Investment Policy Statement (IPS)
The investment policy statement involves the purchase of Google stocks and Aramex Inc. The purchase of the two stocks is intended to enhance value as the stocks are currently regarded as growth stocks. The two companies have been making numerous stock growths. The two companies are currently undertaking various business deals that are set to bring so many profits to the companies. Indeed, the stocks are regarded as high value stocks and are envisaged to record impressive growths in the future. The objective of purchasing the two stocks and their use in the portfolio is motivated by the fact that they are in different in different industries and also based in different locations. Therefore, the stocks are destined to perform exceptionally well owing thus leading to a diversified portfolio. The diversification is brought about by the different sectors, in that Google is a technology company concentrating on provision of internet content while Aramex Inc is a transport and logistics company. Therefore, there co-movement of the two stocks is negatively correlated meaning that when one stock is down, there other is up. This means that they move in opposite directions; hence hedging each other. The asset allocation of the two stocks is 50% for each. This therefore means that there is equal weight for the two stocks. The choice of the two stocks is particularly motivated by various individual aspects of the two companies.
Google Inc deals with provision of internet products and services. Some of these include search ads, software, computer products, licensing as well games solutions. Google Inc accounts for significant percentage within the internet market. However, Microsoft Inc commands largest market share within the industry amounting to over 50% of total market share. Google and other related companies only controls less than 50% of the total market share globally. Most of the internet based companies base their strategy on product value. Financial analysis of the company’s accounts is based on various key accounting policies applicable on valuation processes. Valuation process involves revenue, income tax expense and ascertained accruals, quality of brand, valuation of goodwill and stock compensation expenses. Google Inc designed a method where value of products and services are accounted for upon delivery to the global market. This assists in creation and maintenance of high reputation on Google brands (Google, 2013). The last stock price of Google Inc as at 6th Dec 2013, was recorded as Google Inc. Stock Quote & Summary Data $1069.87* 12.53 up by 1.19%.
Google Inc current mission focuses on organizing the World’s information making it accessible and efficient for use globally. Despite the mission statement representing their goals, there is no reflection on means through which they generate profits. However, the statement positions the company on high platform which sets it as resource accessible to consumers doing some research work. The mission statement is focused only on the end results.
Current objectives and strategies
Google Inc revenue is generated from advertising of which requires more platforms for ads for the purposes of increasing revenue. The company is also consistent in its various acquisitions which provide avenues for various ads. However, the company’s strategy is based on creating ads capable of capturing customer attention. This is achieved by ensuring that various ads are relevant for consumption. Currently, Google’s search ads commands majority’s attention within the market, this was due to hybridized service where bid price was combined with click-through rate. This ensures maximum income as well as increased relevance since the search ads are trusted. The strategy in this case involves expanding the aspect of relevancy beyond search. This would be achieved through personalization of various search ads (Google, 2013).
Current financial condition description
On Financial analysis the gross profit margin from financial statements reveals some gap within Google’s profitability based on sales. Google Inc for many years has been considered as generating significant profit on sales compared to other competitors within the same market. The company’s statement provides some light on company’s ability which definitely falls above industry average.
Google Inc utilizes various financial tools for the purposes of promoting activities within its value chain. In the process of providing services, the company allows consumers to access accurate data and applications for free (Google, 2013). Google Inc is believed to have market share estimated at 60% of the total global internet connection. With such positioning, the company is capable of generating considerable turnover within subsequent years especially on search ads. Recent technological improvements make the company to focus on vertical integration involving various products hence granting Google an upper hand over competitors such as Microsoft (Business Continuity Planning for Banking and Finance, 2007).
Google’s operations outside United States generate considerable income of more than thirty percent of total net revenue. From this 20% is obtained from hubs within Europe, the remaining percentage is obtained from other continents. However, the level of growth of Google’s products and services within market encounter considerable challenges ranging from economic downturn and political instabilities within some regions. Google Inc applies the use of forward contracts for the purposes of countering such uncertainties. The financial breakdown from the balance sheet and other financial statements gives clear position of the current and previous position of Google Inc. financial tool is used in exposing some of the changes experienced over the years. Liquidity levels of the company show that Google Inc is relatively stable.
Google Inc attains significant profitability levels as compared to other companies within the industry and previous years (Google, 2013). Financial statement as analyzed reveals that the company experiences significant decrease in Gross Profit Margin. Such decline indicates an increase in level of cost of goods sold and on services provided over the years. Such evaluation reveals that Google might be on the habit of spending more on innovative processes compared to the ultimate product and service output as per market demand. In the analysis, there is considerable increase of approximately 0.12% from previous years. There is change in net profit margin hence creating positive impact; with notable increase of around 4.4% since the year 2000. Also notable is the level of Asset Turnover which declined from 2007 indicating that Google has got challenges concerning conversion of the available assets into returns.
Investment Policy Statement
Strategic human resource management is the main means through which a company can mold the skills, behavior and attitudes of the employees to support the company’s strategic goals. In Google Inc, the implementation of sound HRM strategy in view of employee is beneficial to the company in moving towards greater technological heights. The engagement of employees in decision-making is critical in individual and organizational performance. The case addresses the importance of implementing a set of human resource management strategies which elicits workforce’s motivation in developing expertise and innovativeness. The strategic practices proposed allow Google to realize and employ knowledge and skills in its employees. This will in turn accelerate innovativeness with sustainable environment practices in the mind of the employees (Kotler, 2006).
Contingency theory provides that leadership and being a leader depends on both traits and situation at hand. Google Inc good leadership abilities within the industry and market grant them the ability to solve problems according to the situation at hand and able to display good traits that are universally acceptable by majority of the consumers. Again, this theory states that leaders are both relationship-oriented as well as task-oriented. That is to say that, those who can provide good leadership will be able to have good and desirable relationship with others; they will also be able to accomplish their task as expected. In addition, the theory clearly shows that leaders should always be social with others as well as have unique personalities and desirable traits. Therefore, this theory tends to combine the first two theories to an acceptable degree.
For the purposes of attaining sustainable development in the Internet industry, the management of resources is crucial. Human resource management (HRM) is particularly important. HRM draws out the incentive of employees and assists in the development of expertise. An organization cannot perform at optimal level until every employee is dedicated to the organizational goals and function as an efficient team member. The input of the human resource function is therefore essential for an Google Inc company in order to produce products that ensures not only sustainability development but also contribute towards company’s profitability (Halldorsson et al., 2013).
Google Inc. overall strategy for conducting business begins with the idea that an organizational competitive edge should be anchored on the value for individuals. Google Inc has a basic supposition that has been cautiously chosen and grown on employees for quite some time. The company assumes that the more people it has the more the production and consequently the profitability of the company. The best strategy aspires to diminish this aspect by introducing ‘engaged, motivated and satisfied employee’. Instead of having a massive workforce that is not engaged in research and development, innovativeness and engagement, Google should seek to develop a workforce based on the aforementioned perspectives. This will lead the company in attaining competitive advantage and shared prosperity.
Google Inc Company maintains an outstanding profile in its human resource policies and standards. The company believes that investing in human resources and innovativeness is the key to success in the production and service oriented companies. The company in the past has made investments in the human resources by poaching professionals from other fields. However, this approach regardless of being successful has not been sustainable. Other companies also poach employees from the company. Google Inc consequently has had to repeat the process thus making it a costly process. The programs that have previously been employed by the company were based on the belief that when the right tools are applied to particular problems through highly skilled personnel, the organizational performance spectacularly improves in a considerably short duration. Such a program is targeted at labor cost and inventory reduction while minimizing quality challenges.
Google Inc invests in programs such as search engine, customization of advertisement solutions, utilization of Double-click technology and at the same time provides customers with various free information ads. Financial analysis indicates that Google Inc shows positive results within its capital structure despite being a small margin. There is positive Debt to Equity ratio which is an indication that Google has capability of financing its business ideas without incurring any debts. The units on liquidity ratios create an impression that the company has the capability of meeting short-time obligations.
Specific actions needed for implementation of chosen strategies
- Training of managers and employees on skills necessary for handling modern technology devices and programs
- Articulation of clear departmental goals and mission statement
- Proper coordination and budget planning can enable the company to achieve their mission
- Creation of appropriate channels for effective communication of valuable ads
The level of Google’s liquidity is further explained form calculations on quick ratio which determines the company’s strength; hence its ability to meet current obligations based on improved liquid assets. Such abilities are considered by investors in the process of purchasing shares, since they are able to generate company’s expected value for their investment from such calculations. The business’s viability can be based on improvement from below zero to 1 within the current financial year. This reveals that the company is capable of meeting their current and future obligations. Solutions and decisions to financial problems can be solved faster compared to previous years. In the same calculations it can be noted that receivable turnover have decreased staging some percentage threat to company’s liquidity. Inventory turnover is on the increase trend from 7.9 to 9.76 in the current year as per the table hence indicating valuable productivity within inventory management (Google Inc, 2013).
Google Inc attains significant profitability levels as compared to other companies within the industry and previous years (Google Inc, 2013). Financial statement as analyzed reveals that the company experiences significant decrease in Gross Profit Margin. Such decline indicates an increase in level of cost of goods sold and on services provided over the years. Such evaluation reveals that Google might be on the habit of spending more on innovative processes compared to the ultimate product and service output as per market demand. In the analysis, there is considerable increase of approximately 0.12% from previous years. There is change in net profit margin hence creating positive impact; with notable increase of around 4.4% since the year 2000. Also notable is the level of Asset Turnover which declined from 2007 indicating that Google has got challenges concerning conversion of the available assets into returns.
External and internal analysis
Google Inc has one of the greatest opportunities to capture the growing number of mobile users by displaying advertisements for mobile users hence increasing returns. Also the company has to obtain more patents through its various acquisitions. In such instances, the company has to search for companies with strong patent portfolios. There is also introduction of driverless electronic cars of which the technology can be installed within any future model. Additionally, Google Inc can utilize the growth currently experienced within electronics industry and the use of fiber cables (Google Inc, 2013).
Google Inc faces various threats some of which include; difficulties in monetizing mobile internet users owing to high number of mobile internet users, there are a number of unprofitable products and services currently provided by the company, legal cases with European Union anti-trust laws and also stiff competition from other companies such as Microsoft Inc.
One of the company’s strength includes its vast source products and services. Google Inc focuses on organizing world’s information hence making it accessible universally. The company offer variety products such as Google maps, calendars, drive, OS amongst others. These products are open and can be accessed from any destination, for example its products can be used with any OS or mobile devices free of charge. Provision on openness makes Google number one provider of products and services (Google Inc, 2013). Second strength lies on quality of customer experiences the company offers. Their services are of premium quality and focuses on bringing solution to consumer needs and requirements. Such services as offered provide excellent customer experiences hence first choice company to consumers. The other strength is on their financial situation, whereby Google is ranked amongst most profitable companies in the world. The company records show that they hold $ 48 billion in cash and only $ 7 billion in debt.
Fourth strength lies on the large customer base where Google Inc is accessed by the largest group of internet users globally. Statistics shows that Google has access to 79% of world’s computers and 89% of access to mobile search market users. The company also has strong patent portfolios which grant superior intellectual property forming the key to competitive advantage over other companies. The company integrates their products with each other hence forming an enriched ecosystem. Such set-up encourages use of more company products and services. Google Inc also has unique culture of innovation providing many unique products (Google Inc, 2013).
Google Inc relies only on one source of income since over 90% of its revenue is generated from online advertisement. In the short run online advertising is expected to increase in 2013 hence promoting Google returns. However, in the long-run it might pose some level of challenge in income growth. This is since the market for personal computers is slowly picking up making Google to experience lower rates in the use of desktop search engine market. Secondly, there are many products and services within the company’s portfolio which do not add value for the business hence making Google incur losses. At the same time, Google’s involvement in patent litigations consumes a lot of company’s time and resources hence distracting the company from innovation activities. Google has efficient internal strategy in comparison to other internet related companies. Within the last two years Google Inc required vast resources for the purposes of maintaining growth. The success of the company can be attributed to solid corporate activities such as creating search ads for the purposes of promoting new inventions. At the same time, Google Inc focuses on products and services design and also marketing for the purposes of penetrating global markets.
Full service broker
Companies require careful selection of brokers capable of supplying valuable investment information which ultimately results into profitable investment suggestions. Full-service brokers are highly considered within full-service national firms. Wide range of services offered by companies include; research reports, individual advice, asset management accounts, consolidated account statements, tax shelters as well as other investment-related topics. Such wide range of services requires services of full-service brokers. Full-service brokers separate themselves from competition within specified areas as stock picking, asset allocation and detailed research.
This account enables purchase of financial assets through money borrowed from brokerage firm. Brokers in this situation assumes greater amount of risk in operating margin accounts. This account requires maintenance of specific margin at all times i.e. there must be maintenance of specific percentage of the value of assets purchased on margin. The current maintenance of the margin rates at 50%, situation which requires margin call in case value of securities purchased on margin goes below the given percentage. The rules safeguarding margin lending are regulated by Federal Reserve.
There is need for diversification in different markets through spread of bets around and at the same time invests in companies of different sizes within different geography and having varied economic status. Such initiative can grant safety when investing 100% in stocks. However, combining investments at times provide great way of reducing risks and decreasing along the way, especially investments that do not move in lockstep.
Profile of the Company
Aramex is a United Arab Emirates-based public company established in 1982 and deals with provision of consumers related solutions based on freight, express, logistics and supply chain management of businesses. The company does this through the acquisition and ownership of controlling interests in companies within the Middle East and other regions. The company has been under private ownership since 2002 and operates comprehensive problems on transportation and logistics. Aramex presents one of the most prominent companies within Middle-East since its listing in international stock exchange in mid 1990s. The company appeared on the public listings of Dubai Financial Market in 2005 under ARMX trade shares. The latest trading index for Aramex Inc as at 5th December 2013 was at 2.70 representing a change of 2.27%.
Aramex’s transportation network covers wide region from Middle-East to United Kingdom through to Caribbean countries. Such land networks are utilized by trucks fitted with Modern GPS-tracking system and also advanced technology involving scheduled services and strategic locations for their various terminal offices (Aramex). This creates a cost-effective service preferred by most companies as compared to shipping services. The company is involved in receiving shipments from defined points taking charge of all clearance procedures to the delivery points of the products. Aramex is capable of providing different modes of transportation depending on customer requirements. Such means include air-sea, air-land and supposedly sea-land (Aramex). The company’s supply chain management team of experts ensures maximization on the product delivery processes from the factory right to retail outlets and finally to customers. The kind of customized solutions used have assisted in reducing customer’s costs on inventory and transaction speed (Harrison and van Hoek). Being one of the global leaders providing major solutions in logistics and transportation, Aramex network has continued their trend in acquiring prominent organizations in all regions.
Supply chain of Aramex
This can be described as the core of Aramex organization’s operational efficiency. Aramex’s supply team comprises of knowledgeable individuals with advanced skills in monitoring flow of goods throughout supply chain. The nature of the customized solutions the company uses has necessitated cost reduction and increase in the speed of transaction and efficient implementation of customer needs. Aramex combines use of technology in delivering internationally standardized services that avails comprehensive solutions to requirements within supply chain and logistics. The company enjoys the services of its largest logistics and transportation networks in the world hence providing cost-effective services within the supply chain (Aramex).
Aramex Partner with Zubair Corporation (Z-Corp) headquartered in Oman for the purposes of offering businesses with integrated services such as warehousing and distribution through every means including sea, air and ground transportation. Z-Corp also offers such services as freight forwarding and customs brokerage to wide range of industries such as telecommunications, military and Information Technology related companies. Aramex also acquired Berco Express (Pty) Ltd to assist in logistics and transportation issues within South Africa and other regions. The company has significant share of South Africa’s freight and logistics market and has over fifteen operating branches within South Africa (Aramex).
Aramex and Z-Corp operates a modern facility in Oman connecting strategic ports and regional logistic hubs. Joint Centre operated by both companies will consider building their leadership on environmental issues. However the nature of Z-Corp Supply chain can be described as complex with demanding logistics and supply chain requirements. This has made the company to have a global footprint with the ability of delivering customized supply chain solutions under affordable circumstances (Aramex, 2013).
Investment Policy Statement
Aramex Inc. considers the use of several approaches for the purposes of ensuring perfect mobilization of customers towards company services. Approaches applied by the company vary in details depending on the target goal. Aramex utilizes push management for the purposes of positioning services at suitable target points based on intended need (Halldorsson et al, 2008). Push model has made Aramex to install new state-of-art technology alongside equipped line of services based on standardized processes. This ensures efficient delivery of products and services at right points within appropriate time line. The kind of technology utilized by the company including GPS-equipped trucks assists in easier tracking and administration of activities along the supply chain. Such models make work easier since all activities down the supply chain are centrally controlled (Wieland and Marcus, 2011).
The current supply chain seems effective due to application of pull management systems. This is since the aspect creates massive and stable foundation capable of handling logistical and other service problems of both individuals and companies. Increasing uncertainties within companies can be reduced through the kind of efficient services offered by Aramex such as professional consultancy services (Halldorsson et al, 2008).This can further be reinforced through application of pull models. The level of professionalism with which services are offered is the main lacking ingredient with most service companies. Consumers, normally seek high level of satisfaction from any kind of service whatsoever. In such cases it is possible for the concerned parties and partners to venture into creative ideas capable of handling contemporary issues with rising demand on logistical services. Real-time visibility technology seeks to improve vigilance at retail level where basic tools and resources are necessary for accomplishing tasks and addressing supply needs. Strategic location of custom bonded warehouses tends to offer constant flow of goods and services within every market segment (Movahedi et al., 2009).
Maturity of the Supply chain brought by partnership between Z-corp and Aramex helped in satisfying increasing needs within the demand chain. Quick responses staged through appropriate channels have made the organization gain importance amongst its customers. Aramex logistic and warehouse services, requires high standards of operation due to the kind of competition within Middle East and international market. Pull model ensures that all participants within the supply chain are considered based on production levels. Efficiency in management of the supply chain is required for the purposes of winning consumer confidence and building the organization’s brand image (Movahedi et al, 2009).
Fitting the overall Strategy
The supply chain fits the company’s overall strategy through focused vision and objectives. Aramex’s main objective involves facilitation of regional and global trade based on logistics and transport network. Participants within Aramex’s supply chain works towards attaining highest level of services on issues pertaining logistics and complex delivery networks. Efficiency of Aramex’s supply chain depends on the consumer response towards new technology used. The company’s objective towards demand requires creative approach since customers are always sensitive to the level in which certain services can satisfy their needs (Johnson et al., 2008).
Such strategy ensures active connection between customers, employees and company’s strategic principles making easier the aspect of exploring market opportunities. However, the services are offered at affordable costs alongside convenience expected by customers. Aramex focuses on satisfying customer curiosity based on efficiency and confidentiality accorded to goods on transit. These processes help in enhancing the Company’s image amongst consumers because of their high performance level. The Company emphasizes so much on product delivery as one of the important quality drivers (Johnson et al., 2008).
In the case of Aramex, all plans are focused on the targeted customers and services provided and the means of delivery. The vision of Aramex Inc. is to provide quality and affordable logistical and transportation services to their customers. The mission centres on timely delivery and affordable value-added, consultation and delivery services to customers with the best efficiency and reliability and the strategy is targeting developing countries in order to offer them quality and affordable services. The services are extended online by the use of communication tools such as internet websites and mobile phones, customers across regions are reached through air and sea services.
The Balance sheet for Margin Account to purchase 1000 stocks of Google Inc with an initial margin of 60%;
|Date||Closing Price ($)||Market Gain/Loss ($)||Account Balance ($)||Margin Call ($)||Account Balance After Margin Call $|
Aramex Inc stock price: Buying 10,000 shares with an initial margin of 60
|Date||Closing Price (AED)||Market Gain/Loss (AED)||Account Balance (AED)||Margin Call (AED)||Account Balance After Margin Call (AED)|
The margin account balance sheets above indicate the progress of the shares at different periods: one week for Google stock and one month for Aramex stock. Evidently, Google stock has gained whereas the investor has made losses with aramex stock, hence requirement for margin call.
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