Market

Political: Processes and actions of government bodies. Tesla have been through ups and downs in their business. During the times of the debt, Government intervened and provided $465 million low interest loan which also provided the company a boost in their operations. Since Government was interested in fuel efficient electric cars, they provided incentives for electric cars. This also lets Tesla to expand globally.

II. Economic: Largely macro-economic. Economic factors like growth rates, price stability became major factors because of which energy vehicles by Tesla became popular in a short p of time. Rising fuel prices, and rising population let the people direct their choices to cost effective source of energy. Fuel efficient, lower battery costs, and decreasing renewable energy costs made Tesla’s products more attractive to consumers.

III. Sociocultural: Sociocultural factors played a major in affecting Tesla’s business as people now are more aware of the clean, green and eco-friendly environment so they prefer electric cars. These external factors helped Tesla in its growth opportunities.

IV. Technological: Technology advancement by creating new products and processes. Tesla has a big advantage in technology advancement by introducing electric cars, automated cars. They are the brains behind the automotive innovation which leads to more growth opportunities in the car industry of electric cars.

V. Ecological: Ecological factors involve environmental issues mainly. Tesla’s purpose is driven to make eco-friendly cars so ecological factor plays an important in role in promoting their market. Over last few years, people are more concerned about the global warming and environment issues because of which they switch their priorities to eco-friendly cars. Tesla electric cars, solar panels, batteries are considered safe for environment.

VI. Legal: Official outcomes of laws and legal systems. Some states in the U.S have banned Tesla from offering test drives to customers. Tesla has the opportunity to grow its sales globally through direct sales, which is allowed in some states but others they can only sell through third party dealership which can be seen as a threat.

2. Using VRIO analysis, evaluate whether Tesla has a sustained competitive advantage.

I. Valuable: Tesla has got an edge over many other companies in a short time. They are continually coming up with improved advancements of battery issues, they are making batteries that provide consumers long mileage with short p of charging the batteries. They are also coming with various technologies to overcome environmental issues by introducing solar city and spacex.

II. Rare: Tesla is the master of innovation in their field. It is the first company that started selling electric cars. They are the only automobile company that is not only working towards the automobile but also solar panel manufacturing and space innovations. In general, tesla cars are rare in itself, only consumers can afford to buy it.

III. Costly to Imitate: The technology that Elon Musk’s brings on the table is very hard to imitate. Tesla’s improbable success is the reason of its unique technology, R&D capabilities, and innovation in fuel efficient cars. Tesla has reached at a stage which is not easy for its competitors to take place.

IV. Organization: Elon Musk is the brain behind this game changer innovation so they possess strong organizational capability to sustain their competitive advantage.

• Brand Recognition: Tesla has become famous in a very short p of time, it has gained recognition globally now. The popularity of Tesla known for its sustainable vehicles has risen in the last few years. They have brought innovations not limited to vehicles only but also in energy products which has helped Tesla gained recognition in no time.

• Fast growing super charger network: Tesla is the only brand to become fast growing super charger network. These super chargers are high speed chargers that charge Tesla products instantly. It has been successful in installing fast charges in Asia, Europe, and USA. There were network of 4000 chargers in 2015 and plans to go more than 7000 in 2018.

II. Weakness

• High Prices: Tesla’s products are quite expensive when compared to its competitor’s products. Middle class consumers cannot afford Tesla’s cars which can be considered a weakness in their growth.

• High production and operation costs: Tesla’s production and manufacturing costs are high. The Model S roughly takes up to $28,000 to build the car. They are still working to reduce the cost of productions.

III. Opportunities

• Growing demand of Sustainable products: Tesla’s main opportunity is the awareness of fuel efficient electric cars and its sustainable products. People are more concerned about the environment change, global warming, and the increase in the fuel prices so this automatically direct consumers towards eco-friendly vehicles.

• Autonomous driving technology: Autonomous driving is next big thing coming up in the automobile market. Tesla is planning to launch its first automated driving vehicle by 2019.

IV. Threats

• Competition: Automobile market is a very competitive market. Tesla face competition from BMW, Audi, Daimler, electric vehicles of Nissan, and Chevy. Tesla is still considered new in the market but they have in the market for over many year so they are more financially stable and face huge demands because of their affordability.

• Dealership regulations: Tesla does face dealership regulation which is a big threat for them as in many U.S states they are not allowed to sell their cars directly to consumers instead have their orders executed by a third party. 

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The calculations have been done using the latest Apple Inc balance sheet.

A. Short Term Debt

Apple’s short-term debt is comprised of the current liability. This is debt that is fully repayable within a year.

The book value of the short-term debts as of 2007/09/29 is $ 9299 million.

The book value is taken to be the market value.

B. Long Term Debt

Apple Inc has not held any long-term debts since 2003 in a trend common in the information technology industry.

YTM =Interest + annual price charge

(Market rate + coupon rate)/2

The present value of the bond = principal amount +___interest

(1+YTM)ⁿ

C. Equity

Apple Inc – Outstanding number of shares as of 29/09/2007

=872.33 million

Market price per share as of 16/11/07=$161.71

Market value of equity =Outstanding no of shares x market price = 872.33 x 161.71 = $141,064.48

Debt Ratio

It is computed by total debt divided by total assets. It shows the ratio or proportion of total debt to assets. It is a measure of debt load. It indicates the risk levels. The higher the debt ratios less risky the firm is. It shows just how much capital used in capital formation is borrowed. A high debt ratio means that the company is paying more in terms of loan repayment and interest charge. (NetMBA.com, 2007)

Apple Inc has an asset base of $ 25,347 million. Its book value debt is $ 9299 million.

The debt ratio based on book value = book value debt.

Total asset = 9299 million = 0.37 or 37% 25347 million.

The debt ratio based on market value is equal to the debt ratio based on book values as the company only holds the short-term debt. The market value of short-term debt is assumed to be the same as the book value.

The company is quite stable using either market values or book values. A debt ratio of 37% is considered a good indication of a stable financial position. It shows good creditworthiness. For every one dollar of asset, this company has $ 0.37 worth of debt. The company has chosen to eliminate all risks associated with long-term debt but at the same time foregone any tax-deductible on interest. This is because interest payments are allowable while the cost of equity is not.

Debt to Equity Ratio:

Is arrived at by dividing total debt by total equity. It is also called financial leverage since it shows the level of indebtedness of a company. The higher the ratio, the greater the indebtedness, and the lower it is, the lower the reliance of the company on debt. It is likely to vary from industry to industry depending on the level of capitalization. (NetMBA.com, 2007)

For Apple Inc., the short-term debt is $ 9299 million while it does not rely on long-term debt in an industry known to maintain very low ratios.

The market value of equity is $5368 million while the book value is $ 141064.48 million.

The debt to equity ratio based on book value = 9299 million = 1.74 or 174% 5368 million.

The debt to equity ratio based on market value = 9299 million = 0.07 or 7% 141064.48 million.

For every dollar in book value the shareholders have invested, there is 1.74 dollars worth of debt.

For every dollar in market value in shareholders’ investment, there is 0.07 dollars worth of debt. The book values depict a weaker financial position than the market value. The Apple management may find it hard to decide which of the two sets of ratios to rely on; those based on the book values or the market values.

Market values and book values rarely coincide and this results in a problem of wrong measurement and comparison over time and across space. (Choi, Fredrick, D. S., 2003) The resultant differential in market values and book values of equity and debt is known as market value added (MVA).

The equity MVA for Apple Inc is $158354.42.

This difference has a big impact on three areas. First, it affects the computation of the cost of capital in a firm. The value to use when calculating WACC between the two is a major headache. While market values are not easy to compute and may consistently vary they indicate the cost of acquiring more capital. WACC cannot use historical costs but the current cost of acquiring new capital and therefore book values cannot be used.

This difference also affects the cross-sectional evaluation of equity and debt. It interferes with debt ratios and debt to equity ratios as illustrated above. Differentials result in different ratios that make comparison and decision making difficult. Finally, it also affects the evaluation of capital configuration over time. It may not be possible to compare two sets of a firm’s components of capital prepared in different time frames.

There is great controversy on which value reflects the true value of a firm’s debt and equity. The value picked should not overvalue nor undervalue the item being measured. Proposals to use market value have been met by a number of objections. Firstly, market values are said to be volatile and fluctuate often while book values are fairly constant, hence cannot be relied on. However, this is an advantage in disguise because the value incorporates what is happening in the firm, industry, and the economy at that particular time. Book values of equity and debt are unresponsive to these changes and therefore do not reflect the true value. Hence market values are a better approximation of the true value. (Sweeney, Richard. Et al, 1997)

Secondly, book values are used more often because they are to be more conservative as accounting standards require. Accountants prefer to recognize the figure that minimizes profit rather than exaggerate it. It is assumed that book values of debt and equity will be smaller than the market values and therefore should be used. This assumption, however, does not hold because the market value may in certain instances fall below the book value.

Thirdly, it is argued that market values cannot be relied on when acquiring funds from banks and other financial institutions but this is sometimes not the case in homeownership plans especially when getting a second mortgage. Lenders are wary of the frequent fluctuations in market values.

References:

1. Sweeney, Richard, Warga, Arthur, and Drew Winters, 1997. The Market Value of Debt, Market Versus Book Value of Debt, and Returns to Assets. Financial Management Association. Vol. 26
2. Choi, Fredrick, D. S., 2003. International Finance and Accounting Handbook. NY, Wiley, and Sons. NetMBA.com, 2007. Financial Ratios: Financial Leverage Ratios. Retrieved on 11/06/07 from http://www.netmba.com/finance/financial/ratios/
3. http://finance.google.com/finance?fstype=ii&cid=22144

Sales have doubled since then and 66% of the British adults now consume organic food and drinks. Their weakness Is the fact they haven’t expanded Into the global market except for Canada and the ASK. There has also been several recalls on brands purchased by the company. The opportunities appear to be significant In this retail market. There Is an Increasing desire for organic, healthy products which bodes well for the success of opening new stores. The threat is competition as the demand grows and more stringent regulation. Rental increases is also a concern.

In making a decision on whether to invest in Whole Foods Market, the welfare and needs of the internal and external stakeholders need to be considered. Growth depends on Bonds and Stockholders. The company must show consistent growth in order to be able to have available borrowing outlets. The employees are instrumental in keeping the customer feel wanted and satisfied with their shopping. The surrounding community wants to feel compatible with Whole Foods facilities, products and service. And the distributors supplying the company’s product need to know there Is a commitment from their customers.

Whole Foods Market is a unique, organic food and natural product supermarket chain located in the US, Canada and ASK. As a wholly owned subsidiary, they are headquartered in Austin, Texas and employ approximately 64,200 people: 13,300 are part-time and 2,700 temporary employees (Denominator, 2012, p. 4). They have an increase in revenue in 2011 from the previous year of 12. 2%, an increase of 25% in operating profit and net profit increase of 42%. (“Event Brief of IQ , 2012 Whole Foods Market Earnings”, 2012).

These figures are significant in recognizing the company’s success in recovering from the recession which hit them In 2008. Presently, the organic food market Is fragmented with many small mom and pops which presents many opportunities for growth by Whole Foods. Fred Meyer, a discount chain, carries an Increasing array of organic foods, but not the quality and quantity of their high end competitor. The company’s strength is in its focused growth plan. “The new store openings has enabled it to grow at a compounded and annual growth rate of 26% during 1991-2011”. Denominator, 2012, p. 6). They have formalized their square footage for new and renovated stores by past analysis of their successes and allures. The expansion into the I-J market, in particular the 2007 acquisition of 80,000 square feet in London could be a major step into a market outside of the US. Sales have doubled and 66% of the British public consumes organic food and drink. (Live Business News, 2012, p. 3) Their weaknesses lay in lack of expansion into international operations, product recall of certain brands, and increasing rental costs.

Recalls are an issue. They have had to withdraw Whole Foods Market Dairy Free bakery products because it contained milk which was not on the label. Texas had to call cheddar cheese products because of an e-coli contamination and there was a possible Salmonella contamination for the Whole Foods, Carob Energy Nuggets in 2009. They have not been able to successfully expand into markets other than a few stores in Canada and the I-J. They have not been able to obtain competitive prices from their distributors for these stores because of the low volume.

Whole Foods also has a weak advertising budget and relies heavily on Internet and word of mouth, a disadvantage when their competitors advertising strategies are expanded into other markets. (Live Business News, 2012, p. 7) Leases for space and equipment have increased significantly from 4. 8 million in 2004 to 201 million in 2007. Future growth could be impacted. The increasing demand for organic foods and the new emerging life styles of the American public appear as great opportunities for Whole Foods Market. “According to industry estimates, the sales of organic food increased three fold since 2000 to exceed $28. Billion in 2010” (Denominator, 2012 p. 7) With this increase in sales, the company is still the only chain catering and available to this market. They are continually expanding their product base to include such foods for customers with facial dietary needs. The trend of the American family is moving towards eating at home and eating healthy. Competition in the food retailing market is intense. Currently, Whole Foods does not experience significant competition in the organic food, natural products, and vitamin supplement area. But, as the demand and desire grow, so will the competition.

The demand for oil will be present a perfect example of this would have to be, the Chinese economy, with a surge in the demand for crude oil in china, their economy has risen tremendously. Since oil is limited. People must look for other alternatives like solar power, hydro power, even alternatives like ethanol where it is used faintly as a source of energy to power vehicles. When it comes to the market speculation there is a lot of investment being poured into the oil trade, due to this surge of investments, fluctuations in the market go from high to low on a daily basis.

Risk will be present when it comes to business, but in the case of the investors depending on how the market trends are they may lose profit rather then make profit. When it comes to the supply of oil there are long and short-term factors that affect the international markets. The short-term factors include: -Profit motive -Spare capacity -Stock External shocks Profit making factors rely solely on OPEC operating nations. OPEC is put in place as a cartel to regulate price fixtures on crude oil and gas that are supplied by world’s oil producers.

Ex: Saudi Arabia Oil refinery’s have stocks in place to be released in the market when the demand for oil fluctuates, in the case of an oil company in peril with low profits, the effects of production shocks may be devastating to the companies growth, examples of these issues. Taking a longer-term perspective, the long run world oil supply is linked to 1 . Reserves: Depletion of proven oil reserves – the faster that demand grows, the quicker the expected rate of depletion 2.

Exploration: Investment spending on exploring, identifying and then exploiting new oil reserves. When oil prices are rising and are expected to stay strong for the foreseeable future, it makes financial sense to invest more resources in exploring for new reserves, even though these may not come on stream for some years. 3. Technology: Technological change in oil extraction (which affects the costs of extraction and the profitability of extracting and then refining the oil) Long-term effects include: Reserves Exploration Technology

Dozier Industries has three options to choose from when deciding on the best way to handle their first non-US dollar denominated receivable:

1. Entering into a forward contract in which Dozier would sell forward British Pounds.
2. Execute a spot market transaction to create a synthetic forward hedge.
3. Do not hedge against any fluctuations between the Pound and the Dollar.

For the purpose of the analysis, there are several assumptions made which are pertinent to the analysis that follows (see appendix).

Forward Contract Hedge

The first option available to Dozier Management to hedge the risk of the Great British Pound (GBP) depreciating against the United States Dollar (USD) is to enter into a contract to sell forward ? 1,057,500 for USD in 90 days. Therefore, on April 14th, when Dozier receives the remaining GBP from the security system contract, it would be required to deliver these GBP to the counterparty of the forward contract. This option would make the firm immune to any fluctuations in the value of GBP relative to USD over the next 90 days as the firm would lock in the USD/GBP exchange rate for their receivable of ? ,057,500.

At the current 3-month forward rates of (1. 4198 USD/GBP), Dozier would capture guaranteed proceeds of $1,501,438. 50. Dozier also received ? 117,500 as deposit for the contract. The firm could sell this deposit on the spot foreign exchange market at the current rate of 1. 437 USD/GBP and receive $168,847. 50. Investing the proceeds of the deposit in a U. S. money market account would yield $171,988. 00 in 90 days.

It is important to note that since the contract was settled on December 3rd, the GBP depreciated by over 3% (from (1. 820 to 1. 437 USD/GBP). As a result of this movement, the USD value of the deposit was reduced by the same 3% from $174,135. 00 to $168,847. 50.

Under the strategy of using the forward contract hedge, the firm would be assured of receiving a total of $1,673,426. 50 ($1,501,438. 50 plus $171,988. 00). Given the total cost of the project of $1,642,783, the firm would realize a profit of $30,643. 50, a margin of 1. 87%. This profit margin would be significantly below the projected 6% return. Spot Market Hedge

An alternative to the forward contract hedge is Dozier could create a matching liability for the GBP receivable by borrowing GBP from the bank, immediately exchanging the GBP for USD in the spot foreign exchange market and then investing the USD proceeds in a three month deposit. At the time the receivable comes due, Dozier would use the GBP proceeds to repay the liability and keep the USD amount of the three month profit. These series of transactions would eliminate the risk of the depreciation of the Pound. GBP funding is available at a rate of 15% (13. 50% GBP prime rate plus 150 basis point credit spread).

To create a GBP liability of ? 1,057,500 GBP in 90 days, the firm would need to borrow its present value of ? 1,021,188. 50. The firm would then receive $1,467,447. 88 at the current exchange rate. As the USD investment would be over $1. 0 million it would be classified as a large deposit and qualify for the premium interest rate. As in the previous scenario, Dozier would immediately exchange the ? 117,500 deposit into $168,847. 50.

The total proceeds of $1,636,295. 38 could then be invested in a deposit bearing 8%, earning interest of $31,787. 57 over 90 days. The firm would receive a total of $1,668,082. 4 from the initial deposit, the principle and interest in the three month investment. Given the project costs stated above, the firm would realize a profit of $25,299. 94, representing a margin of 1. 54%.

Spot Market Hedge The final option available to Dozier Management is to leave the 1,057,500 GBP receivable un-hedged. If the GBP were to appreciate against the USD over the next 90 days, Dozier would reap the full benefit of this appreciation. Conversely, should the GBP depreciate versus the USD over the next 90 days, Dozier would suffer a loss equal to the percent depreciation of the pound to the dollar.

In a scenario where the USD/GDP exchange rate moves by ±10%, the Dozier’s profits would range between negative $96,471. 13 (or 5. 9% of cost, making the project a loss) and $207,819. 16 (or 12. 65% of cost, effectively doubling the profit margin). Conclusion Dozier can capture a profit through both of the hedging strategies albeit it being smaller than the target six percent originally built into the bid. An un-hedged position is unacceptable due to the firm’s recent financial difficulties – it is critical that Dozier profits from this initial venture into this new market.

While leaving the receivable un-hedged alternative does offer the greatest potential profit at the current prevailing FX rates, these profits are not guaranteed (see appendix for profit/loss possibilities given GBP/USD FX fluctuations). Given the importance of locking in a profit and the uncertainty of the GBP/USD future exchange rates, we recommend Dozier hedges the ? 1,057,500 receivable by exchange rate in Appendix Assumptions:

• All transactions are executed immediately.
• All transaction costs surrounding the forward contract are negligible.
• All rates given in Exhibit 4 will not fluctuate over the 90 day time p.

Deposits over $1 million are eligible for the three month deposit rate. Calculation of Profits:

• Spot Market Hedge Deposit Amount $ 168,847. 50
• Interest Received $ 28,507. 45
• Principal Amount $ 1,467,447. 88
• Total $ 1,664,802. 82
• Cost of Project $ 1,642,783. 00
• Interest on Initial Deposit $ 3,280. 12
• Net Profit on Project $ 25,299. 95
• Profit Margin on Project1. 54%
• Currency Forward Hedge Receivable GBP $ 1,057,500. 00
• Short GBP $ (1,057,500. 00)
• Long USD  3 month Fwd $ 1,501,438. 50
• Deposit $ 168,847. 50
• Cost of Project $ 1,642,783. 00
• Interest on Initial Deposit $ 3,140. 50
• Net Profit on Project $ 30,643. 50
• Profit Margin on Project1. 87%

Profit Margin Scenario Analysis FX Rates% ChgUSD EquivalentCost of ProjectDepositProfit/LossProfit Margin 1. 30 -10. 0% $ 1,374,323. 87

Notes:

• All numbers rounded to the nearest one-hundredth decimal place.
• No probability weighting given to each scenario.

The market influence for the company has been highly competitive. The company uses has been granted with “Method and system for conducting a discussion relating to an item on Internet discussion boards” patent after Amazon was faced with controversial allegation against the 1-Click patent (Friedman, 2004). The company’s Canadian site was originated in United States. With an agreement with Canada Post the distribution of books to Canadian customers was to be dealt. Amazon.

ca was launched and the sites was in French and English language however their operations were criticized as being illegal. Since foreign owned bookseller are legally restricted in Canada. However Amazon has been able to keep its sales and demand of products a boost because of the need of consumers which are being uniquely fulfilled by Amazon. com. The third party sellers are also an influential source for the company. Associates are given access to Amazon catalog by directly making use of the Amazon Web Services (AWS) XML service (Marcus, 2004).

This again aids Amazon compete in the market as this opens opportunities for attracting users. The competition makes Amazon to venture out into new and unique ideas and facilitate the users more and more to make easy search for their desired products. For example the content search box aid the users to type n the desired keywords and ease their search into being more specific and time saving. Users have the review section to leave their review on their experience with Amazon.This also influences the company to make improvements.

Reference

Beynon-Davies P. (2004). E-Business. Palgrave, Basingstoke. ISBN 1-4039-1348-X James Marcus (2004). Amazonia: Five Years at the Epicenter of the Dot. Com Juggernaut. W. W. Norton. ISBN 1-56584-870-5 Mara Friedman (2004). amazon. com for Dummies. Wiley Publishing. ISBN 0-7645-5840-4. Robert Spector (2000). amazon. com – Get Big Fast : Inside the Revolutionary Business Model That Changed the World. Harper Collins Publishers. ISBN 0-06-662041-4.

Films play a significant role in packaging industry. Polymers such as polyethylene, polypropylene, polyvinyl chloride (PVC), polyester and POOH are usually used as film materials in the packaging industry. Films are usually manufactured by extrusion process and are in various forms depending upon their end use. Cast films, blown films, shrink films, oriented films and co-extruded films are some of the most important variations of films. Plastics packaging is one of the most widely used techniques of packaging in the world.

Plastic film machinery has huge demand in countries showing growing economies and high GAP as all production processes are supported by the packaging industry right from raw material transport to dispatch. Cast film machineries provide films having relatively high thickness which in turn is raw material for medical and food packages. Co-extruded, oriented and blown film machinery provides raw materials for heavy duty barrier packaging.

All machines are hydraulically operated but fully electric and automated machines could become the major market due to growing awareness towards clean energy and environmental concerns. China is expected to be the largest market for film machinery in the near future. Taiwan and India are some of the other important economies in Asia Pacific that are expected to exhibit huge demand for film machinery. Germany is expected to be the largest market in Europe followed by other economies such as U. K. And Italy.

Brazil ND Mexico are also expected to be large markets for film machinery in Rest of the World and North America respectively. High demand from the packaging industry and the increasing rate of industrialization are the major factors driving the market for film machinery at present. Food processing, chemical handling, pharmaceuticals and mulching (to safeguard the fertility of soil) are expected to be the future trends for growth in this industry. Volatility of raw material prices (crude oil), ever-increasing cost of chicanery and focus of the global market on bio-degradable films could impede the market to a certain extent. You may also be interested in relationship between agriculture and industrialization

Geographies analyzed under this research report include North America Asia Pacific Europe Rest of the World This report provides comprehensive analysis of Market growth drivers Factors limiting market growth Current market trends Market structure Market projections for upcoming years This report is a complete study of current trends in the market, industry growth drivers, and restraints. It provides market projections for the coming years. It includes analysis of recent developments in technology, Porter’s five force model analysis and detailed profiles of top industry players.

The report also includes a review of micro and macro factors essential for the existing market players and new entrants along with detailed value chain analysis.