evaluate and report on the most recent (FY2020) annual report of an Australian company listed on ASX, Adairs Limited (ADH), as if you were investment analysts making a recommendation on whether your clients should invest in it

Environment and Industry Analysis, including:

Discussion of the environment:

1) identify the economic or other relevant factors,

2)discuss how these factors affect the company's operating environment, and

3) explain how the trends in these factors affect the company in the future.

Discussion of competitive forces within an industry using the five forces framework.

please make it simple and relevant.

moreover, if there is any weak explanation or description,

please mark and correct them.

2. Environment and Industry Analysis

2.1 Environment Analysis - PESTEL Analysis

Adairs Limited PESTEL analysis is a strategic tool to analyze the macro environment of the organization. PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal factors that impact the macro environment of Adairs Limited.

Changes in the macro-environment factors can directly influence not only Adairs Limited (ADH), but also other players in the Retailing industry. The macro-environment factors can impact Porter's Five Forces Model that shape strategy and competitive landscape. They can affect an individual firm's competitive advantage or overall profitability levels of the Retailing industry.

a. Political Factors that Impact Adairs Limited

Political factors play a significant role in determining the factors that can impact Adairs Limited's long term profitability in a certain country or market. Adairs Limited is operating in Retailing in more than a dozen countries and expose itself to different types of political environment and political system risks. The achieve success in such a dynamic Retailing industry across various countries is to diversify the systematic risks of the political environment. Adairs Limited can closely analyze the following factors before entering or investing in a certain market-

• Political stability and importance of Retailing sector in the country's economy.
• Risk of military invasion
• Level of corruption - especially levels of regulation in Retailing sector.
• Bureaucracy and interference in Retailing industry by the government.
• Legal framework for contract enforcement
• Intellectual property protection
• Trade regulations & tariffs related to Retailing
• Favoured trading partners
• Anti-trust laws related to Retailing
• Pricing regulations - Are there any pricing regulatory mechanism for Retailing
• Taxation - tax rates and incentives
• Wage legislation - minimum wage and overtime
• Work week regulations in Retailing
• Mandatory employee benefits
• Industrial safety regulations in the Retailing sector.
• Product labelling and other requirements in Retailing

b. Economic Factors that Impact Adairs Limited

The Macro environment factors such as - inflation rate, savings rate, interest rate, foreign exchange rate and economic cycle determine the aggregate demand and aggregate investment in an economy. While micro environment factors such as competition norms impact the competitive advantage of the firm. Adairs Limited can use the country's economic factor such as growth rate, inflation & industry's economic indicators such as Retailing industry growth rate, consumer spending etc to forecast the growth trajectory of the organization. Economic factors that Adairs Limited should consider while conducting PESTEL analysis are -

• Type of economic system in countries of operation - what type of economic system there is and how stable it is.
• Government intervention in the free market and related Retailing
• Exchange rates & stability of host country currency.
• The efficiency of financial markets - Does Adairs Limited needs to raise capital in the local market?
• Infrastructure quality in Retailing industry
• Comparative advantages of host country and Retailing sector in the particular country.
• Skill level of workforce in Retailing industry.
• Education level in the economy
• Labour costs and productivity in the economy
• Business cycle stage (e.g. prosperity, recession, recovery)
• Economic growth rate
• Discretionary income
• Unemployment rate
• Inflation rate
• Interest rates

c. Social Factors that Impact Adairs Limited

Society's culture and way of doing things impact the culture of an organization in an environment. Shared beliefs and attitudes of the population play a great role in how marketers at Adairs Limited will understand the customers of a given market and how they design the marketing message for Retailing industry consumers. Social factors that the leadership of Adairs Limited should analyze for PESTEL analysis are -

• Demographics and skill level of the population
• Class structure, hierarchy and power structure in the society.
• Education level as well as education standard in the Adairs Limited's industry
• Culture (gender roles, social conventions etc.)
• Entrepreneurial spirit and broader nature of the society. Some societies encourage entrepreneurship while some don't.
• Attitudes (health, environmental consciousness, etc.)
• Leisure interests

d. Technological Factors that Impact Adairs Limited

Technology is fast disrupting various industries across the board. The transportation industry is a good case to illustrate this point. Over the last 5 years, the industry has been transforming fast, not even giving chance to the established players to cope with the changes. The taxi industry is now dominated by players like Uber and Lyft. The car industry is fast moving toward automation led by technology firm such as Google & manufacturing is disrupted by Tesla, which has started an electronic car revolution.

A firm should not only do technological analysis of the industry but also the speed at which technology disrupts that industry. Slow speed will give more time while fast speed of technological disruption may give a firm little time to cope and be profitable. Technology analysis involves understanding the following impacts -

• Recent technological developments by Adairs Limited competitors
• Technology's impact on product offering
• Impact on cost structure in Retailing industry
• Impact on value chain structure in Retailing sector
• Rate of technological diffusion

e. Environmental Factors that Impact Adairs Limited

Different markets have different norms or environmental standards which can impact the profitability of an organization in those markets. Even within a country often states can have different environmental laws and liability laws. For example in the United States - Texas and Florida have different liability clauses in case of mishaps or environmental disaster. Similarly, a lot of European countries give healthy tax breaks to companies that operate in the renewable sector.

Before entering new markets or starting a new business in an existing market the firm should carefully evaluate the environmental standards that are required to operate in those markets. Some of the environmental factors that a firm should consider beforehand are -

• Weather
• Climate change
• Laws regulating environmental pollution
• Air and water pollution regulations in Retailing industry
• Recycling
• Waste management in Retailing sector
• Attitudes toward "green" or ecological products
• Endangered species
• Attitudes toward and support for renewable energy

f. Legal Factors that Impact Adairs Limited

In several countries, the legal framework and institutions are not robust enough to protect the intellectual property rights of an organization. A firm should carefully evaluate before entering such markets as it can lead to theft of the organization's secret sauce thus the overall competitive edge. Some of the legal factors that Adairs Limited leadership should consider while entering a new market are -

• Anti-trust law in Retailing industry and overall in the country.
• Discrimination law
• Copyright, patents / Intellectual property law
• Consumer protection and e-commerce
• Employment law
• Health and safety law
• Data Protection

2.2 Environment Analysis - Porter's Five Forces Model

The fundamental explanation behind making business methodologies is to have an edge during the opposition with different organizations in the market. Porter's five powers model glances at expanding organization profit. The organization utilizes this model in scrutinizing if the organization is advancing correctly during their business exchanges as to the market climate. Business techniques can be made from breaking down the market and distinguishing which segments are existing and what the organization needs to do to accomplish benefit amplification (Bennett & Hugen, 2018). This is the place the five powers model comes in. The model examines five significant powers that influence the business during its market period. The powers take a look at the market and how it is advancing from every day with various highlights that emerge. These powers are:

1. Competition in the business

Business rivalry generally happens to at least two adversary organizations that are in the market and are selling a similar item. This implies that clients need to pick between one organization and the other. The organizations could be founded in any field, be it horticulture, innovation, science, or even accommodation. To have an upper hand over the other organization, new methodologies are made to help the benefit it achieving benefit augmentation (Tsay, 2019). This achieves advancement to stay aware of the market and offer the public what the other organization doesn't have. Organizations likewise improve their administrations to guarantee that clients would select to pick their organization over the adversary. There are numerous procedures an association will concoct to guarantee that they have the high ground on the adversary contender. Acquiring more clients is the principal focal point of most systems to expand benefits. Notwithstanding, one ought to likewise take note of that the clients who are accomplished at times leave the organization inevitably (Miller, Vandome, & John, 2017). Holding your clients additionally turns into a significant assignment. This is generally done by granting your steadfast clients rewards and coupons because of their devotion. Adairs Limited uses this method in ensuring that they have low-cost outlets and very fast deliveries which help retain their current customers and attain new ones. The most ideal approach to stay aware of the serious market and outperform it is by guaranteeing that their clients can utilize their systems proficiently. To do this, the company has had an effective website for having customer make orders and get help from the company's customer service.

1. Potential of new contestants

New contestants are showing up much more oftentimes especially in this growing economy. The danger of new participants accompanies the danger of taking your clients since they may offer an item like yours however with more refinement (Hewsbury, 2018). Thusly it is truly essential to screen new contestants and what they have to bring to the table to the clients in the market. The organization should consider the items that are gotten by new participants and guarantee that they are one stage above them if the items they contain are compromising their economy. It is likewise critical to guarantee that the items which are offered by the organization are enhanced to outperform those of the new participants. Nonetheless, now and again the new participant might be delivering complementary products that may help your organization deal. It is essential to collaborate with such an organization since it would reduce expenses of promoting and increment the benefit augmentation of the organization. For instance, if organization A is selling vehicles, and organization B is another participant in the market which sells vehicle save parts, the two could converge to have an organization that sells the two items, or organization A could secure organization B. For Adairs Limited, they could require to merge with another company to beat the new entrants. The company has multiple shops and has built a good relationship with its customers to ensure they continue being their number 1 choice (Porter, 2018). However, the company should be wary of the new market entrants and keep watch of new methods that come about in marketing and technology.

1. Power of suppliers

Suppliers offer merchandise to the organization as mentioned by the organization. The purchases by the organization from the providers are generally crude materials that are utilized by the organization to measure into a completed item that is offered to the clients. By and large, providers are recruited under an agreement whereby the cost for a while, similar to one year, is summarized and paid during the finish of the financial year. The providers along these lines go about as significant entertainer in the market. The provider likewise straightforwardly decides the cost of the completed item. For instance, if the furniture provider was to increase the cost of wood by 30%, the organization would likewise expand the cost of the furniture by a comparable rate or higher to accomplish benefits. This on occasion makes the business drop since others see the cost to be too high thus causing misfortune. Adairs Limited ought to guarantee that they have a provider who is reliable and can be depended on. This will guarantee that the items they offer are offered effectively and with insignificant deferrals, assuming any (Miller, Vandome, & John, 2017). With the organization's large customer presence and handling of furniture items and furnishing materials, they have to ensure they have the right supplier with furnishing materials and products which ensures that the products they produce are quality and not prone to easy breakages.

1. Power of customers

Clients are the general purpose of working together in a market. Customers are the most important resources to having while possessing a business. The clients are the ones who buy your item and empower you to get different deals and obtain the greatest benefits. To guarantee that the company has a decent business, which is decided by the benefit augmentation, the company ought to guarantee that the clients are content with the item given to them and the benefits provided. Forming the business to zero in additionally on client requirements encourages the company to gain more clients in the business. The purchasing power of the customer ought to likewise be examined to guarantee that the value which is put on an item isn't too high to even think about scaring clients away, neither should it be too low with the end goal that you will cause misfortunes (Porter, 2018). The client criticism on various products ought to likewise be investigated to guarantee that the items can be improved in order to acquire clients and keep the ones the company already has. Adairs Limited ought to guarantee that they analyze the customer requirements and value the price which they should price their products. The valuation of products by Adairs Limited is very affordable for clients. They also have coupons and other methods of ensuring the customers can purchase the product. Recently, they introduced a 10% off on all products purchased when the customers subscribed for the newsletter. This creates a win-win situation which enables the company to keep up with their customers and also providing them with quality and affordable products.

1. The Threat of Substitute Products

Items now and again have substitutes that are sold by different organizations. The same applies to the furniture and homeware materials sold by Adairs Limited. There are very many various situations for this situation relying upon client inclination. Bamboo is one such alternative that can be utilized to make solid and flexible structures. Although bamboo isn't 100% friendly to the environment, it is a fundamentally more economical option in contrast to lumber. Some people are also looking for ways they can live without affecting the environment which means they would love trees to be cut down to make timber, therefore choosing a different material. With this information, it difficult to perceive how an organization may pick its business techniques. However, as much as some people may opt for another material for the furniture, the threat of substitutes is a cause of concern when the products are obsoleting quickly but the furniture products are not going to be obsoleted. Going 500 years back, the need for furniture products was there and it will remain there for the coming 500 years as well. There have been innovations in the product but the need for a bed has been there for centuries. Therefore, there is no close substitute for furniture products in the near or even long future which reduces the threat of substitutes for the furniture industry.

references

Bennett, M. J., & Hugen, D. L. (2018). Financial Analytics with R. Cambridge University Press

Tsay, R. S. (2019). An Introduction to Analysis of Financial Data with R. Wiley

Miller, F. P., Vandome, A. F., & John, M. (2017). Porter Five Forces Analysis. VDM Publishing

Hewsbury, L. (2018). Porter's Five Forces: Understand competitive forces and stay ahead of the competition. 50Minutes.com.

Porter, M. E. (2018). Competitive Strategy: Techniques for Analyzing Industries and Competitors. CreateSpace Independent Publishing Platform.

http://fernfortuniversity.com/term-papers/porter5/asx/1886-adairs-limited.php

https://www2.asx.com.au/markets/company/ADH https://finance.yahoo.com/quote/ADH.AX?p=ADH.AX&.tsrc=fin-srch

https://investors.adairs.com.au/DownloadFile.axd?file=/Report/ComNews/20200828/02273426.pdf

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Evaluation and Report on Adairs Limited ADH FY2020 Annual Report This report analyzes the FY2020 annual report of Adairs Limited ADH to assess its inv... View the full answer