DB745 - Wai Ora Adventures: Performance Analysis, Budget & Growth

This assessment provides a comprehensive analysis of Wai Ora Adventures, a tour operator in New Zealand, focusing on its financial performance and strategic opportunities. The report examines the company's current market position, analyzes its performance through key financial ratios and variance analysis, and identifies areas for improvement. It highlights the revenue generated from various market segments and activities, as well as the costs incurred by the business. The report also includes a budget estimation for the upcoming year, projecting a 30% growth rate for revenue and profits. Based on the analysis, the report offers strategic recommendations aimed at enhancing revenue, controlling costs, and improving the overall profitability of Wai Ora Adventures. The goal is to provide the management with actionable insights to guide their decision-making and support the company's expansion plans.

Running head: BUSINESS ANALYSIS
Business Analysis
Name of the Student:
Name of the University:
Author’s Note:

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BUSINESS ANALYSIS
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Current Market Position of the Business.....................................................................................2
Analysis of Performance of the Business....................................................................................3
Variance Analysis........................................................................................................................6
Findings and Recommendations................................................................................................11
Conclusion.....................................................................................................................................12
Reference.......................................................................................................................................13

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BUSINESS ANALYSIS
Introduction
The main purpose of this assessment is to analyse the financial performance of Wai Ora
Adventures in order to recommend proper strategies for the purpose of enhancing the revenue
and scale of operations of the business. The business which is being considered in the assessment
is engaged as a tour operator in New Zealand. There has been significant growth in the tourism
industry over the years and this is the main reason that more and more businesses are coming up
in this sector. The business of Wai Ora Adventures provides so much more to the customers
rather than simple tourism which includes adventure sports, one in a lifetime experience and
other tour facilities (Roberts, Hall & Morag, 2017). The assessment would also be including
estimation of a budget for the new year considers a growth rate of at least 30% for revenue and
profits of the business. The budget would be then considered as the basis on which decisions are
to be taken by the management of Wai Ora Adventures regarding the operations of the business
(Purdie, 2013). The assessment considers the main operations of the business of Wai Ora
Adventures which is a best spot for tour. The business is planning to expand the operations of the
business by taking loans and trying to enhance the revenue of the business.
Discussion
Current Market Position of the Business
The business of Wai Ora Adventures is recently opened in New Zealand which provides
the tourists with a place where they can enjoy different types of adventures sports and along with
other facilities. The business provides safe experience to the customers for all kinds of outdoor
sports to build self-esteem, confidence, leadership skills and the ability to work as part of a team.
The company also provides various other facilities such as accommodation, food and transport

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BUSINESS ANALYSIS
facilities to the customers (Keen, 2013). The management of the company wants to enhance the
scale of operations of the business and also enhance the revenue of the business.
The business of Tourism is rapidly increasing in New Zealand as more and more tourist
is choosing the place a potential tourist destination and in addition to this, the domestic tourism
of the country has also increased significantly. As per the NZ statistics, the contribution of the
tourism industry to the overall revenue in 2018 was around $ 39.1 billion (Hendrikx et al., 2013).
The total tourism rate showed an increase of 7.7% which is 2.5% more than the previous year
which shows significant improvement for the business (Wilks, Stephen & Moore, 2013).
Therefore, from the survey results which are available regarding the industry, it is clear that there
is significant scope for growth of the businesses which are operating in such an industry (Buhalis
& Crotts, 2013). The management of Wai Ora Adventures wants to take advantage of such a
situation and thereby enhance the sales and profitability of the business. The management wants
to expand the operations for which an appropriate budget is to be formulated by the management
of the company on the basis of which feasibility analysis of the expansion proposal can be
considered by the business.
Analysis of Performance of the Business
The analysis of the business performance would be on the basis of the financial data
which is available from the financial statement of the business for the period of years which the
management of the company has formulated. The figure for sales of the business is subdivided
into four major market segments which are considered by the management of the company
(Orchiston, 2013). The sales of the business are shown to have decline during the period of 2018
in comparison to previous year analysis (Keen, 2013). The performance of the business is

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BUSINESS ANALYSIS
depicted from the financial analysis which is done considering the financial report and the budget
which is prepared by the management of the company on estimation basis. The analysis is shown
with the help of key financial ratios and variance analysis. The financial estimates are taken from
the financial statements of the business. The maximum revenue which is generated by the
business is from international tours which is shown to be $ 3,02,190 which is closely followed by
revenue which is generated by the business from students who are studying abroad. The
activities which are undertaken for different segments depends on the nature of the customer and
what they want from such a tour (Hall, Scott & Gössling, 2013).
The total revenue which is generated by the business from different segments shows a
slight decline which suggest that the management needs to attract more customers so that the
management can enhance the revenue of the business. As per the analysis of the costs of the
business suggest that the management of the company needs to control the costs of the business.
The maximum costs which is incurred by the management of the company is for transports costs.
The transport costs of the business are shown to be slightly higher and the same is shown to have
increased in 2018. The other components of the total costs which is shown in the financial
reports which is prepared by the business are commission and wages which forms part of direct
expenses of the business (Razzaq, Hall & Prayag, 2016). The gross profit of the business is
shown to have declined from previous year which is mainly due to increase in the costs of the
business. The key financial ratios which are presented below in the table will determine the
performance of the business.
Financial Analysis
2018
wages to sales % (total and per activity) 62.64%
wages as a % of total costs 58.57%

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BUSINESS ANALYSIS
$ sales per category /$ total sales (and as %)
International Tours 55.84%
Student Studying 25.79%
Soeciality Tours 15.82%
Other Income 2.550%
$ sales per activity /$ total sales (and as %)
Canyon trips 58.98%
Abseiling 13.48%
Skiiing 22.76%
Others 2.23%
$ transport per category /$ total sales (and as %)
International Tours 9.79%
Student Studying 0.69%
Soeciality Tours 2.07%
Other Income 1.03%
$ commissions per activity /$ total sales (and as %)
Canyon trips 0.40%
Abseiling 0.14%
Skiiing 0.30%
Others 0.10%
$ total marketing /$ total sales (and as %) 4.86%
The financial statements show that the business incurs significant losses during the period
of 2018 which is mainly due to increase in the overall costs of the business. The net profit of the
business for the year 2018 is shown to be negative. The wages to sales ratio shows that the wages
costs form an important component of total costs and it is more than half of the revenue which is
generated from sales. There is no wonder that the business has been incurring losses during the
period. The management of the company needs to formulate appropriate strategy for the purpose
of improving the profitability of the business. The management of the company needs to improve
the profitability so that the business can continue its operations for a long time in future. The
ratios which are shown in the above table shows that the maximum revenue which is generated
by the business is from international tour packages which forms 55.84% of the total revenue

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BUSINESS ANALYSIS
which is generated by the business. If revenue generated is considered on the basis of the
activities which are carried out by the business, then the maximum revenue is generated by trips
to canyons followed by skiing activities. The revenue which is generated by the business from
such activities shows that the business is earning a major portion of revenue from such activities
and it also means that the sport is popular among the people. The maximum transport costs is
incurred for international tour as is shown in the ratios computed above. The maximum
commission which is received is for the tours of the canyons as computed in the table above.
Variance Analysis
Variance
2017 2018 Variance
Sales (June 2016 to June
2017)
(June 2017 to June
2018)
International tours
Canyon trips 191200 216140 13.04%
Abseiling 85990 56010 -34.86%
Skiiing 31150 22180 -28.80%
Others 9980 7860 -21.24%
318320 302190
-
5.07%
Students studying
Canyon trips 75020 86030 14.68%
Abseiling 20250 15260 -24.64%
Skiiing 30000 37000 23.33%
Others 1600 1300 -18.75%
126870 139590
10.03
%
Speciality tours
Canyon trips 15010 17010 13.32%
Abseiling 2200 1700 -22.73%
Skiiing 55980 63990 14.31%
Others 2100 2900 38.10%
75290 85600 13.69

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BUSINESS ANALYSIS
%
Other income
Meals - prepackaged 8000 11000 37.50%
Sightseeing tours 2500 2800 12.00%
10500 13800
31.43
%
Total Sales 530980 541180 1.92%
Direct Costs
Transport
Canyon trips 46860 52960 13.02%
Abseiling 3310 3710 12.08%
Skiiing 9620 11220 16.63%
Others 5600 5600 0.00%
65390 73490
12.39
%
Commisions
Canyon trips 2300 2180 -5.22%
Abseiling 730 780 6.85%
Skiiing 1250 1625 30.00%
Others 500 560 12.00%
4780 5145 7.64%
Wages
Canyon trips 83000 96000 15.66%
Abseiling 46000 48000 4.35%
Skiiing 60000 62000 3.33%
Others 2000 1000 -50.00%
Admin 22000 22000 0.00%
Management 85000 110000 29.41%
298000 339000 13.76%
Total Direct
Expenses 368170 417635 13.44%
Gross Profit 162810 123545 -24.12%

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BUSINESS ANALYSIS
Indirect Costs
Premises 42000 42000 0%
Telephones 15020 14770 -1.66%
Power 31960 32960 3.13%
Bank charges 1600 1750 9.38%
Bank loan 26000 34000 30.77%
Other 8500 9400 10.59%
125080 134880 7.83%
Marketing 15250 26275
15250 26275 72.30%
Net Profit 22480 -37610
-
267.30%
The above table shows variance analysis for the business of Wai Ora Adventures
considering the variances which has taken place between the estimates of 2017 and 2018. The
above table shows that the sale for canyon activity has increased during the period and all the
rest have shown mixed results. The income which is generated by the business from other
activities is shown to have enhanced and therefore the same shows positive results. The profit
shows a significant decline and therefore the same is demonstrated as variance. The net profit is
shown to be adverse which the management needs to improve.
Key Area of Performance
The key area of performance of the business is mainly related to how well the
management of the company can serve the customers or tourists of the business. The key areas of
performance are the revenue which is generated by the business from the activities which are
undertaken by the management of the company. Another key area of performance is the ability

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of the business to keep the costs of the business which is a area where the management of the
company is lacking.
Operating Budget
An extract of the financial results of the business for the year 2017 and 2018 along with
a budget which is prepared by the management of the company is presented below:
2017 2018 2019
Sales (June 2016 to June
2017)
(June 2017 to June
2018)
(June 2018 to June
2019)
International
tours
Canyon trips 191200 216140 280982
Abseiling 85990 56010 72813
Skiiing 31150 22180 28834
Others 9980 7860 10218
318320 302190 392847
Students studying
Canyon trips 75020 86030 111839
Abseiling 20250 15260 19838
Skiiing 30000 37000 48100
Others 1600 1300 1690
126870 139590 181467
Speciality tours
Canyon trips 15010 17010 22113
Abseiling 2200 1700 2210
Skiiing 55980 63990 83187
Others 2100 2900 3770
75290 85600 111280
Other income
Meals - prepackaged 8000 11000 14300
Sightseeing tours 2500 2800 3640
10500 13800 17940
Total Sales 530980 541180 703534

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BUSINESS ANALYSIS
Direct Costs
Transport
Canyon trips 46860 52960 68848
Abseiling 3310 3710 4823
Skiiing 9620 11220 14586
Others 5600 5600 7280
65390 73490 95537
Commisions
Canyon trips 2300 2180 2834
Abseiling 730 780 1014
Skiiing 1250 1625 2112.5
Others 500 560 728
4780 5145 6688.5
Wages
Canyon trips 83000 96000 120000
Abseiling 46000 48000 60000
Skiiing 60000 62000 77500
Others 2000 1000 1250
Admin 22000 22000 27500
Management 85000 110000 137500
298000 339000 423750
Total Direct
Expenses 368170 417635 542925.5
Gross Profit 162810 123545 160608.5
Indirect Costs
Premises 42000 42000 54600
Telephones 15020 14770 19201
Power 31960 32960 42848
Bank charges 1600 1750 2275
Bank loan 26000 34000 44200
Other 8500 9400 12220
125080 134880 175344
Marketing 15250 26275 34158

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BUSINESS ANALYSIS
15250 26275 34158
Net Profit 22480 -37610 -48893
The above table effective shows the financial position of the business for the period
which is considered by the management. The budget which is shown in the above table for the
year 2019 is prepared considering certain assumptions such as the increase in the sales revenue
of the business is anticipated to be at the rate of 30% for all the segments from where the
management is generating revenues. The costs elements which are represented in the budget is
also shown to have increased by 25% which shows that the management is attempting to reduce
the costs of the business for the purpose of improving the profitability of the business.
Findings and Recommendations
The above analysis of the financial statements and the current business conditions for
Wai Ora Adventures shows that the management of the company needs to take serious steps for
improving the business structure so that the same can be more profitable. As per the analysis of
the market conditions, it can be deduced that the market conditions are favourable even though
tough competition exist in the market and there is a lot of potential in the industry and the same
is still growing.
The analysis further shows that the main problem which the management of the company
has is the hike in the costs of the business which differs from packages to packages and as per
the needs of customers. However, the management of the company needs to improve such a
situation so that costs do not affect the profitability of the business and also does not affect the
price which is charged for the tour package options which is provided by the management of Wai