Strategic Analysis and Context Evaluation - Boral Australia - Case Study Example

Strategic analysis and context evaluation- Boral Australia Name Institution Course Tutor Date Macro environment Analysis PESTL Analysis Political-legal factors Boral Australia abides the regulations established by government. The government participates in business through by setting laws and regulations which business enterprises must adhere to. Boral consumers are protected by a political agenda that influences the conduct of its business. Also, the government intervenes in business to help conserve the environment and set standard price for products. The management of Boral Australia ensures adherence to the ethical principles created by law when carrying out its various operations. Price intervention is challenging to the company given that it also relies of changes in production costs to set prices for products. This, forces the company to try and minimize the production costs so that meets these legal requirements. Boral Australia is committed to eliminating adverse effects to environment by abiding to environmental regulations, legislations and standards established by the government. It also reduces greenhouse gas emissions during operations and reduces waste disposal by using LEAN manufacturing principles. These are issues the company cannot avoid and has to comply with to them to maintain good relationships with the community. Economic factors The company depends on economic factors to operate the business well. The management has to consider the production costs such as labor and raw materials to make informed decisions. The cost of production changes over time and there is need to evaluate the likelihood of price fluctuations in the future. In addition, the price set determined by government through fiscal and monetary policies influences the cost of production. Competitors and suppliers pricing influences the market of Boral’s products. Fluctuations in foreign currencies, especially the US dollar affects Boral’s profitability. For, instance a recent decline in the Australian dollar against the US dollar increased profitability of US business. This means that management has to continue forecasting economic trends to predict price changes in building and construction products so as to adjust prices accordingly. Socio-cultural factors Culture helps to identify behaviours of a group of people. It displays a unique pattern of life in societies. People with similar culture always have own values, belief and customs that bring them together as a society. Boral Limited is not an exception either. Boral Limited approaches all its activities in a socially responsible manner. In deed, the way the company behaves in different market segments is guided by socio-cultural factors. Through diversity policy, Boral Australia ensures that it creates an inclusive workplace which is sensitive to diversity. The company acknowledges differences in ethnic background, religion, disability, race, gender, political activity, personal association and disability among other social aspects when conducting business. This is a good initiative and has help Boral Limited gain recognition across Australia. The company continues promote indigenous relations through the Indigenous Employment Plan which is to be implemented this year. In addition, Boral’s businesses continue to support community activities such as emergency services, charities, sporting and environmental groups to promote community partnerships. Technological factors Boral Australia has to continue adjusting to technological changes for it to survive in the market in the future. Being a building and construction company, Boral Australia relies on technology to manufacture different products including gypsum, building products, construction materials and cement. Adopting new technology will help the company produce modern products that satisfy customer needs, thus having a competitive advantage over its competitors. Normally, technology influences the type of products manufactured, the equipments involved in the production, as well as the operations to needed to run the production process. The company should focus on using most effective ways of production and this means introduction new technology at its various divisions. According to the Boral Annual Report (2013) Plasterboard Australia in Boral Gypsum division experienced lower costs of operation and distribution due to the upgrading of Port Melbourne plant at a cost of US$25m. The company should make a priority future technology innovation for the Gypsum business and other divisions. Overview Boral Australia has maintained good relationship with various stakeholders in the environment in which it operates. The most important thing for a business is to be able to merge well with the external environment. The company delivers what the environment requires without affecting the people. Business environment keeps on changing and Boral Australia has to continue developing strategies to enable it meet the market needs. Internal Analysis V.R.I.N Analysis Boral Australia has been able to establish strategic capabilities over time since its establishment. It has well structured ways of doing things and dealing with problems, a manifestation of strong rudiments organizational continuity. The company continues to compete favourable in the building and construction industry because its strategic capabilities meet the V.R.I.N criteria. Boral Australia conducts business in a way that provides value to its customers in all the regions it operates. In deed, this is the most source of competitive advantage to the company. Through innovation, the company not only takes advantage of, but also creates new opportunities that reduce environmental threats such as increased entry and competition in the industry. Another important aspect of Boral’s strategic capabilities is being rare. The advantage of Boral Australia is that it has established its brand and reputation in Australia which is highly protected by the Boral Property Group. This makes it difficult for competitors, especially new entrants to compete with Boral Australia. However, the company has to continue improving its brand and reputation to become rare in the industry. The company is in a strong position in the industry because competitors find it challenging to imitate its capabilities such as sales and marketing strategies. However, this does not mean that the company should remain static. It has to continue developing more capabilities that competitors such as Cement Australia, Daracon Group and Holcim Australia among others can imitate easily. Boral Australia’s capabilities are also based on people engagement and leadership. Through proper leadership, the company produces quality products that attract many customers. Therefore, it makes this capability non-substitutable through training and development program. Figure 1: Identification and Implications of Boral’s Strategic Capabilities Valuable Rare Inimitable Non-Substitutable Competitive Consequences Performance Implications Yes Yes Yes Yes Sustainable Excellent Yes Yes No Yes/No Non-sustainable Above Average Yes No No No Equal Competitiveness Standard No No No No Competitive Disadvantage Poor The Value Chain Analysis Boral’s competitive advantage occurs due its ability to identify what customers want and profitably meeting these needs, and even exceeding customer expectations. This is achieved through its value chain. Customers’ value develops over time along a chain of activities the company performs within that eventually lead to final product. Boral Australia performs a series of activities or processes including designing, production, marketing and delivery of products to create customer value. In addition, it supports these products to increase their value. Boral Australia operates two main categories of business activities in all the divisions that help add value to their end products. They include primary and supportive activities as indicated in the diagram below. Diagram 1: Overview of Boral’s Value Chain Primary Activities Boral Australia uses primary activities to directly transform inputs into end products. They are also used to deliver products to consumers and provide after-sales services. In deed, these activities are the line activities of Boral Australia. Primary activities include inbound logistics, operations, outbound logistics, marketing and sales, and service. These activities are coordinated in the company to ensure that customers receive products on time and in good condition. Inbound logistics involve handling and warehousing of materials. Before inputs are processed to final products, they are received and kept safely in the company’s operating divisions. This is the initial stage of production process. Operations involve transforming materials into end products. Operation activity is very sensitive as it determines how the final product will appear in terms of quality and quantity. Boral Australia uses a LEAN production system that gives it a competitive advantage. After the products are manufactured, the management processes orders and then supplies these orders to respective customers. Outbound logistics involves distribution of products to consumers. Marketing and sales involves management of the channel of distribution, communication and pricing of products. This is also a critical activity as the company has to be carefully on how it presents the products to consumers, especially as far as pricing concerns. Service in the company is unavoidable since there is always wear and tear in machines. Thus, the company has to install and repair parts. Support Activities As the term goes, these activities support primary activities as well as other support services. Supportive activities are handled by Boral’s staff functions including procurement, technology development, human resource management and firm infrastructure. The company purchases inputs, supplies, assets and other items through the procurement department. In addition, Boral Australia continues to develop its technological know-how, inputs and procedures necessary to add value to the products. Technology development at Boral Australia is applied in every activity of value chain including, especially in operations. Boral Australia has a comprehensive human resource management program that recognizes diversity in its workforce. The selection, promotion, appraisal, management development among other human resource management functions are conducted fairly. The company employees skilled, experienced and competent human resources that help add value to the value chain. Basically important, the company has a firm infrastructure that helps drive the company to success. These include the planning, financial, legal, quality management, accounting, government affairs and general management of the company. Therefore, both primary and supportive activities are significant elements in Boral’s value chain. They are independent to each other and determine the company’s competitive advantage. SWOT Analysis The SWOT model represents Strengths, Weakness, Opportunities and Threats. This model is used by mangers when carrying out strategic planning. It assists in establishing a common vision which aids the achievement of the development strategy designed by the company (Banham 2010). Understanding the SWOT analysis will help the Boral Australia to develop strategies to improve the strengths, reduce the weaknesses, utilize the opportunities and counteract the threats. The strengths and weaknesses of Boral Australia can be identified from within the organization while its opportunities and threats can be traced from the external environment. The company uses this model to formulate its strategic goals by considering the internal and external environments. Table 1: Boral’s SWOT Analysis SWOT analysis Strengths Weaknesses 1. Professional management team 2. Brand reputation 3. Innovation 1. Competitors for raw materials 2. High production costs 3. High wages Opportunities Threats 1. Increase in market share 2. Expansion of product line 3. Acceptance of products to the market 1. High competition in the industry 2. Technological Changes 3. Government intervention Strengths Boral Australia has a team of professional manager in all the operative divisions. They include divisional managing directors, chief financial officer, group general counsel, chief administrative officer, group communications and investment relations director, group strategy M&A director and other line managers. The company’s brand is highly recognized in Australia and other on international markets such as Asia and US. Boral Australia uses innovation to develop new products that helps in achieving competitive advantage. These are the strategic capabilities for Boral Australia. Weaknesses There is high competition for raw materials in the industry due to availability of competitors including Cement Australia and Hanson Cement Group and others. This contributes to the high cost of production since materials are purchased are a fairly high prices. In addition, the company spends more on salary and wages, especially on management salary. This puts the company at risk of experiencing a reduction in profits. Opportunities Boral Australia continues to register growth in the market potential in all operative divisions. Most of the products are doing well in the market due to product acceptance. Increase in the market share is a great opportunity for the company to exploit. This is also influenced by expansion of product line. Most Australians easily connect the company’s brand to a range of products the company produces. Threats One of the major threats to Boral Australia is high competition in the building and construction industry locally, regionally, nationally and internationally. Competitors for Boral Australia include James Hardie, Fulton Hogan, Downer, Cement Australia, Holcim Australia, CSR, Hanson and Daracon. Change in technology is another threat to the company. This implies that Boral Australia has to continue updating its technology, for instance, in Boral Gypsum division which is very costly. There are various type and levels of government intervention which the company has to and continue to comply with as long as it exits in the future. Government laws and regulations keep changing and the company has to adjust to this requirements. References Boral Limited 2013 “Boral Annual Report for the year ended June 2013,” Accessed on March 27, 2014 from http://www.boral.com.au/promolist/annual_sustainability_reports.asp Boral Limited website 2014 http://www.boral.com.au/ Banham, H. C 2010 “External environmental analysis for small and medium enterprises (SMEs),” Journal of Business & Economics Research (JBER), 8(10). Read More