Kia Motors Financial Analysis - Essay Example

Kia Motors Competitors

Five Years Performance against Industry Peer

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A five years performance of the Kia Motors against the industry competitors is also, essential in demonstrating its potential of enhancing the wealth of the shareholders. Thus, a five years comparative analysis of the company has been conducted using its closest industry rival the Hyundai Corporation. The comparative analysis undertaken focuses on the trend of two firm’s stock price in the last five years. The trend line chart comparing the trend of the two companies’ stock price has been attached below. The green chart line in the graph below represents the trend of the Hyundai stock price in the last five years. In contrast, the yellow trend line represents the movement of the Kia Motors stock price in the last five years. Accordingly, the comparative trend chart demonstrates that the stock price of Hyundai Corporation has remained higher compared to that of the Kia Motors in the last five years. Equally, the stock price return of Hyundai due to its upward trend has on average increased while the stock price return of the Kia Motors has been decreasing as demonstrated by the slowdown trend. Consequently, the competitor’s stock has the potential of generating capital gains to the shareholders in the future while the Kia stock investment has high potential of generating capital losses to the shareholders.  

Source (Bloomberg, 2017)

KIA Motors Research

Conclusion 

The analysis undertaken against the KIA Motors Company has an impact to the diverse stakeholders of the firm. The decreasing profitability of the company as demonstrated by the trend of the profitability ratios and stock price trend in the last five years implies the earnings the shareholders should expect in the future has the potential of continuing to decrease. Similarly, the sustainability of the employees’ employment is at risk due to the decreasing capability of generating profit. Equally, the diminishing liquidity and working capital position of the firm implies the risk of the suppliers and employees in accessing their dues timely is increasing. The decreasing trend of the interest coverage ratio also, implies the creditors lending long-term capital to the firm are increasing facing a higher default risk. Consequently, the financial position and performance of KIA Motors poses adverse impact to the various stakeholders.

Task Two: Recommendation 

The financial analysis of the Kia Motors reflects essential information towards its potential in the future. This analysis is vital in enabling the investors to make informed decisions in dealing with the company. The analysis conducted indicates the Kia Motors has a positive financial outlook on profitability, liquidity, and financial structure in promoting the welfare of the shareholders through the 2015 annual financial report and accounts. However, the trend of the financial performance in 2015 compared to the results realized in 2014 implies financial performance and position of the firm is diminishing. This trend has the potential of hurting the interests of the shareholders and the capability of the Kia Motors to realize its operational objectives in the future. The decreasing financial position and performance of the firm has the effect of causing the stock price to decrease as the demand of the stock declines. Moreover, the recent trend in the last five years demonstrated in the attached chart indicates the Kia stock price has declined significantly. Consequently, it is recommended that investors owning Kia share to consider selling the stock. The selling recommendation is due to the potential decline of the stock price in the future that will cause the investors to lose their capital investment.

Task Three: Just in Time (JIT) Analysis

The manufacturing of the vehicle in the contemporary global environment is increasing becoming turbulent. This scenario calls for the automobile manufacturers to devise a production strategy that promises an efficient and effective production process to minimize costs. The just in time (JIT) is one of the production management philosophies that have become prominent in the manufacturing industry. The JIT implies a management approach and philosophy of acquiring raw materials, transferring them for fabrication, fabricating into subassemblies, and producing and delivering the finished products just in time. However, the value of the JIT approaches and philosophies in the modern vehicle manufacturing global industry should be evaluated before implementing them due to the potential adverse effects it might pose to the manufacturer. Accordingly, an analysis of the JIT model application in the current global vehicle manufacturing industry has been conducted to determine the value it adds. 

According to Tewari, Singh, and Tewari (2016), the application of the JIT production model in Indian manufacturing industries has been effective in reducing the production. The extent of ensuring the production process is efficiently conducted under the JIT model has the effect of eliminating redundancy in the organization, which is effective in minimizing unutilized labor cost and overhead costs. Thus, the application of the just in time production strategy is valuable in the modern vehicle manufacturing environment since it will eliminate wastages that is critical in maximizng the manufacturers’ profitability. Equally, the JIT approach has been found to be effective in minimizing the lead time in the manufacturing industries (Tewari, Singh, & Tewari, 2016). The lead time implies the time consumed between the production initiation and the completion of the product in the production process. Accordingly, the extent of the JIT model in demanding the production process to be timely reduces the lead time since the wastage of time before proceeding to the next step is eliminated. 

This has the advantage of enhancing production efficiency in the automobile industry that is crucial in meeting the consumers’ orders. The efficiency of meeting the customers’ orders enhances the competitiveness of the vehicle manufacturing firm due to the positive relationship it develops with the distributors and car dealers. Moroever, the use of the JIT production strategy has the benefit of enhancing the response efficiency (Tewari, Singh, & Tewari, 2016). The automation and timley flow of the production process under the JIT production approach gives the respective line supervisors the opportunity to identify the hindrances derailing the production flow. Thus, the organization can respond to the derailments effectively and promptly that is critical in ensuring the customers’ orders are realized on time.

 Similarly, the systematic flow of the JIT production process means the internal supply chain from procurement end to the marketing end work close in the production of the products (Tewari, Singh, & Tewari, 2016). Consequently, the various departments and units in the supply chain have the opportunity to share critical information on the changing market dynamics, consumer concerns, and technology development that is crucial in enhancing an efficient response. This benefit is signficantly valuable in the automobile manufacturing global industry due the spontateneous changes in consumer taste and preferences and technology development. Accordingly, the JIT philosophies and approaches are worth considering in the contemporary global automobile manufacturing industry.

References

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Wall-Street. (2017, January 3). Hyundai and Kia Face a Tough Road in 2017. Retrieved January 5, 2017, from https://finance.yahoo.com/m/d202a81b-3e47-3cb9-be84-64c888f507a8/ss_hyundai-and-kia-face-a-tough.html