Introduction
Economic consequences are extremely essential for the sake of an organization, and there will be no chance exists for a company to have effectiveness in the market accordingly (Bello-Imam et al., 2004). Economics is known as the view of earning and consuming the money in a powerful and organized manner. Adam Smith and Alfred Marshal, the fathers of economics are the one who presented the most important definitions of economics and according to them the existence of markets in the economic structure are essential for an organization, and it has a direct impact with the financial and strategic position of the company in an effective manner (Bello-Imam et al., 2004).
In order to analyze the economic environment and market of a company, it is more than essential for the companies to stay in the business accordingly, and compete with the competitors in an organized and perfect manner. There are two important parts of economics are there known as microeconomic environment and macroeconomic environment. However, for organizations, it is more towards the analysis of macroeconomic consequences (Dietz, Michie and Oughton, 2011). China is one of those economies of the world that enhanced effectively even in the current economic crisis time as well. It is effective sign for the people of this particular economy, and also for those individuals who are in the fact of investment in this particular country.
The assignment though not about analyzing the economy of China, it is all about analyzing the core effectiveness and position of a certain company with the market or the industry. There is a company selected for this assignment with the name of WANDA Group, and there are three different sections of this assignment that needed to be cover for the performance of the company.
About WANDA Group
Dalian Wanda Group Corporation Limited is basically a Chinese based Conglomerate company with the core effectiveness and activities associated with the management of the real estate. It is usually associated with the real estate version, tourism, hotels and entertainment. It was usually founded in the Dalian, Liaoning. The company has its physical location in Beijing, China (Dietz, Michie and Oughton, 2011).
Wanda Group was founded in the in the year 1988 as a residential real estate company, and the founder of the company was Wang Jianlin. Wang has now called one of the richest persons in the Chinese region. The company was diversified into the areas including the hotels, Karaoke Cinemas, Cinemas and the departmental stores. Wanda Group acquired Yacht Builder Sunseeker International with a net deal of US$ 500 million in particular. This particular acquisition gave a stake of 92% to the company in particular. It is one of the financially sound companies found in the Chinese region, and the company has the tendency to enhance their productivity further in the market. Till date, Wanda Group owns 55 star hotels, more than 1200 cinemas and more than 70 departmental stores in particular. In the year 2013, the annual income of the company reached to a level of US$ 30.8 billion in the financial year 2013 which is a perfect sign for their shareholders in particular.
There are three effective sections of this assignment that needed to be completed accordingly for the best possible mean. It also includes the market structure that is pertinent to the business. Chinese economy is a booming economy, and there are number of factors that stride under the same aspect.
Part-1
Analyze the Economic Environment
Chinese market is growing with a robust pace, and the country is expecting to increase further in the future consequences. The economic environment that associated with the Chinese economy is highly effective and powerful, and it is one of those economies of the world that performed exceptionally well during the current economic downturn (Dietz, Michie and Oughton, 2011). In order to analyze the economic environment in which the company is operating accordingly, there are numerous models that will be used specifically for the same purpose. Porter’s Five Forces Analysis will be used along with some of the key macroeconomic variables in particular. Real Estate in China is developed and managed y the public, private and state owned enterprises particularly. Currently, the market of Real Estate in terms of China has envisaged a tremendous growth in the market, and the central Government of China is experiencing and implementing certain measures to tighten the interest rate to prevent this particular sector (Dinar and Letey, 1996).
Porter’s Five Forces
Porter’s Five Forces is an important measure that found in the strategic management stance particularly. The Porter’s Five Forces elements are as follows
Rivalry among the Competitors (High)
Competition is an important aspect that associated with an industry in particular. An industry which has high level of competition in particular and the rivalry among the competitors are increasing. The proportion and power of competition in the rivalry of the Chinese market is increasing, and currently lying on the High place (Foxon, Köhler and Oughton, 2008).
Bargaining power of Customers (High)
The bargaining power found in this particular real estate market of China is very high, and it is showing that customers have numerous options to complete the effectiveness. Wanda Group is also facing the same problem, and they should be effective and organized to be effective further in the market (Foxon, Köhler and Oughton, 2008).
Bargaining Power of Suppliers (Low)
The bargaining power of the suppliers is on a lower scale in this particular industry of Real Estate in China. This particular power of supplies would not be essential and effective in particular. Bargaining power of the suppliers is on a lower scale.
Threats of New Entrants
The thing will not be in the favor of the company, and the barriers to entry in this particular industry is on a lower scale
Barriers to exit is on a higher scale, hence companies entered in the industry cannot expel out easily from the market, which is again not in the favor of Wanda Group.
Key Macroeconomic Indicators affecting the Business of Wanda Group
The essence of macroeconomic factors and indicators are essential for the sake of an economy, and it is equally beneficial for Wanda Group. The key macroeconomic indicators used for the analysis to analyze the affect on the business are Gross Domestic Product (GDP) growth rate from 2006 to 2014 and the unemployment rate as well (Foxon, Köhler and Oughton, 2008).
Gross Domestic Product (GDP) Growth Rate
Gross Domestic Product is in important tool that used to analyze the total amount of things manufactured in a given year. GDP certainly has a definite impact over the business possessions of an economy, and it is equally applied over the Chinese region as well. In this particular aspect, the effects of GDP growth would have been analyzed with the Wanda Group (Graf, 2002).
Unemployment Rate
Unemployment Rate is an important macroeconomic indicator associated with the effectiveness of an economy particularly. The unemployment rate of the country from 2006 to 2014 is as follows (Graf, 2002)
This particular analysis is revealing that the unemployment rate of the country lies in a positive range, and it is also very low in particular. The average unemployment rate from 2006 to 2014 is 4.14% which is very low in particular (Tradingeconomics.com, 2014).
Market Structure
Economic structure is one of the most important sections that associated with the analysis of the industry particularly (Letey, 1986). The market structure in which the company is operating accordingly is Monopolistic Market, and there are certain industries are working in the region. The level of competition in the real estate market is very high which is comparing the goods of the markets in an organized and effective manner particularly. From this particular section, it is evaluated that the financial position of this industry is effective and powerful, and has the potential to increase further.
Part-2
Firm’s Recent Performance
In this particular section, the performance of the firm would have been analyzed accordingly. It is required to analyze the appraise the performance comparing with the key competitors in the market lies within the same sector. There are certain ratios which will be used in this particular section for the analysis (Obadan and Adubi, 1998)
Net Profit Margin (NPM) Analysis
Net Profit Margin (NPM) is an important term associated with the revenue generation capability of an entity. High NPM always be effective for the companies all over the world, and it is equally beneficial for Wanda Group as well. The computed NPM is as follows
Gross Profit Margin
Apart from the NPM, there is yet another tool comes under the ambit of profitability analysis used for analyzing the level of Gross Profit of a company. GPM is a ratio specifically talks about the cost efficiency analysis of the company. The illustration for Wanda Group is as follows (Obadan and Adubi, 1998)
Likewise the NPM, The GPM of the selected organization is going accordingly and in a perfect place. The aforementioned analysis is showing that the GPM of Wanda Group was nearly 32% in the financial year 2013, and then it went on a level of 44% in a year after 2013, showing that the gross profit generation capability of the company is effective and high. The average GPM of the selected organization is 38%, shows that the company is highly effective as far as maintain a great cost efficiency level, which is comparatively sounder than that of the competitor of the company. It is showing a remarkable effectiveness in the market for the company particularly. The industry average ratio of GPM of Wanda Group is also lower than the actual GPM of the company.
Return on Assets (ROA)
Return on Assets (ROA) is an important tool that analyzes the level of operational asset provision of the companies. High ROA is an indemnity that the company is operating with effective measurement aspect. The computed ROA of the company is as follows (Obadan and Adubi, 1998)
Part-3
Recommendations
This particular part is related with the recommendation part, and it is one of the most important parts associated with this particular assignment. It is required to have different recommendations that can maximize the revenue of the company. The recommendations can be financial or non financial but it should have a definite impact over the financial capability of the company.
Operational Cost should be decreased
Wanda Group is currently operating in those industries of the world which has high operational cost particularly, and the industry is doing an exceptional job as far as retaining in the industry is concerned. Companies with low level of operational cost have a high gross profit and net profit particularly. The operational cost of the company though not very high, but still the company has to decrease the same for enhances the effectiveness in particular. The operational cost of the company can be decreased by applying the Activity Based Costing (ABC) approach in particular. It is one of the most important types of organizational analysis and aspect and used by different companies of the world.
Employee’s effectiveness
Employees are known as the backbone of an organization, and they have no chance to increase their productivity in a perfect manner without managing their employees in a well organized and perfect manner. It is also recommended to the company to enhance their effectiveness in market in particular. The company has to initiate the approach of Management Bi Objectives (MBO) in which the company should consider their employees to enhance their productivity and level of efficacy pertinently. The company is doing an effective job as far as providing effectiveness in particular. The employees of the company are essential in particular and they have the tendency to deliver the best things in the market in particular. It is recommended to the company to enhance the employee’s effectiveness with the providence of intrinsic and extrinsic motivational sector. Wanda Group would certainly have effectiveness in their core market.
Changing of Pricing Structure
Pricing has a direct linkage with the financial position of an organization, and those organizations which are essential for the pricing effectiveness. The pricing structure of the Wanda Group is PREMIUM Pricing Strategy, and the company has to change this particular pricing strategy in particular. COMPETITIVE Pricing strategy should now be implemented by the company for their core effectiveness. With the help of this particular changing in the pricing structure, the company can enhance their productivity from different actions particularly. Wanda Group has to change their current pricing structure in an effective and organized manner in a perfect manner.
Conclusion
Microeconomics and macroeconomics are two important types of economics, and both of them are essential for the effectiveness in the market accordingly. Economically, every company is essential, and they have to make in an effective manner. China is a big country, and there are number of companies which are operating in the region for their effectiveness particularly. China is doing an effective job as far as enhancing the operational capability of the company. There are certain macroeconomic indicators which are utilizing the things and used for analyzing the effectiveness of the market in a particular manner.
Market analysis and industry analysis are some of the major analytical vision that associated with the companies to enhance their core effectiveness in the market. This particular analysis is all about analyzing the things in a perfect manner, and the company is Wanda Group, located specifically in the Chinese region. From this particular and core analysis of this assignment, Wanda Group is a financially sound and effective company of the world, and now they are enhancing the productivity in a perfect manner. All the three parts have been done accordingly and completed in perfection. Wanda Group is financially active company, and the company will grow substantially in the future.
References
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