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Tanksrus Manufacturing Inc, Research Paper Example

Pages: 7

Words: 1798

Research Paper

TanksRus Manufacturing Inc. is currently operating below its optimal owing to a number of underlying problems and issues within the company’s production and business processes. These underlying problems represent threats and opportunities that the business faces. The identification of threats and opportunities that the business faces is important in helping the company realize optimal production

TanksRus Manufacturing Inc. PESTLE Analysis
Political Factors

§  The 2015 federal elections

§  The 2015 provincial elections

Economic Factors

§  Low employment rates

§  Dwindling international markets

§  Growing regional markets

Social Factors

§  Unemployment

Technological Factors

§  Information technology

§  Costing system

§  Accounting software

§  Advanced robotics

§  Sandblasting

§  Computer numerically     controlled (CNC) systems

Legal Factors

§  Change in legislation

Environmental Factors

§  Oil spill concerns in Alberta and British Columbia

 

Political Factors

The company is involved in a complementary industry where their business operations is largely determined by operations in other industries. Some of the company’s biggest clients are from the gas and oil industry.  The gas and oil industry is considered a very powerful industry with far reaching implications on the status and performance of the economy. As such, political factors carry considerable weight in term of influencing the company’s business.

The 2015 Election

2015 is an election year in Canada. This is a significant factor in the future performance of the company. This is because the election year is taking place amid plummeting global oil prices. This is largely due to the discovery of Shale gas by neighbor the United States of America. With a number of issue plaguing Canada’s economy, it is largely expected that a new government would institute new policies to help protect both the industry and the consumer. These elections may be a threat as well as an opportunity depending on the policies of the winning candidate.

Economic Factors

The discovery of shale gas in the United States has led to the decrease in global crude oil prices. As a result, the international market has recorded reduced demand for TanksRus steel tanks. However, this has led to the growth of the regional market with neighbor, United States. This has led to the increase in demand for steel tanks. This is a potential market for the company.

Social Factors

The reduction in demand by international markets has considerably affected the economy within which TankRus conducts operations, Canada. The oil industry has experienced considerable unemployment of its initial workers. This condition will be further compounded by the probable effect of the decrease in global oil prices.

Technological Factors

Advanced Robotics and Sand Blasting

Technological factors highlight underlying opportunities for the company. Such opportunities include the use of sandblasting and advanced robotics. Sand blasting and advanced robotics would offer the company the much needed operational efficiency to reduce their costs. While these technological advancement have been made by companies with production and processing plants overseas. However, application of those technologies within the country would further reduce costs. This is essential in reduction and mitigation of transportation costs associated with overseas markets.

Computer Numerically Controlled (CNC) Systems

Owing to the nature of the business operations, incidences of human error are common, reducing internal efficiencies. The introduction of auto systems within the production and processing process may prove to be essential in mitigating human error and enhancing product quality. The CNC systems are particularly suited for automated lasers for welding and cutting, precision cutting and for repetitive tasks that need a high level of concentration throughout, robotics are introduced within the production process. This has the potential of increasing the company’s productivity by up to 50%.

One potential threat to achieving optimal technological advancement is the aspect of cost. In order for the company to considerably invest in new technologies, it has to source the capital required. Gaining access to the required level of capital may be considerably difficult considering the company’s current performance. The company has a considerable amount of debt. The company has $793,527 relative to $1,578,514 in current assets. This depicts that the new technologies are particularly suited for large-sized companies as opposed to small and medium-sized enterprises.

Management Software

The company’s management heavily relies on the free flow of information between department to ensure seamless work flow and task execution. However, this is a particular threat to the company currently on two fronts; (1) the accounting software, and (2) the costing procedure

Costing

The company currently has a manual costing system that is unreliable. A good costing system entails an active and live database that is updated real-time, while alerting the relevant employee of any updates, changes and problems within the production process. An automated costing system that includes a database of raw materials and each step of the production process would be essential in mitigating the consistent lagging of the schedule delaying production[1]. This will avail production information to the production manager, enhancing the decision making process.

Cost tracking is essential in ensuring continual system improvement and cost mitigation[2]. However, the manual costing system inhibits tracking costs due to the lack of an accurate bill of materials. A new costing system would essentially entail an integrated database within the whole company that allows the company maintain low levels of inventory, but still be able to meet all their clienteles’ needs. Furthermore, a new costing system would considerably aid management in the identification and analysis of customer information and data. This is crucial in developing and implementing data informatics to enhance existing operational, marketing and distribution systems.

Accounting

The company currently has a good accounting system. However, the highly incompatible relationship between the costing system and the accounting system leads to the considerable loss of information. During the transfer of information from the manual costing system, a considerable amount of information is lost during manual transfer and typesetting. An integrated accounting system offers the company the opportunity to realize considerable efficiency with the ability to apply data informatics in the monitoring and improvement of existing business processes.

Environmental Factors

The company’s biggest clients come from the oil industry. This industry has caused considerable damage to the environment through oil spills. A considerable number of oil spills within the Alberta and British Columbia regions have raised concerns with environmental protection agencies that have sought to have such issues mitigated[3].

Oil Spills

One of the ultimate inhibitors to growth and development of the company is the occurrence of negative events within related and customer industries. The risk of oils spillage is a factor that most environmental agencies take into account when considering the company[4]. This places the company’s products under scrutiny as the company develops containment options for the transportation of oil.

Another important facet to be considered is the company’s external environment. The external environment represents external factors that influence the business’ operations on a daily basis. However, these factors cannot be easily influenced, instead, the business can only react to the effects of these eternal forces.

The Oil Industry

This formulates the biggest portion of the business’ clients and operations. This means that events occurring within the oil industry considerably affect the business. On of the most important facets about the oil industry is the fluctuations in price. The company currently produces storage tanks for oil companies as it main source of revenue. The fluctuating prices in global oil prices directly affects how clients from this industry relate to the company.

One of the most important issues facing the company relative to the oil industry is the declining prices in the global prices of crude oil since 2008. These falling prices are largely due to the discovery of shale gas in the United States. This has caused a general oil glut within the oil industry. These declining oil prices directly affects the ability of their customers to purchase their commodity. With reduced profitability, oil companies would seek to reduce costs by wither reducing the number of tanks purchased from the business, or requesting for a price reduction. Either way, the company stands to lose business as a result of the declining global crude oil prices.

Agricultural Industry

This is a continually growing market with increasing population and increasing demand in agricultural produce. The increase in demand for agricultural produce will necessitate increased production of agricultural commodities. While this industry formulates a much lesser portion of the company’s business when compared to the oil industry, it by far a more standardized market. This market is hardly affected by fluctuations in prices. Any fluctuations in price stems from the change in costs and expenses of specific raw materials and/or procedures. As a matter of fact, major price changes within this industry result from an increase in the price of fuel. The price of fuel is tied into transportation of good and services.

Steel Tank Industry

This is the industry within which the company exists. Environmental factors within this industry have significant implications on the general financial and operational performance of the company. The steel tank industry has been facing a considerable reduction in the availability of steel for the production of tanks. With considerable reduction in the mining of steel by the United States, the company’s operations are affected by the general price of steel. The availability of alternative sources of steel dictate the company requires to recycle steel so as to make new products. The industry is also currently experiencing relatively low competition due to the large market and the number of steel tank producers. The company currently faces competition that may not considerably threaten its position within the market.

Legal

With the 2015 election expected to change the sitting government, there is much expectation of changes within the legal structure governing the oil industry. This is especially important amid declining global crude oil prices.

In conclusion, the company has numerous opportunities and underlying threats as a result of the internal and external business environment. The company has the opportunity of increasing output by employing advanced and improved technologies. The company currently faces an internal threat from the existing management systems and software. The costing and accounting systems are particularly causing the company considerable damage.

Bibliography

Alberta Environment and Sustainable Resource Development. The global oil & gas industry : management, strategy & finance. Tulsa: Pennwell, 2011.

Angevine, Gerry. Towards North American energy security : removing barriers to oil industry development. Vancouver: Fraser Institute, 2010.

Bowhill, Bruce. Business planning and control : integrating accounting, strategy, and people. Hoboken: Wiley, 2008.

Kidnay, Arthur J, William R Parrish, and Daniel G McCartney. Fundamentals of natural gas processing. Boca Raton: CRC Press, 2011.

Wheelen, Thomas L, and David J Hunger. Strategic management and business policy : achieving sustainability. 13th. Upper Saddle River: Prentice Hall, 2011.

[1] Bruce Bowhill, Business planning and control : integrating accounting, strategy, and people (Hoboken: Wiley, 2008), 14.

[2] Thomas L Wheelen and David J Hunger, Strategic management and business policy : achieving sustainability. 13th (Upper Saddle River: Prentice Hall, 2011), 31.

[3] Gerry Angevine, Towards North American energy security : removing barriers to oil industry development (Vancouver: Fraser Institute, 2010), 18.

[4] Alberta Environment and Sustainable Resource Development, The global oil & gas industry : management, strategy & finance (Tulsa: Pennwell, 2011), 26.

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