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Corporate Finance
Course Name
Course Date
Student’s Name
Corporate Finance – Analysis
Introduction
You have recently inherited some money from a wealthy uncle. Part of the condition of the inheritance requires that you invest this money wisely so that you have money to live on in your old age. Luckily, you have been studying corporate finance and have acquired some skills to help with your investment. Your uncles “Will” did not stipulate how you should invest this money. However, as part of the requirements you must produce a report showing how you intend to invest the money before you have access to it.
A friend has suggested five stocks that you should consider investing in. He has downloaded for you the prices of these stocks for the last two years
The five companies that has been taken for the analysis of Australia and New Zealand banking corporation (ANZ), BHP Billiton Limited (BHP), CSL, Downer EDI Limited, Estia Health limited (EHE) and ASX 200.
Task 1
Five force Analysis
Five force analysis is the analysis which helps in analysing the external forces which helps in analysing the environment of the company. It helps in analysing the competition and the pressures that the company face when operating in the market.
ANZ: Five force model:
Threats of new entrants:
The threat of new entrants in the banking sector is quite low because of the high regulations and capital need in the market. The new banks that have put pressure on the companies is majorly through the new technologies which the company is adopting. The minimum capital requirement for a bank to incorporate is mentioned under Basel II framework which is around 8% of the total risk weighted assets held by the company. Existing banks enjoys economies of scale and the opportunity to grow which is not possible for the new entrants.
Industry rivalry:
Rivalry in the commercial banking sector is majorly through the scale or size. There are different kinds of banks which are in Australia, the biggest commercial banks includes Australia and New Zealand banking, common wealth bank of Australia, National Australian bank and Westpac banking corporation. These are the major banks which has dominated the banking industry in Australia.
Threat of substitutes:
The threat of substitute that is faced by ANZ is to switch to another banking company. The companies operating as banks usually has low threat of substitutes as the banks follows the government regulations to run.
Bargaining power of suppliers:
The main suppliers of banks are customers, accounting and legal services and financial markets. Being high competition, the threat of supplier is medium.
Bargaining power of buyer:
The main buyers of Australian commercial banking are individuals and households for the retail banking and business borrowings. With high number of banks in the market, the bargaining power of the buyers is moderate.
BHP Billiton:
BHP is one of the leading companies in the metals and minerals industry. It is one of the biggest companies of Australia and has been established since years.
Threats of new entrants:
The threat of new entrants in the metals and minerals sector is quite low because of the high regulations and capital need in the market. The new entrants needs to have long term contracts for mining and other operations which posses a limited option for the new entrant to enter the market.
Industry rivalry:
Rivalry in the metals and minerals industry is quite high. The industry is dominated by Rio Tinto and BHP. The struggle in the market is to achieve the highest market share and high profitability.
Threat of substitutes:
The threat of substitute that is faced by BHP is highly based on their production and extraction and as there is no substitute, the threat to substitute is quite low.
Bargaining power of suppliers:
The main suppliers of mining companies are labor, equipment and IT. The bargaining power of the suppliers are weak because of the few firms that exists in the sector.
Bargaining power of buyer:
The main buyers of metals and other manufacturers are financial makets and the other long term contractual buyers. As there is no substitute the bargaining power of buyers is quite weak.
Estia Health care
Estia is one of the companies of Australia which is operating under the health care industry.
Threats of new entrants:
The threat of new entrants in the health care sector is moderate. With the new technologies and treatments, new health care centres are being opened. The increase in the private hospitals poses a threat to the company.
Industry rivalry:
Rivalry in the health care centres is quite high because of increasing public and private health care companies. Estia health care is one of the biggest companies with high focus on quality of treatment, the company faces less threat from the competitors/
Threat of substitutes:
The threat of substitute that is faced by Estia is through the treatment and...