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Development & Growth of An Organisation - Report Writing Assessment Answers

January 02, 2018
Author : Charles Hill

Solution Code: 1ACGA

Question: Development & Growth of An Organisation

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Development & Growth of An Organisation Report Writing

Task

You will choose an ASX50 listed firm. You must provide a suggestion for the development of a new venture for this organization for consideration by senior management. The proposed venture must stimulate revenue growth or enter a new market or increase market share, and must have synergies with the firm’s core competencies.

Your report will briefly analyse competitors/the market to identify an opportunity, then it will describe how this venture will be established (type of Corporate Venturing); analyse the expected impact it will have on the overall organisation and any foreseeable problems, as well as proposed solutions; a timeline for implementation; and the expected resources required. As this assignment is based on a real organisation it must reflect the reality of the situation in which it currently finds itself. You must explain why the venture that your group has chosen would be a good fit for this organization (and supply references where appropriate to support this)

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Solution:

Introduction

  1. What is the Company? – Establishment, Owners, what type

Amcor Limited is an Australian-based MNC that deals in packaging. Headquarter of the company is based in Hawthorn, Victoria and the company is also listed in Australian Securities Exchange. The company was founded as “Australian Paper Manufacturers”-1860 and as Amcor in 1686. The CEO of the company is Ron Delia. Amcor limited was formed when Australian Manufacturers has been renamed in the year 1986 (Amcor, 2016).

At present the revenue of the company is marked at $9.5billion sales. The company is significantly bigger in size and it employs around 28000 employees. The company has won many awards over the years and due to that it enjoys trustworthy position among customers. (Melanie, 2015).

  1. What are its products & Competitors at present –

The company has divided the packaging into two lines and this is why the company deals in two major lines of packaging products that are flexible and rigid plastics. These are the major product line of the company. Flexibles is the product line that includes hospital and pharmaceuticals supplies, drink pouches, food, etc. (Jones, 2008). The Rigid products line of the company deals in food, beverages, and personal, homecare and pharmaceuticals plastics. The company claims that it is the largest producer of PET bottles.

There are a number of direct as well as indirect competitors of Amcor all over the world. These companies include ALPLA, Ball Corporation, Bemis and Toyo Seikan. These are the brands that have significant impact over the business operations of Amcor.

  1. Market opportunities –

The company has many markets where it can expand its business and grab the opportunities. For instance the demand of packaging is increasing African countries and at the same time the company does not have much presence in African countries. Thus there is an opportunity for the company to expand in African markets. The size of African market is relatively large and due to that the company can not only expand here but can also earn high profits here (Graf & Harris, 2016).

  1. Failures / Opportunities and previous ventures of Amcordone

Amcor has victimised many failures and opportunities in last few years and this is clear from its multiple closures and new ventures. This started in the year 2007, when Amcor sold its joint venture stake in the White Cap North American Closure Operations. At that time Amcor sold its 65% stake to Silgan Holdings Inc. The company, in 2002 demerged its printing papers and it was named as Papernix. In the year 2002, the 45% interest of Amcor in Kimberly-Clark was divested. In the year 2002, Amcor acquired PET (polyethylene terephthalate). In 2010 Amcor acquired Alcan packaging food Europe, global pharmaceuticals, food Asia and global tobacco businesses from Rio Tinto. In 2011 Amcor Packaging distribution also acquired Marfred Industries that was one of the largest packaging distributors of the US. In this manner the company utilised all the opportunities in a significant manner so far.

The major failures of the company lie in compliance with pollution norms. The company has paid huge fines for its non-compliance with corporate laws of Australia. Due to that the company also sold its ventures such as European bottle business to La Seda.

5-Profitability / Success -done

The company has been in a profitable situation since its inception. Over a period of 20 years the company has acquired a number of ventures. The 2002 acquisition of PET (polyethylene terephthalate) at the cost of $2.875 billion made the Amcor the largest manufacturer of PET globally. The revenue of the company is around $9.5 billion in the financial year 2015 and this is far more than that of its competitors. The company is one of the largest packaging solution providers in Australia. This suggests that company is profitable as well as successful.

6- Share Holding information ( Euro monitor / Financial reports) -

The company has seen tremendous growth in the year 201516 and due to that the dividend of the company has been declared of 410 US cents per share and this is 2.5 % higher than last year. As a matter of fact the dividend is paid in Australian Dollar and it comes to 55.3 Australian cents per share that is 4.3% higher than that of last year. The profit after tax is US $ 671.1 million which is 7.5 % increase as compared to that of last year. The flexible plastics business achieved earning of Euro 681.2 million and the rigid plastic business achieved earning of Euro 352.5 million (AnnualGeneralReport, 2016).

  • New Venturedone

Situation analysis

Dilmah

Dilmah is one of the largest tea exporters in the world under branded tea category . The company has been in the industry over three decades and treats Australia and NZ as its number one region for tea exports. A few years ago , company invested in an Ice Tea project to produce the tea concentrate in the island to market for bottlers located in their strongholds for ultimate packaging before reaching the consumer. As the Brand is known internationally, it will be relatively easy to launch the product in the competitive market . The company is not geared to install a bottling plant since they do not have any competencies to manage one. As a result, they are on the hunt for a large packaging company who has the knowledge and the materials to produce metal cans to pack the RTD tea before marketing in Australia and New Zealand. They are willing to invest in a canning or a bottling plant on a sharing basis.

Amcor

Amcor is the packaging giant in Australia with a vast knowledge and experience in the industry. It is a cash rich company and willing to extend their arms in the business to challenge the competition and to transfer their weight from one filed to another which will eventually add value to their core business. They supply packaging solutions to some of the multinationals in the word and largely are dependents of their customers. Company also fear that their customers might step into the packaging industry and will have their own packaging plants time to come. The management feels the importance of starting a joint venture with a company who can produce and supply a commodity for them to pack and deliver the finished product rather than behaving reactively in the international business to counter any possibility of such a risk. Amcor is not afraid to invest in a packaging plant dedicated for a commodity for a specific period to show the world of their capabilities and have more control.

Opportunity

Both companies see the potential of working together in a joint venture to explore the new markets . After several rounds of discussions, both companies agree on some basic principles to follow to make this JV a success. They are as follows.

  1. The Joint venture is to be inforce for next five years.
  2. Both Companies to invest in the canning plant on 40/60 ratio which is to be installed in the Amcor premises.
  3. Dilmah agrees to supply Tea concentrate in bulk form to only to Amcor for next five years
  4. Amcor agrees not get involved in similar project with any other player in the business within the project period.
  5. Either Dilmah or Amcor or both companies to claim ownership of the finished product after the tea is canned .
  6. Product name is to remain unchanged as Dilmah.
  7. To use transfer pricing method when transferring the finished product from one hand to another.
  8. Both companies to have their distribution channels in Australia and NZ and Decide on the distribution method.
  9. Use their selling, customer service teams for the final move
  10. Record P&L statement to analyze the status of the JV every year.
  11. To have one accounting package from step 2 to step 9.

After five years

AmcorDil [JV] is to evaluate the position of the project. If the project is profitable and growing, then to continue for another specific period is within the company management. The remaining value of the assets must be revalue and shared once more if further period is added. Otherwise, Dilmah can now take ownership of the plant and continue with the business without the JV. Amcor also can look at signing up with a another supplier of tea to continue the project under a different brand after settling all dues to Dilmah also to look at canning different commodity with a slight modification to the plant. Both companies have now a wealth of experience in the finished project which was one of the objectives of the firms as well. Both companies will not be losers even after the project period with lessons learnt in the unknown areas of business. Managing change, understanding cultures, adapting to different regulatory and other requirements are some of the key strengths they have now acquired. Dilmah also might receive offers from competitors of Amcor to join with them for the same business model.

Embracing Risk and Importance of Risk

Risk is an inevitable part of any business and without taking risk a company cannot achieve success. It is very necessary for an organisation to take risks because risk gives an organisation the opportunity to grow and expand further. In this case the Amcor Company is taking risk of Joint Venture with Dilmah Company. At present the company only supply packaging solutions to some of the multinationals in the word and largely are dependents on their customers. In this case the saturation point may come and the operations of the company may come to an end. This calls for a new venture. A new venture always involves risks and without taking risk the company cannot make use of existing opportunities. Embracing risk is very vital for the well being of an organisation. In this case the company also fear that their customers might step into the packaging industry and will have their own packaging plants time to come (Andrews & Kenneth, 2012). This makes it very vital for Amcor to take the risk. The management feels that starting a joint venture with a company that can produce and supply a commodity for them to pack and deliver the finished product rather than behaving reactively in the international business to counter any possibility of such a risk is the only option in front of them. The risk is associated in both the points that are at the time of establishing this venture and after the establishment of the venture. It was found out in the opportunity section that the company has many opportunities but it is important to take risk. There is opportunity in front of the company that it can create acquisitions. The company can tie-up with smaller companies that are dealing in packaging and with this the company can become global player.

There are many companies that are ready to get merged with Amcor and this way the company can become a big brand (Jones, 2008). The company also has less direct competitors and the goodwill of company is high so this is an opportunity for the company to create more value and increase market share. With this Joint Venture with Dilmah Amcor can do this. Along with this the company can also think of enhanced segmentation to target on new markets so as to enhance revenue. Along with African countries there are many unexplored countries in Asian regions where demand of packaging is increasing. The company can undertake market research in these regions and after that it can open up its subsidiaries here. The cost of raw material is also less in these regions and this is a plus point for the company. In this manner the most significant opportunity that Amcor has at present is to look for expansion in the countries where it is not present significantly (John, 2010). This is the right time to grab the opportunity because there is less competition in these regions and resources are also cheap. The company can avail all these opportunities by having Joint Venture with Dilmah ad these are the benefits of embracing risk. AmcorDil joint venture in this manner has a number of risks but it can also be analysed that after five years embracing these risks will be very beneficial to the company. With embracing these risks the company can easily be able to turn these opportunities into its strengths and thus achieve its long term objectives. There are a number of production units of the company in entire world. The company has achieved great success in past decade and this is due to its strong ethical stance and strategy implementation. The company has strict norms and regulations of operations and due to that it is able to produce best quality products. Along with that the company strictly follows its mission and vision and due to that its operations around the world run smoothly (Pavlou & Stewart, 2015). Due to all these reasons embracing risk of Joint Venture with Dilmah is relevant to the company.

SWOT Analysis

SWOT analysis refers to the strengths, weaknesses, opportunities and threats of a company. It helps in identifying the potential and dark spots of the company and on the basis of that a company can formulate its strategies in a significant manner. The SWOT analysis of Amcor is presented below:

Strengths

  1. The company has won many awards and it has been nominated for various prestigious awards.
  2. The company employs over 25,000 employees and all of them have diversified portfolio.
  3. It is one of the best packaging companies.
  4. The company has very strong financial position with its string cash flow.
  5. The company has global operations in more than 40 countries.
  6. The company is one of the few companies that have strong sustainability and good CSR activities.

Weaknesses

  1. It has been allegedly caught for pollution related controversies.
  2. Cartel purchases also affect the brand image of the company.

Opportunities

  1. The demand of company is growing in African market and it does not have much presence in that market.
  2. The company has opportunity for acquisitions and with acquisitions the company can create value.
  3. The company can acquire small companies and tie up with global players and this will help in expanding the business territory.

Threats

  1. There can be some limitations on the use of PET since it affects environment so this is the threat for the company because the company may not get to use this material.
  2. The raw material is scarce and this is a threat to the production process of the company.
  3. Major companies can start their own packaging wing that is a big threat to the company.

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