Strategic Analysis - 1375 Words

Strategic Analysis and Choice of DR CAF (Other (Not Listed) Sample) Content: Name ProfessorInstitutionDate of submission Strategic AnalysisIntroductionThe current world of business is experiencing increased competition and therefore proper and sound strategic plans need to be implemented for its success. Setting up an industry requires more research for the purpose of getting reliable and objective information about the market. Knowledge of the potential competitors is one of the factors that every business person ought to put in mind before commencing any business enterprise in a new area. There are various factors that should be taken into consideration before setting up a business. They include political, economic, social and technological factors. Others include the suppliers power, threat of substitution and the competitive rivalry. It is imperative also for the individual starting up a business to evaluate the business sporadically for the purpose of ensuring that the objectives are met. There are various financial ratios such as liquid ity, profitability and financial leverage that are normally used as the indicators of business performance. In addition to that, both the qualitative and quantitative success indicators are important for the purpose of demonstrating the position of a business, not only for taxation purposes but also to attract creditors and financiers. Before setting up an industry to supply coffee in Saudi Arabia, there are several strategic analyses that should be carried out. That would be helpful to ensure that one does not just begin the business out of the biased information. This is bearing in mind that the company might plunge into uncalled for losses that can be prevented by carrying out an objective analysis of business factors. One of the most important factors to be taken into consideration should be financial forecasting. It is defined as the estimation made by the management about the future income of the company (Moore 67). It is imperative to keep in mind that the main objective of setting up a business institution is for the purpose of making profits. Financial forecasting is made mostly within a period of one financial year. The main importance of making such estimates is for the purpose of motivating the employees and management to work hard to achieve such objectives. One of the people who would want to see such an estimate are the financiers or the creditors (Moore 76). This is because they are able to know the ability of the business enterprise in surfacing the loans given. The government would also be keen with the information on financial estimates in order to carry out their plans about the estimated government revenue through taxation. However, there are various hindrances to making such financial forecasting. One of them is the depreciation of the dollar value (Moore 90). Due to the current economic atmosphere, it is becoming hard for the economic analysts to make accurate financial estimates. There are various factors leading to such situations i ncluding and not limited to the increasing inflation and political unrests. For instance, the constant increase in the price of crude oil has been caused an increase in cost of production in all firms and industries and that reduces the income generated. Even though the firm may set high prices for the consumers, other factors make them not realize their main goal. This is because the increased price of the goods and services only; help to weaken the buyers purchasing power. Therefore, external factors such as the economic, political and social factors are the main limitations for proper and accurate financial forecasting. There are various tools of analysis that ought to be used before setting the Coffee supplying plant in Saudi Arabia. One of it would include carrying out the SWOT analysis. One of the strengths that shall bring about the success of this initiative is by having a strong team of qualified employees and management team. Secondly, it is important to ensure that the c ompany controls the market through supplying large quantities of coffee. This is the only way that the customers can enjoy reduced prices of this commodity, thereby increasing its sales and subsequent profits. The main opportunity that this initiative shall enjoy is the fact Saudi Arabia does not produce Coffee to feed her population. This is therefore an open market that requires to be exploited. However, there could be some threats such as that of competition from other potential companies supplying the same commodity or a close substitute of the same such as tea. Apart from the SWOT analysis, the external environment ought to be checked and evaluated. Such include the political, economic, social and technological factors that affect the business in one way or the other (Hambrick 88). In terms of economy, it should be noted that the country is rich due to the fact that it is one of the biggest supplier of crude oil in the world. That indicates that the clients have the purchasing power. The country is also technologically advanced in terms of infrastructures such as communication networks making it easier to carry materials and services efficiently. Another advantage is the fact that Saudi Arabia is one of the few countries in Middle East that enjoys political stability, which is important for success of any business. Another factor to consider when carrying out the strategic analysis of the business is the financial ratios. These are said to be the main quantitative indicators that the firms performance (Hambrick 89). These include the liquidity ratio, profitability and financial leverage rations. The former is said to be the main indication that the firm has the ability to meet its short-term financial obligations. This is important information for the creditors since they are able to tell whether the firm has the ability to repay once given such finances. Profitability ratio on the other hand refers to the firms income which should surpass its running e xpenses (Hambrick 90). That is the main indication that the firm is really meeting its objectives of success. Finally, the financial leverage ratio refers to the ability of the firm to meet its long-term debts. This is information is again important to potential financiers for the purpose of supporting it financially. In addition to that, the fact that the firm is able to meet such debts is an indication that is growing and in the process of success. For the purpose of an objective strategic analysis, both the qualitative and quantitative success indicators ought to be taken into consideration. Performance indicators include the measures that are expected to show whether the firm is...