Analysis of the Operation and Financial Condition of the Enterprise

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Analysis of the Operation and Financial Condition of the Enterprise- (1) Enterprise has a very good competitive position compared to the competitors, it isoperating in a highly attractive industry of operation with high growth- (9) Enterprise is in a poor state of competitiveness, it is operating in a non-attractiveindustry of operation, in a shrinking market (market entering stagnation)- (2) Enterprise has a very good competitive position compared to the competitors, it isoperating in a partly attractive industry of operation- (4) Enterprise is competitive, while the industry of operation is not particularlyattractive- (6) The industry of operation is attractive, however, the enterprise is not competitivecompared to its competitors- (5) The industry of operation is partly attractive, while the enterprise has a mediumdegree of competitiveness over competitors- (3) The industry of operation is highly attractive, while the enterprise has a mediumdegree of competitiveness over its competitors- (7) The industry of operation is not particularly attractive, and the enterprise has amedium competitiveness over its competitors- (8) The industry of operation is partly attractive, however, the enterprise is notcompetitive compared to its competitorsAn enterprise undergoes several market development stages within the industrywhich is generally called the industry life cycle, and the stages are as follows: Introduction Growth Maturity Decline.An enterprise must try to analyse how and when changes are taking place in themarket, how the strength of the forces involved change and how to oppose the threats.Within the stage of introduction the market is at the beginning of development, itsgrowth is slow and there is still little awareness of the products. The market is beingintroduced thanks to the innovation, new products and investment. The cost of a product isrelatively high at the beginning which, on its turn, increases the price. Distribution may belimited as the sales channels are not yet completely established, the barriers for enteringinto the industry are relatively high. In this stage the market research is not yet been fullydone and the organisation has not yet learned how it functions; the market barriers,however, are still low and would allow a new enterprise or product to enter.Management objective is to create its organisational and operating structure byassuming that an unoccupied, competitive niche has been found in the market and to seeksurvival. The manager must have faith in success, preparedness to risk, operationalcapability, organisational capacity, understanding of the technologies, the market,marketing etc.Within the stage of growth the demand for the product increases, the industryconsumers recognise the product; they turn more demanding and start asking for discounts.New market segments and new areas for application of product appear. Competition is notyet very high at the beginning of this stage, the rapidly growing demand and the marketshare obtained increases the sales revenue of an enterprise. Marketing research is important12
Analysis of the Operation and Financial Condition of the Enterprisein order to make sure that the choice of a product is logical and substantiated and to searchfor the potential buyers.This is exactly the period when many firms go bankrupt. This is due to nonprofessionalismof managers, inaccurate estimates and lack of working capital. If theseproblems are overcome and if the transition to the next stage is successful, usually thetransformation of the inner management principles takes place from single management ofa complex to its differentiation. This requires to devote more attention and at a moreprofessional level to planning, forecasting, risk assessment (not only intuitive, but alsoanalytical), long-term financial solutions, increasing the value for the owner investment.Development slows down during the stage of maturity, the market is considerablysaturated and competitiveness is determined by the lowest price. An enterprise mustreduce prices, search for business partners to stay in the market.Consumers have become even more demanding and therefore the quality of servicebecomes of more importance as well as the amount of sales to consumers needs to beincreased.There are strong market leaders who set market barriers for the newcomers. At thesame time the weakest enterprises are leaving the market.During this stage active personnel management procedures are to be carried out,first of all, training, as it is often the case that the other resources, the employee potential,has been exhausted.An enterprise must stop purchasing products that do not bring the expected profit,by thus reducing the costs and focusing the attention and assets entirely on competitiveproducts. An enterprise may carry out takeovers of the weaker competitors, bringing thehighest benefit to the enterprise, and, besides, this can take place and at considerably lowprice.Three notional categories of maturity may be attributable to this period in anenterprise (early, intermediary and late). The deepest concern in the work of the managersis associated with overcoming the first signs of stagnation and the excessive red-tape of theinternal management processes.Within the stage of decline the demand for the product is falling due to formation ofan excessive capacity surplus in the industry, and the competition is being increased. Thismay be also affected by the external factors of the micro environment to the analysis ofwhich larger attention must be devoted.An enterprise in its attempt to utilise the surplus capacities aims at reducing theprices which, on its turn, may cause price competition to occur. There is a dilemma nowfor an enterprise to consider – to leave the market or to continue operating in the sameindustry.As soon as competitiveness in the market is lost, inner conflicts arise, the financialindicators get worse. The struggle for survival becomes the main issue. However, the onlyway out for an enterprise at this moment is the readiness of the management and itscapability to achieve the realisation of new ideas.Portfolio analysis shows in a simple way the position in the competition and theattractiveness of the industry. If there are several product groups in an enterprise,individual portfolio analysis has to be performed for each product group.13
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