RAP - Part 3 Findings, Analysis + Business Models

@zeest - it is not possible for me to be prescriptive about exactly which ratios you should or should not use (for example inventory may or may not be relevant depending on the sector chosen). Remember the ratios themselves are just a means to an end it is the evaluation of the available information and integration of the models and business analysis that makes forhe a successful RAP. The ratios are best shown as graphs and just key figures pulled out to highlight important facts. This approach is briefly demonstrated in my article on Evaluation and analysis on our homepage www.opentuition.com/obu

Dear students and mentors, I am undertaking topic 8 for a company whose latest published accounts are for Dec 2013; therefore, I would like to ask if I could include some points/evidence about recent events i.e in 2014 and 2015 in part 3 of my RAP to reinforce my conclusions and evaluations? or do I to strictly adhere to the reporting period 2011-2013? Any advice or feedback would be greatly appreciated. Thanks, Chy

@Chiwdhury - The OBU Rules on p.39 of the Info Pack set out the minimum that must be complied with. Students will never be penalised for introducing more recent analysis work. Whilst the financial analysis will be 2011 - 2013, you can bring up-to-date info in the business analysis or as an update at the end - it depends on the material and company. I would also explain that you have done this because you recognise that although 2013 were the appropriate CD to use, you appreciate that they are now relatively old.

1.My company is listed on London Stock Exchange and its competitor also. 2. My Sector is Industrial Machinery and Sub-Sector is Industrial Engineering. Now the respected members please suggest me about two business models which would be more appropriate based on the above circumstances. Thank you...

@nesbiit - please read the advice, help and answers above -particularly those from The Learning Luminarium and me. You will find it useful going forward to use key words in our search facility to locate previous similar questions and answers.

Hello all, Can anyone tell me how can I find the stengths and weakness of a company? what sources do you use? Thanks, Yama.

Hello I hv a question abt the pie chart do I need to put information abt the two companies together in d same pie chart if yes then kind of information thanks

@stevr - pie charts are only amenable to be used for something like market share i.e. when you want to show the proportion of something to the whole. They are not appropriate for most comparisons. Bar charts and graphs show relationships such as revenue, profit and share price over time and you should aim to have charts for just about all of your ratios. As I keep repeating - the markers would much rather be presented with graphs than lots of unnecessary figures and percentages in the text.

Thanks ma u are great n kind

Hi pls I want to how to avoid a descriptive analysis thanks ma

@yama - Assuming that a quick Google search doesn't give you write-ups on the company, we would first suggest gaining a deep understanding of your company by looking at the Annual Report. Does management talk about certain things they are proud of? Certain concerns or areas of focus that they have? That may give hints on the strengths and weaknesses of the company. For example, if they say that they are proud to be the number 1 supermarket, u know their strength is likely geographical networks and reach. You then know how to do a more focused search for information. Also, a quick way is to look at Analyst reports or business writeups from credible sources like the Harvard Business Review. They may identify strengths and weaknesses.

@stevr- The forum has a lot of information on this question, however, for your convenience, let me give a quick reply here. Rule of thumb 1) descriptive is anything a person could easily tell by looking at the graphs and figures. Eg net profit went up by 20%. 2) analysis is "How did the net profit go up?", "Why were the initiatives taken by the company successful in increasing profits? Did an earlier investment pay off? Was the company having a sharp sense of what the market needs?" It's basically the How and the Why of a certain figure. As said, there is even more information within this forum, would encourage you to take a good read.

Thanks very much am greatful

Dear Trephena, I'm struggling with Part 3 , do I have sub headings under this section for eg have a seperate heading for: 1) Financial analysis ,then sub heading for Profit/Revenue and Investor ratios then bring in in SWOT ,PESTEL factors. 2)Business analysis - bring in all pestel factors Or do is it all done as one like : Profit - explain the reason for increase or decrease what swot/pestel has casused the change? I am so unsure as to how I bring my findings together,can you please advice? thank you for your help. Kell Ann

Hi @kellann, Trephena is currently on a short vacation, and we are covering for her. Generally, we recommend the following: Have broad headings for financial and business analysis - Under each heading, look at the subset of items to be discussed. For example, ratios can be divided into Profitability, Liquidity, Activity, Leverage and Investor. Under each of these headings, file your ratios accordingly. - Non-financial analysis should be kept separate. If you are using PESTEL, then the subheadings should be Political, Economic, Social, Technological, Environmental, and Legal.

hi my mentor advised to use only swot model for topic 8 but i had thought to use swot and pestel.would obu fail me for using only swot and ratios with no other model.is there any prescriction as to how many models you can use minimum?

thank you !

@vanmatsiwo - then you are being ill advised. Please,read my article on Evaluation and Analysis where I stress the importance of models and the role they play in the quality of the analysis. I will repeat - possibly for the thousandth time - ratios analysis has only about a 10 -20% weighting in Part 3 and using SWOT and PEST analysis appropriately and INTELLIGENTLY is what will get a pass -NOT numbers and percentages...

Thank you very much for your response. Like i said earlier, i am still new here and can't really access the site well. I am still learning on how to get the best out of here and also make use of it in the best possible way. Please pardon my mistakes. Please i will like you to help me with this other query, it concerns part 3( business models) of the RAP.. When carrying out business analysis using models in part three, on SWOT factors for example, do i need to compare this factor with that of the benchmarked company i am using? For example, if to say one of the company's strength is Strong Brands, after analyzing how this affects business performance of my case study, do i need to now comment on the brand of the competitor(Benchmark) or i just need to focus on my case study? Like do i need to evaluate between the brand of my case study and that of the competitor? Please i really need help

Hi Trephana, Please can u help me to answer my query above concerning business modelling? (SWOT ANALYSIS)

Hi Trephana, Please i need your help here. It concerns business analysis in part three of the RAP. When doing the business analysis, do i need to compare each factor for example say (Strong Brands) which is a strength with that of the competitor? or do I just need to analyze how this factor impacts the performance of the business relating to my case study only? I will greatly appreciate your help as soon as you have the chance to. Thanks.

Hello, can anyone tell me do we include Profit after taxation or Total Comprehensive income while calculating Net Profit margin?

@umerkhayam- hi there! Our suggestion is to always be aware of what you hope to convey. Each item conveys different messages. If you wish to compare the operating efficiencies of a company, using EBIT (operating income) as the profit may make more sense. This is because interest depends on capital structure and tax is dependent on the country the entity operates in. Stripping off both tax and interest does make for a good comparison. Irwin The Learning Luminarium

@rosalemu - you only normally need to apply the SWOT to your main company. Although you don't have to apply the PESTLE to the comparator it is worth remembering when doing your evaluation that the PESTLE for both companies will be very, very similar (if not identical) anyway. When considering strength of brand in the application of the SWOT you would normally only apply it to the main company. However what you should also try to do when looking at market share, revenue or gross profits etc. is consider the impact of the SWOT and PESTLE factors on these. If the comparator has any obvious strengths and weaknesses then it may be appropriate to mention this when explaining the differences and making comparisons between the companies. It is this practical application of the models in practice (linking theory to the reality of what has gone on in the 3 years) which lead to good analysis and higher grades

Hi Trephana, Thank you very much for your response. I really appreciate. Just to make sure i got you perfectly, I will go ahead and ask this Does it mean i don't actually have to compare the factors with that of the comparator? Please i really want to be clear because i just finished doing my SWOT and PEST analysis and for each factor i gave, i compared it with that of the competitor. To be more precised, Coca-Cola Company is my case study and PepsiCo is the benchmark. But i just noticed this part alone is 1910 words and considering the fact that i still have a lot to write(Ratio analysis and evaluation, conclusion and recommendation), i decided to ask if its really necessary for me to do that or do i just need to focus on my case study (Coca-Cola ) when analyzing these factors. I really want to be clear if i just need to analyze how this factors impacts the business performance of my case study and ignore any evaluation between my case study and the competitor PepsiCo in relation to this factors? Please understand my insistence on this. I am resubmitting hence i really want to be sure as i don't want to fail again. Also, how many factors do i ideally need to give under each category of SWOT.( Be it strength, weaknesses etc)? Please @trephena, i really need to be clarified before i proceed. Thanks

@rosalemu - well the fact that you have done the SWOT for both may allow you to at least use some of the factors for the comparator when assessing the financial results so the effort will not be totally wasted. Cut the actual formal SWOT for the comparator though to save your words. Another area to save words is in Part 1& 2 - do not go into unnecessary detail. When you do your evaluation you need to look at how the SWOT and PEST have influenced management decisions and strategies and how these have impacted on the results so the factors from both sets of SWOTs and the PEST are extremely useful. It is difficult to say exactly how many factors you need, all I can advise is that integrating the application of the models and linking these factors to your explanations is key to passing and therefore you should spend adequate time assessing the factors. Read and research widely so that you have strong strengths and definite weaknesses etc.

@trephana, thank you very much. I really appreciate your advice. Thanks again.

Well if one company is making a profit and the other isn't you can still plot them on the same graph but the ratio relating to the loss will be below the x axis but the title would still be 'net profit ratio'. You would need to explain it in the text more in terms of the net loss to sales for the loss making company otherwise if you start calling it net profit ratio but show it as a negative figure it is not quite so clear. If they both make a loss then you would have to call it the graph 'net loss ratio' and remember that a decreasing net loss ratio over time would be a good thing whereas a,decreasing net profit ratio over time would be unfavourable.

Dear Trephena, I need clarity on the analysis of financial and business performance for years 2013 to 2015.For example for the revenue growth,net/gross profit operating margins do I need to split each year and explain why there is an increase or decrease ? eg 2013 why there is a decline in revenue and so on.Would this approach be the same for business analysis using PESTEL & SWOT models? I'm not clear on the approach , can you please advise me. Thanks you for your help. Regards, Kellann

Hi Trephena, can you please advice on the above ? thank you!