Internal and External Business Environment Analysis
Any ethical problem challenge or opportunity facing decision makers at any given time is referred to as immediate issue (Ferrell & Fraedrich, 2015). The immediate issue in the Robots Everywhere Corporation (REC) is the decision to enter a new segment of making home Robots. The decision to enter into the home Robots making has brought about a different dependent issue. It has led to the executive making the decision of Outsourcing some of the assembly parts to other companies such as the Power battery. After the decision to outsource the contract of supplying the NiMH Battery, another issue arose. This is the growth in demand of the NiMH Battery. This is because of the use of the battery by other industries such as remote controlled cars, the video game among others.
This is the process of analyzing the internal and external business environment so that to have information on the customers and the business capabilities (Bull et al, 2016). It is also referred to as SWOT analysis
Strengths- These are the features that helps a business function effectively and efficiently over the competitors (Culp et al, 2016). The strength of the Robots Everywhere Corporation (REC) are as stipulated below:
- Presence of large retailers who offer shipping of electronics at a low cost will help in the shipping of low cost high quality robots
- The good and strong reputation of the company in making products of high quality and delivering goods on time to customers gives the company an upper hand in the home Robots manufacture business.
- Use of state- of- art technology in the manufacture of the Robots.
Weaknesses- These refers to the areas where there is room for improvement by the company (Taghavifard et al, 2018). The areas that Robots Everywhere Corporation (REC) has not done very well and can still improve includes the following:
- Outsourcing of some of the assembly parts. Robots Everywhere Corporation (REC) should be self-sustained with all the required assemblies being manufactured within the company and utilize the economies of scale factor
Opportunities- These refers to the market trends in which a company can take advantage of to improve on the profit margins (Samuels, 2017). Robots Everywhere Corporation (REC) can take advantages on the following market trends to improve on its sales
- The need for people to accomplish their lives more has led to increased demand in domestic purposes use machine hence the demand for the home robot is bound to increase.
- The home Robot is a new product in the market and hence with good advertisement, the company can make good sales.
Threats- These are either internal or external factors that can adversely affect the business of the company (Alvarez et al, 2016). One of threats of Robots Everywhere Corporation (REC) are:
- Increased demand of the Power battery may surpass the supplier capacity leading to inadequate supply to the company hence being unable to meet the demand for the home robots. This can lead to lass of customer goodwill and the hard earned customer reputation over years.
Any threat to the financial status of a company constitutes the financial risk (Bhalla, 2014). These may include the loans and loan defaults, financial transactions among others. The company is outsourcing the Power battery for the home robot. The basis of the order placed for this batteries is on estimation basis. The fact that the demand for the home Robot is volatile could lead to a financial risk. This is because they could place an order of so much batteries as they make the robots. If the demand of the robots does not hit the predicted value, the financial transaction of the outsourcing the batteries contract can be a potential financial risk. From the analysis table below, YNC has the highest probability index hence it is the most preferable as it has the lowest financial risk in terms of the financial transactions. In terms of the exposure to debt, champion has the least long-term debt to equity ratio and therefore most preferable as it has the least financial risk in these terms.
|
Selected Financial Ratios |
YNC |
Power USA |
CATL |
Champion |
|
Asset Utilization: Asset Turnover = Sales/Assets Inventory Turnover = Cost of Sales/Average Inventory Receivable Days = Accounts Receivable/Sales X 365 Payable Days = Accounts Payable/Sales X 365 |
0.8385 1.29 48.85 38.63 |
1.572 3.45 61.03 40.33 |
1.476 0.45 46.36 27.42 |
1.571 0.81 29.86 49.77 |
|
Capitalization: Leverage = Assets/Equity Return on Equity = Net Income/Equity = Profit Margin X ATO X Leverage Long-term Debt to Equity = Long-term Debt/Equity Long-term Debt to Assets = Long-term Debt/Assets Current Ratio = Current Assets/Current Liabilities Quick Ratio = (Cash + Short-term Inventory + Accounts Receivable)/ Current Liabilities EBIT Coverage = Earnings Before Interest and Taxes/Interest Expenses |
2.00 0.43 0.32 0.16 1.16 1.09 10 |
2.30 0.27 0.43 0.18 1.27 1.09 7.25 |
2.58 0.52 0.65 0.25 1.22 1.15 6.75 |
1.92 0.25 0.25 0.13 1.34 1.26 5.05 |
|
Profitability Ratios: Contribution Margin = (Sales – Variable Cost)/Sales Profit Margin = Net Income/Sales |
0.3 0.18 |
0.125 0.076 |
0.25 0.14 |
0.15 0.084 |
Analysis of total cost
This refers to all the functional costs incurred by a company throughout the entire product life (Boardman, Greenberg, Vining, & Weimer, 2017). It is crucial in determining the total cost of a decision.
|
Category |
YNC |
Power USA |
CATL |
Champion |
|
Quoted Unit Price |
$48 |
$50 |
$45 |
$51.50 |
|
Transportation |
$8 |
$8 |
$8 |
$3.00 |
|
Tooling |
$2.6 |
$2 |
$1.8 |
$2 |
|
Quality non-conformance costs |
$1 |
$1.875 |
$2.375 |
$2.625 |
|
Duties/customs, insurance, and tariffs |
$6.5 |
$0.50 |
$5.75 |
$0.75 |
|
Ordering, inbound receiving and inspection costs |
$1.25 |
$0.50 |
$2.25 |
$2.75 |
|
Total unit cost |
$67.35 |
$62.875 |
$65.175 |
$62.625 |
Table 2
Choice of the best supplier is very crucial in business continuity and profit maximization. One of the method of doing this is the weighted average method as shown below.
|
Supplier |
YNC |
Power USA |
CATL |
Champion |
|
|
Parameter /Weight out of ten weight |
Flexibility |
5 |
6 |
8 |
7 |
|
Responsiveness on demand |
5 |
9 |
3 |
7 |
|
|
Historical records |
9 |
9.5 |
7 |
8 |
|
|
Performance in terms of quality |
8 |
6 |
4 |
2 |
|
|
Volume capacity |
9 |
7 |
9.5 |
6 |
|
|
Delivery performance |
5 |
8 |
5 |
8 |
|
|
Total score |
41 |
45.5 |
36.5 |
38 |
Table 3
According to the weighted analysis method, Power USA Company should be chosen to supply the Power battery
References
Alvarez, S., Carballo-Penela, A., Mateo-Mantecón, I., & Rubio, A. (2016). Strengths- Weaknesses-Opportunities-Threats analysis of carbon footprint indicator and derived recommendations. Journal of cleaner Production, 121, 238-247.
Bhalla, V. K. (2014). Financial Management. S. Chand Publishing.
Boardman, A. E., Greenberg, D. H., Vining, A. R., & Weimer, D. L. (2017). Cost-benefit analysis: concepts and practice. Cambridge University Press.
Bull, J. W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C., & Carter-Silk, E. (2016). Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis of the ecosystem services framework. Ecosystem Services, 17, 99-111.
Culp III, K., Eastwood, C., Turner, S., Goodman, M., & Ricketts, K. G. (2016). Using a SWOT Analysis: Taking a Look at Your Organization [2016].
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.
Samuels, A. (2017). The future of Jungian analysis: strengths, weaknesses, opportunities, threats (‘SWOT’). Journal of Analytical Psychology, 62(5), 636-649.
Taghavifard, M. T., Amoozad Mahdiraji, H., Alibakhshi, A. M., Zavadskas, E. K., & Bausys, R.
(2018). An Extension of Fuzzy SWOT Analysis: An Application to Information Technology. Information, 9(3), 46.
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