Strategic Management - Australia Post - Case Study Example

Australia Post Student’s Name Course Professor Date 1.0 History, development and growth 1.1 History Australia postal service began in 1809. Isaac Nicholas took charge of mail that arrived in what was known as the colony of New South Wales. In turn, he set an office in his house at George Street, Sydney where people would collect letters at but he would deliver to high-ranking members of the community. In 1820s there were regular coach deliveries from Sydney to surrounding towns and by 1828 there were additional postmasters or “letter carriers” and more routes were set to connect more towns. In 1830s there were several progresses like the introduction of posting boxes, pre-paid stamped letter sheets and overland mail service between Melbourne and Sydney where most deliveries were done by men riding on horseback. In 1840s postal services expanded to other places like West Australia, Adelaide and South Australian settlements. 1850s development led to introduction of prepaid adhesive stamps in New South Wales and Victoria and compulsory paying of mail after they were posted. During the Gold Rush of 1850 fortune hunters arrived in masses creating an avalanche of mail in Australia. Other development in the last half of 1800 included the first telegraph message in 1854, regular mail service between Sydney and NSW with the coming of the rail service. Travelling Post offices were attached to trains in 1865, Melbourne’s GPO opened to the general public in 1867 and about 6,000 horses travelled for up to 45,000 kilometers a week to deliver mail in Australian countryside. In 1872, the final link in Overland Telegraph and connecting it with submarine cables to receive news from Britain and first Australian postcards sale in Sydney GPO. In 1900s the sic colonial post formed Postmaster General’s Department, letters posted increased significantly with prices to send letters within lowered to one penny in 1911. First Air Mail was done in 1914 and international Air Mail in 1919, regular domestic air mail in 1921 and mail trucks replaced horse-drawn coaches in 1924. Motorbikes deliveries introduced in 1930, women employees increased in 1940 as men were fighting in WW II. In 1975, the PMG split into Australia’s postal services and telecommunications services, Telecom Australia renamed Telstra. Post trucks were introduced in 1985 ending mail by rail era and Express Post service in 1991. The century ended with introduction of barcode sorters machines that sort addresses automatically and launch of personalized stamps in 1999 (Australia Post- our past). 1.2 Development In the last decade, some developments in Australia Post included the installation of sorting machinery in its Sydney, Brisbane and Melbourne facilities. In 2007/08 Australia post mailed more letters than any other time in its history. By 2008, the post was the largest retail network serving around a million customers daily. In 2012, the Post started a company-wide transformation to digitize post as a modern technology organization. The $2 billion investment aimed to improve the infrastructure, services and products to support the digital economy. The IT system was meant to build faster and a more cost effective technology, implement a customer-centric IT model, ne Digital Delivery Centre to deliver online and mobile services and products, training and IT leadership and new information security (Coyne 2013). 1.3 Growth In 2012, Australia Post launched its Digital Mailbox a secure online portal targeting business, government entities and other customers. It has continued to expand its major parcel facilities, seen growth in My Post product offering, rolled out a 24/7 Parcel Lockers network and key strategic partnerships with Chinese companies to grow ecommerce trade (Australia Post Newsroom 2015). However, despite the development in the recent past, Australia post has not shown any growth either in the number of letters/ services offered or profit. This year (2015) it announced a loss of $222 million attributed to declining letter volumes. Today, over 90% of letters posted by the post are from the governments and businesses (Hatch 2015). The figures below show the plummeting rate of letters and last financial year details: Graphs 1, 2, 3 & 4: Australia Post in much trouble: Adopted from Hatch (2015). 2.0 Internal Strengths and Weaknesses The post’s current competitive strategies have been influenced by internal factors and conditions. Australia Post has enjoyed uncompetitive market in mail and parcel services for centuries in Australia. Australia growing economy led to increased domestic demand of postal services. Monopoly, economic growth, greater variety of products and increased features promoted an increased number of customers. From July 2010, the Post came up with a new structure to align to the needs of its modern customers and position the business for growth. The new structure is composed of strategic four customer-centric, profit-focused business units including: Postal Services Retail Services Distribution and Express Services e-Services These business units were meant to be financially self-sustaining and to offset losses in letters from the revenue growth in parcels. As a nation’s leading provider of parcel deliveries, Australia Post was seen to be in a position to reap from expansions of online shopping which was projected to grow in this decade (Australia Post Annual Report 2009–10). Australia Post as a government business enterprise has vast assets and resources including almost 7,000 postal outlets and fleets of trucks. The resources can be reinvested to grow the business and diversify its products and services. Additionally, the company sole shareholder being the Commonwealth Government means that it does not face pressures from shareholders due to dividend issues. Australian Post has modified its production systems to accommodate changes in company’s circumstances over time. The recent modifications have focused on technology, work organization and software. The Post has expanded its logistics and freight services focusing to deliver quality services following the growth of online shopping. In 2012, the acquisition of Startrack from Qantas was an important strategic acquisition. This is because StarTrack’s expertise in various express freight services will also help the company grow its ecommerce delivery market. In 2013, Australia post launched a digital communications platform which complements its physical main service, the Australia Post Digital MailBox which already has over 2 million subscribers (Australia Post Annual Report 2009–10). The platform is secure, cost-effective channel that help business and government organizations to connect with customers and constituents. The main internal environment affecting the continuity of Australia Post relates to the workforce. There is a question of reduction of workforce population due to continued loss in the company. The total size of the Post’s workforce is expected to decrease in near future due to continued losses from main business unit (mail) and net profit as indicated in fig. 5.0 below. A particular difficult the company still faces is attraction of young workers meaning that those who remain will be less productive and versatile in a technologically advancing era. Though the post is diversifying to eCommerce and Digital services, the apprehension of workers reduction might affect the output from workforce. Business transformation and the future sustainability of Australia Post, Adopted from Howard (2014). 3.0 External Environment During the last few years, there are increasing concerns emerging regarding the services offered by Australia Post. One of the apparent one relating to external environment and reported widely in Australia press has been increased cases of poor parcel delivery service. Overreliance of contractors has led to unsatisfactory performance especially during peak Christmas periods. The increased propensity of inserting delivery failure cards instead of an attempt to deliver the packages has led most customers to travel to local post office personally to collect items. The situation is attributed to use of delivery drivers contractors instead of actual Post employees. Another effect in relation to external environment is the public’s reaction to the growing trend in technologies shifting to plethora of new online platforms such as emails, emessages and social media which are fast and cheaper. The ever-increasing rate of online communications has made Australia Post which was once an attraction firm to consumers loses its function. As noted above, over 90% of its services are directed to the government and business (Hatch 2015). Mail services are becoming obsolete with a very high rate and even many businesses are trying to avoid physical letter mailing and shift to faster online communications. Despite the changes in Australia Post and its well-established outlets, mail and parcels delivery has become unpopular especially with the young generation. Another external influence is a negative relationship between Australia Post and its franchised retail outlets. The franchises have created a source of competition. The franchisees including Licensed Post Offices as well as Community Postal Agencies have raised claims of unsustainable business practices from individuals and LPO Group. The matter was handled by the Senate through an inquiry in 2014. In turn, the outcomes of the inquiry led to increased payments and introduction of independent stakeholder Forum. The outcome is a decrease in demand of mail services. The franchises created a competition meaning that the post has to offer services at higher price. The global financial crisis of 2008 accelerated the switch to digital communication options like cheaper email. Letter volumes decreased dramatically not only in Australia but around the world. By 2009-10, the Post operated at a loss. To compound the problem, the Post’s costs continue to increase with increased delivery workloads. Despite of the Post’s efforts to reduce costs and improve efficiency, current projects reveal deeper losses in letter service. 4.0 SWOT Analysis Friesner (2011) argues that a SWOT analysis promote an understanding and decision-making for various situations in a business. It usually helps in strategic planning, research reports and product/services development. In turn, it promotes the identification of the positive and negative influencing factors inside or outside a company. The strategic environment for Australia Post represents minimal opportunities. It also has some challenges that the firm may meet successfully. Table 1.0 below is a SWOT analysis for the company to highlight its strengths, weaknesses, opportunities and threats. The SWOT analysis is a thumbnail sketch of its position in strategic development. Over centuries, Australia Post has developed some impressive strength and in the beginning of this decade, it looked forward to new opportunities. Having no barriers of entry and financial support and the growing number of the government, business and individual customers for most of its business units, the company is in a good position to grow. However, Australia Post has to consider the implication of mail business unit to the profit gained from other product lines. Additionally, the firm needs to guard against the failure to recognize the scope of the business. SWOT Analysis Strength extensive distribution and sales networks Skilled employees Reduced labor costs No barriers of market entry for its new products/services Vast domestic market Monetary assistance provided by its shareholder, the government Weaknesses competitive market due to growth of digital services Poor investments in R&D Tax structure that lowers its net profits Unknown Opportunities Growing economy more so in ecommerce Growing demand Introduction of new products and services Availability of venture capital Threats Self-sustaining financial capacity Tax changes Lower profitability and growing competition Australian Postal Corporation- Strategic SWOT Analysis Weiner & Partner (2013) 5.0 Corporate-Level Strategy Pursued by Australian Post From 2010, Australia Post announced its Future Ready business renewal program which led to adoption of business-level strategies. By 2009-10, its letters service operated at a loss due to declining volumes and increased costs in delivery of workload. Transformation from corporate-level to business-level strategy was meant to create a sustainable, customer-driven, financially viable and high-performing business. In turn, it came up with four strategic business units including the Postal Services, Retail Services, e-Services, Distribution & Express Services. Similar to the previous corporate-strategy, business-level strategy focused on overall performance. The individual units are its major enterprise-like entities focusing on different industry, products or services type and market. In turn, Australia Post business-level strategy is currently concerned with various things. First, the strategy involves managing unit activities to conform to its corporate level strategies. For instance, the Postal Services require more cooperation with other business units for achievement of strategic synergy. Secondly, the strategy helps to develop distinctive capabilities, competitive advantage and resources in each unit. Thirdly, business- level strategy promotes the identification of product or service-market opportunities. In turn, strategies are developed for success in each of the opportunity. Fourthly, the strategy help to monitor the business industry environment to conform the strategy to the market needs at each stage of development. Business-level strategies are a critical strategy for Australia Post as it helps to look at the business SWOT and emphasis on specific product or service. In turn, business-level strategies contribute to the overall corporate-level strategy such as increasing profitability, matching the operations with the overall objectives and navigate the environment to help the company perform better in each industry. 6.0 The Nature of Business-level Strategy Business-level strategies are represented by various methods used by the Post to conduct various functions in its business operations. Since Australia Post is a large company, it uses various business strategies through its several departments and business functions. The business-level strategies provide the company, managers and employees with a guideline to follow when working. The nature of Australia Post business-level strategies is revealed by: Coordinated Unit Activities- Australia Post coordinates all individual units’ activities in the business. Its unit’s activities are broken down into by sections, department and individual job positions. These groups or individuals are coordinated by a manager or supervisor. The manager gets employees focused on particular objective and accomplishing some goals. Utilizing human resources- Australia Post utilizes its available human resources in the company. Business-level strategy helps the company to utilize its employees maximally to deliver products and services to its diversified customers. Business-level strategy has helped the company to have the right type of human labor for its business operations and the right skills needed to complete business functions. Monitoring product strategies- Australia post carry reviews of its business-level strategies for each business unit. For instance, reviews promoted the acquisition of the other half of StarTrack shares from Qantas as a significant economic resources used to deliver goods and services. However, Australia Post have not acted on the review reports of the capital and administrative costs spent on Postal Services which are not earning positive rate of return. Reviewing business-level strategies will give it an opportunity to remain flexible and make the necessary changes to meet new consumer demand (Australia Israel Chamber of Commerce (AICC) 2014). 7.0 Structure and Control System Australia Post employs 32,500 people in its various employment categories as indicated in Table 2.0 below. The organization is strongly committed to employing culturally and diverse groups which make up 23% and people with disability that constitute another 6.9% of employment (Howard 2014). Australia Post: Employment 2014: Adopted from Howard (2014). Australia post has a comprehensive system of corporate governance practices providing the appropriate levels of accountability and disclosure. The following levels comprise of distinct functions of control system: Shareholder ministers – The portfolio responsibility for the Post in under the Minister of Broadband, Communications and Digital Economy while the overall responsibility of the enterprise is held jointly w with Minister for Finance and Deregulation under dial shareholder model. The Board- the Post’s board comprise of nine directors. Except the CEO and the Managing Director, all the other serves in non-executive capacity. Terms of appointment which are in practice for three years can be for up to five years with permissible reappointment. Additionally, before a person is nominated for appointment, the minister considers the balance of expertise in the board. The board then appoints the CEO and the MD. The terms and appointment process help to bring in the necessary expertise and skills to propel the company forward. The board plays a strategic role by deciding the objectives, policies and strategies that the Post will follow and ensure that it performs its functions in a proper, efficient, consistent, practicable and sound commercial practice. The directors also set the key strategies and objectives through a three-year corporate plan and submit it annually to shareholder ministers. The board ensures quarterly reporting of Australia Post’s progress against the plan and keeps the ministers and the departments informed about development on a regular basis. Board Committees- there are two committees in Australia Post including the Audit & Risk and Human Resources Committees. These committees assist the board to discharge its respective responsibilities. The Audit & Risk provide regular communication to the board and corporation’s internal and external auditors and meets five times annually to focus on financial reporting, internal controls and risk management. It also reviews the annual financial statements before they are adopted by the board. Additionally, it reviews the clarity and quality of financial practices, polices and disclosures, carry out internal and external auditing plans, reporting, performance. Also it reviews the significant risk and mitigation activities, adequacy and effectiveness of internal controls and company compliance with laws and regulations (Australia Post Annual Report 2013). Human Resources Committee incorporates the nomination and remuneration functions, human resources, and policy, structural and remuneration issues. The committees address issues of recruitment, selection, succession plans, executive remuneration, culture and ethics, employment terms and conditions, organizational structure, learning and development. Human resource committee’s functions promote the business-level strategies by aligning the workforce with the needs in each business unit. 8.0 Recommendations Following the analysis of strategic management of Australia Post, here are some major issues noted about the company that can be presented to family members: Its earnings growth in income and profit over time, specifically in the last five years has fallen towards to an extent of making losses. The trends also reveal a downward curve from 2009-10 to 2015. It also reveals that the decrease is dramatic. Australia Post indicates that it does not have consistent earnings growth but instead it has operated at a steady loss over time making it a less preferred organization for the future. The stability assessment of Australia Post reveals that the company is not only going through a period of losses as the case of most organizations that were affected by the 2008 economic crisis. The overall stability is affected by decline of postal services globally revealing a great fluctuation. Australia stability is real difficulties which are not normal to the rest of the organizations in struggling market. On stability basis, it is hard to consider the stock. The relative strength of Australia Post in the industry is manifest but it does not show any promise in the future. Its relative strength sorely based on monetary assistance from the government and fewer barriers to entry and investing revenue are not enough to place it against the global competitors with a shift to emails by most customers, businesses and government entities affecting its major business unit. The projected growth in e-Services may not actually be as it was planned in near future. Its dividends pay can reveal some stability but the recent high yields with 277.8, 171.9, 78.5, 193.9, and 243.7 from 2009 to 2013 can be an indication of coming instability as it might be due to failure to reinvent in the company (Australia Post Annual Report 2013). Process Reflections (a) Any difficult and/or complex issues you confronted The first problem faced in carrying out this strategic analysis was to define the problem or the goal necessitating the analysis. Some examples of parts that were challenging to define were part 5 and 6 involving the kind of corporate-level strategy that the company pursues and the nature of the company’s business-level strategy. However, to gain a clear definition of the issue the strategic analysis was attempting to answer helped guide my effort toward successfully completing the part. I would start by researching on key words and then read through the company’s documents like Annual Reports to identify the portions of the entity that are instrumental in the analysis. Often, I would attempt to analyze the whole company then focus on specific departments and compare it with parameters that define each issue to understand the strategy that is in use. Secondly, gather the information was challenging due to some reasons. First, I had to look for the most current information especially when analyzing the financials. Secondly, it was the need to assess the organization strengths and weaknesses and conclude whether the firm was really facing the problem. There were impressive strengths and opportunities and still challenging weaknesses and threats and they required to brainstorm and have a conclusive report regarding the viability of the company. However, one strong point is that there were available documents or annual report that assembled quality data on these areas. Thirdly, it was problematic to define the scope of each problem I was trying to solve. To make sure I did not lose the scope, I assemble key points on each question and identified the most relevant ideas regarding the problem at hand. It was key to manage the issue and come up with specific the solution. I would then identify the best materials that helped avoid being redundant. Finally, it took time to review the results of the analysis. I found it helpful to compare my findings/solutions for each section to ensure that it responded to the question appropriately. Review helped me to organize ideas in order of their importance and ensure the information and the analysis had a defined flow. (b) Key learning on Strategic management in this task Management of strategy requires adaptation as conditions in the industry change. Australia Post seems to have failed to change with global changing conditions in communication in the 21 st Century. I noted simple and standard rules of firm’s strategy and performance including: The organizations resources determine performance over time. Australia Post revenue has been critical in its survival. The resources in a firm can be won and lost over time when the strategy is reactive instead of being proactive. Strategic growth depends on organizational existing resources, the management choices taken and competitive factors in its environment of operation (c) Any other reflections on the process Time management- there was a lot to do and at times it was overwhelming. However I worked on the assignment by having “things to do list” which was helpful. It acted as a planning guide and made the assignment less overwhelming when spread in an entire week. Getting started in research was hard but as I moved on, it was easy to keep it going Communication with other students- consulting with fellow students was important to guiding in the research project. Adviser’s guide- there were eight areas that made it easy to break down the report as it was organized to follow the structure. References Australia Israel Chamber of Commerce AICC, August 2014, Speech by Australia Post Managing Director & CEO, Ahmed Fahour, Australia Post at a Turning Point Australia post Annual report 2009–10, Getting Future Ready, https://auspost.com.au/media/documents/AP-annual-report-0910.pdf Australia Post Annual Report 2013 Australia Post Newsroom, 2015, Australia Post records full-year loss of $222 million, https://auspost.newsroom.com.au/Content/Home/02-Home/Article/Australia-Post-records-full-year-loss-of-222-million/-2/-2/6063 Australia Post, Australia Post – our past, http://auspost.com.au/education/ourpost/students/our-post/timeline.html Friesner, T, 2011, History of SWOT analysis, Marketing Teacher, 2000-2010. Hatch, P, 2015, Four graphs that show why Australia Post is in so much trouble, June 27, The Sydney Morning Herald. http://www.smh.com.au/business/four-graphs-that-show-why-australia-post-is-in-so-much-trouble-20150626-ghyvbe.html Coyne, A, 2013, Inside Australia Post's IT transformation: Moving into the digital era, http://www.itnews.com.au/news/inside-australia-posts-it-transformation-344488 Howard, J H, Digital Post: Business transformation and the future sustainability of Australia Post, Institute, The MCKELL INSTITUTE. Weiner & Partner, 2013, Australian Postal Corporation- Strategic SWOT Analysis: http://swot.advisorgate.com/swot-a/3994-swot-analysis-australia-post.html Read More