising and publishing has many advantages. One such advantage is the company’s borderless sales probabilities. Clients from any part of the world can visit the company’s website and patronise the company’s publishing and other related services. Legal. The company has been complying with all the employments laws, work-related laws and other statutes. Environmental. The company continues to adhere to the environmental laws of the United Kingdom. The company does not pollute the country’s pristine rivers with its printing company’s waste products. SWOT Strengths. Johnston, (2010) reiterated during 2010, advertising categories and geographic market segments have performed profitably well. Property advertising has bounced back to a 9.5 percent growth from the 2009 accounting period’s property advertising debacle. Consequently, house sales have started to increase as compared to the 2009 house sales. Understandably, the 2009 low house was had been triggered by the United States-based financial crisis. Further, cost reduction that included a reduction from 5,640 heads to only 5,417 heads, has augmented the company’s profitability ratio. The company’s single editing process has increase production performance. The company’s newspaper titles include Batley News, Halifax Courier, Glasgow South and Eastwood Extra, Carrick Gazette, and Isle of Man Courier. Weaknesses. Johnston (2010) emphasized the company’s print advertising industry is been set to second place. The Johnston Plc’s print advertising has been losing to the new and innovative digital advertising market segment. The economic debacle has cut the company’s advertising revenue by a significant percentage. Opportunities. Johnston (2010) explained the company should focus on increasing digital sales performance, the internet and computer technology has metamorphosed the printing business into the digital age. In fact, the company’s digital sales growth had increased by ten percent during 2010 when compared to the digital sales growth in 2009. The company should increase its focus on selling of its display inventories. The early part of 2010 shows a slow but sure recovery from the debilitating crunch of the prior year’s unprofitable economic depression. Threats. Johnston (2010) theorized the lack of any influential increase in the economic activity in the Republic of Ireland threatens the company’s plans to increase it overall sales performance. Using Porter's five forces analysis, the research focuses on Johnston press plc business activities and the environment; Bargaining power of suppliers. Khan (2006) theorized the suppliers of Johnston’s printing materials offer the most reasonable selling prices to the printing company. The company chooses the supplier offering the best benefits at the most reasonable purchase prices. Consequently, the Johnston Company selects its list of suppliers based on their delivery promptness, quality of service, quality of product, and reasonability of the purchase prices. Bargaining power of Customers. The clients of the Johnston Press Plc are eager to increase their purchases if they see a discount or sale sign posted in front of the store’s doors, in radio stations, newspapers, television programs, bus and train advertising with lack. Competitive Rivalry with the same industry. The company’s major rivals are in the other companies engaged in the publishing industry. The company’s major competitor, Pearson Plc, has a price earnings ratio of 708.35. Another competitor, Informa Plc has a price earnings ratio of 2,636.97. A third competitor, Reed Elsevier Plc, has a price-earnings ratio of 2,053.51. These companies outperform Johnston at this time of the year. Threat of New Entrants. The company does not fear the entry of new entrants. The Johnston Company has more than 300 items published under the Johnston brand. Most of the items are books dedicated to the improvement of the book readers’ and online readers’ books and online resources. The entry of new entrants on a small scale basis would not create a significant dent in the Johnston Press Plc’s current revenue data and profitability statistics. Threat of Substitute Products. Moyer (2010) reiterated the company does not fear a major threat to the company’s belonging to the cream of the crop in the United Kingdom press market segment. The company’s substitute alternatives, email messaging, would be classified as unscholarly. People prefer to read the books of persons who are experts in their field. Likewise, the competing online news distribution, blogging, is not at par with reading books written by experts in one field or another. 3. Adopting financial ratio analysis, the financial performance of Johnston press Plc on different year basis from 2007 to 2010 and compare and contrast each year performance with recommendations. 2009 2008 2007 Return on Shareholders Funds (%) -30.75 -83.54 18.24 Return on Capital Employed (%) -10.17 -31.42 7.00 Return on Total Assets (%) -9.00 -27.98 6.58 Profit margin (%) -26.58 -80.70 20.53 Based on the above financial statement analysis, the company’s financial performance for 2008 shows that the company’s return on total assets is -27.08. This is indicates a poor financial performance when compared to the return on total assets for the prior year, 2007. Likewise, the company’s 2009 return on total assets is -9. This is a better performance data when compared to the return on total assets for the year 2008 at 027.98. The company’s 2008 profit margin is lower than the prior year’s 20.53 profit margin ratio. This shows that the company’s net profit is 20.53 percent of the company’s total assets. In the same manner, the company’s 2009 profit margin is -26.58. This is a better result compared to the profit margin during the prior year, 2008. Likewise, the company’s return on shareholders’ funds has improved in 2010 when compared to its 2009 performance. The 2009 return on shareholders’ funds is -30.75 is better than the prior year’s return on shareholder funds of only -83.53. The company’s 2007 return on capital employed for 2007 shows the company’s best financial performance at 18.24. The company’s return on Capital Employed of 2009, at -10.17 shows a better financial picture of the company when compared to the e return on capital employed in 2008 at only -31.42. However, the 2007 return on capital employed show a better performance at a score of 7. Using another financial statement source, http://www.johnstonpress.co.uk/jpplc/investorcentre/financialsummary/5yearsummary/, the company’s gross profit ratio for 2009 is 17 percent. The company’s 2010 gross profit ration is 18 percent. This shows that the company’s 2010 gross profit data shows more favorable information at 18 percent. Likewise, the company’s 2009 net profit ratio is -0.204.This is lower than the prior year’s net profit ratio of only (-20388). 4. Strategically analyse and evaluate operating performance of Johnston press Plc in relation to its value-chain strategy adopted to attain it market target, positioning and segmentation. 2009 2008 2007 Net Assets Turnover (x) 0.38 0.39 0.34 Fixed Assets Turnover (x) 0.37 0.39 0.34 Debtors Turnover (x) 10.33 9.40 7.94 Debtor Collection (days) 35.35 38.85 45.96 …………………………………………………………………………………. http://www.johnstonpress.co.uk/jpplc/investorcentre/financialsummary/5yearsummary/ Comparing 2009 to 2010, Year 2010 2009 Fixed Assets Turnover 2.04 1.95 The company’s fixed assets turnover to 2010 is 2.04. This is higher than the fixed assets turnover. The above computation shows that the company’s operating performance is better in 2010 when compared to the 2009 fixed assets turnover of 1.95. The above operating performance data shows that the company did profitably well when using value chain management techniques in the online call –center and related business endeavors. And skills laboratory. The 2009 fixed assets turnover is only 0.38. The figure shows a less favorable picture compared to the picturesque lines under the short. In addition, the company generated a fixed assets turnover at. 37. The figure is slightly lower than the 2008 fixed assets turnover ratio of .39. However, the 2009 figure shows a better operating performance when compared to the company’s 2007 operating performance. The debtor collection figure shows that the collection data is unfavorably been stretched to less profitable levels during the 3 operating years, 2008 – 2010. Based on the above discussion, Johnston Press Plc generated profits in 2010. The company suffered from the economic depression of 2009. During 2010, the company was able survive the economic difficulties of 2008. Indeed, Johnston Press was able to bounce back from the 2009 economic debacle by generating profits in 2010. REFERENCES Johnston, 2010 Financial Statement, London, retrieved May 16, 2011 from http://company-profile.reportlinker.com/o0296138/Johnston-Press-PLC.html Johnston, 2010 Financial Statement, London, retrieved May 16, 2011 from http://www.johnstonpress.co.uk/jpplc/mediacentre/investorsnapshot/factsheet.jsp Besley, S. (2008). Essentials of Managerial Finance. New York: Cengage Press. Gibson, C. (2010). Financial Statement Analysis. New York: Cengage Press. Khan, M. (2006). Management Accounting. New York: McGraw Hill Press. Moyer, R. (2009). Contemporary Financial Management. New York: Cengage Press. Read More