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Strategic analysis 1

PART 2

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Strategic analysis 2

Over the years our company has been looking for the best way of improving the accuracy

and the efficiency of our products. This is after realizing that over the years we have been facing

a stiff competition from our counterparts. The results of this competition is minimal surplus over

the years which calls for a keen response if we need to have a stable company that is self-

independent. The competition in the market therefore calls for a necessary attention on the current

market issues so that we can have a positive consequence on our sales. From our recent sales and

expenditure analysis it has been clear that the Company has not been performing well although we

have made a slight increase in the surplus. Over the six months we have been making a slight

surplus ranging between $71200 to $162250 between the months of January and June with a slight

drop in March. This is an implication that our product has not been doing well in the market due

to some specific factors that should be improved in the immediate effect. The improvement should

be effected irrespective of the nature of the requirement. For this reason we need to figure out some

of the factors and their cost implications in order to effect the changes where possible.

As it has been indicated in the sales and expenditure report, it is clear that the company has

been using less capital in production. For instance, the cash disbursed in the month of December

to the month of June ranged between 5250 dollars to 8250 dollars the amount that was disbursed

to wages occupied a bracket of between 3000 dollars to 3500 dollars in every month. In the same

analysis less amount has been used as capital which is an implication that there is potential of

growth only that we are under utilizing our resources. The consequence for this has remained to

be low profit margins in the first half of the year. To be precise, our profit margin has remained in

a close range between 71200 dollars to 162250 dollars. In addition, the company is operating under

minimal cash balance (5000 dollars) this operation cash balance is less in that sometimes the

company is forced to look for loans in order to service the urgent needs which requires urgent cash.

Strategic analysis 3

The loans are in most cases unfriendly to the company due to unattractive interest rates which

consequently deprive the company its profit. Minimal wage bill is an indication that there is no

enough staff an implication that the staffs in the company are being overworked. In addition to

this, the terms of sales of our customers have a problem, this gives the reason for the delayed

payments of the purchased machines by our customers. This is the one of the contributing factor

that explains why the company is able to buy less raw materials for the production, consequently

less output.

The company will improve if the management is going to be keen on the way it is handling

its staff, materials and its income from the sales. From the information in the sales and expenditure

analysis it is clear that most of the income is being redirected in the shareholders pocket rather

than in the company development. The company has allocated only 5000 dollars as the minimum

cash balance, which is the most vital. Similarly less total amount is spent as the company input

expenditure. Comparing the input and the company output there is an indication that the company

has potential of increasing its marginal profit if more resources are directed in production. It is

evident that the surplus has been increasing from the month of December to the month of June.

This is brought out by consistent increment of the raw materials that has been occurring throughout

the period. The company should therefore engage itself in the large scale production, which can

be effected through the following; increasing the number of workers in the company, increasing

the quantity of inputs which has a direct relationship with the amount of products produced and

consequently the magnitude of surplus. In the analysis insurance cover has not been mentioned

anywhere. In the current businesses risks and uncertainties are the most important things that any

business must consider. The business may fall away from the expectation, since some product

demand are seasonal, therefore, it is important for the company to cover itself from unexpected

Strategic analysis 4

failure so that we can avoid company closure due to market failure. Finally the company should

lea with the government which is one of the potential customer to the company. The company

should therefore emphasize on the quality of its product so that it can much with the current

competing companies that are producing similar machines. This will only be possible if some of

its marginal income or profit is directed to the production process. For example in case of huge

surpluses the company can give some incentives to the staffs may be through increment of wages.

This will consequently motivate the workers hence becoming more productive to the company.

The company can also outsource qualified staff (experts on specific areas) so that they can

contribute in improvement of the product quality.

With improved quality and proper use of the company finances, the marginal income will

rise. This consequently will ensure that the company is more stable and other competing companies

will not be able to out do it in the market. The reason is that through large scale production, the

cost of production is less. This implies that the company machines will be sold at a lower price

that is customer friendly. Consequently the company will realize increased sales with a high

marginal profit. With this the company will be able to grow to meet some of its targets such as

creation of extra jobs among others.

One of each and every company is to grow to a level that will make it be among the biggest

exporters in the world.in the same case the company has the same target which somehow they are

affected by the market forces and the economic forces. For example the matter of wage bill in the

company will always remain an issue of concern. The company has previously been trying tom

minimize the wage bill but the issue of minimum wage bill has tied the company that this cannot

be reduced. In addition the prices of the substitute products from other companies is another

problem. The company product prices are in most cases determined by the market forces that is

Strategic analysis 5

the supply of similar goods in the market. Increased flow of precision machines in the market have

caused the prices of the company products leading to reduced product profit margins.

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