MBA731 Strategic Analysis Report on Blackmores Limited - University

This report presents a strategic analysis of Blackmores Limited, a healthcare company. It examines the external environment using PESTEL and Porter's Five Forces analyses, assessing political, economic, social, technological, environmental, and legal factors, as well as competitive dynamics. The internal environment is evaluated through financial performance analysis (profitability, liquidity, asset efficiency, and gearing ratios), company culture, core competencies, and cross-cultural competencies. The report explores Blackmores' competitive advantages through business and corporate strategies, including vertical integration and diversification. It also covers organizational design, including structural changes and integration mechanisms. Recommendations are provided for strategic capability improvement, considering functional, business, vertical, and horizontal integration, diversification, and alliance changes, along with risk and return assessments.

Running head: STRATEGIC ANALYSIS REPORT ON BLACKMORES
Strategic Analysis Report on Blackmores
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1STRATEGIC ANALYSIS REPORT ON BLACKMORES
Executive Summary
Blackmores Limited is involved in the business of developing and marketing healthcare goods
for animals and humans. The company also follows a culture of passion for health, integrity,
respect, leadership and social responsibility among the employees. The vertical integration
strategies are followed by Blackmores Company in which it controls more than one aspect of its
supply chain. The report analyzed that Blackmores Company deals with certain political and
resource-based issues as it is not being able to address the challenges presented by new entrants
within the industry and has lost a considerable market share in niche categories. Effective
implementation of the business strategies by Blackmores Company has facilitated in attaining
exceptional performance outcomes. Certain risks with the strategy implementation must be
considered by the company while dealing with them. Considering another risk of increasing
entrants in the market, Blackmores must focus on launching innovative healthcare nutrition
products in competitive prices.

2STRATEGIC ANALYSIS REPORT ON BLACKMORES
Table of Contents
1. Introduction..................................................................................................................................4
2. External Environment Analysis of Blackmore............................................................................4
2.1. PESTEL Analysis of Blackmore.....................................................................................4
2.2. Industry Analysis.............................................................................................................7
2.3. Critical Forces and Key Success Factors Analysis.........................................................8
3. Internal Environment Analysis of Blackmore.............................................................................8
3.1. Financial Performance Analysis......................................................................................8
3.2. Company Culture, Core Competencies and Cross-Cultural Competencies..................10
3.3. Political and Resource Issues........................................................................................10
4. Competitive Advantages through Business and Corporate Strategies......................................11
4.1. Business Level Strategies..............................................................................................11
4.2. Level of Vertical Integration.........................................................................................11
4.3. Diversification and External Associations....................................................................12
4.4. Performance Outcomes and Industry Characteristics...................................................12
5. Organizational Design Enabling Strategies...............................................................................13
5.1. Recent Organizational Structural Changes...................................................................13
5.2. Level of Centralization..................................................................................................13
5.3. Horizontal Structural Characteristics............................................................................13

3STRATEGIC ANALYSIS REPORT ON BLACKMORES
5.4. Structure Diversification Affects and Integrating Mechanisms Being Used................14
6. Recommendations on Strategic Capability Improvement.........................................................14
6.1. Functional and Business Strategy Options....................................................................14
6.2. Vertical and Horizontal Integration...............................................................................15
6.3. Diversification and Alliance Changes Considering both Fit and Stretch......................15
6.4. Risk and Return Inherent in Suggestions......................................................................16
7. Conclusion.................................................................................................................................16
References......................................................................................................................................17
Appendices....................................................................................................................................19

4STRATEGIC ANALYSIS REPORT ON BLACKMORES
1. Introduction
Strategy analysis facilitates in analyzing strengths and weaknesses faced by the
companies in its operating environment that can facilitate in developing effective business
strategies (Bergh, Sharp, Aguinis and Li 2017). Blackmores Limited is involved in business of
developing and marjrting of healthcare goods for animals and humans. It also includes herbal,
vitamins along with mineral nutrition-based supplements. The objective of this paper is to carry
out the strategic analysis of Blackmore Company through evaluating its internal and external
business environment factors along with competitive advantages through corporate or business
strategies. Moreover, the report will also offer effective recommendations on improving strategic
capability of the company.
2. External Environment Analysis of Blackmore
2.1. PESTEL Analysis of Blackmore
Political  Stable political system in Australia
 Australian trade agreement facilitates
Blackmores in attaining benefit from
low taxes
 Deregulation can benefit businesses
and bring profitable changes in
political environment (Bettis,
Gambardella, Helfat and Mitchell
2014)

5STRATEGIC ANALYSIS REPORT ON BLACKMORES
Economic  Blackmores Products being desirable
faces the issue of profit reduction
when economy is sluggish
 Increasing unemployment rates and
slow economic growth of the nation
has resulted in decreased profit over
years
Social  Supporting “Equal Opportunity for
Women in Workplace Agency”,
Blackmores have attained 70% women
employees for supporting them
(Durand, Grant and Madsen 2017)
 Constant investment in people by
means of training and development
programs
Technological  Blackmores have considered increased
investment in technology for
improving its supply chain distribution
structure
 In-built smartphone application
facilitates its target consumers to attain
all the information regarding its
healthcare products

6STRATEGIC ANALYSIS REPORT ON BLACKMORES
Environmental  Blackmores Company complies with
all the aspects within the
environmental laws (Engert, Rauter
and Baumgartner2016)
 Several steps have been taken in
decreasing packing wastes through
participation with “National Packaging
Covenant”
 Mission of the company is also to
make sure compliance with “People
and Corporate Environment
Responsibility”. This is to make sure
that its responsible product sourcing
can decrease carbon footprints in the
environment.
Legal  China-Australia free trade agreement
has facilitated Blackmores in ensuring
increased involvement with China
(Grantet al.2014)
Porter’s Five Forces Analysis of Blackmores
Threat of New Entrants New entrants within the personal and
household products brings innovation that is

7STRATEGIC ANALYSIS REPORT ON BLACKMORES
excreting pressure on Blackmores to
implement competitive pricing strategy and
new value propositions for consumers
(Grantet al.2014).
Supplier Bargaining Power Most organizations in household and personal
products industry purchase raw material from
several suppliers. Suppliers holding dominant
position can reduce the company’s margin in
the market. To deal with this, the company
can maintain effective supply chain with
several suppliers.
Buyer Bargaining Power Buyers are observed to be demanding those
desire to purchase best available offerings in
low prices as possible that impacts
Blackmores profitability in long term. New
products innovation is considered by the
company to decrease the buyers bargaining
owner (Durand, Grant and Madsen 2017).
Substitute Products or Services Threat New services and products address consumer
demands in distinct manner such that industry
profitability suffers. To deal with such
situation increasing switching cost for
consumers is considered by Blackmores.

8STRATEGIC ANALYSIS REPORT ON BLACKMORES
Existing Competitor Rivalry Blackmores has its business operations in
highly competitive personal and household
products sector. Maintaining a sustainable
differentiation can facilitate the company in
ensuring a sustainable edge.
2.2. Industry Analysis
The vitamin and dietary supplement industry of Australia is anticipated to grow at a
CAGR value of 2% at constant prices (Grant2016). The industry is also estimated to attain
advantages from demand of consumers in the future years. Changing public perception towards
maintaining healthy lifestyle along with complementary goods is persuading industry leaders to
supply their goods within big retail chains such as Woolworths and Coles. The industry is
dominated by established companies such as Swisse and Nature’s Own. However, Blackmores is
observed to attain second position within the industry (Hill, Jones and Schilling 2014).
Moreover, therapeutic goods administration maintains strict regulation in decreasing misleading
information on labels.
2.3. Critical Forces and Key Success Factors Analysis
Critical forces owned by Blackmores Company that facilitates it in attaining success
within the global marketplace (Hill and Schilling2015). The resources and competencies attained
by the company acts as its critical forces. One of critical force is its extensive health care product
ranges along with its digital marketing and education programs. Another critical force is its
financial aspect that is focused maintaining low operational cost. The key success factors of
Blackmores are focused on three aspects such as people, product and passion (Hill 2017).

9STRATEGIC ANALYSIS REPORT ON BLACKMORES
 Product- Blackmores offers compelling products that is callable of increasing sales
 People- Successful business is maintained through maintainingstrong corporate culture
and by understanding value of people
 Passion- Passionate employees are motivated to attain larger organizational goals
3. Internal Environment Analysis of Blackmore
3.1. Financial Performance Analysis
 Profitability Ratios- It has been observed that gross margin, net margin and return on
capital employed for Blackmores Company has decreased from the year 2016 to year
2017. This is for the reason that the company is dealing with issues related to generating
earnings in comparison to its expenses. Gross margin has decreased from 23.92% to
14.92%from 2016 to 2017 and then increased to 36.93% in the year 2018.This can be
stated to be a good rate of growth as the organization has adopted various strategies to
increase operations and reduce the costs associated with them. Net margin has decreased
from 13.96% to 8.30% from 2016 to 2017 and come back to a stable rate of 11.65% in
the year 2018. Hence, this shall improve the financial standing of the organization on a
whole. Return on capital employed has decreased from 27.82% to 20.75% from 2016 to
2017 and then come up to 35% in the year 2018. Therefore, it can be stated that the
performance of the organization has improved considerably in the current year and its
strategies seem to be working well. Such decreased profitability ratio is because of the
reason that the Australian-Chinese consumers stopped buying at that point of time.
However, as the firm has targeted new markets, profitability stabilized recently. This also
indicates that Blackmores was not able to use its assets profitably in generating sales

10STRATEGIC ANALYSIS REPORT ON BLACKMORES
signifying decreased return on assets, however the changing strategies helped the firm to
perform well later (Blackmores Annualreports.com. 2018).
 Liquidity Ratios- It is gathered that the liquidity ratios such as current and quick ratios
of Blackmores are observed to decrease in the year 2017 from 2016. Current ratio of the
company has decreased from 2.07% to 1.35% from the year 2016 to 2017 and then
increased to 1.73% in the year 2018. Quick ratio of the company has decreased 1.25% to
0.90% from 2016 to 2017 and then came up to 1.14% in the year 2018. This is because of
the reason that the company was not that capable to pay its debt obligations for
maintaining its safety margin in attaining increased cash flows. However, recently, the
finances of the firm have improved and it has improved its accounts payable and
receivable which has led to the increased ratio. This also indicates that the company was
facing increased difficulties in selling inventories or prepaid assets in case of any
emergency but now it has improved its position (Ingram et al.2015). Liquidity issues are
generally being faced by the company as the debt levels for the company increased
because of its new Warriewood site construction.
 Asset Efficiency Ratios- The asset efficiency ratios of Blackmores are indicating a
decreasing trend from the year 2016 to 2017 in the average total assets. Asset efficiency
ratio of Blackmores is observed to decrease from 0.76 to 0.46 from year 2016 to 2017
and 0.23 in the year 2018. This is because of the reason that it is not able to employ its
assets effectively to generate enough sales. This is because of the reason that Blackmores
have dealt with decrease in 41% because of declined sales in its vitamin supplement
segment.

11STRATEGIC ANALYSIS REPORT ON BLACKMORES
 Gearing Ratios- The gearing ratios of Blackmores is signifying a decreasing trend in
interest cover ratio and an increasing trend in debt-to-equity ratio in the year 2017 in
comparison to year 2016. Debt to equity ratio of Blackmores has increased from 0.10 to
0.25 over the years from 2016 to 2017 and 0.26 in the year 2018. Interest cover ratio of
the company has also decrease from 36.83 to 10.00 over the years 2016 to 2017 and 26.5
in the year 2018. This is because the company is able to net interest obligations from
operating earnings which is a good sign because the firm is being able to meet its
obligations (Jenkins and Williamson 2015). However, the company is unable to generate
sufficient cash to address its debt obligations.
3.2. Company Culture, Core Competencies and Cross-Cultural Competencies
Corporate culture of Blackmores is focused on two aspects, behavioral ad aspirational.
The work practices within the company are supported by the legal procedures and policies.
Moreover, the company also follows a culture of passion for health, integrity, respect, leadership
and social responsibility among the employees (Lasserre 2017). The cross-cultural core
competencies are explained below:
 Effective working capital management through decreasing short-term obligations to
consumers
 Investment within additional warehousing all over Western Sydney
 Partnership agreement with Asian universities for following pharmacy education
programs
 Offering online learning program intended for health care professionals in distinct
languages