Financial Statement Analysis

PESTEL Analysis of Decmil Group Limited (DCG)

  1. Political factors: Fern Fort University (n.d.) has mentioned that DCG is spread over more than 12 countries. Therefore, the company is surrounded by different kinds of political systems. DCG must address the systematic risks in all these political environments to achieve success. Before investing in a country, DCG should make sure whether the political environment of that country is stable or not and how much importance is given to the capital goods sector in the country. If the political environment of the country is unstable or there is low importance of capital goods in the country, DCG will not profit by investing in such a place in the future and over the long term. Henry (2018) has mentioned that an unstable government and growing tensions adversely affect the growth of the industry and limit is opportunities over the long term. Australia has a stable political environment which does not hamper the operations of DCG in the country (David, n.d.).
  2. Economic factors: Market Publishers (2020) have mentioned that the economic trends, policies and frameworks of countries affect the performance and operations of DCG. Hudson (2017) has highlighted that economic components have visible and apparent effects on the profitability and the all-round attraction of DCG. He says that GDP per capital furnishes just a minute perspective on how economic factors can influence the growth of DCG. Nevertheless, a higher GDP means the sales of DCG will grow over the long term. On the other hand, higher inflation tends to raise the costs of raw materials used by DCG. Interest rate fluctuations affect buying and selling prices. High unemployment rate in a region lowers the sales of the company. This would result in lower profitability and revenues in the future. Working on economies of scale, handling business costs, controlling product pricing and retaining a sustainably managed workforce will help DCG counter economic instability. Australia is politically stable, has transparency in its regulatory system as well as strong governance, which are factors making Australia economically resilient. Therefore, DCG’s operations can be carried out safely and securely in the country (Australian Government, n.d.).
  3. Social factors: These include attitudes and common beliefs regarding a host of dimensions which include health, work and leisure routines, monetary situations, religious practices and demographics among others (Group Map, n.d.). These factors affect growth prospects of DCG over the long term. Along with these factors, DCG has to explore whether there is trust among the population in capital goods industry, to ensure future growth. Australian population is modern, straightforward, hardworking, smart, egalitarian, diverse, tolerant and open-minded (Smith, 2018). These factors work in favour of DCG to smoothly run its operations in the country.
  4. Technological factors: DCG (2019) has published in its annual report that it depends heavily on technology to deliver its large-scale resource projects like transport infrastructure and fuel infrastructure systems among a host of other projects. To successfully conclude its projects, DCG must make use of modern and the latest technology available. The success of DCG’s projects in the future depends on efficient use of modern technology. It has already taken up solar and wind energy projects for which it must deploy the latest technology to develop these projects. DCG should ensure making use of state-of-the-art technology in all its future projects to achieve its organisational goals and deliver projects of high quality over the long term. Australia is a technologically sound nation. The Government of Australia is committed to delivering a powerful, secure and inclusive digital economy to its masses (Australian Government, 2018). These factors make the operations of DCG in Australia smooth.
  5. Environmental factors: Since DCG is heavily into construction and large-scale resource projects, it must make sure that is does as minimal damage to the environment as possible. DCG (n.d.) has pointed out that environmental management is one of its top priorities and it is committed to protecting the environment. DCG has a policy of ‘Zero Environmental Harm’. It has an Environmental Management System which has the ISO 14001:2004 certificate. DCG has provided a comprehensive framework for processes to its employees and subcontractors so that they follow such guidelines in their work which do not harm the environment. The future of the Nature and that of organisations like DCG are dependent on each other. If an organisation takes care of the Nature, it can derive benefits from it, and the Nature can thrive if organisations do not overexploit it.
  6. Legal factors: DCG operates in more than 12 countries and therefore, has to abide by the laws of all these countries. Australia has a powerful legal system. DCG is aware of and complies with the laws of the country in its operations. The laws DCG must take into consideration before investing in a country are Anti-trust law in capital goods industry, Discrimination law, Intellectual Property law, Consumer protection and e-Commerce, Employment law, health and safety law and data privacy laws. Overlooking or no abiding by the laws of the countries the company operates in might land it into litigation battles in the future and affect its overall growth in the country or region.

Porter’s Five Forces Analysis of DCG

  1. Threat of new entrants: Most of the times, new entrants come with innovations of their own, which might pressure DCG to reduce its expenses, adopt a lower pricing method and to provide new value propositions to its clients. DCG can tackle these threats in three ways. It can innovate new products and services. It can build economies of scale which help in reducing fixed cost per unit. It can also build capacity and spend money on research and development (Fern Fort University, n.d.). Nevertheless, the threat of new entrants is not very high for DCG because most of the companies like DCG which are existing in the market, already have their unique ways of operating in place and are constantly improving and innovating their working styles.
  2. Bargaining power of suppliers: Suppliers to DCG do not hold great bargaining power as they outnumber its buyers. Owing to standardised and less differentiated products DCG purchases from its suppliers, DCG can switch suppliers easily, making the bargaining power of suppliers a weak force. However, what makes the bargaining power of suppliers a great force is non-availability of substitutes to their products (Murphy, 2018). Still, forward integration of the construction industry is not provided a believable threat by the suppliers. Overall, the bargaining power of suppliers is a weak force in this industry.
  3. Threat of substitute products or services: DCG does face a challenge of this nature. The market is competitive. Some competitors of the company are NRW Holdings, MACS and DM Civil (Owler, n.d.). Prospective clients can choose from any of these companies. This threat increases when another company is providing cheaper products and services and/or when substitute products promise better quality. This is a considerably high threat for the company in question. DCG can tackle this threat by making it noticeable to its clients that its products and services are better than those of its competitors, giving its clients a better experience and value for money, raising switching costs by gaining loyalty and by improving the quality of its products and services.
  4. Bargaining power of buyers: Lots of demands from the buyers and their desire to get the best by paying as low as possible puts a pressure on DCG over the long term. The bargaining powers of buyers is a lot in this industry and DCG too has to make sure that it tries to fulfil all kinds of expectations of its clients. This issue can be tackled by building a huge pool of clients. Continuous and rapid innovation of new products will be of great help in this regard. These new products would also lessen the defection of DCG’s existing customers. An example of this is DCG’s new Fibre to the Node network rollout (Decmil, 2016).
  5. Rivalry among existing competitors: Construction Placements (2020) has enumerated a list of construction companies in Australia, some of which are rivals of DCG. They are CPB Contractors, Lendlease, Laing O’Rourke, BGC, BMD Constructions, SMEC Holdings Limited and Kane Constructions among a host of others. DCG functions in a highly competitive market environment. There is a lot of rivalry between DCG and other existing competitors, which makes the market ripe for all kinds of changes. Creating sustainable differentiation, constructing scale to compete strongly and/or entering into collaborations with its competitors are some ways such rivalries can be managed by DCG.

References for Environment and Industry Analysis

Australia Government. 2018. Australia’s tech future. [Online]. Available at: https://www.industry.gov.au/sites/default/files/2018-12/australias-tech-future.pdf [Accessed on October 2, 2020].

Australian Government. n.d. Business. [Online]. Available at: https://www.austrade.gov.au/International/Invest/Why-Australia/Business#:~:text=Australia's%20political%20stability%2C%20transparent%20regulatory,a%20safe%2C%20secure%20business%20environment. [Accessed on October 2, 2020].

Construction Placements. 2020. Top construction companies in Australia updated list 2020. [Online]. Available at: https://www.constructionplacements.com/top-construction-companies-in-australia/ [Accessed on October 1, 2020].

David, J. n.d. PESTEL analysis of Australia. [Online]. Available at: https://howandwhat.net/pestel-analysis-australia/ [Accessed on October 2, 2020].

Decmil Group Limited. 2016. New contract for SC Services. [Online]. Available at: https://decmil.com/dmwp/wp-content/uploads/2016/06/20160608-SC-Services-new-contract.pdf [Accessed on October 1, 2020].

Decmil Group Limited. 2019. Annual Report. [Online]. Available at: https://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_DCG_2019.pdf [Accessed on October 1, 2020].

Decmil Group Limited. n.d. Environment. [Online]. Available at: https://decmil.com/about-us/our-approach/environment/ [Accessed on October 1, 2020].

Fern Fort University. n.d. Decmil Group Limited PESTEL & environment analysis. [Online]. Available at: http://fernfortuniversity.com/term-papers/pestel/nyse4/4234-decmil-group-limited.php [Accessed on October 1, 2020].

Fern Fort University. n.d. Decmil Group Limited Porter Five Forces analysis. [Online]. Available at: http://fernfortuniversity.com/term-papers/porter5/asx/45-decmil-group-limited.php [Accessed on October 1, 2020].

Group Map. n.d. PESTLE analysis. [Online]. Available at: https://www.groupmap.com/map-templates/pestle-analysis/ [Accessed on October 1, 2020].

Henry, Z. 2018. Decmil Group Limited Porter Five Forces analysis. [Online]. Available at: https://www.case48.com/porter-analysis/45-Decmil-Group-Limited [Accessed on October 1, 2020].

Henry, Z. 2018. Decmil Group PESTEL analysis. [Online]. Available at: https://www.case48.com/pestel-analysis/6448-Decmil-Group-Limited [Accessed on October 1, 2020].

Hudson, A. 2017. Decmil Group Limited case solution. [Online]. Available at: https://www.essay48.com/45-Decmil-Group-Limited-Case-Solution [Accessed on October 1, 2020].

Market Publishers. 2020. Decmil Group Limited. Fundamental company report including financial, SWOT, competitors and industry analysis. [Online]. Available at: https://pdf.marketpublishers.com/bac_swot/decmil_group_limited_swot_analysis_bac.pdf [Accessed on October 1, 2020].

Murphy, E. 2018. Decmil Group Limited Porter Five Forces analysis. [Online]. Available at: https://www.essay48.com/term-paper/6448-Decmil-Group-Limited-Porter-Five-Forces [Accessed on October 1, 2020].

Owler. n.d. Decmil’s competitors, revenue, number of employees, funding, acquisitions & news. [Online]. Available at: https://www.owler.com/company/decmil1?pendo=kUUes6C7jD_rqETPliseSRbPjmA [Accessed on October 1, 2020].

Smith, T. 2018. 11 things you should know about Australian culture. [Online]. Available at: https://theculturetrip.com/pacific/australia/articles/11-things-you-should-know-about-australian-culture/ [Accessed on October 2, 2020].

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

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