The Success of a Business - Essay Example

BUSINESS SITUATION ANALYSIS Assessment Item 3 BSB115- Management Introduction Success of a business is literally an effect of pool of good decision making. In everyday operation of the firm, executive and subordinate employees interact through decision making to ensure success of their company. Bronxe Yachtstm, a privately owned business making luxury yachts is not an exception of the same. The company target consumers are mostly middle to upper-income individuals. The company makes boats by hand and has the parts supplied by other firms. Their yachts are mainly sold on order basis. The company is not looking to compete with others in this industries however for the past eighteen months the currency exchange rate for the company’s headquarters branch in Australia has experienced a steady reduction. This has come with a lot of implication on the price of production in Australia branch and thus the ability of the company to compete with emerging-market producers from Australia production facilities. This report aims clearly to define this problem or situation for the business and keenly analyze the situation to compare the implication from planning and organizing perspective. The report will then provide its recommendation in a form of a step-by-step action plan that the CEO of the company should take. Definition of the Situation The world market today is a global village (Cadle & Eva, 2014). This means every business in its planning today faces a lot of constraints that must be incorporated in these ventures. Some of these problem comes with differences in price of a currency of the mother firm’s country and those of other countries with it has business relations. Exchange rate is defined as the cost or worth of one currency as compared to other currencies (Cadle & Eva, 2014). This price can either rise or reduce depending on the prevailing economic atmosphere in the country. A fall or reduction in exchange rate in a country is mostly referred to as depreciation or devaluation depending on the kind of exchange rate system adopted by the country in which the business is established (Cadle & Eva, 2014). Reduction in currency exchange rate, therefore, makes the currency of the country in question lower in value as compared to currencies of other countries. A decrease in currency exchange rate, therefore, will mean that the county’s export becomes cheap in a global market as compared to imports of the same country from other countries (Cadle & Eva, 2014). Bronxe Yachtstm, a privately owned business, has in the recent past faced this interesting problem through their headquarters branch in Australia. The company target consumers are mostly middle to upper-income individuals. The business makes boats by hand and has the parts supplied by a third party. Their yachts are mostly sold on order basis. The company has in the recent eighteen months experienced a reduction in Australian dollars in relation to currency of other countries with which it has business relation. Being a company that makes its boats mostly from imported materials, this has increased the company’s cost of production over the same period. The increase in cost of production with the same profit margin means a reduced profitability of the business ventures of Bronxe Yachtstm. The reduction has also given its competitor from within but with different business plan advantage in terms of sales and profitability (Cadle & Eva, 2014). The situation has interrupted the firm’s planning of its financial resources and thus proper functioning of its operation. Every business aim high profitability and a strong edge over its competitor something that the current currency situation denied Bronxe Yachtstm. For a smooth operation and greater profitability, therefore, the company need to make positive steps to address these shortcomings associated with a reduction in currency exchange rate in Australia (Cadle et al. 2014). Situation Analysis Reduction in exchange exposures for Bronxe Yachtstm is among the three problems that totally disorient its planning and organizing its daily operation. These risks can be classified as transactional, economic and translational risk (Cadle & Eva, 2014). Transactional risks are those risk associated with its daily actual transaction related to its receivables or exports, imports and repatriation of dividends. Economic risk on the, on the other hand, represents a threat to Bronxe Yachtstm’s present values of future operating cash flows from variation of currency exchange rate (Cadle & Eva, 2014). Finally, translation risk refers to exchange rate risk reflected in the firm’s balance sheet and it related to the company’s valuation by other prospective partners. These risk influence smooth planning and organizing of the firm’s daily operation as it seek to ensure better performance and higher profitability (Cadle & Eva, 2014). Every management primary function involves designing one or more detailed plans to attain the equilibrium between the resources at its disposal and the desired goals of the firm (Cadle & Eva, 2014). This is done through planning that help in identifying goals to be achieved, help identify measures to achieve them and directs the procedures of achieving them. Since planning ensures proper usage of the resources at hand, a reduction in currency prices will significantly influence the possible decision to be made concerning profitability (Cadle & Eva, 2014). Organizing, on the other hand, involves identifying and classifying a task to be undertaken by employees. It, therefore, defines and delegates responsibility and authority and ensuring a conducive relationship for employees to work efficiently in ensuring higher profitability (Cadle et al. 2014). It is through proper organizing that a firm will, therefore, assemble required resources to achieve both its short and long-term goals. Reduced currency exchange rate, therefore, affects how Bronxe Yachtstm will assemble resources needed for its operation (Cadle & Eva, 2014). Reduced currency exchange facing Bronxe Yachtstm evidently triggers a lot of contextual factors that will influence its operation. First the situations will increase production cost facing the firm. The increased cost of production will trigger increased prices for the boats and thus low demand for the firm’s products (Cadle and Eva, 2014). The depreciation of a currency facing the firm will also reduce its market power by boosting its competitor’s potentials. This will mean a reduced profitability of the Bronxe Yachtstm ventures in Australia (Cadle and Eva, 2014). Conclusion It is evident from the analysis of the problem that reduced currency exchange rate carries a lot of threats to the smooth operation of Bronxe Yachtstm. The firm at the moment mainly depend on raw materials from third party and thus has low control over their cost. There is a great need for proper planning and organization the firm’s current resources to ensure a higher profitability amidst the situation. The company, in order to address the situation, can, therefore, apply management technique pertaining to customers to ensure they continue having Bronxe Yachtstm as their preferred boat supplier. The paper in the recommendation part will use the SMART method to give a clear way forward the firm’s management can follow, through the above technique, to ensure continued profitability and competitiveness of the company amidst the situation. Recommendation Developing sound and mature goals is vital for the profitability of any firm, this objective will help employees work with a definite objective in mind and helps managers to in mitigating the uncertain market situation (Cadle & Eva, 2014). Bronxe Yachtstm is faced with a problem of low demand for its products and reduced competitiveness due to reduced currency exchange rate given that it imports most of its raw materials from a third party. To help boost demand for its boats, the firm needs to take a management technique pertaining to customer. These measures must include ways to keep the current clients and the same time attracting new customers. The paper, therefore, recommends a SMART goal for the firm to help ensure proper mitigation of this problem. A SMART goal developed by this paper can be defined as one which is specific, measurable, achievable, result-focused and time-bound. In addition, to help solve this situation of low demand brought by the reduced currency exchange rate, the company must in the next twelve months through its marketing department introduce a proper after sale service for its customers. The after sales program must be operational on 3rd January 2015. To address the problem increased cost of production the firm should start buying through its procurement department half of its raw material from domestic suppliers. The policy to buy half of its raw materials from a domestic supplier should be implemented on 4th January 2015. With these two SMART goals Bronxe Yachtstm will ensure higher profitability and greater market power. Reference Cadle, J., & Eva, M. (2014). Business Analysis (3rd ed.). 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