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Strategic Analysis on Rail Operators Assignments
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Strategic analysis plays a significant role in strategic decision-making. It brings out crucial information through internal and external analysis of organisation’s environment. In this report, the strategic analysis of a logistic industry of Australia has been done. For that purpose, a general external environment analysis is done, wherein different physical, economic, sociocultural, global, technological, demographic aspects is considered. Moreover, the environment is analysed using Porter’s five force model. Furthermore, the competitive environment, opportunities, and threats have been worked on. The second part focuses on internal analysis. To achieve that the firm’s resources (both tangible and intangible) are explored. The analysis also covers the firm’s capabilities and core competency. Later on, a proposal is given regarding a suitable information system that satisfy the needs of the selected organisation. At last, the proposed system and the recommendations are evaluated thoroughly.
- Business Background : XYZ is one of the biggest private rail operators of Australia. The company is a result of a joint venture. The company functions across the Australia. The company currently operates 12875 wagons and 596 locomotives. The services include bulk freight, such as steel ore, grain, coal, etc. In addition to this, the company all deals with intermodal container for import and export and domestic purposes.
- What industry is it? : XYZ is the logistic and transport industry that emphasises more on bulk haulage of steel and coal. The organisation make use of the processes, such as planning, implementing, and controlling for effective and efficient transportation of material. The company uses a wide range of equipment and instruments in order to reduce the transportation cost, such as specialised wagons and balloon loops. The company takes important measure in maintaining the quality services.
- General environment analysis : Environmental analysis is the one of the important strategic analysis tool that identifies all the external and internal factors affecting the organisation’ performance. The analysis can determine the potential opportunities and threats along with their impact on the business. Once this is done, the outcomes and results are considered in decision-making. The widely used tool for a detailed environmental analysis is “PESTLE analysis” (Ho, 2014). Using this tools for the analysis of XYZ, one can easily determine the diversification of logistic industry.
- Political Factors: The political factors such as government stability and policies play a significant role. These factors affect every aspect of a business, namely planning, developing, using, regulating, educating, and promoting XYZ to other service providers and customers. Other factors include taxation system, financial backing, and government intervention can also affect the business functions at different stage (Lee, 2012).
- Economic Factors: The Company’s economic positions is directly linked to national economy. In Australia, nearly 10 billion tons of freight needs more than 3 million heavy-duty trucks. This show the importance of logistics and transportation industry in the GDP of Australia. Economic factor have two sub-components: macro and micro factors. The former include the national economy growth, inflation rate, taxation policies. The latter include income, unemployment, education level, etc.
- Social Factors: It is quite difficult to pin point the social aspects of XYZ due to a wide range of social traits the logistic industry beholds. The company can make use of social media platforms in order to promote and advertise its services. The link between the logistic industry and social media is quite natural i.e., both depend on digital platform to operate. XYZ’s strategies are greatly influenced by social media (Ho, 2014).
- Technological Factors: The logistic industry is getting transformed day by day due to ever-changing technology. The technology is altering the way how transportation and logistics industry operates. The use of IT in various business aspects can be a vital opportunity for the business. The IT can enhance XYZ’s service and products integrity. Now customers can track their parcels (Lee, 2012).
- Legal Factors: Transporting goods and products is not always hassle-free. Within domestic boundaries, there are numerous administrations that governs the trucking sector. Each authority has led down their rules and standards. These rules and regulations are regarding the road safety, health and safety of drivers, transit corridor regulations, etc.
- Environmental Factors: The logistic industry is always been criticised for its high carbon footprint, pollution, and environmental degradation. The major challenge for XYZ is to lower down the carbon footprint without affecting efficiency of the supply chain. The company can make use of greener trucking equipment so as to increase the fuel economy. This can help in reducing the global warming and making a world a more sustainable place.
- Industry Environment Analysis : Industry Environment can be best analysed by implementing Porter’s five force model. Porter’s model in the logistic industry can help in determining the attractiveness of the market and competitive intensity (Verma and Verter, 2012). This model will ultimately analyse the profitability of XYZ. This model can be used by the firm in order to gain an edge over the competitors.
- Threats of new entry: Since the company deals in every state of Australia, it requires a large number of delivering vehicles in order to match with the annual target. This requires a large amount of capital investment. As the initial capital requirement of a logistic industry is quite high, the threat from the new entrants is very meagre. To generalise this point, it can be said that overall threat from new entrants is moderate.
- Threat from substitution: Substitution threat arises when the consumer inclines toward the rival service provider. This may be due to poor quality of service, high prices, and increase in time of shipment. It may severely hit the company’s bottom line as it has to figure out other ways to combat the substitution. If the availability of substitute products is large and their prices are low, then it may increase the threat for XYZ. Overall impact of this force is moderate to high (DulÄiÄ‡, et.al, 2012).
- Bargaining Power of Supplier: Suppliers in the logistic industry are characterised as: high profit makers, high price factors, high switching cost, and large in numbers. As they are very large in number, there bargaining power is low. Hence, overall impact of this force is low.
- Bargaining power of buyer: The logistic sector is depending on two core factors, such as price and quality of service. Due to high competition in this industry, the buyers enjoy a high bargaining power. In addition to this, consumers’ are capable of making such demands because the businesses are always in threat of losing them. Overall impact of this force is high.
- Competitive Rivalry: Transportation industry has high competition due to large number of service providers and high returns and profit margins. This leads to sharing of hard earned revenues with the rivals. Since the growth of logistic industry is high, there is very less chance of rival switching the field. Overall impact of this force is high.
Australia has a privatised, liberalised, and globalised business market. This is characterised by international trade and Foreign Direct Investment (FDI) in the logistics sectors. This has increased the overall competition for the localised industry like XYZ. Rivals eats up the customer base which further leads to sharing of profits with the rivals (Verma and Verter, 2012). The five force model have determined certain factors that can affect the logistics and transportation sector rivalry. These include, large and balanced competitors, high storage and fixed costs, slow industry growth, high exit barriers, large strategic stakes, etc. In order to evaluate the competitive powers of a logistic industry like XYZ, the LPI indicators are usually taken into consideration (Paul, et.al, 2014). These components include:
- Logistic Competence
- International Shipments
- Tracking and Tracing
Rivals can increase their customer base by decreasing the logistic cost and improvising their service standards. Along with this, they may make use of modern information technology in order to gain a competing edge over XYZ.
Opportunities and threats
Threats for Logistic Industry
- Threat is from overseas big players like UPS that may enter this sector.
- The small transporters can also be a threat as they provide services at a very cheaper rate.
- Rise of the substitutes in Australia (Aithal, 2017).
Opportunities for Logistic Industry
- Rising influence of digitalisation can be a huge opportunity for XYZ. This could help in promotion and cost reduction.
- Investing in developing countries like India, South Africa, and Kuwait as these have the maximum potential due to high rate of growth.
- Target market is rapidly growing. Therefore, XYZ can invest more capital.
Internal Analysis and Proposal
The Resources of the Organisation
As the organisation operates its business or has the place of business in Australia and is considered to be one of the largest rail freight organisations. This organisation functions in the whole of Australia and have resources of good quality. The resources of XYZ Ltd include the locomotive engines which are used for transportation or freight services, its innovative and efficient workforce and the publicly funded financial resources. This organisation runs on the total of 1000 locomotive and with 10200 wagons at 85 sites all around Australia (Queensland Resources Council, 2018). These locomotives are used in providing the services of carriage for different bulk freight for coal, steel, ores, steel, etc. It also includes in domestic and export in intermodal containers and other specialised services. Another resource of the organisation is its workforce or the Human Resources. The organisation is responsible for employing approximately 4,000 employees specialised in their own area (Pacific National, 2018). In this organisation, innovation isn’t based on the traditional theory that innovation means something instead it means working for the objectives created by the management of the organisation and makes plans to improve those plans so that the objectives of the organisation can be accomplished. It is made sure by the expert and specialises employees of the organisation that allocated work are performed effectively and efficiently. Another resource of the organisation is its financial resources. The organisation is funded by the public and the equity of the shares considered as A $1,274 Million.
The organisation is making its way up in the market of Australia on basis of its capabilities and provision of good and better quality services. The capability of the organisation identified in this regards is as follows:
This organisation is responsible for managing the elements of the supply chain which is utilised to meet the requirements of the customer through controlling, implementing and planning of the effective storage and the movement in relation with the products and services from the place of origin till the place of destination. It reduces the expenses of the organisations and improves the services provided to the customers. There are several factors which are to be considered while managing logistics. These factors are meeting requirement of the customers, industrial standards and other strategies, planning, and implementations of such plans for logistics management.
It is essential that the resources of the organisation must preserve and must be utilised in accordance the requirements of the customers and the operations and functions of the organisation providing the services of logistics and its management. As there is a scarcity of resources, it is necessary that resources available with the organisation must be utilised properly. This helps in the reduction of wastage of resources which eventually saves the funds of the organisation. It is necessary that the locomotives and the wagons available with the organisation must be properly so that quality services can be provided to the customers, reduces the expenses of the organisation and increases generation of revenues with the passing times (Paul, et.al, 2014).
Core competency analysis
It is an analysis which is done by the organisations for identifying its strengths and weaknesses so that it can ensure its growth and development in the market in which it is operating its business and in order to make sure the organisation is capable enough to compete with other organisations functioning in the market (Mindtools, 2018). The analysis of the core competency of the organisation provides an overview of the uniqueness of the organisation i.e. what the organisation can do or perform uniquely. Analysis of core competency is done with the help of three tests which are Relevance, Breadth of Application and Difficulty of Imitation.
Suitable information system
There different types of an information system which can be used for the organisation provides the services of logistics. It is significant that such an information system must be adopted in accordance with the nature of the business and the size of the organisation. Such an information system helps in exchanging the information and the data at different levels of the organisation by which the issues at various levels of the organisation can be resolved. This information system can be described in “pyramid model” which includes different systems. The three-level pyramids is the basic model which helps in making decisions at different levels of the organisations. These information systems are Executive Information System, Transaction Processing System and Management Information system (Kroenke and Boyle, 2015). Strategic or planning decisions are made in the top level system i.e. Executive Information System, Tactical decisions are made with the help management information system and Operational Decisions are made at lower level i.e. workforce of the organisation and is made with the help of Transaction Processing System.
Evaluate the proposed system and provide your recommendations
There are three levels in the model which includes different system in it i.e. Executive Information System, Transaction Processing System and Management Information system. The main purpose of these systems is to make appropriate decisions by which the objectives of the organisation can be accomplished within the specified time period. Moreover, these systems will also help in meeting with the requirements of the customers.
It is recommended for the organisation providing the services of logistics and transportation of the products and its storage that proper communication channels must be established by the organisation so that information at different levels can be easily exchanged and planning and performance for the allocated task could be done accordingly (Laudon and Laudon, 2015). Moreover, as the organisation has a large number of fleets of locomotives and wagons, it must manage all the resources properly as it would result in the generation of more revenues.
This report aimed at understanding the importance of strategic analysis in decision-making process of an organisation. This report analysed the logistic industry of Australia. For that purpose, a general external environment analysis was done, wherein different physical, economic, sociocultural, global, technological, demographic aspects were considered. Moreover, the environment was analysed using Porter’s five force model. Furthermore, the competitive environment, opportunities, and threats were worked on. The second part focused on internal analysis. To achieve that the firm’s resources (both tangible and intangible) were explored. The analysis also covered the firm’s capabilities and core competency. Later part of the report discussed the proposal regarding a suitable information system that satisfy the needs of the selected organisation. At last, the proposed system and the recommendations were evaluated thoroughly.
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