Strategic Management Organization Analysis - the Australia Post - Case Study Example

Executive Summary Australia Post operates in the postal service industry. It was established in early 1800s and as seen growth in number of variables including employees and services. Australia Post is owned by the government and the government determines the operation at the post based on the employed leaders. Australia Post as a strong structure, which is divided into business and functional units. The business units are the core process of Australia Post while the functional units assist in the achievement of core processes. Therefore, Australia Post has both business and functional level strategies. The financial position of Australia Post and with the help of strategic tools e.g. SWOT analysis, the future of the organization is not viable. If strategies and approaches are not changed, it is not advisable to invest in the company. Table of Contents Executive Summary 1 Introduction 3 History 3 Development, and Growth of the Company over Time 3 Company’s Structure and Control Systems 4 Organization Structure 5 Organizational Chart 6 Operational Model 7 Quality Assurance 8 Control Systems 8 Development 9 Letter Volumes 9 Australia Post Forecasts 10 Financial Analysis 11 Return on Invested Capital (ROIC) 11 Debt Ratio 11 Current Ratio 12 Return on Equity (ROE) 12 Operating Profit Margin 13 External Environment 13 Internal Environment (SWOT Analysis) 15 Corporate Level Strategy 16 Business Level Strategy 18 Conclusion 20 Recommendations 20 Process Reflections 21 References 22 Figure 1 Organizational Chart (Australia Post 2013) 6 Figure 2 Operational Model (Australia Post 2014) 7 Figure 3 Australia Post Forecasts 10 Introduction History Australia Post was established in 1809 after Isaac Nichols, who was an ex-convict, started operating it in Sydney. The original purpose was to manage the letters because frequent conflicts and misunderstanding exist especially when the parcels were delivered by ship. Hence, Isaac maintained order. In 1825, The Postal Act was passed, and an official Postmasters was appointed. Regular service between Sydney and Melbourne commenced in 1936; uniform postal rates were established in 1849, and other sectors (colonies) continued to enter into the postal union. Postmaster General’s Department was established in 1901 in which numerous products and services were merged. In 1967, the 4-digit Postcodes were introduced and other legislative directives incorporated into the entire framework of postal services. The Australia Post continued to operate and change its processes based on the requirements and expectations of the customers, businesses, and government. Development, and Growth of the Company over Time The company was operating differently until in 1989 when it was corporatized and was forced to follow and adhere to the corporation requirements. The APC Act clearly defines the requirements and limits of Australia Post. It elaborates on the mission and vision requirements and expectations. Prior to the period and after the period, the mission and vision has remained similar with the purpose of advancing the community and customers requirements to improve and advance the society. The community and society are important to the operations of Australia Post. According to the APC Act, the role of the Australia Post fulfills community obligations through providing effective and sustainable services. The strategy in the last seven years as remained the same but inclusion of technology has redefined the strategy. The strategic change because of technology has changed the product and service mix. The customers are shifting to technology and competition is also changing. The business environment through e-commerce and e-business has changed forcing Australia Post to redefine its marketing mix. The strengthening of the market mix through allocation of resources also has contributed to the improvement of the sector. Even though Australia Post continues to play an important role in the society and community, challenges exist. However, the adjustment and advancements have not reflected positively in the financials. Perusing through the annual financial reports, it is evident that the financial reports are indicating changes. For example, the profits are decreasing even though additional investments and strategies have been implemented. For example, the partnership and collaboration aims to expand the market but the lack of reflection of the same on the annual financial records, indicates that the strategic approach is ineffective. Company’s Structure and Control Systems The introduction of APC Act and other legislative changes affected the organizational structure of Australia Post. The Australia Post plays a major role in advancing the requirements of postal services and because of the investments associated with the process, the structure was changed to reflect the requirement. Moreover, the changing structure was to redefine the functional and business unit requirements. Furthermore, Australia Post entered into partnership and collaboration with other companies and institutions. Inclusion of these other entities means that the structure has to change to reflect the newer functional dispensation. The changes can be seen when the organizational structure and system control are discussed. Organization Structure According to Australia Post (2015) experiences and skills play an important role in determining the position in the company. The executive positions include Managing Director & Group CEO; Group Chief Operating Officer; Executive General Manager, Postal Services; Executive General Manager, Postal Services; Executive General Manager Parcel Services; Executive General Manager, Corporate Affairs & People; and Corporate Secretary and General Manager Government Affairs; and General Manager, Human Resource. These positions are important in the way an organization operates since it collects the information and use the information in making decisions. In addition, the individuals and position are able to bring together the different stakeholders in ensuring the organization operates effectively. The positions and structures exemplify the requirements of collaboration, leadership and teamwork towards the success of Australia Post. In ensuring the executives operate the business effectively, a board of nine members guides the operations and makes the important decision. The Board of Directors members have thedifferent educational background and extensive experience meaning that they provide appropriate and effective decisions. Organizational Chart Organization structure determines the position of everybody in the organization and determines the level of an individual about other employees. The organizational chart provides a physical representation and indicates the position of an individual in the management ladder. The following chart shows the position of each of the executives in the organizational structure of Australia Post. Figure 1 Organizational Chart (Australia Post 2013) Operational Model Figure 2 Operational Model (Australia Post 2014) The operational models present a graphical represent the operations and different between the strategic requirements of Australia Post (Finger and Bukovc 2014). The operational model indicates that the strategic business units are communication management services, parcel& express services, and retail services. The functional business units are corporateaffairs& people and finance & businesses services. Through the use of the model, it is easier to differentiate the roles and responsibilities of each sector in Australia Post. Quality Assurance Quality assurance is important to Australia Post because it reduces the cost of operation while improving revenue generation. The assurance is associated with the way Australia Post transports and delivers the parcels and other processes (Shim, Kumar &Hakami 2013). The frequent feedback through the use of questionnaires and other strategies used in collecting information is used to gauge the quality of the services. It aims to determine the requirements for the customers and measures, which can be employed in ensuring the customers’ requirements, are fulfilled. In addition, the internal auditing processes and community engagement provides avenues in which differences and misunderstandings can be ironed easily (Lawrence, Coelli and Kain 2015). Hence, the engagement of the different stakeholders results in development and implementation of the framework, which advances the requirements of quality assurance and customer satisfaction. Control Systems The aspect of control systems can be seen through corporate governance practices. Australia Post operates based on provisions of Commonwealth Government Business Enterprise Governance and Oversight Guidelines (2011), Public Governance, Performance, and Accountability Act 2013, and Australian Postal Corporation (APC) Act 1989. In addition, the roles and responsibilities of each member in the organization are clearly defined, and delegation of duties is also provided. Moreover, numerous committees exist that advice and determine the operations at Australia Post. Some of the committees are Executive Committee, Human Resource Committee, Nomination, and Remuneration Committee, and Audit & Risk Committee (Australia Post 2014b). The presence of these numerous committee and supporting legal directives ensures Australia Post operates effectively and provides mechanisms for analyzing the operations of the company. For example, Audit and Risk Committee reviews the financial and accounting requirements based on statutory bodies in ensuring the financial information is disclosedappropriately. It ensures the investments of the stakeholders are considered and protected while also fulfilling the requirements of different stakeholders. Development The section reviews general data on parcel and letters and indicates that Australia Post has challenges when it comes to the volume of letters. Letter Volumes Table 1Letter Volumes Source: Australia Post, Submission 8, p. 13 Australia Post has been playing an important role in delivering the letters, but the volume of the letters has decreased in the recent past (Australia Post 2013). For the financial period 2007-2008 to 2012-2013, the volume of delivered letters has decreased from 5.2 billion to 4.2 billion. The review of the data indicates the future of Australia Post in fulfilling the requirements of local letter volume is decreasing, and an alternative market should be sought. Hence, the future of the domestic market is not viable based on the provided data. Australia Post Forecasts Figure 3 Australia Post Forecasts Source: The Boston Consulting Group, Australian, and International Postal Services Overview Background Report, June 2014, p. 12. The Boston Consulting Group (BCG) analysis available information and their experiences in reviewing a market and industry, and provide an overview of the future of the industry or market. According to the above graph, the future of domestic addressed letter volume is not viable. For example, the total letter volume decrease for the periods between 2012/13 and 2019/20 is estimated at -11.4%. In addition, the volume is premised on already available information and has not factored future technological disruptions. Hence, investing into the company is inappropriate because of a decrease in the volume of letters. An individual may be advised to invest in the company depending on the strategies and approaches, which Australia Post can formulate and implement. Financial Analysis Return on Invested Capital (ROIC) ROIC is used to assess an organization’sefficient at the allocation of capital to different profitable investments. It determines how an organization uses the invested capital in generation of returns. It determines whether the invested capital is used efficiently. The following table summarizes the ROIC operations at Australia Post: 2012 2013 2014 Average ROIC -2% 0.65% 0.48% -0.87 The statistic indicates that it is not appropriate to invest in Australia Post. Debt Ratio It estimates the consumer’s or company’s leverage. It is the ration obtained after dividing the total debt against the total assets. The following table summarizes the debt ratio of Australia Post. 2012 2013 2014 Average Debt Ratio 29.1 27.3 28.8 28.4 Current Ratio The role of current ratio in financial analysis is to test an organization’s ability to meet its short term financial obligations. An organization has to have more that 1 value and less than 1 means that the organization does not have enough resources to meet the short term obligations (Treworgy and Wong 2013). The obligations are usually within one year period. The following table summarizes the current ratio. Australia Post had enough resources to fulfill short term obligations in 2012 but in the subsequent years, the short term obligations cannot be fulfilled. In the table (below), the average for the last three years indicates that the incoming cash cannot meet the obligations. Based on the current ratio assessment, it is not appropriate to invest in the Australia Post. 2012 2013 2014 Average Current Ratio 1.06 0.64 0.74 0.81 Return on Equity (ROE) Return on Equity ratio estimates the net income generated as a percentage of the equity the shareholders have contributed (Australia Post 2015b). The return on equity determines the amounts of profits that an organization generates based on the investments of the shareholders. The recommendation appropriate level of REO is between 15% and 20% in which an investor can decide to invest in the company. The 2012 and 2013 ratios are within the recommendation level but in 2014, the REO is weak. Moreover, the average is below the recommended levels meaning that a cumulative review of the entire operations is appropriate before arriving at any conclusion. 2012 2013 2014 Average Return on Equity 18.6 18.54 6.6 14.58 Operating Profit Margin The ratio determines the amount, which remains after subtracting the expenses. The ratio is imperative because investors and creditors can determine the profitability level of organization’s operations. A higher percentage indicates that the company generates enough income to meet operations. A lower percentage means that an organization will need to seek alternative sources to fund operations (Australia Post 2014). In the case of Australia, the table illustrates the summary of operating profit margin for the periods between 2012 and 2014. Based on the ratio, the profit generated meets the expenses of operation but there is no additional income generated to sustain the Australia Post operations. Moreover, the data indicates that the operating profit margin is decreasing meaning that alternative sources of income will be required in near future to fund the operations. 2012 2013 2014 Average Operating Profit Margin 5.56% 5.43% 1.87% 4.2% External Environment Political environment –The political environment in Australia is stable based on the strong democratic processes and beliefs. The political system that determines both legislations and Acts incorporates numerous factors before arriving at respective and different conclusions. For example, the passage of legislations, such as Commonwealth Government Business Enterprise Governance and Oversight Guidelines (2011), Public Governance, Performance, and Accountability Act 2013, and Australian Postal Corporation (APC) Act 1989 indicate the importance of regulation to improve the businesses processes. Moreover, the taxation regime and other business operation measures are discussed extensively before it is passed. Economic environment –Australia can be seen as stable democracy, which means that the economic activities may reflect the stableness of the country (Ryan 2015). However, the 2007/2008 economic crisis and internal economic challenges are reduced disposable incomes. In addition, alternatives to the operations of Australia Post exist such as the use of email and other digital forms of communication which are comparatively cheaper and faster in nature means that the consumers prefer these platforms to traditional approaches e.g. post letter (The McKell Institute 2014). Hence, based on economic aspects such as traveling to the post location, purchase of a stamp, waiting for the delivery of the mail, the customers believes that digital processes are cheaper. Hence, economic approaches influence extensively the operations at Australia Post. Social environment –the requirements of the customers are changing, and the customers tend to move to the digital platform because of the convenience. However, traditional requirements of parcels still exist, and the online businesses also require the use of the traditional approach to ensuring the parcels are received by their customers. Therefore, strategizing towards fulfilling the requirements of consumers using the online platform to acquire products is the most appropriate approach. For example, a consumer can acquire a product from eBay, which requires physical delivery. Hence, the social environment is at cross road because of technological advancement and traditional requirements of postal services. Technology environment –the operations at Australia Post are affected by the technological advancement. The customers are shifting to digital platforms, which affects the general model of Australia Post. Moreover, the speed that the technology evolves means additional technological products will be created, which would affect the business operation. Nevertheless, the Australia Post can capitalize on e-commerce and e-business because it is the newer means of doing business, which may result in an increase in some parcels. Legal environment –The legal environment is stable, and the legislations including the Acts reflect the requirements of the business environment. The legal documents such as permits and other local authority document can be obtained easily. However, future changes in the legal environment can affect the business because already Australia Post has to address the challenges associated with changing business environment. Environmental environment –sustainability and climate change are factors that affect the supply chain. The logistics need means of transport meaning that environmental requirements should be integrated and embedded into the way business activities are done. Hence, the environment requirements and concerns influence the way business activities are accomplished. Internal Environment (SWOT Analysis) In understanding the internal environment, SWOT analysis is the appropriate tool. SWOT analysis bringsintoconsideration the strengths, weaknesses, opportunities and threats. The strength of Australia Post includes the extensive domestic market. The market share is large and Australia Post understands its marketers. In addition, Australia Post has a strong and skilled workforce. Investment in postal services is demanding meaning that it creates barriers of market entry, which is important to Australia Post. The government also boosts the operations at Australia Post because the government is the sole owner. The weaknesses include the competitive marketer and the tax structure. Competition requires Australia Post to invest to market the services and reduce the cost of products. Such approaches affect revenue generation. The government owns the Australia Post meaning that inefficiencies associated with nationalization of enterprises afflicts operations at Australia Post. Furthermore, the research and development is not available or effectively employed at Australia Post. The postal service industry has numerous opportunities that Australia Post can capitalize. The growing economy means that additional consumers services are required meaning that additional demand. Diversification would also help Australia Post to improve its services. Collaboration and ventures can be used to extent the requirements and expectations of Australia Post. Hence, Australia Post should use the weaknesses top advance the requirements of the organization. In any business environment, threats exist. Possibility of any tax changes can affect the business immensely. Lower profitability means that Australia Post cannot operate effectively. Moreover, the lower profitability affects the financial capacity of Australia Post. Furthermore, growing competition would continue affecting the operations at Australia Post. Corporate Level Strategy Australia Post as group its mission and vision statement requirements. Australia Post as a statement of purpose, which is “Helping our people, customers, and communities build a better future. Everyone, everywhere, everyday.” It is evident that the objective of Australia Post is to advance the community requirements and ensure the community achieves its objectives. Corporate level strategy factors into consideration the decisions that an organization makes, which usually affects the entire operation of the organization. It incorporates allocation of resources, human resource management, mergers and acquisitions and financial performance. Australia Post employs the value creating strategy value neutral strategy. Value creating strategy results in an increase in products and services while the value-neutral strategy is aimed at ensuring the different departments complements each other in accomplishing organizational requirements. In the case of Australia Post, the corporate level strategy can be grouped into two: Corporate Affairs& people –the approach of this section is to ensure the employees, customers and other stakeholders are satisfied. The employees are important assets to the organization while the customers are the backbone of the operations at Australia Post. Employees cannot operate without the customers, and customers cannot access services and products without employees. Australia Post has a strong human resource department that allows creativity and innovation, which is championed through continuous development. The requirements of the customers are addressed, and frequent feedbacks are integrated into the operation of the business. The management of the organization understands the importance of these two stakeholders and has created a framework to continue championing their respective requirements. It includes effective communication frameworks and also adhering to the requirements of community service obligations. Therefore, Australia Post has continuously improved the services based on the strategic obligations and requirements. Finance & businesses services–Australia Post understand the importance of allocation of resources based on the demands and expectations. The finances are important, and collection and use of the finances are also important (Crew and Kleindorfer 2012b). Australia Post analysed the financial data and reallocates the financials including the cost of postage and services to ensure the requirements of the customers are fulfilled (Cavusgil et al. 2014). In addition, the business approaches have been improved through embedding numerous processes depending on the expectations of Australia Post. For example, subsidiaries and joint ventures, such as StarTrack, Sai Cheng Logistics, Post Logistic Hong Kong and Australia Post Digital Mailbox have improved the business processes at Australia Post. Moreover, introduction and use of technological frameworks improves the efficiency and effectiveness of the entire operations at Australia Post. Therefore, the finance and business service strategy ensures that the business continues to operate effectively depending on the requirements of the organization. Business Level Strategy Communication management services – the important role of Australia Post is to champion and create efficiency when it comes to communication. Australia Post provides letter services and other numerous mail related products through an efficient handling mechanism. In addition, Australia Post provides digital communication services enabling integration of both physical and digital communications at a low cost and secure approach (Crew and Kleindorfer 2012a). The digital services enabled the launching of Digital Mailbox, which enables customers, government and business to communicate securely online. Australia Post also created a digital vault to enable storage of important documents, which will be easily available on desktop and mobile. Hence, Australia Post has provided numerous avenues to improve and champion the communication processes based on the changing business dynamics, especially after the introduction of digital technology. Parcel &Express services – Australia Post offers numerous services depending on the requirements of the customersthatare alignedwith the domestic and international requirements. It creates an effective chain of delivery of services and products based on the requirements of different stakeholders; for example, the customers require receiving their letters on time. Australia Post strategy is to collect, process, and deliver multi-parcel or single parcels consignments within Australia and also internationally. Australia Post also provides end to end supply chain that enables a product to be moved from the manufacturer to the consumer through the use of integrated logistics services. In addition, Australia Post has numerous distributors meaning that it is easier to ensure the customers receive their parcels within stipulated time. Retail services – Australia Post offers numerous retail, agency and financial services across Australia. The services and products offered are shaped in a manner that aims to meet the requirements of community service obligations. The requirements are reasonably accessible, performance standards and uniform price (Australia Post 2012). The agency provides third party agency services that enable different connection stakeholders including government bodies, businesses, and consumers. Some of the agency activities accomplished includes identity services, banking services, and bill payment. Also, Australia Post offers personal finance products, such as currency conversion, travel and car insurance. In the retail merchandise branch, Australia Post offers locked bags, post office boxes, packaging products and complementary products throughout the country. Conclusion Australia Post has been facing numerous challenges because of theintroduction of technology, which as disrupted the traditional model of business. Consumers, businesses, and governments are shifting their services from thetraditional approach to technologically based approaches, meaning that Australia Post business model will continue severing. Even though Australia Post has introduced new process and improved previous process, the revenues generated continue to shrink. In addition, the company in the near future will start marking losses because of the decrease in letter volumes and other parcel related complications such as competition and changing businessenvironment. The Australian government is the only shareholder meaning that the complexities would continue because of the challenges associated with thenationalization of enterprises. The business and functional level strategies are effective on paper, but the actual outcome of the implement has not yielded any positives. For example, the financial ratios and other strategic processes indicate Australia Post continuous shrinking of income, revenues, and business transactions. Nevertheless, Australia Post aims to fulfill the requirements of community service obligations. These obligations include reasonably accessible, performance standards and uniform price. Recommendations Investing in Australia Post is not advisable because of the following reasons: The financials are not promising based on the ratio and other financial analysis The volume of letters, which is part of its core business is not operating effective, and future forecasts indicate the volume of letters will continue decreasing Australia Post is owned by the government and investing in the organization means that an investor will have to deal with thenationalization of business challenges. For example, lack of efficiency, challenges in decision making, and lack of innovation and creativity The world is changing, and the presence and convenience of technological mail/communication reduce the dependency of postal services. In addition, thedemographic analysis indicates that more consumers tend to use digital communication meaning that Australia Post has to re-strategize and offer services, which are associated with technology. Process Reflections Researching Australia Post has opened my understanding, and I have been able to apply numerous strategic processes including financial analysis. The assignment was demanding in nature because I have to read numerous annual reports and search online for the latest information about the company. I understand that effective decision making is premised on the quality of the data and analysis of the data. The annual reports are important because additional bodies review the provided information, and independent review of the information is important. Therefore, I took my time and used different resources in ensuring the completed assignment reflected the requirements of the instructions. References Australia Post 2012, Future Ready: Annual Financial Report 2012, Australia Post, viewed October 22 2015, Australia Post 2013, Future Ready: Annual Financial Report 2013, Australia Post, viewed October 22 2015, Australia Post 2014, Future Ready: Annual Financial Report 2014, Australia Post, viewed October 22 2015, Australia Post 2014b, Australia Post at a Turning Point, Australia Post, viewed October 22 2015, Australia Post 2015b, Home Page, Australia Post, viewed October 23 205, Cavusgil, ST, Knight, G, Riesenberger, JR, Rammal, HG and Rose, EL 2014, International Business, Sydney: Pearson Australia. Crew, MA and Kleindorfer, PR 2012a, Regulation and the Nature of Postal and Delivery Services, Sydney: Springer Science & Business Media. Crew, MA and Kleindorfer, PR 2012b, Commercialization of Postal and Delivery Services: National and International Perspectives, Sydney: Springer Science & Business Media. Finger, M and Bukovc, B 2014, Postal Services in the Digital Age, Sydney: IOS Press. Lawrence, D, Coelli, T and Kain, J 2015, Updated Estimates of Australia Post’s Mail Centre and Delivery Centre Cost Elasticities, viewed October 22 2015, https://www.accc.gov.au Ryan, P (26 June 2015), Australia Post To Slash 1,900 Jobs Amid $500m Mail Losses; Boss Warns Of 'Tipping Point' As Letters Business Plunges, Australian Broadcasting Commission, viewed October 24, 2015. Shim, SJ, Kumar, A &Hakami, H 2013, Internet Usage Trend and Postal Service Performance In Australia. In Industrial Engineering and Engineering Management (IEEM), 2013 IEEE International Conference on (pp. 427-431). IEEE. The Boston Consulting Group June 2014, Australian and International Postal Services Overview Background Report, viewed October 23 2015, The McKell Institute 2014, Digital Post: Business Transformation and the Future Sustainability of Australia Post, The McKell Institute. Treworgy, DE and Wong, EY 2013, Assessment and Responses of Postal Sector Operators.Postal and Delivery Services: Pricing, Productivity, Regulation and Strategy, vol. 41, pp. 373. Read More