JOE SWIFT

a) SAF Framework

Introduction

SAF framework is use to evaluate the attractiveness of EVM as an acquisition target

by Swift.

Suitability

Definition - Suitability relates to whether the proposed strategy fit the current
strategic position of the organization.

No Traits Or Evidence Cause Or Effects

1. The Ambion market is mature By acquiring EVM, it enables Swift to access

and extremely competitive new market and growth since Ecuria market
is seen as immature.

2. Ambion government has impose Acquiring EVM is suitable as it may reduce

heavy tax on fuel the amount of tax paid by Swift. This is
because there is no interference from the
Ambion government

3. No experience for acquiring Acquiring EVM might be seen as not suitable

foreign companies because Swift has no experience in acquiring
foreign companies which may lead to several
problems such as cultural differences
Acceptability

Definition - Acceptability relates to whether the strategy could bring in the

expected outcome which is acceptable by stakeholders and can be
evaluated by considering return, risk and shareholders reaction to the
strategy.

Ratios EVM Joe Swift

Current ratio

= 1,200

= Current assets 1,050

Current liabilities = 1.14 = 1.55

Acid test ratio

= 1,200 - 100

= Currents assets - Inventories 1,050

Current liabilities = 1.05 = 1.15

Gross profit margin

= 4,000 x 100

= Gross profit x 100 20,000

Revenue / Sales = 20 % = 17 %

Net profit margin

= 1,500 x 100

= Net profit x 100 20,000

 Sales = 7.5 % = 9.15 %

Return on capital employed

= 1,500 x 100

= PBIT x 100 2,500 + 5,750

NCL + Equity + Reserves = 18.2 % = 18 %

Gearing ratio

= 2,500

= Non-current liabilities 2,500 + 5,750

NCL + Equity + Reserves = 30.3 % = 60 %

Interest cover ratio

= 1,500

= PBIT 300

Interest =5 =8

Return

The gross profit margin of EVM is 20 % which is seen as higher compared to Swift
which only has a margin of 17 %.

The net profit margin of EVM however is 7.5 % which is lower than Swift that has a
net profit margin of 9.15 %.
The Return On Capital Employed (ROCE) OF EVM shows a strong performance which
is 18.2 %, quite similar to Swift which has ROCE of 18 %.

Risk

The current ratio or liquidity ratio for EVM is lower which is 1.14 compared to Swift
which has a current ratio of 1.55.

The acid test ratio of EVM is also seen as lower which is 1.05 compared to Swift
which the acid test ratio is 1.15.

Gearing ratio of EVM is 30.3 % which is very low compared to Swift which has a
gearing ratio of 60 %.

The interest cover ratio for EVM is 5 which is lower than Swift which has an interest
cover ratio of 8.

Stakeholders reaction

Swift is a private company and the family are major shareholders where opposition
of the acquisition of EVM are unlikely to happen.

Feasibility

Definition - Feasibility relates to whether the strategy can be delivered with the
given level of resources available in the organization.
No Traits Or Evidence Cause Or Effects

1. Swift has funds in place Feasible to acquire EVM

2. Swift has competencies Feasible to acquire EVM

Conclusion

According to the discussion on suitability, acceptability and feasibility above, Joe

needs to make a careful decision on his next course of action. Acquiring EVM looks
attractive for Swift. However, Swift needs to address the worrying issues related to
EVM before acquiring it.

b) Porter’s Diamond Model

Demand Condition

Definition - relates to the strong demand and sophisticated customer taste that
will drive the quality up and costs down through economies of scale and
the learning curve.

 Will there be a demand in Ecuria ?

 Will Swift be able to fulfill the expectations of customer in Ecuria ?

- Yes

- High standard living

- Strong economic growth

Factor Condition

Definition - relates to the resources enjoyed by a country which can be

categorized into basic factor and advance factor.

 Privatization policy by the government

 Government invested heavily in road transport system

Firm strategy, structure and rivalry

Definition - relates to the national cultural factors in the nation and social
attitudes that can lead to advantage in certain industries

 Capital market of Ecuria is immature

 Haulage and logistic is successful with supporting of other input

Related and supporting industries

Definition - relates to the industry which can provide a good local supply chain
which may enhance quality and cost advantage

 Who are the competitors?

 What are the organization structure?