Harvey Norman Case Study Essay
Harvey Norman Holdings Ltd is a public company in the secondary sector engaged in selling products for households and offices they include Electrical, Computers & Communications, Small Appliances, Furniture, Bedding & Manchester, Home Improvements, Lighting and Carpet & Flooring. As a franchisor Harvey Norman grants franchisers to independent business operators, there are many stores in Australia, New Zealand, Slovenia, Ireland, Singapore and Malaysia. Harvey Norman is Australia’s is leading the retail chain.
The Harvey Norman success started as a independent electrical appliance store that was opened by the company chairmen Gerry Harvey with the retailer Ian Norman at a site of a former auction house in Sydney suburb of Arncliffe at the date of 1961. A public company is a company that has issued shares to the public to buy and is traded on the stock exchange. When becoming a public company it allows the market to find out the value of the whole company through daily training. The working capital of Harvey Norman in the year of 2009 was not that great ,It was 1. 1:1 it is still a decent ratio but not enough to be able to pay off bills and other expenses. An average ratio would be on the mark of 1. 5:1 but it isn’t that great so the most preferable ratio is 2:1 but in the year of 2010 the ratio is 1. 61:1. Harvey Norman has increased their working capital over 1 year and is over 1. 5:1 (average) but not as good as 2:1 Harvey Norman can still pay off debts and if they continue this improvement they will reach 2:1 soon but if the ratio is over 5:1 there is too much cash flow and the business should spend that money on the business. Comments on the cash flow
Total revenue received from franchisees increased from $976. 61 million for the past year to $1,024. 18 million for the year that has ended on 30 June 2010, an increase of $47. 57 million has been gained. Net GST payments increased by $13. 22 million in the year that ended on 30 June 2010 compared to the past year. The past year contained higher GST input tax credits resulting from increased capital acquisitions and lower GST outputs due to lower revenues received from franchisees. Payments for the purchases of property, plant and equipment, intangible assets and investment properties have decreased by $58. 6 million relative to the previous year. The 2010 financial year is a year of consolidation and the store roll-out program will resume in the 2011 financial year. In this chart we see the share price going down and up. It is evident that in the period of May 2011 has had a low share price it is possibly because there is not a lot of sales and this is affecting the business. The business was well off on the month of January which has 3. 20 for a share compared to May that is declining to 2. 50 for a share. Source of change There are internal and external sources of change.
The difference between them is that internal is something you can change and must be changed avoid loosing the business but external influences cannot e changed they are like for e. g. Tax , economic factors , geographic maters anything that is hard to change and must keep on selling and move past the situation. The similarities of these influence is that they can affect the businesses performance and progress in the market. The external influences are the one who hurt and affect the business more. The external influence on this business is the GFC (global financial crisis).
The GFC stoped people buying product due to not having enough money and people losing jobs. Businesses were shut down and employees were let off and told they no longer work for them due to not enough cash flow. Harvey Norman was one of the businesses which was affected hard but eventually came out of its shell and started selling products and gained market share. Harvey Norman’s competitors were shut down due to financial reasons. The other external influences on Harvey Norman are the Free GST on products less than 1000 dollars imported electrical appliances from overseas.
This will stop potential consumers buying goods from Harvey Norman but buying from overseas. Harvey Norman has a majority of electrical appliances and this will hit them hard if no one buys from the business. The internal influence is that Harvey Norman has bought Collapsing Clive peters and this is a bonus for Harvey Norman because they will gain more money from the Clive businesses and possibly make some of the businesses Harvey Norman. To succeed Harvey Norman should produce good quality products, reasonable market price and gain reputation to gain more profit and be worth it buying Clive peters
The internal influences for Harvey Norman is that due to people buying products online cheaper now retailer Harvey Norman will set its electronics and furniture goods online to reduce costs from July the 1st this will help Harvey Norman reduce people buying products from overseas and buy products from Harvey Norman online. The negative thing about this is that potential consumers do not trust giving private details online due to theft and online hacking so Harvey Norman should have a security base program to reduce and possibly stop identity and personal information theft.
The external influence is the carbon tax on the businesses which let of carbon into the air. This greatly affects Harvey Norman because the producers of TV and other electrical appliances let out carbon into the air and with the cost will increase and it will be passed on to customers which don’t want to pay that much and thats why some people are importing products from overseas to reduce costs. Harvey Norman will eventually be broke in the meantime.
The Government says they will compensate lower and middle income workers but that’s only this year how about next year and the following year ……. The internal influence is that Harvey Norman has decided to clone staff for new virtual world. This process will reduce cost for training people and not much spending will be done for employers but the major impact will result in unemployment rate Going up and robots or virtual people taking over humanistic jobs.