Baldwin’s Vision and Strategy gap analyzing
Why there is a gap
A gap relates to the difference between the actual performance results of the company and the projected results (Lucey, 2002). A gap arises out of a number of factors ranging from those factors which are within the control of Baldan to those which are far away from control by the company. From the annual reports, there is a gap in sales in the year 2016 and the projected sales of the year 2023. The sales of the year 2016 which amount to $46,669 vary significantly with sales of the year 2023 of $96,236 (Baldan Annual report, 2015). This is a favorable variation indicating a prospective increment in sales due to a projection of increased quality of goods and services. The projected increment in sales revenue is in line with the organization’s vision which is to ensure provision of high quality products. The positive gap or rather deviation is additionally as a result of projected positive change in core competence and the fact that the company enjoys competitive advantage. Additionally, there is a variance in net profit with the year 2016 registering $2,864 and a projected net profit of $5,195 This is a favorable variance which could be caused by increased profitable business operation. Further, there is a variance in variable cost with 2016 having a total variable cost of $32,312 whereas projected variable costs for the year 2023 amount to $57,129. This could be a s a result of projected increase in business operations and increased output. Since variable cost varies with level of production and that there is projected increase in production in the year 2023, variable cost is bound to increase.
What factors have caused this gap to occur?
Planned increase in price
There has been a projection of increment in prices which have led to the projected increase in sales revenue. Prices per unit in the ear 2016 are relatively lower. However, prices are expected to increase by the year 2023 hence the favourable sales variance and favourable profit variace. Increase in prices will lead to increased sales revenue only and only if the company maintains high levels of sales units.
The company’s vision has been to ensure that varied high quality products are produced. Currently, the sales volume is lower compared to projected sales revenue in the year 2023. The cause of this prospective favourable variance is change in products in terms of quality, price and packaging. The company is putting in place measures to ensure that the target sales of the year 2023 are met. One of the measures put in place to ensure that 2023 target sales are met include provision a chain of new high quality products. Besides, out of projected increase in sales, variable cost is bound to increase whereas profit is bound to increase.
In as much as competition leads to improved product quality, it also negatively affects the company’s market share. There is a projected favourable variance in sales revenue and net profit margins because the company projects that there will be reduced competition hence its ability to sell more and consequently leading to increased sales volume and consequent increase in profits. This is on the assumption that coupled with increased sales price per unit, the company will sell more units.
When the gap first appeared
From the annual reports, there has been a trend of projected increase in sales revenue and profits all the way to the year 2023. The first gap which is in form of a favourable variance is assumed to have started in the year 2015 as indicated by the trend which has been observed to the year 2023.
Corrective measures refer to actions taken by an organization inorder to contain any form of variance, whether adverse or favourable (Lucey, 2002). Corrective measures are normally undertaken to make corrections mostly in cases where adverse variances are observed. However, in the case of Baldan where there has been favourable variance in sales revenue and profits, the company has implemented strategies to ensure that there is continued increase in sales revenue and profits and that is why sales and net profit in the year 2023 have been highly projected. To ensure that the company continues enjoying increased sales revenue and consequent increase in profits, Baldan has introduced new high quality products. This move is also meant to ensure that there is reduced competition and that the company enjoys competitive advantage.
From the reports of Baldan, there is an indication of variance but mostly favourable ones. Since the company’s operations are based on sales revenue, the report has analysed majorly variance arising out of profit and the sales activities. The report has indicated that a trend of favourable variance has been observed in the company’s profit ad sales revenue. A number of factors are considered the drivers of these favourable variances. These factors range from prospective price increase, provision of new products and projected decrease in firm competition. Baldan’s favourable gap or rather variance in sales revenue and profit is positively significant and the company should put in place measures to ensure that the company continues registering increased sales revenue year in year out. The observed favourable gap in sales revenue and profits is in line with the company’s strategies to achieve objectives and mission. From the report, the favourable sales revenue and profit has been enjoyed by the company and the trend is projected to continue to as far as 2023is concerned. In conclusion therefore, Baldan has enjoyed positive sales and profit gap and should put in place measures to ensure that the trend continues.
Baldan Annual report, 2016-2023.
Lucey, T 2002, Costing, 6th edn. London, Continuum International Publishing Group.