Economic Factors Affecting the Woodside Petroleum Company in Australia - Case Study Example

Economics for Management Name: Institution: Subject: Date: DECLARATION I hereby declare that this Business Report as far as I know is my original work and has not been presented before either in full or partial fulfillment of any other degree at my institution or any other institution of learning for the award of an academic certificate. Executive Summary This business report provides the latest current economic situation in Australia and how it might affect the company’s performance. Furthermore, the report analyses the current situation of Woodside Petroleum Company and the expected future of the company. The Woodside Petroleum Company is one of the biggest independent oil and gas companies in Australia. As a senior manager of the company, I will provide factors that are likely to affect the future performance of the company, the recommended strategies, and the nature of the profits, ratios and the inventory management. Table of Contents Executive Summary 2 Introduction 4 Purpose 4 Scope 4 Company’s Mission Statement 4 Current Economic Analysis Approach 5 Mega Environment 5 Economic elements 6 Legal/Political element 8 Technological element 8 International Element 9 Social Cultural Element 9 Conclusions and Recommendations 9 References 11 Introduction Purpose The purpose for this business report, based on the Australian laid down accounting standards, is to evaluate the adequacy of the Woodside Petroleum Company’s financial performance and its economic situation. This economic situation analysis provides structured qualitative assessment of the market environment. It addresses inflation rate, interest rates, and exchange rate. The assessment recommends the best strategies that need to be implemented so as to improve the company’s performance in the market. Scope The scope of this economic analysis assess the company’s performance and strategies (implemented or planned) to improve the weaknesses and / or manage the internal threats that affect the company. This economic analysis report evaluates the profit margins (net profit and gross profits), inventory turnover, and sales ratios The recommended strategies for improving the company will allow the management to make a decision on how to carryout implementation, control the implementation of the strategies so as to eliminate the identified weaknesses of the company. Company’s Mission Statement The company’s mission statement is to be leading institution in the market that produces quality products and services that are beyond customers’ expectations Current Economic Analysis Approach According to Corones (2014), the Australian economy is growing at a lower rate, and this has slightly affected the performances of the company. The low economic growth is due to weakening of the Australian dollar against the rising US dollar. This has greatly affected the company’s competitiveness in the market. The weakening of Australian dollar has affected the company’s profits and has also affected the ability of the company to expand. In order to improve this situation, the company needs to implement the following strategies. Marketing Activities – the marketing department needs to strategize on how to market the company’s products so as to increase the sales volume. This will at least improve the profit level of the company Management Controls - the managers need strategies on how to attract new customers and at the same time retain the old customers. It is always essential for the company to target large number of customers so as to maximize the sales volume. This can be done through use media adverts that are likely to reach many people both in Australia and outside the country. Mega Environment The Australian business environment is very attractive and favorable though the company has little or no influence over. According to the data released by the Reserve Bank of Australia this year, it indicates that the Australian monetary authorities have managed to achieve low and stable inflation rate in this quarter of 2015 as compared to last year. The graph below shows the trend of the inflation rate in Australia In order to understand in details the Australian current economic situation that is likely to affect the company, it is essential to divide mega environment into five main components into i) technological; ii) socio-cultural/demographic; iii) economical; iv) legal/political; and v) international/global (Bartol et al. 2011). Economic elements According to Ferrell & Fraedrich (2014), economic elements comprise of various factors that are likely to affect the operation of the company, and it should be given a serious consideration. These factors include inflations, changes in per capita income, government policies, taxes, management, labor costs, stock market fluctuations, and the interest rates. For example, if per capita income decreases, people’s purchasing power will reduce and this will lower their demand for goods and services. Because of low demand, the prices of goods and services will fall and definitely the profits for the Woodside Petroleum Company will shrink. On the other hand, the interest rates in Australia are slightly improving as shown in the table below. According to the Reserve Bank of Australia, the economic growth is continuing at a below-trend pace, and this might affect the performance of the company. However, the company can still improve its performance by expanding its operation. As shown in the above graph, it is evident that the company can apply for more funds for expansion and implementation of recommended strategies. It is essential for the company to improve its services they offer so that they can maintain its leadership in the market. The Australian Bureau of Statistics (2015), records that the low interest has attracted investors to the country, and this is likely to improve the amount of cash in circulation, and thus to improve the economic situation. This is an advantage to the company because the sales are likely to improve in the future. Legal/Political element This can be defined as the Australian legal and governmental systems within which the Woodside Petroleum Company must function (Wild, Wild, & Han, 2014). In Australia, there is various local government regulations that can really influence or affect the entire performances of the Woodside Petroleum Company. These local government regulations are likely to affect the performances of the company because the company spends so much in such regulations. Examples of such regulations include the safety laws and the occupational health. These laws exist so as to ensure that the Woodside Petroleum Company is safe for both the employees and the public. Furthermore, there are employment laws that show the range of wages and salaries that are paid to employees, and also it prescribe the training requirement for the company. Technological element This refers to the ability of the company to produce and deliver products that are of high quality so as to satisfy the customers’ needs (Jeston & Nelis, 2014). Technological environment is a key factor that determines the success of the company; it can positively or negatively affect the performance of the Woodside Petroleum Company. For the company to remain competitive in the market, it is advisable for the Woodside Petroleum Company to stay abreast of latest technological development. International Element Countries have different economic situations that are likely to affect the businesses. For example, the Woodside Petroleum Company can slightly be affected by the slight decrease in the value of the Australian dollar against the US dollar. When the Australia dollar is weak, it will be difficult for the company to establish branches or invest in other countries because the company will be paying more. In addition, the weak dollar will make the company incur high cost in importing materials from other countries. It is, therefore, essential for the Australian government to implement the necessary measures so that they can strengthen the value of Australian dollar. Social Cultural Element Social, cultural elements have less effect on the performance of the company. However, the Reserve Bank of Australia can resolve these issues by ensuring that the taxes that are levied on imports are raised so that they can discourage the local customers from going for the foreign goods. This will help in reducing competition in the market though, in some cases, it can cause imported inflation Conclusions and Recommendations The main agenda in this report was to analysis economic factors that are affecting the Woodside Petroleum Company in Australia. Based on the research and the proceeding analysis, it is evident that the latest current economic situation in Australia is not favorable to the company. It is, therefore, important to implement the following recommendation as a way of improving the performance of the company. These recommendations include the following; 1. The marketing department to target a specific market segment so as to increase the number of customers 2. The focus should be on delivering quality products and services so that the customers can offer referrals to other potential customers in the market 3. Investment in technology should focus on ancillary technology so that the customers can find an easy time when making inquiries, making complaints and seeking for instructions concerning products bought. 4. To ensure the retention of the employees, the management should focus on rewarding hardworking employees and developing the skills of that staff through training them. 5. Entering into forward contracts and other measures of hedging against inflation and unfavorable future exchange rates when dealing with foreign clients. References Bartol, K, Tein, M, Matthews, G, Sharma, B & Scott-Ladd, B 2011, Management A pacific rim focus, 6th edn, McGraw-Hill, Australia. Brousseau, E., & Glachant, J. M. (Eds.). (2014). The manufacturing of markets: legal, political and economic dynamics. Cambridge University Press. Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia. Corones, S. G. (2014). Competition law in Australia. Thomson Reuters Australia, Limited. Ferrell, O. C., & Fraedrich, J. (2014). Business ethics: Ethical decision making & cases. Cengage learning. Jeston, J., & Nelis, J. (2014). Business process management. Routledge. Paul G. Farnham, Economics for Managers, 3rd edition, Pearson, 2013. Wild, J., Wild, K. L., & Han, J. C. (2014). International business. Pearson Education Limited. Read More