Rohan Company Expansion to USA By Name

Rohan Company Expansion to USA 17

RohanCompany Expansion to USA

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RohanCompany Expansion to USA

Introductionand Background

RohanCompany is a Britain-based company that is famed for its consistentproduction of designer outdoor fabrics and footwear, and the supplyof their products in various outlets all over the world. It isnoteworthy that the products of Rohan Company are designed in MiltonKeynes and Buckinghamshire, but has extended a franchise to theinternational markets to be able to manufacture goods for theintended users of the same products. In view of the need to expand toa new continent, and in this case the United States of America(USA)’s markets, the management felt it appropriate to sell theirnewly introduced merchandises such as trousers and shirts made frommosquito repellent and ultraviolet protection fabrics, thermalfleeces, hats, socks, and shoes. As so, the desire to make a movetowards expansion requires a measured step, which incorporates a widerange of considerations like the input of informed financial andmarketing analysis. The examination of the management issues andconsiderations of Rohan Company to extend its operations and open abranch in the United States, along with possible recommendations isimmense importance. Furthermore, the work is bound to investigate thepotential opportunities and to establish whether it is a viableopportunity or not (Stavrou, Kandias, Karoulas &amp Gritzalis, 2014,pp. 120). In this precept, the company passed a mandate to have areport that encompasses the entire scenario that concerns theirexpansion plans to the USA. This paper, therefore, seeks to delveinto possible issues detailing the important undertakings andcontemplations to be observed before the company can move to expandits market niche. The audience of this work, the Rohan Company, willbe able to make an informed choice based on the evidence andscenarios presented here at the end of the exercise. Thus, the reportwill be cognizant of the analyses drawn from financialinterpretations, environment, legal and ethical or political mattersas well as the underlying opportunities available. Indeed, themanagement of any business can make the best decisions anchored on athorough research geared towards gauging its strengths andopportunities, and considering the most suitable ways to deal withthe threats and the weaknesses that may hinder their extensioneffort.

Ata moment where the technological advancement has had tremendousramifications of almost all aspects of life, businesses have not beenleft behind either as they have benefitted a great deal due to theability of various firms to reach untapped ends of the global market.Apart from the general practices of trade, legalities and ethics,human resource management and environmental considerations, observingthe current political developments in the prospective economiestargeted for expansion is equally crucial. Further, for purposes ofthe internal organization, it remains imperative for a company torely on its analyzed and well-informed capacities in various frontsto be able to make a step towards growth on other marketplaces(Stavrou, Kandias, Karoulas &amp Gritzalis, 2014, pp. 130). It ison that basis that this paper shall give an approach that categorizesvarious departments and comparatively gauge the viability of theexpansion program. For instance, a company’s financial performance,human resource and strategic management, availability and capacity,and the marketing capabilities all form a vital basis for probablegrowth plans.

FinancialAnalysis

Justas a project manager may find it valuable to establish a predictableand reliable methodology for carrying out a task, the same applies toa company as vast and expansive as Rohan Company. In this dictum, theneed to have a reliable financial guidance in the decisions to betaken cannot be overlooked. The management finds it necessary toconstantly refer to the accounting arithmetic for varying reasonsthat entail data analysis, risk management, rations and the similarrequirements to avoid hidden risks that may be associated with anexercise (Stavrou, Kandias, Karoulas &amp Gritzalis, 2014, pp. 123). A given business entity will have to develop a framework ofquestions designed to aid in the analytical investigations of thepossible pitfalls. Likewise, it will be prudent enough for RohanCompany to create a range of financial techniques and to selectively,carry out an assessment of various portfolios, which are seen to berelevant to the planned growth projections. Subsequently, care mustbe observed as the tests are only partial in their reflections, andtherefore a holistic reflection of the said analyses cannot beobtained in a squarely reliable manner. That also suggests that asampled test can be employed in cases where it is difficult toapportion segments to individual sets. The company would besuccessful if it depended on a set of techniques such as thedifferential analysis, margin analysis, and ratio analysis to deriveuseful information from the company accounts. Besides, the objectiveof the investigation, it also encapsulates the construction of anevidenced-based narrative of the enterprise`s performance,effectiveness and risk management of the tools discussed herewith.The study also helps to point out if the company is in any financialrisk and if it may face imminent failure in its delivery in the nearfuture or within a predictable period (Cruz &amp Nordqvist, 2012,pp.33-49).

ValueDriver Analysis

Themoment the objectives of a financial analysis has been clearlyestablished in the alignment of the business` core functions, a stepshould be taken further to zero into the company`s business type andkey deliverables. The step works to identify the main drivers of thefirm and how such drivers create value to the outlet. To illustrate,Rohan Company is a mixture of merchant type of a company andmanufacturing, which means that its value driver is contained in theproduct price differentials and the exploitation of both fixed ortangible and intangible assets to create goods and services (Stavrou,Kandias, Karoulas &amp Gritzalis, 2014, pp. 126). The mastery of thevalue drivers aids in the determination of certain financial ratioswhich work to give guidance on the general performance of selectedassets or assortments. Once the Rohan Company has recognized the typeof a company it is and its relevance to the approachable marketsegment, the next move is to ascertain the economic environment, themarket setting, and other related strategic issues it is likely toface in its effort to enlarge.

Prevailingeconomic circumstances play a significant role in determining thesteps taken by firms and their ability to expand based on the effectsof the financial occurrences within a given economy (Cruz &ampNordqvist, 2012, 38(1), pp.40). For example, the growth of the grossdomestic product (GDP) of a given country stands out to be a pointerof a stable and reliable economy, which further guarantees anenabling environment for business. It should be noted that the GDPonly measures the input and the output of goods and service within aneconomy but not the external flows, which, in a real sense, also playa role in the general performance of an economic growth. RohanCompany will have to consider the prospects of its expansion afterreviewing the underlying effects if its sales and profitability arecompared to the general economic growth and the country’sinflationary tendencies. Also, the company must be alive to variouseconomic variables which usually have an impact on the businesses`overall output like changes in interest rates, taxation and theforeign exchange rates. Interest rates are a crucial aspect toconsider as it defines the rates at which a company will beborrowing. Even though it is seen to be reliable since it is set bythe central banks of a given country hence independent of politicaleffects, they play to influence the rate of return on a firm`sinvestment. Changes in the interest rates also affect the consumers`spending as they either lowers or raises the cost of credit. Theeffect of high-interest rates would mean that there is a contractedexpenditure. Likewise, higher exchange rates also put a higher coston various foreign currencies, which implies that imports costs arebound to remain lower with increased costs of exports. The RohanCompany, given its scattered characteristic of sourcing for rawmaterials, which it turns to consumable products, will have to weighthe chances as relates to the economic circumstances surrounding theUS financial trends. Having survived the recent economic recession,the company is likely to withstand the aftershocks associated with abase shift if it relies on sound financial management and simulationexercises and consequently embarks on an upward growth trend havingexhibited a trait of resilience.

DifferenceAnalysis

Anattempt to look into the group’s financial statements containedtheir books of accounting. For instance, it is conducted in aprocedural sequence as

  1. Extraction of the financial reports and compare the current period’s with a corresponding period of the previous year,

  2. Conduct a detailed breakdown of costs comparatively as well,

  3. Note the differences appearing between the preceding years and the current period’s figures without caring about the negative or positive signs thereof,

  4. Carry out a simple analysis, noting if the calculations and mark as favorable (any increase in the revenue) and adverse (the increases in expenditure.)

  5. Adjust the previous period’s profit by factoring in the current inflation rate to make an informed comparative analysis of what would be if the rate of inflation were static. For example, Rohan Company had set about enhancing the product range and simplifying the management structure. In the 2009 recession, the company made an operating loss of £400,000, but two years later, operating profit stood at £384,000 with a turnover of £17.9m

Fig:Assuming that consideration was to be made between the financialyears 2009 and 2011 and that the inflation rates were as shown in thetable above, then it is correct to say that the FY 2011 was afavorable year. The operations realized a profit margin even thoughthe inflation rate had a rise from that witnessed in the FY 2009. Inthis case, the Rohan Company is positive and would enlighten on amove towards a new market.

  1. The past two steps are supposed to be repeated with the adjusted inflation rates to compare the trends as availed,

  2. An adjustment should be made on the previous year`s figures upwards with the nominal gross domestic product growth numbers to correct the results.

MarginAnalysis

Tosupport the results obtained from the difference analyses, themanagement should be able to extract the financial statement uponwhich ratios are tested to comparatively check on the variousmixtures of the investment, financing, and operating portfolios. Inthis section, gross margin is put as a function of the total turnoverto calculate the gross margin rate, normally expressed in percentageform. The same computations will have to be conducted to also comparethe operating profit margin by making operating profits be a functionof the sales turnover, multiplied by 100%. The net profit is alsocalculated by dividing distributable profits by the sales turnover,multiplying by 100%.

FinancialRatios

Accordingto Weiss (2014), the need to analyze the accounts also cause theanalysts to compute the accounting ratios to be able to foretell theexpected performance, efficiency, risk and the liquidity (PERL)issues that might be faced by the firm intending to enlarge. Besides,the investment ratios are also engaged in trying to measure theperformance of a given company against the quoted or listed marketprice of its capital formation or equity.

Performanceis measured based on the financial statements prepared by the companyinvolved in the expansion scheme (Weiss, 2014). It is concerned withthe measurement of the efficiency upon which a firm converts itsinputs to realize its profits. The main ratios applicable to theRohan Company are three

  1. Margin Ratio: measures the proportion of sales expressed as profits and is arrived at by margin (net, gross or operating) = sales turnover/profits*100

  2. Return on capital employed (ROCE): measures the return on capital invested in the business plus loans and equity and is arrived at by calculating the profit before interest and tax are deducted with the total capital of the firm, thus ROCE = 100* profits before tax and interest

Totalequity + long-term borrowing

  1. Return on assets helps in determining the performance of hard assets without the equity part of it. It is arrived after dividing the profits before tax and interest by the total fixed and current assets multiplied by 100.

Measuringefficiency

Costeffectiveness is measured based on the revenue that the company gets.The Rohan Company may be in a position to predict the operating coststo be directly related to the output. In this case, the firm will becertain that the last year’s costs will be in line with the currentyear’s costs (Boons &amp Lüdeke, 2013, 45, pp. 17). Besides, itis imperative for the company to measure risks that are likely to befaced in its attempt to realize expansion in the American continent. In this regard, the overall capriciousness in the business’financial earnings and the underlying return expected from all othersources is referred to as the business risk. The market risk (thefirm’s variability) in the economic earnings is occasioned by avariety of factors such as the environment, political developments,and the firm`s internal arrangements. Undoubtedly, it is enough toacknowledge that any companies may find themselves susceptible tothis kind of risk. The management should then come up with a reliablemechanism to ensure that such risks are looked into ahead of a movetowards expansion. On the other hand, a firm-specific risk in theeconomic earnings is prompted by a variety of internal factors andlargely be mitigated by way of well programed and executeddiversification processes. Such risks can be mitigated by theorganization`s effort towards the management of the internal affairsand the way in which it handles the instant challenges averted by theenvironment it is functioning. Also, the technological developmentsare adopted to keep pace with the emerging trends in the globalmarket and should be managed well by the firm, depending on thechoices the company makes. It is worth noting that any weakness thatwill be realized along this segment is likely to necessitate a slowdigression of the company, which make it end up being ineffectual inits programmed progress.

StrategicManagement Analysis

Giventhe present competitions that are posed by similar outlets in theworld markets, it would be a matter of priority for the Rohan Companyto consider conducting a survey on the economic competitiveness.Also, the assessment of the company`s strengths, weaknesses,opportunities and threats (SWOT), plus the attendant political,economic, social and technological (PEST) analyses has to beconsidered (Bharadwaj, El Sawy, Pavlou &amp Venkatraman, 2013,37(2), pp.480). Admittedly, the SWOT and the PEST analyses have shownover time to be critical parameters, which assist in the generaldecision making for businesses considering the move towards newermarkets like the USA. It helps in choosing most important factors andthe identification of problems. The group`s values and opportunitiesare also illuminated and categorized in a related case as those ofthe competitors. The strategies discussed here will further informthe combination of factors and considerations to come up with animplementable matrix that seeks to combine both external and internalfactors in realm threats, opportunities, weaknesses and strengths(TOWS), and which is aimed at realizing an effective employment ofthe strategies. Given, the initiation of the stratagems meant toengage in the structured review of the sustainability of thedevelopment focus majorly on the prospects of a continuous adaptionthan challenging the existing arrangements within the company. TheRohan Company, in all respects, stand to gain a lot of this step thatwill in involve a systematic procedure to enjoy the full potential ofa sustainable development of the firm. In fact, the need to change isa motivating factor for a well-placed company that still feels theneed to strategize for a better prospect. In this scenario, the RohanCompany, with its already founded market base and a robustmanagement, finds it easy to launch onto extended territories if thechances are well calculated. The need for change is quite ofteninformed by the extrinsic factors like technological, environmentaland economic changes. In this view, an approach that will explicitlyexhibit consistency with external values and environmental norms gofurther to set a platform for a successful expansion.

ASWOT analysis can be performed before the creation of a goal andmission statement, thus giving ample space to observe thecompetitors’ omissions and to come up with a formulation, whichshall capitalize on the noted gaps (Cruz &amp Nordqvist, 2012,pp.37). An intending company has to prove the predictions to beavailed in the new market as far as market leadership, technologicaladvancement and indulgence, customer preferences and the employmentof resources available are concerned.

Theissues raised in the SWOT analysis should be able to inform themanagement`s formulation of a workable matrix designed to offer asolution to some of the challenges available. The company is supposedto derive the information that leads to the analysis from theprospective competitors’ information data sources. The threats,opportunities, weaknesses and strengths (TOWS) act as complementarytools besides the SWOT. The setting replaces the internal andexternal shortcomings seen in the SWOT system by systematicallyidentifying the associations, prompt and guideline on how to come upwith an appropriate strategy based on the identified relationships.Indeed, the company must consult further analytical tools thatconsist of the internal environment whose actions are in directcontact with the firm such as internal customers and staff members,office technology, wages, finance and employee benefits (Boons &ampLüdeke, 2013, 45, pp.11). Another segment of the organization is themicro direct action environment such as the external customers,agents, distributors, suppliers, and competitors. The third aspect isthe external indirect action environment, which involves politicaland legal interplays, economic determinants, social-cultural factorsand technological changes and advancements. In order to understandthe implications of the previously mentioned, the company will haveto conduct a political, environmental, socio-cultural andtechnological (PEST) analysis to get prepared for any externalpressure that might affect the business intentions. It is usuallyunderstood that the PEST issues are external and that most companiesdo little or nothing to sway their occurrences and the attendanteffects, though, quite often, they may be reframed to offer areliable, conducive and workable setting (STEP).

Theexternal idea for growth may be viewed by the existing organizationin varying perspectives. As so, the management will have to subjectits organization structure to some considerable changes with a viewto cultivating an efficient system. The organization structure hasalways been seen to comprise of people, processes, rewards,structures and systems that work coherently to deliver a common goal.Imperatively, it remains mainly the decision of the top management toensure that an appropriate blend of all the necessary structurecomponents is put in place. The resource theory of the firm isrecognized as a good fit between strategy, organizational design, andexternal opportunity that creates a competitive advantage for theorganization (Weiss, 2014). The changes geared towards the bettermentof the firm’s performance shall be communicated in a manner not tobe misunderstood by the workers. Therefore, that is a procedure thatall companies are suitably capable of executing depending on thecommunication policies and existing values and norms.

Competitionanalysis with the Nike Company

Oneof the greatest competitors in the market is the Nike Company that iswidely known to be genuine and classy. Nike is a multinationalcompany that produces great fabrics that is used by many people inthe USA. Their products includes shoes, cats, shirts, socks and evencaps. People use Nike label as an identity of greatness because it iswidely valued and appreciated by all. Just like Nike, the Rohanexpansion is working hard to target the high end group of peoplebecause their products are genuine and quality. Both companies offersa wide range of products especially the sport wear designs thatleaves their customers amazed with their wide range of varieties.However, the Rohan Company has been left behind in terms ofadvertisement of their products. When compared with Nike a globalknown company that has sponsored many international games boostingtheir popularity. If Rohan could borrow this strategy, they couldfind themself a top notch companies amid older companies such as Nikeand adidas. The management has promised to advertise their productsextensively in the upcoming year to increase their sales and promotetheir business.

MarketingManagement

Rohan’sexpansion to the USA requires an intensive and carefully researchedmarket study before the extension, or the promotion of the productsbegin (Bharadwaj, El Sawy, Pavlou &amp Venkatraman, 2013, 47).Barriers to the entry to selected markets are supposed to be assessedand addressed. In so doing, the management will be able to considerfactors such as the achievable economies of scale, possible measuresto realize product differentiation, access to distribution channelsand possible prohibitive government policies. Competitor analysis isequally crucial, and the lead to their information is contained intheir portals and printouts. Similar industry players and thepossible effects that may be experienced due to competitors’ offersof alternatives are manageable with a better-modelled scheme to reachthe target market. Furthermore, the approach should also put in placeschemed means with which a situational analysis is conducted. Political, economic, social and cultural, technological, legal,ethics and environment analysis (PESTEL) also come into play in thiscase. The factors call for the auditing of the different practicesthat are consistent with the general jurisdiction, thereby allowingan intending newcomer a smooth edge with the suppliers,administration and the society (Boons &amp Lüdeke, 2013, pp. 13).

Recommendationsand Conclusion

Evenwith the looming elections in the USA, I would recommend the RohanCompany to consider going ahead with the expansion program it iscontemplating. The advice is premised on the fact that the USA, beinga mature democracy that she has been known for, will emerge out ofthe elections with no or very little undesirable post-electioneffects. Before the move, the company had better carry out all thefinancial, managerial and marketing analyses contained in this paperso that it may base its decision on a founded business ideas.

Appendix

Inthe case of Rohan Company, its SWOT can be presented as

Strengths

  • It has already established an unmatched leadership as it manufactures footwear to keep one protected and comfortable even in the wildest regions. From enactment clothing to luggage and shoes, the company has made a range that is of use to all,

  • The ability to diversify on the customer requirements,

  • Rohan Company remains an independent company with innovative views on how a successful organization should operate,

  • The Rohan franchise opportunity is a very cost effective and efficient business system stemming from the fact that it has a fully automated stock holding and reordering system that ensures the franchise owners’ stores are constantly restocked with the most popular product ranges, combined with a huge database,

  • The company has had a history as a conformist to various laws and regulations guiding the practices of business in given internal jurisdictions

Opportunities

  • The available market in the USA with few competitors but of a large population,

  • Rohan has been a member of the Ethical Trading Initiative (ETI) since 2005, a clear testament to the company`s ethical trading practices,

  • Passion for the Rohan company brand and its associated products, an obligation to building good customer connections through brilliant service standards and high levels of professionalism

  • The company does not need to tie capital on its merchandised stocks thereby allowing it to open extra outlets at minimal costs,

  • Changes in transport technology and effects of social media might work for the company for fast movement of products and the marketing of its produce,

Weaknesses

  • Rohan company operates with a relatively small number of partner factories, hence a confined output that may impede its growth plans,

  • A relatively smaller financial base could mean that its investment is staggered of funds are borrowed to finance its growth plans

Threats

  • Regular audit costs and their interpretations meant to have the company keep well-informed with the financial progressions,

  • Considered relatively small, the company may be overstretched in term of resources to expand to the next continent,

  • External market monitoring and the maintenance of a reliable and regular information to guide the company in its operations would be a challenge given that the extension targets a different continent,

  • Different social and political environment might present a challenge to the company, owing to the pending elections in the USA,

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