Investigation and evaluation of environmental analysis

This assignment was given to me as well as to everyone else in the group by Ms. Karen Abberton. It is requested to be done as part of the course work experience in order to see how well students understood business management structure of the company they completed their work experience in. The brief for this assignment was given to us on the 16th of September 2009 and was requested to be submitted by the 16th of December 2009. As a business course student it is very important for me to understand business management, how a well organized business works and how it can change the wellbeing of an organization. In order to create a successful company or to upgrade an existing one, we should know what opportunities this organization has. We should be able to position the organization in the market scale against its competitors if there are any. The environmental analysis of a company helps us to see negative and positive elements of the organization, what in future might make us change some of the strategies in order to make the company more confident and invulnerable.

3. Methods of procedures

Quite a few different sources were used by me in order to construct this report. In the first place based on the information received during Marketing Management Classes in Balsbridge College a lot of handouts were given to me as well as examples based on work of real existing companies and practical exercises. Also based on my work experience in KWE World Express where I have spent over two years working as Exports coordinator. I have included mainly secondary research and applied academic theories in order to support my assignment. Books, internet and newspapers.

4. Findings

4.1 Description of organization

Is a Freight Forwarding International company which started its business in 1948 and was established in 1970 in Japan. At present there are 297 offices in 192 cities in 31 of the world it and employs over 8,000 people around the world. It is a tall company with LTD-limited Liability. It’s product is the service the company provides to its customers. KWE is one of the leading freight forwarding companies in the world. Domestic and foreign air and ocean freight forwarding business, trucking company agent, customs agent, and transportation agent.There are two offices in Ireland: Dublin and Cork. Dublin office is located beside the Dublin airport in Horizon Logistics Park. It employs 26 people working in the office and 1 person working as sales representative visiting potential customers, (so called sales on the road). Dublin office organizes imports and exports of freight by road, sea-ocean and air. It has been established in Ireland in 1998 and managed to gain and keep quite a number of big and growing customers. Some of them are quite known pharmaceutical companies like “Takeda”, “Astellas”. “Takeda” is has been Dublin’s branch customer for over 10 years and there are two people in the company who are responsible for “Takeda” account. “Astellas” is a new pharmaceutical company which imports and exports up to 5 tons of cargo weekly with the KWE’s help.

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I can’t go any further until I mention such a well known customer of KWE as “Dell”. Dell have been KWE’s customer for quite a long time, but as far as I know just before I left the company last spring Dell moved its main production to Poland which means the account was lost. There are still some transactions but only occasionally.

Below I would like to show the structure of KWE in a chart. The first chart will show the main offices and the second chart will give information of the Dublin’s branch.

Now I would like to point out the countries which go under the supervision of the areas shown in the chart:

Americas: Brazil, Canada, Mexico, USA

Asia and Oceania: Australia, China, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand, UAE, Vietnam.

Europe and Africa: Belgium, Czech, France, Germany, Italy, Ireland, Netherlands, Poland Russia, South Africa, Sweden, U.K., Switzerland.

Japan is the head office, each country should report to the headquarters main office, and the headquarters main office reports to Japan.

Dublin Office Chart:

As you can see it is a tall company, but let’s start from the bottom.

Each staff member should report to its supervisor, the supervisor reports to the department manager and the manager should report to the M.D. For Example I would report to Sandra White, she in her turn would report to John O’Shaugnessy and John should report to Thomas Weppelmann. In reality Thomas Weppelmann is responsible for more than just Dublin office. It means if the issue is not very big it will be resolved within the company, but if a decision has to be made like who to make redundant than Thomas Weppelmann will have to take part in the final decision, but still the opinion of John O’Shaugnessy is essential here as he spends more time with his staff and he knows everyone’s performance abilities.

As already said the company is a freight forwarding agent. Its job is to safely transport goods from point A to point B, with the help of haulers, shipping lines or airlines. 

Sales Department: Manager Karl O’Reilly Mark Fuller and Josephine Kill under his supervision. The aim of the department is to sell the company’s product, which is service. They are a kind of company’s advertisers. It is also under their responsibility to give price quotes to any customer inquiring a service to any destination of the world. Sales department is the start point of any shipment. They should know:

1. What kind of cargo

2. Where is it going to?

3. Dimensions and weight of goods

4. When the goods can be ready for transportation?

5. What is the desired date of transportation?

And many more, the reason I say many more is because each customer and each type of cargo is different in its way. It can be smaller or bigger, it might be urgent on normal, it may go to different destinations and so on, it can be different types of goods and so on.

The sales department goal is to give customer an impression that we are the only company in the country who can provide the cheapest, the safest and the best service off all. The information they give to the potential customer should be as accurate as possible, in order to avoid any issues later down the line.

Imports Department: Eamonn Grogan and David Howell are responsible for Air Imports, the aim of these two people is to proceed the imported cargo as per government rules and regulations and to make sure that nothing bad happens to the cargo from the moment it arrives into Dublin and until the moment it is delivered to the final destination. They should make sure that the information they fill in the customs docs should be 100% correct, because any wrong steps or wrong information can lead to big fines for the company.

Paul Byrne is dealing with DHL account, his job is to look after road exports and imports.

Sarah’s job is to look after sea imports and exports. She should be aware of the timetable of the ships and feeder vessels; she should daily check if the ships with different containers arrived into the transit port and left it as pre the time timetable.  On the import side the procedure is pretty much the same as air imports, all the goods should be customs cleared and delivery organized unless customer wants different.

Exports Department: Sandra White, Joanne Howe and myself, responsible for air exports. Responsibilities include negotiating the prices with the airlines, checking the post flights on daily basis, organizing pickups and deliveries to airport.

I was working in the Air Exports Department. I personally was responsible for some of the imports and accounts jobs as when I joined the company there wasn’t too much job in the exports department and people from other departments used to give me staff to do. In general my main responsibility was checking the post flights in the mornings, than I was preparing the airway bills for that day’s shipments arranging collections, customs clearance for the shipments. My duties also included Cass Reports twice a month – they are bills from the airlines which have to be checked if the amounts to be paid match the amounts on the bills, reports for customers, earlier mentioned   “Astellas” account is one of the customers who require weekly and monthly reports of the shipments KWE handle for them it was also one of my responsibilities.

Accounts department: Sylvia Smith is the H.R. representative but “geographically” she is part of the accounts department, and her job is closely related to accounts. She is responsible for payroll. Her duties include to staff and operate the organization.

Nicolla Uzell and Michelle Boylan are responsible for the accounts of the company. I think this department’s duties don’t have to be explained.

Avril Reilly – receptionist, she is the first person anyone speaks to on the phone. She has to sort the post, make sure that no unattended people are on the territory of the company.

Warehouse: Mickael Tallon ahs 3 people under his supervision, their duties include packaging the goods for exports, delivering cargo and documents to the airport. Collecting cargo from the customers, delivering imported cargo to the customer, labeling the shipments with the referenced stickers.

That is pretty much the structure of the KWE and the explanation of the different department’s duties.

4.2 Internal influence on organization.

Tangible assets:  these are the things which can be touched; we can also call it touchable: furniture, transport, equipment, it system.

Furniture is the one of the assets KWE has which belongs strictly to the company as well as transport (Kintetsu Dublin owns one company car which is mainly used by the manager but it can be also used by any member of the staff unless they don’t possess a full driving license), Also KWE owns a 20ft container truck which is used on the daily basis for collections and deliveries of the cargo. Equipment is a property owned by KWE, it includes copy machines, printers, fax machines, computers, a fork lift in the warehouse. IT system is another tangible asset the company owns. It belongs wholly to KWE and cannot be used by any other company.

Intangible assets:

The difference from the tangible assets is that intangible assets cannot be physically touched but it doesn’t mean that its value is less than of those tangible ones.

Intangible values of the KWE are: name, intellectual property.

KWE name is a well known brand in the freight forwarding business circle. KWE is in the first ten biggest and known freight forwarding companies of the world. KWE has a good service reputation, and a good relationship with its customers built during many years with the help of the services provided. 

Intellectual property is one of the strongest assets of KWE. Most of the people working for the company have many years of experience working in the business, which is supported by completing different courses from time to time, which gives staff the ability to be up to date with any innovations.

Capabilities:

It is the ability of the company, its staff to achieve the objectives, which lid to the achievement of the mission.

What KWE capable is of: each department has an objective which is to gain as many customers as possible, and customers are money – profit. But how strong are the capabilities of the company to achieve. What KWE are well capable for is to keep the existing customers, of course it gained a few new ones in the last period of time but only a few not because they are not capable to, because of the already mentioned economical crisis.

Value chain analysis:

Is one of the tools we can use to see the company’s steps taken for creating the greatest possible value for its customers. It shows how the product of a company looks from its infinitive conditions and step by step it becomes a finished product which is a value for customers, who are ready to use it only in its final, result condition. In KWE it is the service they provide. But the customer is not interested and some of them don’t even know what is used to provide the service they require. Value chain is a chain of procedures, and action taken which are applied in any organization. It includes:

• Inbound logistics
• Operations
• Outbound Logistics
• Marketing and sales
• Service

I would like to demonstrate this chain in a real example. I will describe a day of work dealing with a particular customer in exports department.

Inbound Logistics:

1. 10 am a call received from a ones off customer by our sales department for an urgent shipment to Japan. Customer needs a quote.

2. Sales get the information required in order to proceed the quote.

3. Sales let know the air exports department about a potential shipment to Japan and the information about the goods, dimensions and weight in order for the exports department to book a collection.

4. If the shipment was going let say to Canada than sales would have to contact different airlines for a quote, but because KWE have a daily consol going to Narita and Osaka in Japan they know how much it will cost the company for that particular shipment. All sales do is add up collection fee different airline fees, security if applies VAT and give the customer an estimated time of arrival of the shipment to the final destination and the total price. If customer agrees to the price the first part is done. Customer cannot refuse to go ahead because of the ETA – estimated time of arrival, because any other airline can give whether later arrival time or the same one, the choice here is not a major one. There are only 2 airlines flying directly to Japan from London, none from Dublin.

The inbound logistics part is done.

Operations:

After shipment’s arrival into KWE warehouse it has to be repacked (usually put on a pallet and wrapped with plastic cover to avoid any loss of the boxes from the pallet or water damage and so on.) A sticker with correct ref number matching the reference on the documents has to be labeled to the box now the shipment is ready to be loaded on the truck to go the port and connect Ulysses vessel to London. 

Outbound Logistics:

It is the main process of the transportation. Next morning exports department have to ring Japan airlines in order to see if cargo managed to get to their warehouse for the cut off time to go on the plane. If so we can advice our customer, if requested, that the shipment is in London as scheduled and should arrive Osaka next morning.

Marketing and Sales: As you can see the sales department did its job in the very start of this operation. And in this particular case all they can do is to send a thank you for using our company service and a kind of advertising to this new customer who may appear to be not just a once off one. Advertisement can include the information of thee services KWE provides and letting the customer know about different destinations and our availability anytime with mobile all the details included and company mobile numbers.

Service:

Is the final result. The cargo arrival to the final destination point. It is in time as promised. All safe without any damage, this is where the value to our product is added in the eyes of the customer. And trust me this customer will advice our services to its friend, and that’s how KWE becomes a brand name.

The main winning point for any business is – TIME. A company cannot become famous in 1-2 months time from the moment it opened.

4.3 External influence on organization.

Marketing Environment consists of the macro and micro-environment. The macro-environment includes large social forces that affect micro-environment, and usually can’t be controlled by the company. It is an external structure which includes the following:

• Political
• Economical Opportunities and Threads
• Social PEST and Porter Five Forces
• Technology 
• Natural

And micro-environment consists of forces that are under control of the company. Micro-environment influences the ability of the company in producing a required service to its customers. It is an internal structure which includes the following

• Suppliers
• Customers
• Company Strengths and Weaknesses
• Marketing intermediaries
• Publics

PEST analysis.

Quite often someone who starts a business doesn’t realize how important environmental factors for an organization are. I mean the country a certain business will be started in. It is very important for a new business owner to understand and to be aware of the political, social, economical and technological factors of the country the business is going to work in. A PEST analysis is one of those tools that help to understand the external environment of the organization.

P – Political                                                        S – Social

E – Economical                                          T – Technology

Political factors

Can have a direct impact on the way a company operates. This factor does not depend on internal work of the company. Only decisions made by government affect the operations. Political factors include such areas as:

v What is government policy on the cargo transportation?

v Labor Law                                                                                                                                                         

v Government Stability                            

a)  There is a law referring to imported and exported goods in Ireland. This would include: goods imported or exported to or out of Ireland have to be customs cleared; all goods have to be declared on the paperwork, airway bills or bill of ladings. There is a law referring the goods for resale or personal effects goods. There is a law concerning import or export of medical goods and many other laws and regulations which strictly have to be obeyed by the transportation agents.   b) Labor law can influence a company’s performance a lot. Ages ago people could work 24 hours a day and for very cheap pay, nowadays people cannot work more than 4 hours without a brake of 1 hour and no more than 8 hours a day. Total hours worked in a week should be no more than 40 hours. Min pay per hour has been implemented. During my employment in KWE I noticed that the rules and labor law regulations were followed as per law, every employee has been given a copy of the KWE handbook where everyone could see a detailed description of the company’s policy and entitlements procedures                                                                                                                            c) All the factors included above depend on how stable the government is. Any of the above can be easily changed due to government change or government instability. Government changes or coming of the new political parties can influence the organization’s total figures. Business owners feel better to move the business to a country with growing economy rather than keep it in Ireland, where economy is down at present. Poland for example, labor is cheaper, government taxes are lower. Transportation laws are softer. This follows with loss of clients for KWE.

Economical Factors

All types of organizations are affected by economical factors locally and globally. It doesn’t matter if the economy is in a boom, recession or recovery all these affect consumer confidence and behavior. Economical factors affect the purchasing power of potential buyers. It also influences the internal and external economy. Economical factors include:

v Exchange Rates

v Economic downturn

v The level of inflation

v VAT rate

a) Interest rates influence the company sometimes positively, but sometimes negatively. Because KWE deals with customers and agents all over the world, invoices the company gets are in different currencies, so the exchange rates which are in place of the payment day can influence the amount to be transferred for payment in foreign currency. Quite often payments are queried because of the exchange rate changing every day. 

b) The present economical crisis negatively influences not only KWE but the general business structure of Ireland. People get redundant, companies lose experienced staff. A team which is used to perfectly fulfill its duties when everyone is in, looses the ability to do it in case of some people (not just one) of the team are not present. Performance of the companies is down, because not a full team works in the operations department.

c) Level of inflation if it lows down than the customers are not very confident in using a service or buying a good.

Social Factor:

Social factor include the demographic changes of the country and of the world. KWE is a company who has offices all over the world so not only local demographics affect the business. These factors affect customer’s needs and size of potential markets. Information about demographical situation in Ireland can be found on the website: www.cso.ie . Social factors include:

v How are views expressed?

v Age

v Career attitudes

Technological factors.

Technological factors are very important tools for an organization. Up to date technology can change the level of production, can improve peoples’ work performance and can change internal environment of an organization. Technological factor includes:

v Impact of the internet

v Software

v Online Customs Clearance

Internet is one of the most powerful technology inventions which were ever created. It helps people instantly send and receive information to and from agents, customers, suppliers and so on.

Software- used in KWE for printing the documents for cargo and invoices was an old one, just before I left the company people started to be trained to use a new software which was easier to use, more friendly and could save time to staff because of the features and benefits it had and the old system didn’t.

Online Customs – a few years ago I order to customs clear exported or imported goods the staff of the company were fill in all the customs declaration attach the documents for the shipment and physically go to the customs office and hand everything in. it was taking hours but sometimes days to customs clear the cargo. It was a problem for more people you can imagine: transportation agent, customer, customer’s customer…and so on. After that an online system was brought to life to customs clear the goods. It saved people time increased the shipments, increased performance and increased the profits for customs office (which is regulated by the government), and for freight forwarding agents.

From this analysis we can see how the PEST analysis can change the performance and may be predicting the near future of an organization even though a PEST as we know is an external factor which doesn’t depend of the company’s strategic. The most important of all four factors of PEST for KWE are the PET. We can see that technology had a huge impact on the company and freight forwarding business itself; economical factors like exchange rates have permanent influence different laws and regulation like the goods imported within EU are going under T1 status which means they don’t need to be customs cleared and it eases the procedure and makes it cheaper as no customs charges apply. It was said that on tomorrow’s budget meeting 09-12-09 the government wants to bring the VAT up, which will hit the customers and KWE even more, negatively. It will work out better for companies to buy the goods they need across the border in England as the VAT is much lower there. 

Porter Five Porters

This model was invented by Michael E. Porter’ he wrote a book called “Competitive Strategy: Techniques for Analyzing Industries and Competitors.” Since then, people use this structure for analyzing a company’s industry structure and its corporate strategy. Porter described five forces that shape every single industry and market. These forces help us to analyze everything from the intensity of competition to the profitability and attractiveness of an industry. The structure below: 

Threat of substitute.

1. The time is wrong (economy is low). Bad time for any industry to be started right now.

2. This type of industry might need a much bigger capital to start the company than a local shop for example.

3. A lot of companies producing the goods for exports move out of Ireland to cheaper countries in Europe or Asia. (Dell moved to Poland, Xilinx-who were one of the biggest customers of KWE for nearly 10 years, moved to Asia) Cheaper countries means: cheap labor, cheap government taxes, VAT on imported goods and so on.

Threat of new entrants.

1. If we look to substitute service KWE is providing than rivalry is quite high. There tens of companies at present competing for business in freight forwarding domain who can offer better service or rates. Due to high number of competitors with the same strategies and a lot of them being the same size the mission of KWE and many other organization in that industry is to just stay in for the moment until things pick up.

Power of Supplier.

Suppliers just like KWE are not in a very strong position at present. KWE can chose from many different suppliers and negotiate the rates to KWE’s advantage. From many years of working in Ireland KWE managed to set up accounts and to build a business relation with many different suppliers, so at present if they move from one to another it won’t be a totally new one which means there will be no switching cost involved. Switching doesn’t affect KWE it only affects  the airlines, trucking companies or feeder vessels.

Power of buyer.

This is exactly who is in a winning position at the moment. If we look at it, it can be whether KWE or their customers in this position. Customers now win as they buy cheap transportation of cargo worldwide. KWE wins as well as it buys cheap service from its supplier another side of it is that KWE have sell thing they for very cheap as well, so the profit they make at present is minimum.

Competitive rivalry of freight forwarding business.

Conclusion: from the point of view of new entrants into the business rivalry is minimum and from the point of view that customers may move to a substitute supplier, rivalry is maximum. Competitive rivalry is high for KWE at present. So we cannot say for definite now that there is someone in a winning position in the present economical crises. Product can be easily substituted, suppliers can be easily substituted, each of them buys cheap and sells cheap. The only definite winner is the final consumer like us who doesn’t buy imported goods for resale. The prices in Ireland on different products decreased a lot. The only problem is that the final consumer doesn’t have the ability to buy as the income of people is very low and even worse people lose their jobs.

4.4 Internal and External influence on organization

SWOT analysis

Internal analysis

Strengths of KWE Kintetsu World Express:

Staff – is one of the most important strengths of the company. A well trained and experienced staff is company’s biggest advantage.

Name – KWE is a well known, recognized name in freight forwarding business area. Companies who supply different types of goods worldwide are well familiar with KWE – as a freight forwarding company.

Experience – Many years worked in freight forwarding area gives the company an advantage.

Global Coverage – KWE provides services into main and secondary destinations worldwide. It can deliver any type of goods into most cities in the world.

Long terms contracts with suppliers – gives KWE the opportunity to offer its customers competitive rates as the rates they have with their suppliers are based on long term relationship.

Weaknesses of KWE Kintetsu World Express:

Prices of Services – Air freight for example, some competitors might have their own planes flying to different destinations worldwide (ex. DHL) of course no matter how low the rates are DHL offers to KWE they can steel offer cheaper transportation to the customers and KWE’s rates are going to be higher in comparison. 

Large number of players – a lot of competitors in freight forwarding business quite a big number of which might offer better rates and bigger service

Staff – as well as staff can be a strength it can also be a weakness. Some workers are not very competent in doing their job; some are not team players which is very important in an organization. It gives birth to a weak operating performance.

External analysis.

Opportunities of KWE Kintetsu World Express:

Funding – Investments could help the company in present economical crisis to gain new customers. Example: Invest in company’s transport; trucks – 40 foot containers could help offer customers cheaper transportation charges on road freight.

New Services – could gain new customers or provide new business for existing customers.

Threats of KWE Kintetsu World Express:

Economy – is one of the external factors of macro-environment. As said before it doesn’t depend on the company’s strategy. This is exactly what happens in the current economical environment, when economy negatively influences the business. People losing jobs, sales drop, annual profit targets fail to be reached and so on.

Falling Sales – this is also what is happening at present due to economical crisis. But it can also happen when economy rises, depending on the company’s marketing management.  How good are the strategies of the company, and how efficient are they for the org