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Global Economy Was Subdued

Essay by   •  February 25, 2019  •  Coursework  •  657 Words (3 Pages)  •  21 Views

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IDENTIFY STRATEGIC ISSUES OR PROBLEMS APPEAR IN ORGANISATION’S CURRENT SITUATION

GLOBAL ECONOMY WAS SUBDUED

The Pensonic witnessed vitality in almost all major commodities including crude oil, base metals and agricultural products. The global economy was subdued with the slowing down of major economies such as China and the European Union. Since the citizens of the United Kingdom voted to leave the European Union there are uncertainties in the market. The sales and profit of the company will decrease due to the decline in the export of the products to other countries will be fall because fewer products will be demanded in other countries. It will impact in the profit of the company where the company does not show a good profit from their operations typically do not have a competitive advantage.

POWER OF CONSUMER SPENDING REDUCED

The consumer inflation rate hit an eight-year high of 5.1% in March 2017, the highest since touching 5.7% in November 2008. Consumer sentiment has shrunk in Malaysia mainly because salaries have not increased in tandem with the rising prices of goods and services. If the inflation unchanged the spending power of Malaysia consumer will reduced. The quantity demanded and purchased will be decreased when the power of consumer spending reduced. Directly it will affect the sales and profit of the company.

FINANCIAL PERFORMANCE

The Pensonic’ Group stated a decline in revenue of 11.7% which is from RM386.3 million in financial year 2016 to RM 341.1 million in financial year 2017. Due to competitive pressure and general slowdown in macro economy both local and overseas market remained slow. There are a lot of substitute products in the market since there are large group competitors in the industry. The substitute goods for the company’s product will be rival company’s product. For an example, the competitor of the Pensonic company is Panasonic which produce electrical and electronic products. Panasonic’s video player is the substitute product of Pensonic’s video player.

Other than that, the profit before tax in financial year 2017 was 6.6 million, decrease of 44.1% due to challenging macro economy which necessitated higher advertising and promotional expenses to improve sales and market share of the company. High expenditure incurred by the company cause the profit before tax was reduced. Consequently, the Group has lower earnings per share of 4.97 cents as compared to 8.68 cents in the financial year 2016. The EPS is important because the investors will make decision based on the EPS. When the EPS decline, the investor may not invest in the company. The Group reported a lower return on equity of 5.39% as compared to 9.71% in the financial year 2016. ROE helps investor to determine whether the company will make profit or not. The lower Roe will not attract the investor to invest in the company.

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