CanGo Business Analysis
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CanGo is a young and dynamic company that operates in the intensely dynamic and competitive online retail and gaming space. Due to its value creating offerings, it has managed to grow at a very impressive rate and is now at the threshold of scaling up to the next level expanding both in terms of the products it offers and the geographies it operates in. FGL’s Consulting has been engaged as consultants by CanGo board of directors to study CanGo processes and systems in detail and come up with recommendation that would create long term value and achieve organizational goals. This report is the result of the thorough analysis to come up with detailed recommendations for CanGo from the perspective of overall organizational strategy and recommendations from perspective of individual functions.
Some of the findings that are included in the analysis include the current position of CanGo which focuses in improving efficiency and turnover ratio as it is lagging behind competitors in this area, the current status of the global online gaming market is in a huge growth spurt which is presenting huge opportunity for growth, Training and evaluation issues within the Human Resources Department, and concerns with regard to internal and international legal issues. We believe that the recommendations offered in the analysis would be of value to CanGo and enable it to leverage its strengths and resources to maximum potential, while ensuring that it is operating in a manner that would ensure long term success and value creation.
CanGo Business Analysis
The CanGo Company has an ambition plan of expanding its online services through different market areas. The company has been working hard in providing to its customers the latest cutting edge online gaming services. In order for CanGo to be very successful with the online services, the company needs to make sure that it is able to leverage its strengths and capabilities to take advantage of the opportunities present. The CanGo Company had experienced many obstacles and conflicts during the development of the proposed online gaming services. It is imperative for CanGo to review or to identify any problems that could threaten the company’s future goal. First of all, All team management of the company need to have a clear vision about the company’s long term planning, and analyze very carefully what audience would be targeted for the online gaming services. Also CanGo needs to perform a reliable analysis about their financial status, and making sure that they have the equipment is fully functional and available necessary before they start on new online gaming project. CanGo should also consider that each staff is fully aware about the CanGo’s mission, and this would be a positive way for the company to successfully achieve its goal.
CanGo is made up of multiple internal and external factors that are both favorable and unfavorable to the company’s future plans and success. A SWOT analysis helps to breaks these areas down to fully understand their impacts on the organization.
CanGo does have unfavorable factors including internal weaknesses, and external threats. Weaknesses that have been identified include an unorganized management team. Low customer satisfaction is another internal weakness that is crucial to the success of CanGo. Another internal weakness includes severe communication issues within CanGo’s management and employees. External threats such as competition, plays a big role in the future success of CanGo. Your organizations internal organizational strengths such as online growth, and cost advantage offers great potential if properly utilized. Another external threat includes economic slowdown. The economy can play a direct role in the success of an organization, and should be monitored accordingly. Another external threat is currency changes which can affect business and sales in other countries, another area that should be monitored closely.
With limitless external opportunities in markets online CanGo has room to expand in multiple markets outside of online gaming, books, and the music industries. With online market growth the opportunities for CanGo are endless, a very important factor to consider in the company’s future growth. Cost advantage is another external opportunity along with CanGo’s ability to view products from customer’s perspectives. CanGo has great potential with strong strengths and opportunities to allow for success and growth. CanGo can be unstoppable, highly competitive, and ready for whatever the future holds by implementing FGL’s Consulting Firm’s strategically planned, analyzed, and proposed suggestions. Financial Analysis
CanGo is off to a good start financially. CanGo has done a great job of not taking on more debt than they can handle. CanGo also has very good current and quick ratios, with a current ratio of 5.39 and a quick ratio of 4.53 it is pretty clear that CanGo could easily pay of their debt if need be and still be able to keep running. CanGo has a working capital of 164,820,000 on again this shows that CanGo is more than capable of paying off its debts. When looking at CanGo’s level of solvency they seem to be doing very well in this area as well with a current debt ratio is 40.23%. According to the Risk Management Association the average debt ratio for most companies is 62%, given that CanGo is at just over 40% should they need financing for a project banks will consider them as low risk and be more likely to give lower interest rates (Financial, 2008). Other liquidity ratio’s concerning inventory and receivables do not look as good. CanGo with its current inventory turnover ratio of only 0.28 needs to consider making some changes to its inventory policy to increase this rate.
This number will send up a red flag to an investor or financing company as to their ability to sell their products. CanGo is a new company though and this number may just be low simply because they are so new. Generally a low inventory turnover ratio indicated one of two things, either they are having troubles selling their products which would also be notable in other ratios or they are keeping way to much stock on hand. Keeping too much stock on hand means paying un-needed storage and warehousing costs. Given that CanGo has a high sales revenues of 51,000,000 reported on its income statement it is likely that because they are a new company they are simple just overstocked and need to find a good balance of how much inventory they really need to keep on hand (CanGo, 2002). Financial Strategic Recommendations
There are many strategies CanGo can use to improve its receivable turnover ratio; providing rebates or incentives for customers who pay their balances off quickly, imposing fees on those who take more than a specified amount of time, and lowering or even eliminating interest on accounts that are paid in a specified period of time. All of these strategies will encourage customers to pay their debt as soon as possible. It is important for any company to collect on its receivables quickly because the longer a receivable goes unpaid the more likely it is that it will be defaulted on. CanGo needs to do a complete inventory analysis, they need to determine what is in stock, how much of each item they have, how many of each item is being sold, and how often they are selling each item. They then need to determine how many of each item should be held in stock and how often they should do re-orders. The purpose is to be to keep as little stock on hand as possible without creating stock outs. This will increase CanGo’s inventory turnover ratio and save them avoidable storage and warehouse expenses. Market Analysis
A full understanding and analysis of the online game market is crucial to the success of CanGo’s organization. Our consulting team has fully analyzed and researched their organization’s market. Therefore, the purpose of this analysis is to give CanGo a detailed overview of the industry that will include information regarding the target market, geographic area and size of the audience to include gender and age; along with trends and outlook of the gaming market. First we will begin with the market size. Throughout this analysis it was found that the market size has grown in both revenue and popularity. “Estimates that the video game market will increase from $31.6 billion in 2006 to $48.9 billion in 2011” (Intelligence, 2006). This makes video games the third-fastest-growing segment of the entertainment and media market after TV distribution (up 9.3% to $250.7 billion in 2011) and Internet advertising and access spending (up 13.4% to $331.6 billion in 2011).” (Scanlon, 2007) This is an enormous jump and places CanGo in a prime time for advancement availability and success. Which means that there will be a growth of almost 4 billion is projected in the video game market alone.
Demographically the market is on a global scale. Globally, “a final growth at the closing of this year is expected to be at a 30.4% increase in comparison to 2007” (Intelligence, 2006). This supports their organization’s mission to expand globally due to the excelling video game market. With such a large market segment there is endless potential to sky rocket in this industry. Online gaming is the new trend worldwide with billions of customers waiting and anticipating the “new hot item”. “Certain trends hold steady across most regions: For instance, driven by increased penetration of broadband access, online gaming is surging. In the U.S. and Europe/Middle East/Africa, online gaming represents the fastest-growing consumer segment (19.3% and 24.6%, respectively); in Asia Pacific and Canada, online growth came in second only to wireless (at 16.1% and 13.9%, respectively).” (Scanlon, 2007)The global video game market is set to explode, and CanGo can be a part of this market success and growth. The average age and gender of online gaming seems to be holding strong in the market with “the average age of game players was 29 and the average age of buyers was 36, with men making up 59% of the playing audience.” (Tech, 2011) Market Strategic Recommendations
With such a large room for growth within the online market CanGo has to remain informed of the market along with any changes for demands. This leaves big and hopeful potential for CanGo in the gaming market. Giving CanGo this opportunity to take advantage of this huge profit as long as proper planning is implemented, and market analysis understood. That means that it is important that CanGo takes advantage of this market availability now in order to grow their reputation within the market, and increase their profits from online gaming.
In order to grow CanGo has to remain desired by consumers. CanGo can use advertisement online and off line to help assist. Advertisements such as publications, billboards, satellite, and internet can help support CanGo’s online market success. Strategic Planning
A key part of having a sustainable and scientific model for strategy creation is being aware of what the firm is capable of, its strengths and capabilities, resources it has at its disposal, and a proper way to analyze opportunities it would want to take advantage of. Given that CanGo now has grown beyond its startup stage, and is looking to scale up its business, it needed structured framework for planning, that they might use to ensure that they have thought about where they want to be, what are the key business capabilities and what are the opportunities they are going to work upon. After analysis of the way CanGo approaches key business initiatives, their decision making, we have observed that there is lack of strategic planning for key business decisions and initiatives and key decisions are taken in an ad hoc manner. In addition to the above, as the company strategy would be executed in a fast changing dynamic and global environment, and would be implemented over a sustained period of time, there has to be a way to proactively monitor and effectively track strategy execution, that would ensure that the company is able to meet its strategic goals. Strategic Planning Recommendations
For ensuring that the CanGo brings in structure and analytical rigor into its strategic planning, the company should institutionalize strategic planning, using it as a framework for the way the organization create and executes strategy. To this end, the CEO and company leadership team should be trained on the strategic planning process, the different elements and steps. Some of the key aspects of this include being able to define mission, vision and value statement for the company, performing a SWOT analysis to understand their core capabilities and best opportunities, evaluation and analysis of opportunities, coming up with alternative ways in which the selected opportunities can be achieved and then having control mechanisms for ensuring that the company is able to execute the selected alternative effectively. It is suggested that the company involve experienced board members and also have an experienced chief strategy mentor, who would work with the leadership team is helping them learn and implement the strategic planning process at CanGo.
Another key aspect of implementing the strategic planning process is having a robust and effective way of tracking strategy execution that would ensure that the execution is in line with strategic objectives, and the company is on track to achieve its intended goals. It is recommended that CanGo implement the Balanced Scorecard framework for strategy monitoring and tracking. The Balanced Scorecard is widely accepted as a best in class framework for performance measurement that displays in a dashboard format the key operational measures on which the strategy is tracked (Balanced Scorecard Institute, n. d.). The Balanced Scorecard can also be used as a robust organization wide strategic planning, management and communications system that can be used for aligning organizational strategy and vision with communication, employee strategy and operational initiatives, which would ensure that there is a lot of focus and alignment behind the way in which the company is executing its strategy (Rohm, H., 2008).
With a large market size such as that of online gaming there is guaranteed to be a vast amount of competition within the market. With this in mind what sets each competitor aside from another is that niche that they have developed for themselves. This is where your company has a great opportunity to take great strides within this market. Some of the large key players within this market include Xbox live, PlayStation, and Nintendo, all offering online versions of their gaming systems. The problem that all of these competitors face at this time is that the games they offer online are limited to the games that are offered on their specific systems. Some of the smaller but also viable competitors include Big Fish games and pogo.com. Both of these companies offer online gaming with titles such as dinner dash and bejeweled however they do not have the ability at this time to offer larger games such as modern warfare or other games that the larger name competitors offer.
This is the niche where CanGo alone have the opportunity to flourish. To become a one site stop that includes both the larger name games similar to what the game system companies offer alongside with the time management and puzzle games that other online companies offer. If CanGo takes advantage of this opportunity they will truly be offering games that will keep the entire family entertained for hours. In addition to the types of games offered they have the ability to appeal to their customers by ensuring that any additional software that a game requires to run is either offered on their site or a direct link to the software site. This alone will help to improve CanGo’s customer service by leaving customers felling more secure that they are downloading the proper software and not a potential virus. With this market growing faster than most it is of the upmost importance for CanGo to set them aside from the competition. The greatest way for CanGo to do this while also increasing their customer base is to offer competitive pricing alongside special offers that would give their customers a special deal on their birthdays or on their gaming anniversaries.
Competitive Strategic Recommendations
Some of the areas that CanGo did lack when compared to the competition was in selection and reputation. In order to correct the problem with selection CanGo needs to increase warehouse space and adopt a warehouse management system so they will have the ability to increase selection without risking availability and shipping time. The second problem of reputation is something that will come in time. If CanGo is keeping customers satisfied the reputation will only flourish within the market. If CanGo would take full advantages of these opportunities it would truly set CanGo aside and give your organization a niche in the market that is currently voided and deeply needed. Human Resources
Human Resources are a vital department within all business and organizations. A human resource department can be considered the backbone to an organization, because of the multiple functions within. HR is not just responsible for the hiring and staffing process of an organization. Other responsibilities of an HR department include but are not limited to training and employee relations.
CanGo has demonstrated multiple areas within HR that is causing employee and company conflicts. Training issues have been identified through visuals of employee behaviors, production, questions, and knowledge. Employees have questioned how to perform certain duties within their position. In addition to uncertainty in job duties amongst employees; CanGo has planned to make changes in their operating systems. These changes will place employees in new roles and responsibilities that they are not prepared, or trained to handle and perform successfully. Performance reviews are also important for all employees within all organizations. CanGo does currently have a performance evaluation in place; however these reviews are also raising conflict and major concern. Employees are not receiving detailed information regarding areas in which they are excelling in, and areas that they need to improve. Without proper training employees’ production rates can lower, timely and costly mistakes can occur, and profits within the organization can drop. These training issues have been fully analyzed, and these issues offer severe repercussions for CanGo if not properly attended to.
CanGo has great potential for growth and success, and implementing our recommendations can allow for employees to be productive regardless of their area of expertise. Concerns of job duties will be minimized, and employee performance reviews will be accurate and beneficial. With a few changes made CanGo can have a new innovated HR department that is able to support the organizations missions and goals. Human Resources Strategic Recommendations
There are multiple methods to help correct these training related issues and concerns. It has been fully analyzed and researched that CanGo needs to first change their performance evaluations of employees. A 360 Degree performance appraisal system is recommended to put in place immediately. “A 360 degree appraisal involves the employee receiving feedback from Managers and HR, whose views are considered helpful and relevant. The feedback is typically provided on a form showing job skills/abilities/attitudinal/behavioral criteria and some sort of scoring or value judgment system” (Businessballs, 1995-2011). This review has to contain detailed information regarding employee expectations. During the employee performance evaluation each employee needs to be educated and explained what areas they are excelling in, and what areas they need to improve. The areas that they need to improve should also contain methods that the employee can achieve with an explanation of resources available to them.
A comparison can be included to show an employee where they fall compared to all employees within the organization, but employee’s performance reviews cannot be limited to this. Implementing a detailed 360 Degree Evaluation performance appraisal will allow for detailed needs of employees to be known to both CanGo and the employee. Prior to all employees’ 360 Degree Evaluation HR has to analyze the training needs for the organization and employees. A training needs evaluation or assessment can help to improve training for new and existing employees. “Needs assessments help identify what knowledge, skills, behavior, and other learned capabilities are needed. Needs assessments also help identify where the training is expected to have an impact” (Noe, 2008). A training needs assessment will allow for CanGo to know and understand fully what is expected of each employee, and begin the process of a new innovated training and development system for employees. Legal Analysis
An important key to any company’s success is not only to ensure their own business is legally inline but also to learn from the legal mistakes of their competitors so they do not fall into the same traps that can cost the company millions. With that in mind the following seven areas are legal issues that are currently affecting CanGo or legal issues they could face in the future if certain matters are not taken into account. The first issue deals with ensuring that warring labels for medical concerns and ratings from the ESRB are place on games. Some games are known to have high amounts of flashing light which can cause problems with epilepsy and other health concerns. Also each game has a certain rating to ensure that parents and players are aware of which age group the game is appropriate for. The second deals with the need to follow copyright laws that are placed on games, books, music, and literature having to do with them. All of this material is protected by copyright laws. Due to the fact that all of these areas affect CanGo’s daily business it is extremely important that they have a clear understanding of the laws and are ensuring that all of the laws are followed to the letter of the law.
The third refers to customer deception and the responsibility of the company to ensure that the information that they provide to the customer is accurate. The fourth law is that of the laws of other countries. Within the US there are very limited laws affecting online gaming and game sales, however this is not the case in other countries. In fact many of the laws in other countries are constantly changing and sometime no immediately updated with the other countries that provide these games. A good example of this is when looking at Australia’s laws as they are some of the most stringent. “With MA15+ the highest rating available for games, any content deemed suitable only for adults 18 years old and over is refused classification by our country’s peak ratings body, rendering that content illegal for sale in Australia.”(Chiappini, 2008) The next three laws are pertaining directly to CanGo and require as much consideration as the first four. These include the need for CanGo to protect their Intellectual property by taking part in the right they have to trademark their website, business name, and logo. “Intellectual property protection is critical to fostering innovation.
Without protection of ideas, businesses would not reap the full benefits of their inventions and would focus less on research and development. Similarly, artists would not be fully compensated for their creations and cultural vitality would suffer as a result.” (Why Protect Intellectual Property?) Next they need to ensure that they are following the rules for publicly traded companies by listing Executive Compensation on their proxy statement, form 10-k, and their registration statement “Changes in SEC reporting requirements have forced companies to include an “Executive Compensation Discussion & Analysis” section to accompany all future pay documentation in all SEC forms. This section requires a “readable” explanation of how the compensation was determined and what it encompasses.”(Kuepper, 2010) The third includes certifying that they are following The Fair Labor Practice laws to the letter as not doing so can be detrimental. “The Fair Labor Standards Act (FLSA), which prescribes standards for the basic minimum wage and overtime pay, affects most private and public employment. It requires employers to pay covered employees who are not otherwise exempt at least the federal minimum wage and overtime pay of one-and-one-half-times the regular rate of pay.” (The Fair Labor Standards Act (FLSA)) Legal Strategic Recommendations
With the current status of CanGo and with the above laws in mind the following two recommendations will help to safeguard CanGo from future lawsuits and profit losses. Extensive training is needed for the following reasons. Not following labor laws can put CanGo out of business or cost the company thousands in lawsuits. That is why it is of upmost importance that all members of the human resources department are constantly trained on these laws as they sometimes are constantly changing. Also it is important to develop strong communication regarding legal aspects that can affect CanGo. For that reason all department managers need to be updated on all of these legal aspects. The second recommendation is to hire an in-house corporate lawyer. An attorney will help to ensure that CanGo conduct successful business within the limits of the law. It will also keep more profits in the business and not tied up in costly lawsuits. The attorney that is hired should be trained in both business law as well as international law to best benefit CanGo. “A good business attorney will provide vital assistance in almost every aspect of your business, from basic zoning compliance and copyright and trademark advice to formal business incorporation and lawsuits and liability”(Ennico, 2011)
The CanGo Company has been very successful when they first started developing their online services, but they were having issues when implementing a good planning about their online projects. The company has the potential to overcome any obstacle and be very successful if they only follow and understand the simple SWOT analysis. Also the organization needs to make sure that every staff member is completely trained when implementing new technology, and at the same time bring the best the services to the customers. The CanGo needs to focus in any legal issues that could affect the development of the company, and they also need to strategize in how to deal with the problem. In addition, the company would need to determine what level of customer service support they would need to bring to its customers. And this would mean having a good strategic management in which the company would be able to implement a solution for their business plan, and at the same time they would be able to develop a good strategy plan when achieving the company’s goal and mission.