Discussion on Growth Prospects (Essay Sample)
There are different business environment factors that may affect a company performance.
They could be macro, industrial or company specific factors (Stricoff, 2000). Most macro-
economic factors influencing firm’s performance include the interest rates, economic trends,
consumer price index, gross domestic product and globalisation. Industrial factors including
competition and technological advancement may affect a company growth. Firm specific
factors include high expenditure, employee’s satisfaction and capital investments (Stricoff,
2000). To assess the potential growth the CPI and GDP are used at the macro level. Industrial
indexes are used at the industry level and the net profit and earning to shareholders are used
at the firm level for Common Wealth Bank and NAB Bank.
GROWTH PROSPECTS
There are different business environment factors that may affect a company performance. They could be macro, industrial or company specific factors (Stricoff, 2000). Most macro-economic factors influencing firm’s performance include the interest rates, economic trends, consumer price index, gross domestic product and globalisation. Industrial factors including competition and technological advancement may affect a company growth. Firm specific factors include high expenditure, employee’s satisfaction and capital investments (Stricoff, 2000). To assess the potential growth the CPI and GDP are used at the macro level. Industrial indexes are used at the industry level and the net profit and earning to shareholders are used at the firm level for Common Wealth Bank and NAB Bank. The results of estimated growth are presented in the table below.
Table 1: estimated growth rate
Industry
Macro economy
NAB
Common wealth
EHGDUAU index
Tewvwras
Index
Wire line Revenue
CPI
GDP
Net Profit
EPS
Net profit
EPS
Geometric mean growth rate
0.0144
0.0569
0.0125
0.0229
0.0131
0.283
0.358
0.0604
0.0453
Arithmetic growth rate
0.0279
0.0175
0.3205
0.0529
Estimated growth of company
0.122
0.032
At the macro level due to issues of government regulation and the high inflation, NAB would need CPI data to assess its growth rate (Sathye, 2001). Similarly, Common wealth for being in the same industry will use similar indicators.
Industry factors will help assess competitive advantage. Sathye (2001) uses a SWOT model to assess the competitive edge of a firm.
Table 2: SWOT analysis of NAB and Common Wealth Banks
Strengths
NAB
Common Wealth
Use company earnings to improve internal management
High dividends hence attractive to investors
Expertise in governance
High level of customer satisfaction
Efficient energy use and environmental conservation
Deep expertise in financial and risk management.
Have maintained a strong corporate governance policy
High ascertained stability
Use of panels hence reducing carbon emission by 7%
High brand loyalty
High cost to income ratio of 41% hence increased efficiency
High cultural diversity with 41% coming from outside Australia
weaknesses
Involved in time to time legal disputes
Low investment in internal infrastructure
Has had issues with regulatory compliance
Low earnings
Highly affected by inflation
Opportunities
After investing in customer awareness there is likely brand loyalty.
high cost to income ratio of 41% showing room for improved efficiency
Diversification to cater for climate change risks
strengthening accountability
Investment in carbon related investments.
Innovations that are community based.
To invest in promotion of risk based culture.
Can improve on technology based investments.
After investing in customer awareness there is likely brand loyalty.
high cost to income ratio of 41% showing room for improved efficiency
Diversification to cater for climate change risks
Strengthening accountability and innovations that are c
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