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An External Environmental Analysis, Business Plan Example

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Carrying out an external environmental analysis helps us in understanding various societal, industrial and competitive implications. The classification of external environmental factors includes different components like political, legal, economic, social, cultural and demographic variables and following sections provide an in-depth analysis of those features. Furthermore, the porter forces of analysis together with the financial ratio analysis assist us in assessing the financial status of the chosen company under study. The crucial illustrations outlining the company’s developmental features along with the corporate resources were clearly presented.

Key words: Competitive advantages, External environment, Financial Ratios, Industrial environment, Freight-Brokering companies and Porter 5 Forces,

Part B

External Environment

A. Societal Environment

The external environment within, which an organization carries out its operations, presents various threats and opportunities. Development or declines in the international trade, National Protectionism and, Regional Trading Blocs are certain examples of the political and economic environment that exert a significant impact on the marketing of freight brokering and other maritime industries. The comprehensive classification of the external environment (also referred as macro-environment) includes- political and legal, technological, economic, technological and demographic components and, analyzing these components help in understanding the similarities and, variations with the trading in different countries. Competition would prevail amongst the different ports, even those which may not be located in proximity as much as it would be freight forwarders and shipping lines (Shin, 2005)..

Political: Government Stability, Taxation Policy, Foreign Trade regulations and Social Welfare policies are some amongst prime components under political climate.
Economic: Business cycles, Interest rates, money supply, Inflation, Unemployment, Disposable income and trends with the gross national product influence the shipping industries in developing its brand image in New Mexico region.
Socio-Cultural: Population demographics, Income distribution, Social mobility, Changes in Life styles, Work and Leisure attitudes, Consumerism and Levels of education exert considerable impact on shipping or freight brokering companies.
Technological: Government spending on the research activities, industrial and government concentration on the technological efforts, innovations, new discoveries as well as developments, technological transfer speed and obsolescence rates are some of the technological implications.
Environmental and Legal: Laws governing the competition, employment, health and safety, product safety, environmental protection are the legal factors affecting the organizational development. Besides, the waste disposal, presence of gases, pollution and energy consumption are other environmental implications.

Amongst the above mentioned components, sociocultural factors in the macro environment impinge more upon consumer goods and services, when compared to other industrial services. Enhancing encouragement, privatization and legislation and deregulation may result in increasing awareness for the strategic planning and marketing necessity.

B. Industrial Environment

Freight Brokers, as middle men for raw mineral material industry, had known to be involved in establishing relationships with the carriers specialized in unique cargo (Gibson, 2008):

Threat of Competitor Entry: Gaining success in theglobal transportation business necessitates the firm in possessing large network of distribution centers, efficient and effective parceling hubs sorting around the world and possessing access towards reasonably large fleet of air planes, ships, trucks and, trains. Besides, certain companies possess strongest overnight delivery market (like other shipping and parcel distribution systems (UPS). However, most of the major rivals of shipping companies had extended their services to provide their customers the one-stop shopping convenience. A potential and new entrant at this point, who is interested to gain an entry in to the market by specializing in the sub-market system delivery, may not be able to hold a competitor One of the most significant issues can be the long term contracts and commitments that significant companies possess are other significant issues. With the brand name, experience and relations, companies need to position themselves to grab an advantage of global trade agreements amongst countries and world trade regulations.
Threat of Substitutes: It may not seem likely that substitutesoffer a potential threat to the freight brokering or transportation industry. Whilst, embracing the one-stop shopping procedure and providing the possible transportation answers, the rivals ensure market share even if the customer chooses to substitute the air-freight transaction with other means of systems. Nonetheless, freight brokers within the delivery market had known to experience considerable threat from the emails and facsimiles in the dot-com age. Internet Service Providers had involved in educating more and more individuals about the e-mail benefits, document digitization and online forms. Most of the organizations and firms are welcoming more and more than ever to agree with the online signatures in saving time and money. Numerous customers substituted their paper statements with the online ones with the banks starting to deploy the online checking accounts.
Supplier Power: The changing fuel prices severely exertimpact on the profitability of transportation business. The determination of these prices is dependent upon the political and economic issues that place the fuel suppliers in an immense bargaining position. However, most of middle transportation industries tackle this complexity by gathering surcharges for fuel at times of increased fuel prices. As a consequence, this caused straining in the relationship with the customers. Suppliers of service, particularly catering and maintenance, airport services and, trucks possess high power of bargaining. Partially, this can be attributed to the enhanced switching costs and commitments for on-time delivery. These systems are high time and price efficient and possess tremendous advantage that they run the firm by themselves.
Buyer Bargaining Power: Freight Brokering Companies as middle men transportation systems,experience fierce competition to offer delivery services for large corporations and firms. With the rapid developments of e-commerce, one may order the product or book a shipping service online to be delivered globally. Many of such corporations may not offer flexibility to their consumers in selecting their transportation providers. Switching to other relatively cheaper modes of transportation may eventually place such corporations in immense bargaining position. Alternatively, developing more distribution centers and warehouses and teaming up with some transportation firms provides the individual customers with little bargaining power.

III. A. Internal Analysis-Competitive Advantages

Organizational Structure for any organization is a formal system of roles and authority associations, which govern how managers and other relevant associates mingle with one another (Gibson, 2008). The culture and structure of companies includes the values and norms distributed by managers and associates that prejudice behaviour. As a powerful force in an organization, the consistency in freight broker’s culture helped effectively in defining the key elements of organizational dimensions, corporate strategies, competing-values, socialization, cultural audits, sub-cultures and significance of fit amongst individual values. Presence of effective structural characteristics (fundamental organizational structure element) aids in estimating the shape and appearance of organizational hierarchy. Policies, approaches and strategies used to explain manager and associate behaviour make up the consistent and efficient organizational structure for the freight brokering services. Besides, the well-defined organizational culture shipping companies with minimal environmental constraints and enhanced technological advancements assisted effectively accomplishing the freight brokering organizational objectives and mission values.
The technological superiority developed with the introduction of electronic shipping solutions, adaptations to the new Internet era, wide variety of automated shipping solutions together with the convenience of sending global shipments, preparing airway bills, offering necessary documents, estimating shipping costs and reaching international resources are some of the prime corporate resources that aid companies in gaining competitive advantage over others middle men transportation companies. The use of this logistic technology had played a crucial role in increasing the speed and efficiency of sorting the packages and minimizing human error factors. Presence of wide transportation arrays, e-commerce business, and a minimal number of misplaced packages, rapid customer services, and accessibility for immediate address change, sophisticated tracking systems, timely delivery and quality service help the company in building strong-brand image and competitive advantage (Cleland and Ireland, 2006).

III.B. Financial Status

Financial ratios, calculated for the company, help in providing valuable information about financial structure and turnover (Troy, 2008).

Profitability ratio: The Company’s profitability ratios indicated an alarming increase from 2009 over its competitors like UPS and DHL. Though the company recorded a decline in its profits at various times, owing to its long term investments, it can be considered as an income generation in future.
Investment ratio: Decreased Price/Earnings (from 207.32 to 19.12), Price/Sales (0.94 to 0.16) and Dividend Pay-out percentage (139.80 to 10.41) indicate reductionin their levels of shares and, stock market pricing. Besides, it shows that the market possesses less interest in investing its share in shipping companies and this was found to be higher for its competitors.
Debt or Equity ratio: indicated a progressive decline from 0.16 in 2007 to 0.11 in 2011. This indicates the percentage of the company assets, provided in the form of debts and total assets had found to be decreased. Decreased values signify minimal risk linked with operational abilities of the firm.
Interest Coverage: Increased values of interest coverage from 21.42 in 2006 to 66.82 in 2011 indicate the ease of company in paying interest expenses on outstanding debts. Higher ratio signifies the company’s burden through debt expense.
Book value: Increased price to book value ratio rom 37.73 in 2006 to 48.22 in 2011 represents the rise in the closing price of the stock through its latest quarter book value. Increased ratio values ascertain the over-value of stock and presence of fundamental importance to the company.
Price-Earnings (P/E) ratio: Decreased earnings from 6.34 in 2006 to 3.12 in 2011 signifies reduction in the present share price of the company and investors assuming least earnings growth in future when compared to other competitors like UPS and DHL that possessed higher P/E values.