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CanGo Business Evaluation and Strategic Recommendations

Info: 5503 words (22 pages) Essay
Published: 8th Feb 2020 in Business Strategy

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Executive Summary

CanGo has shown itself to be a fast growing online business that specializes in several varieties of services and product lines that rapidly continue to grow within the company. Based on all the episodes it seems to me that CanGo’s strategic decisions are underdeveloped, Extreme Care Consulting will be basing their recommendations from observations that were made by our team during our visits, from the Financial Statement that was provided for us and from the CanGo management and staff. With the S.W.O.T. analysis, the results will provide the strengths for CanGo to show what they could benefit from, as well as concerns and potential weaknesses that can halt any progress with the profit margin and the corporate growth.  Extreme Care Consulting feels that CanGo can depend on a few of their strengths. My firm feels that if any weaknesses were found from any of these areas it could cause a decrease with the profit margin and slow down their customer service.

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The Management Team for CanGo seems to be a good team, but they are having issues with communication and moving in the right direction with a strategic plan. With expected growth for online gaming, CanGo has to improve their management style and how they want to approach online sales. Extreme Care Consulting offers these strategic recommendations that could be really useful and beneficial to CanGo Company. Our firm suggests taking on each issue of concern separately, this way they could see the end result for each issue. Our main objective is to see developments within the organization from a corporate level, gain in market share and have increases with their finances. As the online entertainment industry grows CanGo will find itself in a tough position. With our offer CanGo has the potential to grow and gain a larger investment capital.

S.W.O.T. Analysis

Strengths

  1. CanGo has grown extremely fast for a small business, and as a result has firmly established their presence in the online entertainment industry. Other companies, such as Amazon, have shown that the online entertainment industry has great potential for growth and success as well as being extremely profitable. CanGo’s main consumers consist of individuals who want to purchase books, music, and videos.
  2. CanGo is extremely cost efficient as it is an online only business.
  3. CanGo consists of a loyal management team and other staff members, all of which show individual pride for their creativeness, innovation and their work techniques.

Weakness

  1. CanGo has a limited advertising budget that needs to be changed so they can update their web page for reviews or complaints from their customers.
  2. The CanGo Company has a delay in their product deliveries due to their limited distribution capabilities and wrong orders.
  3. CanGo struggles from their poor decision making. All plans and ideas need to go through Elizabeth for her approval since she is the CEO and Founder of the company, she should make any final decisions. CanGo could benefit from slowing down the decision making process, allowing for more thought to be put into any ideas brought forward.
  4. CanGo has no strategic business plan allowing for short term and long term goals with a dedicated plan of action, or deadlines for completing any of these goals.
  5. CanGo struggles from its lack of knowledge and poor communication of ideas within the senior management team to other staff members. As a result the staff is left confused about deadlines and what projects are more important than the other tasks they have to complete.

Opportunities

  1. CanGo is moving forward to expand into the online gaming market. This will allow them to expand on their current inventory.
  2. Installation of the ASRS systems.
  3. CanGo would benefit from setting up games on a social networking site, as it would instantly allow for a wide consumer base, to potentially enjoy their other products along with the games they offer.
  4. The company’s role of being a provider for entertainment options gives them the potential customers that are from all over the world. Their products allow them to be a domestic and international business.

Threats

  1. CanGo has multiple competitors within the online gaming industry, with new firms popping up overnight.
  2. There is no clear vision for expansion, productivity issues with planning, organizational issues, and CanGo employees lack the training needed for new technology such as the ASRS system.
  3. The CanGo Company does not have a plan in place for how to raise its capital for a business expansion plan.
  4. The company does not have an efficient delivery system unlike other competitors which could cause CanGo to lose their loyal customers.
  5. CanGo is facing the threat of pirating and torrent sites as they allow free viewing and downloads of nearly identical products illegally.
  6. CanGo is overworking their staff team as a result of trying to expand. This could cause delays in progress as there are too many tasks to handle for such a small team, especially with little to no compensation from the company.

Marketing Analysis

Over the last two decades the Internet has changed, transformed even, how we as a society share our information. As well as how we communicate with each other, keep ourselves entertained, and the way we shop. After researching online sales it seems that the sales percentage is on a rise. According to Forrester Researcher Inc. online sales are projected to be 17% of all retail sales by 2022 (Lindner, 2017). In 2017 the projected sales were to be 12.9%, in actuality the retail sales make up 13% of all sales.

CanGo’s biggest competitor Amazon ranks number one for Internet retailers in 2017. Amazon plays a big role in the extreme e-commerce growth. “83% of U.S. online adults made purchases from Amazon in 2016, and 55% used amazon for research resource before they made a purchase.” (Lindner, 2017). From 2016 to 2017 traditional retail sales grew only about 3.8% compared to the 13% of online retail sales. Figures that correspond to the online gaming market would be considered equal for the CanGo Company.

Based on this U.S. commerce department they have reported shoppers spending $394.86 Billion online in 2016. That number went up 15.6% from $341.70 billion in 2015. In 2017, based on Forrester Research Inc. they expect online sales to grow 13% each year. The fourth quarter, of 2018, was said to be the strongest year-over-year growth for U.S. e-commerce in six years. Many consumers had spent $453.46 billion on web retail purchases for 2017 and a 16% increase of $390.99 billion for 2016 (Zaroban, 2018). It is the highest retail growth rate since the 17.5% high in 2011. These figures include sales from items not normally bought online, such as fuel and automobiles, when factoring out these items out of retail sales figure the most accurate way to measure the impact of e-commerce for retail as a whole. The total retail sales reached $3.496 trillion, which is a 3.8% increase compared with $3.369 trillion (Zaroban, 2018).

This means that the e-commerce represents 13% of the total sales for 2017 which was a market increase from 11.6% in 2016. It also means that the e-commerce represents roughly 49.4% of the retail sales growth for 2017, versus the 41.6% growth in 2016 (Zaroban, 2018). The e-commerce’s main retail leader, Amazon, continues to gain loyalty from its U.S. consumers. The total values of all U.S. consumer transactions from Amazon.com were as high as $189.61 billion in 2017. A 30.1% increase from the $145.72 billion in 2016 (Zaroban, 2018). Amazon consists of 70.2% of the $126.51 billion retail sales growth increase.

Competitive Analysis

The online entertainment industry is constantly growing with more competitors every day. While having multiple sources of competition, Amazon, Google, and Wal-Mart are the main three to share the book / music / DVD sale market, CanGo wants to expand into the online gaming industry but faces hard competition from other gaming networks such as Nintendo and free online gaming websites like Pogo, and Kongregate. This competitive analysis will discuss more on the three major rivals to CanGo and its offered products or services. Amazon, Google, and Nintendo do not feature the exact same products as CanGo but all the companies do specialize in providing multiple forms of entertainment through online stores.

Over the last two and a half decades Amazon has managed to establish a strong foothold as the promising provider in the online entertainment world. With focusing on the company’s policy for offering a wide range of products at lower prices than other business, while shipping to the consumers in a reasonable time period we can see why Amazon is so prominent in the online world. Amazon has made online shopping into an easy and accessible process for everyone; because of this they have cultivated a loyal consumer base along the way. Online shopping numbers are projected to steadily rise; as a result Amazon will be a fierce competitor of CanGo seemingly forever. Although traditional book sales are in a steady fast paced decline, Amazon has survived due to selling e-books and digital subscriptions for newspapers and magazines alike, which are to be read on Amazon’s e-book / tablet device known as the Kindle. Amazon is not safe from the decline in any manner; as a matter of fact Amazon faces threats from other online retail companies, streaming services, digital content sold by other stores, and free entertainment websites. These rivals pose a threat to Amazon’s continued future success. Amazon could also come across issues with entering other sales markets and may struggle to have any of the success they had with the Kindle when creating a new entertainment device.

Like Amazon, Google poses a very real and large threat to the continued business of CanGo, more specifically in the sales of movies and music, but they do offer e-books as well. Google provides access to movies and music, offering them on any android device immediately after purchasing. Google has built up its brand recognition in the last 20 years, providing more services the longer it’s been active, Google has benefited from the current wave, albeit small but strong, of digital product sales. Digital sales bringing in about $1.9 billion dollars, streaming sites gained up to $9.5 billion dollars, and traditional hard copy DVDs went down 14%, only making up $4.7 billion dollars in 2017 (Gaille, 2017). As well as music and movies, Google sells e-books that can be read directly from the mobile device nearly as soon as you buy it, essentially working like how a Kindle does minus the extra cost for a new device. However, the overall economic climate can affect Google or CanGo just like with any other company. If the economy is good, then people will be willing to spend their money on non-essential items. Likewise if the economy is doing poor, the people will be more likely to save their money than to purchase entertainment items. Google is no different than CanGo or Amazon, and is threatened with a wide array of competitors from the online variety or other brick and mortar businesses such as Wal-Mart, who could potentially sell the same products for cheaper or even free.

Nintendo has grown as a creative developer since its creation in 1889, making consistent and entertaining games such as Legend of Zelda, an open world exploration single player game, and Mario Kart, a racing multiplayer game. Nintendo has well established a strong foothold in the gaming community, with numerous handheld console games, at home console games, and even branching out into the mobile, as in phone, gaming department.  As the demand for more mobile phone games continue to rise, we can lead ourselves to believe that Nintendo will keep bringing in new consumers and releasing new games. Like CanGo and Amazon, Nintendo has the potential to be a victim of the economic culture. If the economy is on the rise, the population would be willing to spend money on trivial things such as single player video games or online multiplayer video games. If the economy is on a downfall, Nintendo will have lower sales due to the population saving their money instead of purchasing video games of any sort. Video games will be competing with other forms of entertainment, such as movies, music, TV shows, and as social medias grows that as well. The online gaming market has flourished within the last few years, websites that offer free games such as Kongregate, and Pogo will continue to exist while demand for free alternatives are high. CanGo will be able to level the playing field if the other companies lack innovation for new gaming titles, and if websites have hosting errors or provider issues.

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Despite the large number of competitors CanGo does have the opportunity to slot itself within the market well. The online / digital gaming market is one of many markets that offer a growth to the CanGo Company. With Nintendo releasing the Nintendo Switch recently, CanGo stands before a choice to try and sell digital codes or physical copies of Switch games. CanGo could use that as a chance to look into partnerships with other companies, or as a stepping stone to partnering with social media sites. By partnering with social media networks, for example the platform Facebook whom has over one billion users, CanGo would be able to market and promote their own products through the games shared through a partnership.

Financial Analysis

A detailed analysis of CanGo’s financial earnings, when compared to the competition gave Extreme Care Consulting a chance to look over and evaluate CanGo’s financial standing. The ratios will give the CanGo management a better look at CanGo’s financial health. CanGo’s Inventory Turnover Ratio is.28, Amazon’s current Inventory Turnover Ratio is .30. This number tells that CanGo knows how to manage its inventory well but obviously has room for improvement. High Inventory Turnover Ratio is linked to efficient stocking whereas lower Inventory Turnover Ratios are linked to overstocking. Higher Inventory Turnover Ratio can be linked with a loss of sales or returns. The Debt to Equity Ratio for CanGo is .67 and Amazon had recorded its own ratio being at .89. Based on these numbers CanGo is doing better than its main competitor. A higher Debt to Equity Ratio usually means the company in question has been very aggressive in raising its finance growth with its debt. Debt takes many forms, whether it be in the form of bonds, loans and stocks, all of which the company has borrowed against. CanGo’s Current Ratio is 5.39; Amazon’s Current Ratio is 1.04. CanGo can say without a doubt that it is performing well within this area compared to its main competitor. This ratio shows that the company in question is able to repay its debts and liabilities. A higher Current Ratio is in direct relation to how capable the company is at paying off all of its obligations. A Current Ratio less than 1 very much suggests that a company would not be able to pay off any or all obligations if they were to suddenly come due. However a Current Ratio any lower than 1 does not entirely mean that the company would go bankrupt. The final Ratio to compare is the Net Profit Margin; CanGo had recorded their Net Profit Margin as .1 (10%), while Amazon has recorded their own Net Profit Margin as .2 (20%). Based on this information 10% of CanGo’s sales are considered a profit for the company. We here at Extreme Care Consulting suggest that CanGo keeps in mind that the Net Profit Margins vary from company to company and that ranges are to be expected from industry to industry, just as similar business constraints exist within each distinct industry. From all the information gathered we can say that CanGo performs well in some areas but underperforms in others.

Strategic Planning Recommendations

 CanGo made progress in excelling and establishing as a place for online entertainment, but they are still having issues with the concept of a plan and how the company should take a direction with the plan to cover for the next several years. Strategic planning is important in perspective, both a macro and micro one. Marco perspective is conducted in a global market, mainly e-commerce. Internet and technology improvements allow more people from all over the world to have access to the products and services provided by businesses everywhere. A micro perspective will provide a much needed purpose and set direction for CanGo with having a strategic plan whether it would be from the CEO to the most recent staff member, they will know the products the company sells or the services they provide, know the target customers and what you plan to do to compete for the consumers attention (Lawlor, 2005). Having a strategic plan allows you to clearly define realistic short and long term goals for the company even when communicating the goals to each member of the management team. Before CanGo starts a strategic plan they should develop a mission and vision statement that focuses on the purposes of CanGo as a company and what they want to accomplish in the future. With the vision statement that describes CanGo’s plans for now and eventually the future. CanGo needs to develop a SWOT analysis for the company. In order to do this the company has to use a wide-range of research for CanGo and their operations along with competitors in the online entertainment industry. Providing this information, CanGo will be able to develop a business plan that works for the company, in providing CanGo with these strategic planning steps, it’s going to give them a good foundation for both short term projects and their long term goals. Having a strategic plan is going to have a better informed decision making process, a higher consumer retention rate, continued growth, a competitive advantage, and market or brand recognition for the online gaming industry. While having no strategic plan in place CanGo will not be able to function properly. Extreme Care Consulting noticed several issues that CanGo has been experiencing with their current organizational structure. CanGo needs to stop operating the way they are and take into consideration the matrix management structure. This system groups peoples together based on similar skill sets to work on various projects and assignments. Employees no longer need to juggle tasks, they would be able to just focus on the task they know how to complete, by doing so it would place employees in positions that they are able to move yup based on their personal experience and expertise of projects and assignments they have been assigned (Hall, 2008). Matrix organizational structures could also improve CanGo’s flexibility allowing resources to travel from one project to the next. If the matrix environment was balanced the company would only need one project manager to oversee a group other functional managers. By having a less confusing and more cohesive workplace would improve CanGo’s effectiveness and efficiency for both short and long term goals.

Extreme Care Consulting noticed several issues CanGo’s management over the last seven weeks. CanGo’s managers fail to prioritize tasks and projects according to importance, they also don’t inform staff members of the decision making process or the planning process with future works. CanGo’s staff members are unaware of project deadlines and goals when assigned tasks or projects, as a result of these un-informants projects are not completed on time and employee morale goes down. In order to stop the threat of declining employee morale, CanGo’s staff members should take part in training seminars by CanGo’s management team, so that they can learn skills that are relevant to the business world like time management, multitasking, and organization. This will help members of CanGo become better organized so that they are able to grow and expand globally with online gaming.

Solutions to these problems would consist of making more of an effort in prioritizing projects and tasks according to CanGo’s objectives. This will allow management to keep projects on a timely schedule while researching necessary resources for the projects.

CanGo needs to address several issues on their current performance appraisal evaluation system. Just like the director of operations allowing under preforming staff members to get a good or even an exceptional evaluations just to keep personal relationships intact, is not how you do appraisals. Performance appraisals with any organization should be based solely on objective, observational, and quantitative measures, not subjective or qualitative tendencies. This would be fair with the performance appraisals while eliminating both leniency and halo errors, that way you don’t risk giving non-hardworking staff member’s good reviews. As a manager such as the director of operations that should have given constructive feedback to the staff member in question during the performance review, identify specific areas that the staff member needs to work on, and show improvement so that the next appraisal he will have improved himself. Feedback should provide realistic goals and timelines from both the manager and employee. CanGo should also consider implementing a result-oriented approach with performance process. According to the study released by the international journal of scholarly academic intellectual diversity, a result-oriented approach primarily focuses on what the employee is supposed to accomplish on the job rather than the employees personal characteristics and behaviors (Lunenburg, 2012).

Legal Recommendations

Based on our episode for week 7 the CEO for CanGo held a meeting to gather everyone’s thoughts and stances for online gaming along with any violent games, games with adult language and content. CanGo wishes to go forward with online gaming, but in doing so comes issues. Violence, fantasy violence, sexual content and adult language are a few of the warnings on popular games. Regardless of the company, even Amazon and Walmart, they need to take into account the consumer age range they have. CanGo needs to consider the company’s investors, because those investors might have issues with the type of games being offered by the company to their consumers. If CanGo were to sell violent games in any manor they should consider the legal side of things and take into account all the possible lawsuits that could arise if a minor were to purchase these games. We already know that consumers will buy the games from a different supplier and potentially lose those customers. As a result of that they would potentially lose profit and not be able to grow globally. Extreme Care Consulting would like to offer a few legal recommendations for the CanGo Company.

  1. They could incorporate a disclaimer in their web based gaming administrations, that way they can caution people about the content involved in the game. There should not be a problem with the organization, as long as there’s a notice about any potentially harmful or hurtful content in the game. To further the distinction between a rated M, and PG13 game and a PG, or E game, they could have separate pages for each category. One page containing family friendly games and the other housing the more adult oriented games.
  2. By introducing violent games CanGo will see a rise in sales, and would still have all the same options as before the expansion. If CanGo were to warn the consumers beforehand, as well as offered a survey as a way to give feedback, it would allow the CanGo consumers a chance to express their opinions and concerns on products. The main consumer target being shareholders, as this would give them the opportunity to convey their thoughts on the subject directly to CanGo. With the survey in place CanGo will have a better idea on what their consumers want, and will be able to offer the products.

With these recommendations CanGo should also consider the Code of Ethics to follow, because in order for the company to not get a lawsuit or complaint. Each employee needs to comply with the code. CanGo needs to make sure everyone within the staff members receive a paper on the Code of Ethics with proper training. 

Conclusion

Extreme Care Consulting has seen great potential within these last eight weeks. Growth and success within the CanGo Company is possible. CanGo cannot see nor realize the potential if these changes don’t take place then CanGo will not be able to proceed to conduct itself as a small fast growing startup company. With needing more attention and recognition CanGo needs to increase the responsibility to all customers, creditors and any potential investors. CanGo needs to apply the concept for strategic planning so it can allow CanGo to see who they are as a company, what their target market is and their future plans on how to build a competitive advantage through rivals in the industry. CanGo has to change the way their organizational structure is to a more flexible matrix management structure for which CanGo can become successful to expand and grow globally.

This should increase the efficiency and communication throughout the company so it allows the individual staff members to progress with projects by grouping skill sets together. CanGo needs to update the performance appraisal system on how they get done in order for them to be successful for the company and staff at CanGo. The current system is based only on subjective measures of employee performance, rather than objective and observable measures for employee performance. Hard performance by each member is neglected in favor of casual observations and impressions. With this being said poor employees are not even given the chance with receiving and feedback, due to the current system being structured with leniency errors, resulting in poor performers like Nick left unable to identify areas that need to be improved. Extreme Care Consulting sees that the senior management of CanGo does recognize the need for more objective approach for employee evaluations. Our consulting firm feels that if CanGo can correct these issues, the company will be well positioned to compete with its competitors for a larger share of online entertainment retail market.

References

  • Best, N., Hutchins, D., & Mahmuti, M. (2013.) Global Perspective on Retail: Online Retailing Cushman & Wakefield Retrieved 10/22/2018
  • http://www.cushmanwakefield.com/en/research-and-insight/2013/globalperspectives-on-retail                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
  • Transparency Market Research. (2012.) Gaming Market – Global Industry Analysis, Size, Growth, Share, and Forecast 2011-2015. Retrieved 10/22/2018
  • http://www.transparencymarketresearch.com/global-gaming-market.html
  • https://www.digitalcommerce360.com/article/us-ecommerce-sales/
  • https://www.digitalcommerce360.com/2017/08/09/e-commerce-grow-17-us-retail-sales-2022/

 

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