Australia Post Management Strategy: Performance Analysis and Forecast

This report provides an in-depth analysis of Australia Post's management strategies, examining its historical financial performance and forecasting future trends. The report begins with an executive summary and introduction, highlighting the need for innovation and strategic adaptation in the modern business environment, using examples like the US Postal Service and technological advancements in the video rental industry. The data approach involves analyzing Australia Post's annual reports from 2016 to 2018, focusing on revenue, profit margins, and balance sheet data. The report employs forecasting methods to project future performance, considering factors like decreasing mail volume and increasing prices, and includes profitability and solvency analysis. The strategic development section explores Australia Post's mission, vision, and strategic vision, along with a SWOT analysis. The report concludes with recommendations for building effective business strategies to navigate the competitive landscape and leverage innovation.

Running head: MANAGEMENT STRATEGY
Management Strategy
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary:
This report is prepared to explain and analyze the present scenario of Australia Post and their
strategies, which helped them to survive in this modern era of business and innovation. It can be
noticed from the case study of US Posts, that the privatization and innovation in the parcel
delivery system have created a strong challenge to the US post. In most of the countries the same
situation can be evidenced but the Australia Post is performing well as compared to others. In
this report such success and strategies of the Australia Post have been analyzed and the future
expected financial performances have been projected based on some historical data. Lastly, some
recommendations have been made for building a good business strategy, which will help them to
survive in this highly competitive situation with innovation in their process.

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Table of Contents
Part 1: Introduction and Data Approach:.........................................................................................3
Introduction:................................................................................................................................3
Data Approach:............................................................................................................................4
Future Forecasting Methods:...........................................................................................................6
Strategic Development:...................................................................................................................9
Strategic Vision:..........................................................................................................................9
SWOT Analysis of the Australia Post:......................................................................................10
Generic strategies:.....................................................................................................................11
Competitive Strategies:..............................................................................................................11
Vertical Integration and Diversification Strategies:..................................................................11
Conclusion:....................................................................................................................................12
Recommendation:..........................................................................................................................13
References and bibliography:........................................................................................................15

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Part 1: Introduction and Data Approach:
Introduction:
In the modern competitive business era, every business organization needs to adopt
certain strategies and come up with innovative ideas for a long-term success and survival. There
are certain stages, which all the business organizations face and it can be called as the business
life cycle. As and when a business organization comes up with some innovative idea and
innovative product, in a very short period of time they gain popularity, thereafter with the
introduction of more innovative products by the competitors the former one loses its market. The
same situation can be cited in many successful business organizations (Park and Kim 2018).
Invention of new technology and innovative products gives a peak to the industry and by the
time those organizations, who are unable to adopt changes and innovation, becomes less
competitive and could not survive in the market. For example, the video rental industry have
completely wiped out from the market within a few years with the innovation in the technology.
Now a days, no one rents a video player, DVDs, or video tapes from the market as thousands of
videos and clips are available over the web which can be accessed easily from anywhere in the
world (Auspost.com.au 2019).
Therefore, with the revolution in the technologies, companies need to adopt such
technologies and invent new products and services otherwise, they would become irrelevant in
the industry. Some very successful technologies companies such as Apple, IBM have achieved
such a long-term success only because of that. IBM invented the computer parts and systems and
that they have developed and upgraded until now to offer products that are more competitive to
the customers. Apple, the most successful computer manufactures in the world, created the

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Macintosh far way back and now they are competing in the market with the Apple Mack Book
and Apple I-phone.
After understanding the need for innovation in the products and service offerings and the
need for revolution in the business strategies, now the case of Australia post can be analyzed. It
can be evidenced in most of the countries that most of the government companies and
organizations fail to adopt technological changes and create innovative products and services. As
a result, most of the government companies suffer from loss for a longer period and government
still tries to continue the business with subsidizing it. At last, with the robust competition from
the private players in the industry, the government organization goes for liquidation. It can be
noticed from the past few years’ performance that the Australia Post is doing far well than the
others as they have adopted the technological changes in the country and built revised their
business strategies from time to time according to the situation and needs. Currently they are
enjoying the monopoly in its industry and looking for more profit with the introduction of a new
stamp fee of $1 for a rapid mail and a lesser amount for a slower second-class mail. This
proposed strategy might have certain benefits as well as some drawbacks also. In the following
paragraphs of this report all those past business strategies have been analyzed based on its
historical financial performances. Further, the future expected performance have been forecasted
with the help of such historical data and some suggestions have been made for a better business
strategy (Auspost.com.au 2019).
Data Approach:
To evaluate the past performance of the Australia Post, the information has been taken
from the annual report of the company for last three years. In this report, the annual report for the
last three years 2016, 2017 and 2018 annual report have been considered. The revenue and profit

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margin have been taken for the evaluation of the financial performance of the company and for
evaluating the financial health and stability of the company some data have been taken from the
balance sheet of the company. Various ratios have been computed for analyzing the past
financial performance and financial position and the same have been projected using the trend to
forecast the future financial performance. Some information has been taken from some academic
publications for accumulating information about the present economic situation of the country
and the industry related information.
Table 1: Profitability and Solvency Analysis
Particulars 2014 2015 2016 2017 2018
Volume (m) 4,507.20 4,314.20 4,023.50 3,634.10 3,342.40
Revenue ($m) 6,383.30 6,252.50 6,451.60 6,619.50 6,730.80
Profit or loss after tax ($m) 116.20
(221.70
) 36.40 95.40 18.60
Return on equity (%) 6.70
(14.90
) 2.30 5.90 7.80
Return on average operating assets
(%) 3.40 (8.20) 1.80 4.00 3.30
Dividend declared ($m) 78.80 - 20.00 63.30 83.10
Dividend paid ($m) 142.30 - - 50.10 78.50
Interest Cover (times) 3.60
(10.20
) 2.20 3.60 4.90
Capital expenditure ($m) 523.10 342.00 298.10 295.60 310.20
Debt to total assets 28.80 27.20 27.80 24.90 22.90
Source: Australia Post Annual Report 2018

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Source: Australia Post Annual Report 2018
Future Forecasting Methods:
Forecasting is the method of projection of the future demand, revenues and profitability
based on the historical data and the trend. First of all the trend needs to be analyzed to forecast
the future based on such trends. An analyst would be as much successful as much the prediction
would be errorless and the gap between the actual result and the predicted estimates decreases.
Forecasting can be applied for such variables which depends on certain market related factors
and uncertain in nature but follows certain trends. Applying the same technique the future
revenues and profitability have been forecasted in the following parts (Park and Kim 2018).
It can be observed from the above information that the company is having a sustainable
growth in their profit after tax except an abnormal loss in the year 2015. They have suffered a
huge amount of loss in the year 2015, later on, they have managed to recover the loss in the year
2016, and again they have come to the regular pace of profit from the year 2017. They are

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continuously investing in their capital assets to develop their business model and to give a better
service experience to their customers. It can be observed that, the volume of mail delivery
throughout the last five years have been decreased from 4,507.20 million to 3,342.40 million
though the revenue and profit have been increased. It can also be observed from their annual
reports that the total equity of the company have been increased in the last few years and they
have managed to maintain their total capital assets to a significant level despite have depreciation
and erosion (Auspost.com.au 2019). Taking all those historical the future financial performance
and position of the Australia Post can be projected using the trends as follows.
Table 2: Forecasted Financial performance of Australia Post
Particulars 2019 2020 2021 2022
Volume (m)
3,061.3
7 2,719.09 2,401.62 2,105.24
Revenue ($m)
6,818.3
9 6,998.81 7,112.75 7,233.33
Profit or loss after tax ($m) 137.20 236.10 238.13 298.45
Return on equity (%) 9.99 17.45 16.27 19.02
Return on average operating assets
(%) 5.41 9.51 8.64 10.15
It can be seen that the total volume of mail or parcel deliveries tends to decrease and as
per the trend it goes to 2,105.24 million in the year 2022 and the respective revenue and profit
goes to $7,233.33m and $298.45m in the year 2022. It can easily be understood that, with the
changes in technologies, people in modern age sends an email or SMS instead of formal written
letter or mails through post. Therefore, it is rational that in near future the volume of such written
letters would further decrease. It will remain restricted to the business essential communications
only. Hence, recover the huge fixed costs and to adjust with the inflation rate, the price charged
must be increasing. The same can be evidenced from the forecasted data. The price for the

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services tends to increase whereas the volume of the business tends to decrease. On the other
hand, the profitability tends to increase which implies the efficient business strategy of Australia
Post. The same projection can be shown using the following charts.
2014 2015 2016 2017 2018 2019 2020 2021 2022
-
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
8,000.00
f(x) = 5244.5188336502 exp( − 0.0959584375960519 x )
R² = 0.984006488225261
f(x) = 6147.3951106867 exp( 0.0179867564547427 x )
R² = 0.959320832481839 Volume (m)
Exponential
(Volume (m))
Revenue ($m)
Exponential
(Revenue
($m))
The company maintains its total assets level by continuous investment in capital assets, if
they continue the same and maintain their total assets in its current level, they can earn a
significant amount of return on their average operating assets as has been projected in table 2. It
can be evidenced that the total equity of the company also tends to increase, and if the same
thing were continued then the return on equity would be approximately 1015% in the year 2022
as has been projected above. Therefore, if the capital investment is kept on the significant level
as it is currently, the there would be a sustainable growth in their revenue and profit but the
business volume will decrease because of the innovation in the technologies. In such a situation,
they need to formulate more efficient business strategies and adopt advance technologies to offer
more developed and advanced products and services to their customers (Groenewegen and
McFarlane 2014). If R-sq is considered as the only goodness of fit then the R-sq for revenue is

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0.959, which implies the computation exhibits almost 96% of the variability of the population
and for the sales volume, it exhibits almost 98% variability of the sales revenue.
Strategic Development:
The Australia Post has shown a significant financial and operational performance over
the last few years while most of the government companies in the same industry in most of the
countries failed to manage their business profitably. Behind such a success, there are some
efficient business strategies, which helped them to make their parcel delivery business more
profitable. Their current business strategies and situations can be analyzed further with the help
of the following models (Groenewegen and McFarlane 2014).
Strategic Vision:
Mission and vision is the prime objective of every business organization, which they
always strive to achieve. Mission is the long-term goals which an organization wants to achieve
while the vision is some broader thoughts, which are set far beyond the mission of a company.
Business organizations formulate their business strategies keeping in mind the mission and
vision of the company (Park and Kim 2018). They include all those alternative courses of actions
or ways in their business strategies, which will help them to achieve their mission and vision.
The mission of the Australia Post is to serve the citizen of the Australia with the essential post
and mailing services and to offer them a better solution to their shipment and communication
issues. Initially their activities were only restricted to the parcel deliveries, later on with the
advancement in the technologies and change in the needs and preferences of their customers;
they have changed their product and services offerings (Park and Kim 2018). Their vision is to
serve the citizens of the Australia with all of their essential services and shifting from only the

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parcel delivery services to all other auxiliary services such as insurance products, they are
moving forward towards their vision (Park and Kim 2018).
SWOT Analysis of the Australia Post:
Every business organization has some core competencies, efficiencies, and strengths,
which give them the competitive edge in the market. They face certain challenges and if those
challenges can be handled managed efficiently then some new opportunities can be availed. In
the same way, the Australia Post is having some of such core competencies, financial and
operational efficiencies that helped them to achieve such a long-term success (Bohari, Hin and
Fuad 2017). On the other hand, they are facing certain challenges in their business operations
and if they can adopt the changes in the technologies and customer needs and preferences, equip
themselves with the advanced technologies, and come up with new and innovative product and
services, then they can have some wide opportunities in their near future. Their strengths,
opportunities, weaknesses and threats can be summarized as follows in the four quadrants
(Bohari, Hin and Fuad 2017).
Helpful Harmful
Internal
Strength:
 Large delivery network all over the
Australia
 Diverse portfolio of service offerings
 Government funding
 Digital business under e-services
Weaknesses:
 Operation in the domestic market
and less presence in the international
market
 Unable to adopt rapid changes in
technologies

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External
Opportunities:
 Global market can be entered into
 Diversity in product and services
Threats:
 Intense competition from the
competitors such as FedEx
Generic strategies:
Generic strategies are the strategies built up based on the core competencies of the
business organization. The Australia post is having a large network of delivery system all over
the Australia. They are having a huge work force to make their delivery operations possible
efficiently and in time. It has been their generic strategy to develop their business based on such
strengths and core competencies of the organization. They are continuing the parcel delivery
services until now, which have been the base of their company. This is included in their Generic
Business Strategies (Bohari, Hin and Fuad 2017).
Competitive Strategies:
There are various international players in the parcel and post delivery industry on most of
the countries. In Australia, also there are some of such international organizations operating their
business. FedEx is the number one competitor of the Australia Post. FedEx is having the largest
international network of mail and parcel delivery system (Grant 2016). To compete with such
competitors and to survive in the industry, they have shifted their focus from only the parcel
delivery system to some other services such as insurance products, and some of such other
essential services (Park and Kim 2018).