Friday, December 6, 2019
Strategies of Overseas Family School-Free-Samples for Student
Question: Analyse and evaluation of the internal as well as external strategies of Overseas Family School (OFS). Answer: Introduction The main aim of this report is to make an analysis and evaluation of the internal as well as external strategies of Overseas Family School (OFS). The main objective behind this evaluation of OFSs strategic position is to identify the positive aspects of the performance of the company so that it can attract the attention of the investors. Investors use to consider different aspects of the performance of the companies before making major investment decisions (Hitt, Ireland Hoskisson, 2012). In this context, some of the major considerable aspects by the investors are internal growth, external growth, financial growth, strategic changes and others. Financial performance is considered as the most important aspect for the investors in order to make investment decisions as good financial health of the companies always attracts the attention of the investors. OFS is one of the leading English language schools for the overseas families living in Singapore. OFS was founded in the year of 1991 (ofs.edu.sg, 2018). This report sheds light on both the internal and external growth of OFS. The report also discusses about the financial performance of OFS over the years for providing the investors with assistance in investment decision-making. Internal growth According to the earlier discussion, it can be observed that internal growth of business is a major considerable factor for the investors in order to make investment-decisions. Internal growth, also known as organic growth, happens when there is a business expansion in its own business operations without relying on any kind of takeovers and mergers (Sherman, 2014). There is not any exception of this fact in case of OFS. It needs to be mentioned that there has been major internal growth of OFS over the years. When started in 1991, OFS was operating in a temporary site. However, OFS invested their capital in their internal expansion; and in the year 2015, OFS moved to a newly built campus (businesstimes.com.sg, 2018). The design of this new campus is considered as the school design of the future where there are unique technologies to support the advanced learning of the students. It implies that OFS also makes major investments in technological development (businesstimes.com.sg, 2018). Apart from this, OFS also make investments for the development of their campus. OFS has made major internal expansion with the development of some of the major aspects; like establishment of library students from all classes, establishment of multi-purpose auditorium, Black Box Theater for differences purposes, swimming pools and different types of activity rooms (businesstimes.com.sg, 2018). Apart from these, OFS has expanded their learning curriculums in order to cater to the needs of all types of students with the introduction of different curriculum like International Primary Curriculum (IPC), International General Certificate of Secondary Education (IGCSE), International Baccalaureate Diploma Program and many others (businesstimes.com.sg, 2018). In this context, it needs to be mentioned that OFS has invested large amount of capital for the introduction of advanced technology in the learning process; and the introduction of Math-Coding technology can be presented as example in th is aspect. The above discussion provides some major evidences of the occurrence of strong internal growth within the organizations. Most important, the crucial aspect is that OFS does not depend on any takeover or merger for this internal expansion. External Growth External growth refers to the ways adopted by the business organization in order to increase the value of the organizations. Thus, it can be seen that external growth of the companies is largely depends on the development of external strategies. There is not any exception of this fact in case of OFS as the school has developed some of the major strategies for ensuring external growth. In the recent years, the major business strategy of OFS has been to increase the amount of student enrollment with the help of the expansion of the capacity to approximately 5000 in the campus. Another major strategy of OFS is to fully leverage the expertise of the management in order to explore the opportunities of business collaboration, joint venture, acquisition, investment opportunities and others (oel.listedcompany.com, 2018). It needs to be mentioned that the main aim of OFS is to deliver quality educational services in order to ensure the external growth of the organization. In this aspect, one of the major targets of OFS is the conservative maintenance of the organizational expenditure in order to increase profitability. Apart from this, OFS is also eyeing on the opportunity of foreign direct investment in order to ensure their business growth (oel.listedcompany.com, 2018). Thus, from the above discussion, it can be observed that OFS has developed effective strategies in different business aspects in order to ensure the external growth of their business and it can be considered as a major positive for the investors. Strategic Changes based on Financial Analysis Trend analysis of Overseas Family School Horizontal analysis of income statement Changes Particular 2014 2015 2016 2014-15 2015-16 Revenue $ 102,120.00 $ 97,119.00 $ 91,847.00 -4.90% -5.43% Less Operating expenses $ 75,680.00 $ 79,745.00 $ 84,346.00 5.37% 5.77% Profit before tax $ 26,440.00 $ 17,374.00 $ 7,501.00 -34.29% -56.83% Less: Income tax expense $ 4,456.00 $ 2,438.00 $ 2,237.00 -45.29% -8.24% Net profit $ 21,984.00 $ 14,936.00 $ 5,264.00 -32.06% -64.76% Horizontal analysis of balance sheet Particulars 2014 2015 2016 2014-15 2015-16 Assets Non-current assets $ 218,996.00 $ 289,174.00 $ 279,357.00 32.05% -3.39% Current assets $ 132,905.00 $ 64,302.00 $ 57,434.00 -51.62% -10.68% Total assets $ 351,901.00 $ 353,476.00 $ 336,791.00 0.45% -4.72% Equity and liabilities Current liabilities $ 43,744.00 $ 45,138.00 $ 36,569.00 3.19% -18.98% Non-current liabilities $ 150,941.00 $ 153,320.00 $ 148,507.00 1.58% -3.14% Total liabilities $ 194,685.00 $ 198,458.00 $ 185,076.00 1.94% -6.74% Total equity $ 157,216.00 $ 155,018.00 $ 151,715.00 -1.40% -2.13% Total equities and liabilities $ 351,901.00 $ 353,476.00 $ 336,791.00 0.45% -4.72% Vertical analysis of income statement Particular 2014 2014 2015 2015 2016 2016 Revenue $ 102,120.00 100% $ 97,119.00 100% $ 91,847.00 100% Less Operating expenses $ 75,680.00 74.11% $ 79,745.00 82.11% $ 84,346.00 91.83% Profit before tax $ 26,440.00 25.89% $ 17,374.00 17.89% $ 7,501.00 8.17% Less: Income tax expense $ 4,456.00 4.36% $ 2,438.00 2.51% $ 2,237.00 2.44% Net profit $ 21,984.00 21.53% $ 14,936.00 15.38% $ 5,264.00 5.73% Vertical analysis of balance sheet Particulars 2014 2014 2015 2015 2016 2016 Assets Non-current assets $ 218,996.00 62.23% $ 289,174.00 81.81% $ 279,357.00 82.95% Current assets $ 132,905.00 37.77% $ 64,302.00 18.19% $ 57,434.00 17.05% Total assets $ 351,901.00 100% $ 353,476.00 100% $ 336,791.00 100% Equity and liabilities Current liabilities $ 43,744.00 12.43% $ 45,138.00 12.77% $ 36,569.00 10.86% Non-current liabilities $ 150,941.00 42.89% $ 153,320.00 43.37% $ 148,507.00 44.09% Total liabilities $ 194,685.00 55.32% $ 198,458.00 56.14% $ 185,076.00 54.95% Total equity $ 157,216.00 44.68% $ 155,018.00 43.86% $ 151,715.00 45.05% Total equities and liabilities $ 351,901.00 100% $ 353,476.00 100% $ 336,791.00 100% From the trend analysis of the company it can be observed that though the revenue as well as the net profit of the company is in decreasing trend, for all the last 3 years the company has positive profit (Bruce-Twum Mensah, 2015). Further, from the company was able to reduce its liabilities by 6.74% over the year from 2015 to 2016. Computation of financial ratios Ratio Formula 2014 2015 2016 Profitability Ratio Operating profit margin Operating profit / Sales *100 0.26 0.25 0.20 Return on capital employed PBIT/ Capital employed * 100 7.51 6.89 5.37 Liquidity ratios Current ratio Current assets/Current Liabilities 3.04 1.42 1.10 Acid test ratio (Current assets -Stock)/Current liabilities 3.03 1.38 1.53 Gearing ratios Gearing ratios Long term debt / (long term debt + Equity) * 100 48.98 50.28 49.47 Debt ratio Total debt/Total assets 0.55 0.49 0.55 Ratio analysis Profitability ratio the profitability ratios are used as the financial metric for analysing the ability of the business to generate income after paying off the expenses (Tomczak, 2014). Generally, the companies with higher profitability ratios are considered better and stable. Looking at the calculation above it can be observed that the operating profit margin of the company for the last 3 years is moving between 20% and 30%. Further, the return on the capital employed of the company is moving between 5% and 7.5% during the last 3 years. Therefore, it can be said that the profitability position of the company is good. Liquidity ratio it indicates whether the current assets of the company are sufficient to meet short term obligation of the company after they become due. The current ratio and quick ratios are generally computed to assess the liquidity position of the company. Under the current ratio the current liabilities of the company is compared with the current assets of the company. On the other hand, under the quick ratio inventories and prepayments are not taken into consideration in measuring the current assets. Looking into the calculation table of the ratios it can be observed that both the current ratios as well as the quick ratios of the company are in decreasing trend (Palepu, Healy Peek, 2013). However, the very high liquid ratios indicate that the company is not using its working capital efficiently. It is observed that the liquid ratios of the company states that the company has improved with respect to utilization of its current assets. Gearing ratio It measure the long-term debt level of the company and compare it to the level of equity. High gearing ratio represents that the company is highly leveraged and associated with high level of financial risk. Looking into the gearing ratio of the company it is observed that the long term debt of the company as compared to equity for all the 3 years is around 50%. On the other hand, the debt proportion of total asset is ranged between 50% and 55%. Therefore, it can be stated that the company has maintained the gearing ratio over all the past years under consideration (Brochet, Jagolinzer Riedl, 2013). Recommendations From the above discussion, it can be seen that there are many positive aspects in the business operations of OFS and all these aspects together can fetch healthy returns to the investors. Based on the above whole discussion, some reasons are provided below for the investors to invest in OFS: It can be observed that OFS has been able to maintain effective internal growth for their business. OFS has been investing in the expansion of their school, introduction of technology in learning and others. It is a positive aspect for the investors. Growth can also be seen in case of external factors. The above discussion shows that OFS has undertaken some major strategies that are helpful for ensuring the external growth of the company. These factors will be great boost to the investment of the investors. From the analysis of the gearing ratio, it can be observed that OFS has effective debt position where effective proportion of debt and equity can be seen. This is a positive aspect for the investors of OFS as it reduces the risk related to the investment. However, in order to maintain this gearing level, OFS needs to use the mix of debt and equity. The liquidity analysis also shows the effectiveness of the liquidity position of OFS. However, at the same time, it is required for OFS to reduce the debit period for the debtors in order to pay the liabilities. Thus, in the presence of all of these positives, it is highly recommended to the investors that they should invest in OFS to get better return. Conclusion The above discussion sheds lights on the major factors considered by the investors while investing in any company like internal growth of the company, external growth, financial performance and others. The above discussion indicates towards the internal as well as external growth of OFS that re highly beneficial for the investors. At the same time, the financial analysis part also indicates good financial performance of the company. In the presence of all these aspects, the investors can invest in OFS to get high return References Brochet, F., Jagolinzer, A. D., Riedl, E. J. (2013). Mandatory IFRS adoption and financial statement comparability.Contemporary Accounting Research,30(4), 1373-1400. Bruce-Twum, E., Mensah, C. C. (2015). Financial Statement Analysis. Gandhi, R. (2018).Overseas Family School.The Business Times. Retrieved 28 March 2018, from https://www.businesstimes.com.sg/specials/overseas-family-school/ Hitt, M. A., Ireland, R. D., Hoskisson, R. E. (2012).Strategic management cases: competitiveness and globalization. Cengage Learning. Investor Relations: Business Strategies and Future Plans. (2018).Oel.listedcompany.com. Retrieved 28 March 2018, from https://oel.listedcompany.com/future_plans.html Investor Relations: Financials. (2018).Oel.listedcompany.com. Retrieved 28 March 2018, from https://oel.listedcompany.com/financials.html Overseas Family School - Background. (2018).Ofs.edu.sg. Retrieved 28 March 2018, from https://www.ofs.edu.sg/about-ofs/background/ Palepu, K. G., Healy, P. M., Peek, E. (2013).Business analysis and valuation: IFRS edition. Cengage Learning. Sherman, H. J. (2014).The business cycle: growth and crisis under capitalism. Princeton University Press. Tomczak, S. (2014). Comparative analysis of liquidity ratios of bankrupt manufacturing companies.Business Economic Horizons,10(3).