ASSESSMENT TASK 2: DESCRIPTION
Produce a business study report. The report needs to contain the following four parts plus a formal introduction to your report and a conclusion.
1) Introduction to the business and general business environment
Select a business from the list of ASX Companies provided in Week 2. Provide an overall description of the business and the competitive environment in which it operates. You may provide information about the business as suggested below plus any other information peculiar to the business you choose.
a) Name and location of the business, the type of business (e.g. retail, manufacturing);
b) What the business produces or sells;
c) Who the main customers are (e.g. other businesses, government departments, young girls, older men);
d) Where most of the customers are located (e.g. in Townsville, Jakarta, or on the net);
e) Who the main competitors are (i.e. those producing similar products, and selling to similar customer base);
f) Where the competitors are located; and
g) The (approximate) market share of key competitors including your business (e.g. ’your’ businesses has approximately 10% of the market, your main competitor has approximately 50% of the market, and many other small businesses share the remaining 40% of the market).
Given the above information, comment on whether or not you think the competitive environment in which the firm operates is likely to be closer to (a) perfect competition; or (b) monopoly. Comment also on the number of ‘close substitutes’ for your business’ products, and the cost of your product relative to ‘average’ income of your customers. Does this mean that the demand curve facing the firm is likely to be relatively elastic or relatively inelastic? What does this imply about the ability of the firm to ‘mark up’ its price above marginal cost?
2) Production costs and scale
Provide a description of the required factors of production, grouping them according to whether the factors of production are:
a) Fixed and hence unlikely to vary much according to the quantity of goods produced or sold; or
b) Variable and hence likely to increase with increased production or sales.
Use the above information to comment on the likely overall cost structure of your business. For example: Are fixed costs large or small relative to variable costs? Does this mean that the firm’s ‘optimal’ size is likely to be small, medium or large?
3) Macro business environment
Provide a description of the macroeconomic environment in which the business operates noting:
a) The overall ‘stability’ of the political system/government of the country in which the business operates.
b) The general level of inflation, unemployment and ‘average’ interest rate of the country in which the business is physically located (and also the countries in which most customers live if different from the location of the firm). Discuss any recent changes in those variables. Does the economy seem to be in a recession, boom or otherwise?
c) If ‘your’ business exports its products to other countries, provide some information about the (currency) exchange rate, discussing its current level, and recent changes in it.
Use the above information to comment on whether or not the overall macroeconomic conditions faced by the firm are likely to become more or less favourable over the coming years. In this part you should consider such things as: • Whether your main products are likely to be ‘normal’ or ‘inferior’ and hence whether demand is likely to rise or fall during recessions and thus whether the economic climate of the countries in which most of your customers live is likely to reflect well or poorly on your sales.
• Whether you are likely to face problems getting access to key factors of production (e.g. are there skills shortages?), and whether this is likely to affect the business’ future operating costs.
• If your business exports its products or imports factors of production…whether recent trends in exchange rates are likely to be good or bad for costs and/or revenues.
4) Sustainability practice of the business
a) Does the production process of the business generate any positive or negative externalities? If negative, has the government (or anyone else) put in place any measures to mitigate? What is done to mitigate by the business? If positive, what is done to take advantage of it?
b) Does the consumption of the good produced by the business generate any positive or negative externalities? If negative, has the government (or anyone else) put in place any measures to mitigate? What is done to mitigate by the business? If positive, what is done to take advantage of it?
c) Use the information from above to comment on how the sustainability practice by this business and other businesses in the same industry would affect their long-term business viability.
ASSESSMENT TASK 2: ASSESSMENT CRITERIA
In this assessment, you are required to demonstrate their ability to apply economic principles learnt in this subject to analysing real-world business operations and evaluate how their long-run business viability may be affected by the sustainability practice they adopt in their business operations.