Internal and External Environment

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Analyse the Internal and External Environment
Submission details
The assessment task is due on the date specified by your assessor. Any variations to this arrangement must be approved in writing by your assessor.
Performance objective
In this assessment, you are required to complete analyses of the organisational environment to develop an understanding of potential competitors and allies, and the associated risks and benefits.
Assessment description
Complete a value chain analysis, PEST and SWOT for your organisation, plus analyses of the potential competitors and allies supplied in the case study.
Procedure
For the provided case study, you are required to complete for your organisation:
PEST analysis (including a review of legislation impacting on MacVille)
SWOT analysis (including an evaluation of the value-chain).
You are also required to review competitors/allies to MacVille, as described in the case study, and:
identify and describe existing and potential competitors/allies, then summarise the strengths and weaknesses of each
develop a separate summary statement for each potential ally for a cooperative venture that describes their alignment with MacVille’s vision, mission, values and attributes, as identified on the tender document.
Once you have developed these materials, you need to meet with your supervisor (role-played by assessor) to discuss and confirm the analyses you have completed, together with the summary of potential cooperative venture allies. Take notes in the meeting with your supervisor and make any changes as suggested by them, before submitting your final version.
Note: You need to retain your analysis of the organisation, competitors and allies for reference and use in Assessment Task 3.
Specifications
You must provide:
a completed set of analyses (PEST and SWOT)
a review of existing and potential competitors and allies
a review of potential allies and a statement of their alignment with organisational values (as described in Assessment Task 1) and tender requirements
summary notes from the meeting with your supervisor.
Case study
Having completed MacVille’s review of the vision, mission and values, you should then consider the environmental factors that could impact on MacVille’s goals and objectives. To help you with this assessment, you are provided with an industry consultant’s report that contains a recent and comprehensive review of the industry and general operating environment.
Industry consultant’s report
You have noted the following points from the report.
New commercial espresso machines are being developed that use 30% less energy to run, with an innovative and more efficient heat exchanger.
Planned changes in trade, where all tariffs on imported goods, including espresso coffee machines, will be removed in line with the government’s free trade policy.
The development of the home consumer market for consumer espresso machines is experiencing high growth.
There is a lifestyle trend towards eating out more frequently as the population ages and becomes more affluent.
A steady population growth rate is predicted for Australia, from 22 million in 2010 to 36 million in 2050.
The prediction of a strengthening Australian dollar against all our major trading partners over the next few years is a concern.
Higher-than-expected growth in the economy is predicted, as a result of a resources boom.
A carbon tax has a strong possibility of being introduced on all energy-intensive products used in a commercial enterprise.
Senior manager’s meeting
At a meeting with the CEO and other senior managers, the following points were noted in regard to the operations of MacVille. In response to your question about how effectively MacVille adds value to its products and services, the following responses were agreed
by all.
Inbound logistics is a problem, due to the lack of experienced personnel in importation and customs The lack of solutions from Human
Resources management has meant that delivery timelines are sometimes delayed because the proper procedure was not followed.
The operations of MacVille is an area of strong value-add, with the state-of-the- art Management Information System (MIS) forming part of MacVille’s infrastructure. The MIS has allowed for sound corporate/strategic planning, along with strong internal controls in accounting and finance.
Outbound logistics is an area that could be improved. Currently, MacVille relies on a three-year contract with a delivery firm to deliver its goods to customers. Sometimes there is a delay in getting the appropriate vehicle to deliver the espresso coffee machines, which is causing some issues with customers. The contract delivery firm seems to be struggling to deliver the promised quality with their fast expansion.
All managers agreed that marketing and sales are strong points for MacVille. The marketing communications and promotions mix seems to be working well, particularly with the social marketing that MacVille has introduced in the past Technology developments are helping MacVille to reduce costs, yet expand the message via internet marketing activities.
Service is another strong point for MacVille, which enjoys a good reputation in this field. The installation, after-sales service, complaints handling and training all get top marks from customers. Some of MacVille’s procurement policy has helped in this regard, with MacVille outsourcing work where it cannot meet customer demand. The policy of putting the customer first and guaranteeing service calls within 24 hours has been a key reason for the increased sales.
In a brainstorm with the CEO and senior managers, the following points were noted. When asking about the potential for opportunities, threats and competitors, the consensus was the following.
Moving into the new Sydney market, where the bulk of espresso machines are sold each year, and from which a major (but ineffective) competitor has withdrawn.
Other opportunities could be found in strategic alliances with coffee bean suppliers, where market penetration could easily be achieved and costs of advertising and service could be shared.
There was also concern about the rising Australian dollar having a severe long- term impact on tourism, which was a major category buyer of espresso Raising interest rates that are predicted for the coming years could impact negatively on the disposable income of coffee-drinking patrons.
The concerns of the group were centred on a global corporation, Nufix Inc., shifting from instant coffee into the espresso bean and machine market. The resources they would have at their disposal in marketing, finance and human resources could be a serious threat to MacVille’s However, they would
still struggle to gain a foothold in a market that already has strong supplier/buyer allegiances, with most stretching over many years. Global players like Nufix Inc. have difficulty being adaptable to the needs of niche market buyers.
Another competitor of note was BeanEx, a large coffee bean supplier that had recently started importing espresso machines for their customers. There was talk of them selling the espresso machines as wholesalers. They certainly had easy access to markets with their coffee bean trade, but they had no established service arm to help wholesale clients maintain the machines that they purchased.
MacVille has been keen to pursue strategic alliances as part of its strategy to achieve its objectives. It called for tenders from interested parties, who were asked to complete a tender application form that provided information relating to the tender requirements. Some notes have been included by senior managers who assessed some of the information.
Tender submissions
Three submissions are attached to this case study.
Business name – Home Espresso Traders
Description of business (include vision, etc.) – Selling consumer home espresso machines to the home market, only in Sydney, and incorporating other digital home entertainment products.
Description of joint venture – Shared space in four trade shows per year.
Venture: Strengths and weaknesses – Strength: covers the consumer market for espresso machines (which complements the commercial market for espresso machines) to make a full range offer to clients. Weakness: working with a strategic partner who is not solely focused on the hospitality industry.
Venture: Risks –
Partner not fulfilling their financial commitment.
Association with a non-industry partner may have a negative effect on MacVille customer base.
Partner access to MacVille’s trade secrets.
Venture: Cost-benefit analysis – Costs of the shows are $2,500 each. Four shows costing $10,000, selling 10 machines per show at $500. Each would see a profit of
$10,000 for the year and a break-even after two shows.
Venture: Financials –
Home Espresso Traders

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Statement of Financial Position

as at 31 December 201X

ASSETS

Current Assets

Cash at bank
10,000

Accounts Receivable
15,000

Stock
8,000

Prepaid expenses
2,500

Total Current Assets

35,500

Non Current Assets

Buildings

Less Accumulated depreciation

Equipment
356,000

Less Accumulated depreciation
(24,998)

Goodwill
10,000

Total Non Current Assets

341,002

Total Assets

376,502
Represented by

LIABILITIES

Accounts Payable
25,000

Long term loan
251,500

Total Liabilities

276,500
OWNERS EQUITY

Initial Capital
2

Current earnings
100,000

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Total Owners Equity

100,002
Venture: Trend analysis – Sales 2007 – $1.0m
2008 – $1.3m
2009 – $1.5m
2010 – $1.6m
2011 – $1.6m
Able to provide access to due diligence materials?
Copies of other strategic alliance agreements? YES or NO ¨
Statement of Financial Position from last tax return? YES or NO ¨
Full personal contact details of all directors? YES or NO ¨
Supporting data for trends, and cost-benefit analysis? YES or NO ¨
Business name – Ambrosia Coffee Roast
Description of business (include vision, etc.) – Sell all grades of coffee bean to supermarkets and hospitality outlets around Australia.
Description of joint venture – Share in the cost of outdoor advertising for cafes and restaurants, with shared branding of umbrellas and barriers.
Venture: Strengths and weaknesses – Strength: Supplier is committed to  the coffee bean industry, with some sharing of the client base. Weaknesses: Has concerns with sharing information, citing intellectual property. Product image is not quality but more commodity-based.
Venture: Risks –
Risks with poor brand association.
Long-term commitment in signage.
Venture: Cost-benefit analysis – 50 cafes per year, at $200 per cafe cost for each partner. 50 machines sold at $500 profit is $15,000 profit return for the year. Break- even after 20 cafes.
Venture: Financials – Not available.
Venture: Trend analysis –
2007 – $3.2m
2008 – $3.0m
2009 – $2.9m
2010 – $3.0m
2011 – $3.3m
Able to provide access to due diligence materials?
Copies of other strategic alliance agreements? YES or NO ¨
Statement of Financial Position from last tax return? YES or NO
Full personal contact details of all directors? YES or NO
Supporting data for trends, and cost-benefit analysis? YES or NO
Business name – Java Estate
Description of business (include vision, etc.) – To sell quality Arabica roasted coffee beans to all states of Australia.
Description of joint venture – Java Estate provides MacVille espresso machines to client at no charge. Java Estate pays MacVille cost price for the delivery and installation of the machine, then pays the remainder of the purchase price on a 12- month repayment program.
Venture: Strengths and weaknesses – Strength: Australia-wide partner – 100% committed to hospitality and coffee bean market. Weakness: Other coffee bean suppliers may not recommend MacVille machines with this strong strategic alliance.
Venture: Risks – Concern over the amount of money outstanding.
Venture: Cost-benefit analysis – Potentially 200 machines installed in the first year. Interest costs $40,000 p.a., profit $100,000. Break-even after 80 machines sold.
Venture: Financials –
Java Estate

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Statement of Financial Position

as at 31 December 201X

ASSETS

Current Assets

Cash at bank
78,000

Accounts Receivable
123,000

Stock
100,000

Prepaid expenses
12,000

Total Current Assets

313,000

Non Current Assets

Buildings
240,000

Less Accumulated depreciation
(123,000)

Equipment
230,000

Less Accumulated depreciation
(78,000)

Goodwill
39,500

Total Non Current Assets

308,500

Total Assets

621,500
Represented by

LIABILITIES

Accounts Payable
25,500

Long term loan
151,000

Total Liabilities

176,500
OWNERS EQUITY

Initial Capital
100,000

Current earnings
345,000

Total Owners Equity

445,000
Venture: Trend analysis –
2007 – $8.2m
2008 – $9.1m
2009 – $12.2m
2010 – $14.6m
2011 – $16.3m
Able to provide access to due diligence materials?
Copies of other strategic alliance agreements? YES or NO ¨
Statement of Financial Position from last tax return? YES or NO ¨
Full personal contact details of all directors? YES or NO ¨
Supporting data for trends, and cost-benefit analysis? YES or NO ¨

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