Strategic Analysis of Australia Post Company - Case Study Example

Australia Post Case Study Name: Course: Tutor: Institution: Date: Table of Contents Table of Contents 2 1.0 Introduction 4 2.0 Company History 4 3.0 Internal Analysis: VRIO Model 5 3.1 Human Resource 6 3.2 Financial Resources 6 3.3 Materials Resources 8 4.0 External Analysis: Porters Five Forces Analysis 8 4.1 Buyers Bargaining Power 9 4.2 Suppliers Bargaining Power 9 4.3 Competition Rivalry 10 4.4 Threat of Substitutes 10 4.5 Threat of New Entrants 11 5.0 A SWOT Analysis 11 5.1 Strength Analysis 12 5.2 Weakness Analysis 12 5.3 Opportunities Analysis 12 5.4 Threats Analysis 13 6.0 Corporate Strategy Applied 13 7.0 Business Level Strategy Applied 14 7.1 Low-Cost Practices 15 7.2 Customer Alliances Strategy 16 8.0 Company Structure 16 8.1 Management Structure 17 8.2 Corporate Governance 18 9.0 Recommendations and Conclusion 18 10.0 Process Reflection 19 References 21 Appendices 23 Appendix 1: Australian Post Financial Analysis 2014 Report 23 1.0 Introduction As an investment group, fellow youths in my locality are considering investing our accumulated funds in a viable organisational venture. In this case, we seek to invest our funds in a viable organisation that not only offers a high return on investment, but also provides production and our investment sustainability in the long run period. In this regard, I was tasked with the responsibility of evaluating the viability and the suitability levels of the Australian post Company for our investment considerations. In this regard, I was tasked with the responsibility of evaluating the organizational current situation, as well as a future feasibility forecast of its operations. In order to enable me to execute this function successfully, I evaluated the organisational background, its internal and external environment analysis as well as both the corporate and business level strategies. Finally, based on the company strategic analysis I offered recommendations to the group on whether to invest or not invest in the organisation. This report offers a summary of the strategic analysis of the Australia Post Company as per the investment group requirements. 2.0 Company History The Australian Post Company has a strategic organizational vision of emerging as a preferred mail delivery company in Australia. In this case, the organizational vision is pegged on the application of a continuous improvement process that has characterized the organization since its establishment in 1809 (Australia Post, 2015a). The organization emerged as the result of the operation of a reformed ex-convict Nichols Isaac in Sydney. He was in charge of parcels and letters and parcels arriving by ship as a means of allowing for order in the dock when the ships arrived, a scenario formerly characterized by disorder as people rushed to get mail when ships arrived. The first step to the organizational formalization was in 1825, upon the passing of the Postal Act of 1825 that allowed the Governor to appoint postmasters outside the Sydney region as well as fix postage stamp duties and costs. In this case, the process led to the eventual formation of the Australian Postal Commission. Eventually, the organization evolved to its current name the Australia Post that has served the Australian market. Over the last decade, the Australian Post has diversified its traditional manual mail delivery to include a wide technology base in its new product innovations as a means of delivering quality as well as remaining competitive in the highly dynamic market (Australia Post, 2015a). Further, the organization has a mission of ensuring on time delivery of mail as a means of ensuring value for money and its consumer satisfaction. Moreover, it has a core value commitment to its employees it provides a dynamic employee-oriented working environment to boost their satisfaction, as well as commitment levels increment. 3.0 Internal Analysis: VRIO Model In The process of developing an organisational strategic analysis, Pineda and Brebbia (2010, p.87) argued that one of the viable approaches through which this can be achieved is through a VRIO model analysis. In this regard, the authors described the model as a comprehensive approach through which organisations evaluate their available resources to evaluate their weakness and strengths respectively. This report section offers a review of the organisational, financial, human and material resource analysis based on the model perspective 3.1 Human Resource A value analysis of the organisational HR workforce illustrates that the organisation has a diversified workforce. In this case, the organisation developed gender diversity in its workforce. As such, the process of a qualified and experienced workforce offers the venture an opportunity to maximize and optimize the available market opportunities such as taking advantage of technology developments. However, the resource represents a high representation of the indigenous population that make its rare in the parcel delivery in the market. As such, this creates a close connection between the employee culture and the consumer culture, allowing for reduced conflicts and misunderstandings between the two key stakeholders In this case, the organisational annual report indicated that the organisational frequency injury rates reduced from 2.5 in 2011/2012 financial year to 1.6 in the 2013/2014 financial year (Australia Post, 2015b). However, an analysis of the resource imitation rates establishes that the availability of a qualified indigenous workforce in the Australian market makes its highly likely for imitation and thus competitors can adopt a similar workforce structure in the long run period, reducing its current market competitiveness. However, the resource organisation and the presence of proper employee management systems and motivation programs make it a sustainable competitive edge that will increase the organisational competitiveness in the future. 3.2 Financial Resources A value analysis of the organisation establishes that is a high value and ability to meet market opportunities due to its large capital base. In this regard, the venture is a business enterprise owned and managed by the Australian government. As such, the government as the sole shareholder offers the venture the opportunity to access a large resource base as and when needed in the market. On the other hand, an evaluation of the extent to which the financial resources in the organisation are rare illustrates that with the 2008 global financial crisis, access to sufficient capital is a rare resource to organisations globally (Forrest, 2011, p.225). Therefore, the resource offers the venture an added advantage over peers in the market; however, an evaluation of the extent to which competitors can imitate the resources application establishes that it is easy for competitors to source additional funds from other institutions in the Australian market. In this regard, the current economic growth and the rise of financial institutions from the 2008 global financial crisis effects have created an increased lending opportunity for ventures in the market. The venture has a declining trend in its financial trends such an as dividends decline from $213.7 million in 2012 to $78.8 million in 2014 (Australia Post, 2014) Therefore, this illustrates that although the venture has a short-term competitive edge over competitors; its competitiveness is not sustainable in the long run period. Therefore, although its profitability has been on the rise where the organisational 2011 profits were $241million, $281 million in 2012 and $312 million in 2013 indicating a rising trend, the trend will be unsustainable in the long term period (additional financial analysis under Appendix 1) (Australia Post, 2014). Finally, an organization, analysis of the venture financial resources, establishes that being a government institution, the organizational management is highly subject and influenced the national political dynamics. In this case, the diversity of different successive governments over the decades has created an inconsistency in the organisational management, reducing its financial management organisation efficiency as compared to industry both domestic and global competitors. 3.3 Materials Resources A value an analysis of the organisational matters that includes its distribution system systems establishes a high-efficiency level that enables it to respond to consumer and market needs with increased flexibility. In this case, its distribution vehicles as well as the online platform, increases its value in the market. On the other hand, an evaluation of what the extent the materials resources acquired are rare establishes that due to the fact that the development of such distribution chains and logistical infrastructure and trust is a long term process it is not only rare but also hard for the competition to imitate (Australian Government, 2015). As such, this makes the organisational material base, for both the tangible and intangible assets as the key sustainable competitive edge in the market. Finally, an organisation of the Australian Post materials organisation establishes that its national wide and regional offices allow for the resources ordination. Moreover, technology application in the process management practices has increased its organisation efficiency in the market. 4.0 External Analysis: Porters Five Forces Analysis In order to evaluate the Australian Post Company external environment, the report adopted the posters five force model. In this case, the analysis evaluates the existing and forecasted industry situation and influencing factors. In this case, the developed analysis was adopted as a means through which future strategic decisions based on the established opportunities and threats would be made. The evaluation was a vital process tool as it allowed me evaluates the existing opportunities and threats for the organization in the future. In this case, if the analysis established opportunities exceeding the threats is would adopt is a viable investment opportunity. The analysis process involved the evaluation of the buyers bargaining power, suppliers bargaining power, competition rivalry, the threat of new entrants, and the threat of substitutes respectively. 4.1 Buyers Bargaining Power An Evaluation of the Australian buyers bargaining power establishes that is currently low. In this case, the buyers and users of the parcel and letter delivery services as a fragment in both the household and corporate consumers. However, due to the low implications of such parcel delivery service is in the household market reduces the financial implications of each of the consumers to the Australian Post Company market performance. Therefore, the consumers lack the ability to influence its market pricing and service delivery due to its fragmentation. However, this trend is expected to increase in the future. In this regard, the rise of corporate consumers in the market has increased the overall consumer significance in the industry as it has a direct impact on the organizational operations due to their reliance on the parcel delivery services to their internal business ventures (Hoque and Chia, 2012, p.122). Therefore, this will increase the buyers bargaining power in the future, as corporate organisations, consumers contribute a significant proportion of the organizational supply base in the market. 4.2 Suppliers Bargaining Power The Australian Post Company relies on a wide range of suppliers to actualize its business operations. In this case, supplies of the stamping and packaging packages are its key suppliers in the parcel industry. Others include the transportation and aviation industries for the far and regional delivery needs. However, an analysis of their power establishes that they have a low bargaining power. In this regard, the presence of a large supply base reduces the organizational supplier shifting costs. In this case, the relatedness of their offered service and the minimal prices and quality of service delivery differences reduce their bargaining power. This trend is expected to project into the future. In this case, as a government owned enterprise, the organization is under no legal restrictions and enjoys the local and international governments to source supply and distributions partners in nations with a comparative advantage. 4.3 Competition Rivalry The Australian parcel and letters delivery industry are growing competitive with the rise and competitive edge development by key industry competitors. In this case, among the competing organisations in the market facing the venture include the Virgin group, which has diversified its aviation services to delivering multinational parcels, especially for the multinational ventures in the Australian market as well as beyond. However, the organization has pricing merit due to the offered government subsidies that have enabled it to increase its market share as illustrate in its financial statements. Therefore, this has allowed it to reduce the overall competition levels as its offers value for money to its consumers, mitigating the rising competition levels. However, as indicated in the financial analysis, the organisation relies on the government funding to support its operations a situation that is currently risking its failure with the delayed government support (Huthens, 2015) 4.4 Threat of Substitutes Similar to other industries in the Australian market, the parcel and letters delivery industry faces numerous challenges of substitution due to technology changes. In this case, the emergence alternatives to information delivery and communication through the technology platform pose a major organizational future market dominance challenge. In this regard, one of the alternative approaches is the use of emails, fax and chat services to communicate. In addition, the acceptance of these communication channels and approaches into organizational managements as formal communication platforms as well as their admission as legally recognized information transfer approaches, increases the challenge. In this regard, the flexibility, speed and low operational costs of these substitute mediums is bound to increase their acceptance in the consumer base, However, this analysis concludes that in order to overcome this challenge, the Australian Post Company should diversify its technology application in services delivery. As such, it should diversify of products base to include both the electronic and physical information transfer platforms. 4.5 Threat of New Entrants The threat of new entrants into the parcel delivery industry in the Australian market is relatively high. In this case, the industry is at its growth stage with respect to its targeting the corporate consumers’ market segment. As such, the size and current market profitability margins are expected to rise in the future allowing for increased investment interests in the industry. Therefore, the Australian Post Company is expected to face a high market competition in the future. However, this analysis argues that with its current material resources base merit, the venture is bound to overcome this challenge in the long run period with the formulation of the relevant marketing and management strategies and policies. 5.0 A SWOT Analysis Based on the above report strategic analysis on the organizational resources through a VRIO model, as well as a, porters five force analysis, this analysis develops a matrix of the organizational SWOT analysis as represented in this section 5.1 Strength Analysis Strength analysis establishes that the existence of a diversified workforce offers a market culture fit. In this regard, the organization has the potential and capability to enhance a market and systems synergy increasing its overall market competition and success. An additional strength is the presence of a strong financial base that allows the venture a market flexibility opportunity as well as its government financial support offering it a financial base stability during a period when other industry peers face an unstable base due to the 2008 global financial crisis. 5.2 Weakness Analysis One of the fundamental organizational weaknesses is its shaky management stability. In this case, he influenced by political dynamics and government changes reduces its market consistency. 5.3 Opportunities Analysis The rise of the new corporate consumer segment and its ability to form a large market proportion in the future with increased internationalization is a major development opportunity. Focusing on this market will increase the venture future market competitiveness. 5.4 Threats Analysis The rise of technology changes and the establishment of alternative communication, as well as parcels delivery platforms, pose a major threat to the organization similar to the threat of new market entrants risk the business future success. 6.0 Corporate Strategy Applied A corporate strategy is the strategic approach through which an organization operates and seeks to position itself in the market. In this regard, the positioning involves the perception and image that an organization wishes to create on its consumers as a branding approach. In This case, an organizational corporate strategy can be analyzed based on the porters’ generic strategic model. Under the model, there are four alternative corporate strategies namely the differentiation, cost leadership, focus, and focus differentiation respectively. An evaluation of the Australian Post Company illustrates that the organization adopts and applies the cost leadership approach in the market (Winter, 2014). The strategy is based on the principles of adopting the least costs and prices in the market. In this regard, organisations seek to reduce their operational costs as a means of ensuring that their overall market prices are low as compared to peers in the industry. Through the approach, organisations target to increase their consumer base. The fundamental guiding principle for the Australian Post Company is its mission value of creating value for its customers. In this case, one of the organizational pillars, as enumerated in its mission statement, is based on ensuring a value for money of the consumers. This implies that the organization seeks to deliver the highest quality services and products to the consumers at the lowest possible price in the market. The application of this strategic approach has served the organization as its key sustainable competitive edge. In fact, the strategy application has been its unique selling point in the market allowing for differentiation between the organization and its competitors that apply different market corporate strategies. In addition, the strategy application has allowed the organization meet its strategic goal of establishing its influence in the Australian parcel industry through a market share leadership. As such, the need for quality parcel and letters delivery services at reduced prices has been its main market penetration and entry success factors (Winter, 2014). Nevertheless, the application of the organizational cost leadership strategy has reduced its overall market competitiveness. In this regard, the organization, although serving the largest market share has minimal profit margins. For instance, despite its market by share leadership in the Australian market, the venture registered a profit before tax of $103 million, a value below its competitors in the market. This led to the 2014 organisational consideration for changing the corporate strategy as a means to increase its profitability a move that was highly opposed by the consumer base (Winter, 2014). Therefore, this financial analysis implication of the strategy application illustrate that the cost leadership approach, although increasing the organizational market share leadership, has no similar effects on its revenue and profitability gains. Therefore, the strategy is unsustainable in the long-term period and the analysis forecasted that if the organization strategy remains unchanged in the future, it will lead to marginal profitability gains unlikely to attract any additional investment by any potential investor shareholders. 7.0 Business Level Strategy Applied In a bid to establish and execute its strategic corporate strategy of cost leadership, the Australian Post Company has rolled out a series of supportive business strategies to support its operations. In this regard, the adopted business strategy aims at ensuring that the organizational corporate strategy is achieved in both the short and long run periods. 7.1 Low-Cost Practices On one hand is the roll out of cost effective parcel delivery products and packages targeting the different organizational strategies. On one hand, the organization retains a total of 15,800 street posting boxes for its consumers across the Australian market. In this case, the street posting boxes, especially in the Australian rural areas aim at ensuring that consumers can access their mail as and when required at low costs. In addition, the Australian Post Company has adopted the bulk delivery approach for its parcels. In this case, instead of delivery different mail to given destinations individually, the organization uses a bulk delivery approach where parcels and mails to a given nearby region are delivered through the same bulk (Australia Post, 2015c). As such, the use of the bulk delivery process has ensured that the delivery costs associated with the parcel transportation needs are significantly reduced. However, the delivery bulk business strategy in delivering parcels has reduced the organizational flexibility. In this case, parcels delivery is at times delivery in a bid to ensure that the required minimum bulk size is attained for transportation to commence. As such, this strategy application reduces the organizational business efficiency and attractiveness in terms of urgency as compared to peers in the industry. 7.2 Customer Alliances Strategy In addition, the Australian Post Company in a bid to reduce its operational costs has developed market alliances with its consumer base. In this regard, the alliances focus has been especially in the corporate consumer segment. The organization currently serves as an agent for over 150entitires and government departments of which over 70 are financial institutions. Through the adoption of this approach, the organization ensures that it conducts all the parcel delivery services for these corporations a move through which it concentrates its market on efficiency rather than on costs in the marketing process. Therefore, the adoption of consumer based alliances and the subsequent development of increased satisfaction and consumers’ loyalty has enabled the organization reduce its operational costs. One of the highest operational costs for any venture is the cost of retaining and acquiring new consumers in the industry (Australia Post, 2015d). Therefore, a high loyalty base for the Australian Post Company has not only reduced its operational costs, but also increased its branding image in the highly competitive Australian parcel industry. This analysis establishes that through the application of the above business level strategies has been the main approach through which to achieve the cost leadership approach strategy in the market. 8.0 Company Structure An organizational structure has two implications both the management and the hierarchy structures respectively. This analysis section evaluates the management and hierarchy structure through which the Australian Post Company is governed through. In this case, the structure analysis was aimed at evaluating the existing structures relationship with the current situation as well as with their suitability for the expected market changes, especially those listed under the porters five forces analysis model in this report. 8.1 Management Structure On one hand, management structure evaluation establishes that the organization is headed by the managing director who couples up as the Group CEO in charge of the organizational strategic management and strategies development. As of 2015 the CEO was Mr. Ahmed Fahour. On the other hand, others supporting the Group CEO in the organisations structure included the executive general managers and heads of the organizational respective business units. The units include the Corporate and commercial services, postal services, parcel services and, the corporate affairs and people business sections (Australian Post, 2015d). Others included the Information and digital technology, and the marketing and customer experience units respectively. In addition, each of the organizational unit Executive General Managers has a series of line and staff managers supporting each of the functions operations. In this regard, a strategic evaluation of the organizational management structure illustrates a holistic and future-oriented structure. In This case, the presence of independent business units will increase the respective functions development efficiency in the wake of expected competition and substitutes rise in the future. For instance, the organizational Technology and digital unit form a basis through which the organization can develop a viable online approach to mitigating the expected substitution threat in the market. 8.2 Corporate Governance On the other hand, a management and governance analysis establishes that the organization applies a corporate governance management structure. In this case, besides the presence of the executive directors in the organizational board of directors, it has independent directors. In this case, the board of directors, which incorporate both the executive and non-executive directors, ensures a management process audit through its various committees that ensure that the CEO and other executive directors confine their practices to the organizational constitution and the interest of the stakeholders. As such, this report’s analysis concludes that the Australian Post Company applies the stakeholders’ management theory. As Phillips (2012, p.37) noted, the theory argues that managers should not only consider business strategies and alternatives that increased profitability, but instead considers those that enhance profitability, as well as the stakeholders wellbeing. In this case, this analysis concludes that the adoption and application of the strategic and management theory allow for the venture future market competitiveness and performance, making it a viable investment opportunity. 9.0 Recommendations and Conclusion Based on the above analysis, as the group investment advisor, I recommend that the group does not invest in the Australia Post Company. Although the organization faces the threat of market operations substitution, and the threat of new entrants, its corporate governance and organizational structure have the potential to enable, it overcomes the strategy. Nevertheless, the key challenge is the lack of future profitability markets expectation. In this regard, as other industry competitors gain influence, the current cost leadership approach will no longer be viable, and thus the venture will lose its current low profitability margins. Therefore, in the interest of investing in a profitable venture, I recommend that the group should consider the alternative organization to invest in. Therefore, this report concludes that the organization is not viable for a profit-oriented investment. 10.0 Process Reflection In the process of evaluating the Australia Post Company, I learnt a number of lessons in strategic management. On one hand, I learnt that in strategic management, organizational decisions and investment decisions are based on the long-term business operations and performance and not on the current gains. As such, I realized that although an organization could be well performing in the short run period, it could lack relevant structures to support its long-term performance. On the other hand, I was also surprised that although at the face value an evaluation of the Australia Post Company indicates it as a performing and viable venture, it lacks a relevant support structure for a long-term gains. Therefore, the key lesson in this regard was that in evaluating investment opportunities business operations sustainability opportunities should be the core of the process. In addition, I learnt that in formulating strategic investment decisions, one should be objective and only choose the most viable opportunity. As such, decisions should not be made based on the wishes, but the existing strategic organizational reviews. Nevertheless, I encountered a challenge in financial analysis. In this case, I realized that to be a successful investor and businessperson in the future, one needs all the skills from the management to the evaluation of statistical data. Therefore, it developed a challenge in me that besides focusing on my major in management, I should also seek to diversify my knowledge in business operations as a proactive preparation strategy. References Australia Post, 2014, Annual Report. [Online] Available at < http://auspost.com.au/annualreport2014/> [Accessed April 4th, 2015]. Australia Post, 2015a, Vision and Mission. [Online] Available at {Accessed April 4, 2015]. Australia Post, 2015b, Australia Post Annual Report 2014. [Online] Available at < http://auspost.com.au/annualreport2014/supporting-our-people.html> [Accessed April 4th 2015]. Australian Government, 2015, Australian Postal Corporation. [Online] Available at < http://www.australia.gov.au/directories/australia/australia-post/resources-list> [Accessed April 4th 2015]. Australian Post, 2015c, Bulk Mail Options. [Online] Available at < http://auspost.com.au/business-solutions/bulk-mail-options.html> [Accessed 4th April 2015]. Australian Post, 2015d, Fast Fact about Australia Post. [Online] Available at [Accessed April 4th 2015]. Forrest, R., 2011, Housing markets and the global financial crisis, Elgar, Cheltenham. Hoque, Z. & Chia, M. 2012, "Competitive forces and the levers of control framework in a manufacturing setting", Qualitative Research in Accounting and Management, vol. 9, no. 2, pp. 123-145. Hutchens, G., 23rd February 2015, Crisis point': Australia Post profits tumble as government rescue package stalls. The Sydney Morning Herald. [Online] Available at < http://www.smh.com.au/federal-politics/political-news/crisis-point-Australia-post-profits-tumble-as-government-rescue-package-stalls-20150223-13m847.html> [Accessed April 4th 2015]. Phillips, R. A., 2012, Stakeholder Theory: Impacts and Prospects, Edward Elgar Publishers, Cheltenham Pineda, F. D., & Brebbia, C. A., 2010, Sustainable tourism IV, WIT, Southampton. Winter, C., 21st Jan 2014, Welfare groups up in arms over suggestions Australia Post could charge extra for daily deliveries, Australian Broadcasting Corporation, [Online] Available at [Accessed 3rd April 2015]. Appendices Appendix 1: Australian Post Financial Analysis 2014 Report Read More