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Business Analysis Of Fletcher Building Company

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Question:

Discuss about the Business analysis of Fletcher Building Company.
 
 

Answer:

Introduction

With the ramified economic changes and complex business functioning, each and every business is performing innovative and creative process to earn profit. This report is completed in various parts such as in the starting of the part brief introduction about the business and after that methodologies have been used to critically evaluate the business performance of the organization. After that finding and interpretation of the calculated data have been taken into consideration. In the end of the report, conclusion have been drawn to determine whether company has been performing well or not in current business functioning.  Shareholders and other investors could use this report to make their investment decision.  The annual report of the Fletcher Company has been used to prepare this report

Fletcher Building Company is one of the largest listed companies in New Zealand, having a market capitalization of over NZ $ 5 billion. It is an integrated manufacture and distributors of world-leading building and construction Service Company. This company has been running its business on international level (Fletcher building Company, 2016).

These objectives of the Fletcher Building Company are based on the key intents of the business process such as specific, measurement, accurate, relevance and time.

Specific- This report helps in identifying the core intents of business performance of Fletcher Company.

Measurable- Implement analysis process to compute the financial trend of company

Accuracy- It will help in gauging the financial performance and business effectiveness in accurate manner by using annual report of company.

Relevancy- It will increase the overall understanding to set targets and goals for organization.

Time- The proposed study will take time of around 1 month action plan to complete this report (Bloomberg, 2017).

Balance score card of Centaur Media

Particular

Objectives

Goals

Indicators

Initiatives

Financial perspective

Company wants to increase its revenue by 20% in coming two years.

Increase overall sales by 30% and profit by 25%.

Use of annual report and financial statement

Install new cyber computing system to increase the productivity.

Customer perspective

Increase customer satisfaction and productivity to cover 22% overall New Zealand Market share.

Increase the production by 20% by installing cyber computing system (Bloomberg, 2017).

Increased client’s satisfaction and brand value of business.

Improve the product mix and implement marketing strategies.

Internal process system

Installation of cyber computing system and improve the product functioning to improve the quality value chain activities.

Company needs to reduce the labor turnover and increase the productivity of business.

Determine the target and set outcomes of business.

Installation of new system to increase the building manufacturing

Learning and growth

Hiring of highly skilled employees and invest in research and development department.

Setting training and development department.

Entering into strategic alliance with other partners.

Implement strategic cost and less effective business.

Environmental analysis strategic tool

This Environmental analysis strategic tool of Fletcher Building Company reflects that company needs to implement effective business functioning if it wants to increase its overall revenue and turnover.

Particular

Implementation

Buyer’s power

In building construction market, buyers are more inclined towards the services and products offered by Fletcher Building Company due to its high brand.

Suppliers power

It is evaluated that due to high turnover, Fletcher Building Company has faced high problem in buying raw material from suppliers. Suppliers in New Zealand are having strong market position.

Rivalry in market

There are several rivals who are following cost leadership and product differentiation strategy to beat the competition in market.

New entrants power

Starting business in construction requires low investment but effective strategic alliance. In addition to this, this construction business has high growth rate which attracts high numbers of new entrants.

Financial analysis of Fletcher Building Company

Fletcher Building Company has effective business functioning. After evaluating the annual report of company, it is considered that in 2013 Fletcher Building Company had .90 current ratio which it increases to 7.12 in 2017 after that, it has also increased its quick ratio to 6.19 which is very high as compared to 2013 data. Profitability ratio of company has decreased throughout the time. Return on equity of company has gone down by .20 points since last five years. In addition to this, return on assets of company has also gone down to .90 which is not indicator of the company’s functioning. Assets turnover of company has increased to 311% which is very high as compared to last five years data. Efficiency ratio also reflects that receivable turnover ratio of company has increased which is good indicators. Inventory turnover has also increased by 10% in these five years which will help company to reduce its cost of capital. Market based ratio of Fletcher Building Company reflects that it has created value on its investment and resulted to 264.33 which is 350% higher as compared to its last five years data. Solvency ratio of company also reflects that it has increased its overall capital structure to maintain effective cost of capital. In addition to this, time interest earned reflects that company has low level of interest earned ratio which may be not good indicator for the effective business functioning (Fletcher building Company, 2016). 

 

Fletcher Building Company has set up specific objective to increase its overall business productivity in determined approach. It has set up target to achieve at least 24% market share in New Zealand and increase its overall turnover by 40% in coming 5 years.

Fletcher Building Company has measurement to cut down its overall cost to terminate its other units which is giving less amount of output. This level of strategic program and cost reducing strategies will give an advantage to increase its overall profit.

Fletcher Building Company has incorporated a business process in which accurate set measurement is identified. All the cost and price determination is based on the inventory management policies and cost of the capital of the organization. Fletcher Building Company has determined its product sells price after including 20% profit margin in its cost of production. This has shown the accuracy of the price of the products sold in organization (Brigham & Ehrhardt, 2013).

It has to design its price of the products very low with a view to increase its overall sales. It has relevancy with the cost of the production and offered products price of the rivals. Fletcher Building Company has kept low price of its offered product for the relevancy of its cost leadership strategy.

Fletcher Building Company has planned its action plan to deliver its business process to increase the effectiveness of its business. It has developed its core competency to increase the overall productivity by reducing the overall time involved in business.

Feasibility- All the data and financial information of Fletcher is based on the ratio analysis implemented on the data shown in annual report of company.

Acceptability- Financial statement of Fletcher has been prepared by following domestic and IFRS accounting standards. It increase its acceptability on international level

Quality- All this financial and business information will assist students to make a final judgment on the performance of company.

Reversibility- This solution developed is relevant and in case of failure to draw effective conclusion will give idea to student to implement another analysis tool.

Ethics- All the data or work done in this presentation is plagiarism free and only relevant and truthful contents have been used in this presentation.

Cost- preparing this presentation will be accompanied by very low cost due to easy and free access to annual report of company.

Financial analysis derived and trend of Fletcher Building Company

It has been observed that company will increase its all of its productivity and net profit by at least 250% in coming next three years.

This trend reflects effective business functioning of Fletcher Building Company in market.

After evaluating the details and market data, it is considered that industry average of Fletcher Building Company reflects higher profitability and efficiency of business. If company wants to grow its business then it will have to increase the overall productivity at the industry level (Ehrhardt &Brigham, 2016).Profitabiltiy of company is high and company is also managing it business efficiently which not only increases the overall productivity but also efficiency of the business.

This balance score card approach and strategic map of Fletcher Building Company is designed to increase the overall productivity and improve its financial and business activities. It has been observed that if company could increase the overall productivity by installing cyber computing system and adopting newly advanced technologies in its internal system. This will help company to increase the productivity and reduce the overall cost of the capital. Fletcher Building Company has to improve its performance by increasing the return on capital employed.

Recommendation

Strategic Map and flow chart from solutions proposed in BSC and Portal five model

A strategic Map is the diagram which is used to implement effective internal and external set goals of the prepared balance score card.

Company needs to set its target realistic and achievable for the sustainable future to increase the overall productivity of organization. It has installed cyber computing enterprises resources planning to increase the efficiency of its internal control system. In addition to this, company needs to set new targets at least 20% higher than last year to increase the revenue of company. In addition to this, Fletcher should also increase the overall employee’s numbers to 15000 and hire experts in particular department (Fletcher building Company, 2016).

Identified

Discussion

Rivals core competency in cost leadership

Other rivals such as KIWI glassware and Lucky constructions have developed core competency in market. Fletcher needs to reduce its overall cost and increase return on capital employed...

Not effective innovative machineries

Fletcher needs to invest more capital in research and development department to increase the productivity of business.

Hiring of experts and talented employees

It is hard to find skilled employees; company needs to import the services from other countries to increase the effectiveness of business.

Conclusion

After analyzing and evaluating all the details of the annual report of company and business performance of Fletcher Building Company, it is considered that if company could install newly adopted cyber computing enterprises resources planning in its business process then it will surely help company to increase its profit and overall business efficiency. The main problem of company is related to increased cost of production and less effective business functioning.

 

References

Bloomberg, (2017) retrieved on 14th November, 2017 from www.bloomberg.com.au

Bloomberg, 2017, government security retrieved on 14th November, 2017 https://www.bloomberg.com/markets/rates-bonds/government-bonds/australia

Brigham, E.F. & Ehrhardt, M.C., (2013). Financial management: Theory & practice. Engage Learning.

Ehrhardt, M.C. & Brigham, E.F., (2016). Corporate finance: A focused approach. Engage learning.

Fletcher Company (2016), annual report, retrieved on 14th November, 2017 from https://www.google.co.in/search?q=annual+reprot+of+Fletcher&oq=annual+reprot+of+Fletcher&aqs=chrome...69i57.5242j0j7&sourceid=chrome&ie=UTF-8

Yahoo finance, (2017) retrieved on 28th October, 2017 from https://in.finance.yahoo.com/

(Link of annual report)- https://fletcherbuilding.com/investor-centre/financial-results/2017-annual-report/

OR

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