Business Studies – KAZ Group Limited
Over the Financial Year of 2003, KAZ Group Limited (KAZ), Australia’s largest information technology company, owned by Peter Kazacos, has seen considerable change within the business from internal and external influences such as business culture change, economic influences, financial influences, social influences, technological developments and one off abnormal circumstances such as SARS.
Through effective strategic planning and direction, flexibility and adaptability to change and effective problem solving and decision making, KAZ has been able to successfully consolidate its position as Australia’s largest Information Technology Company and achieving a revenue increase of 41% to $357. 7 million. Strategic Planning and Direction Strategic planning and direction have been important for KAZ to have consolidated its position as the largest Australian information technology services company whilst introducing new services that will capitalise on the expanding market for business process outsourcing.
Currently KAZ has continued to invest in new products which ensure new growth opportunities for the future. Their key focus for 2003 was the integration of their recent acquisitions, and with the integration now complete KAZ are now focusing on further reducing their cost structures over time. KAZ expects to streamline its property portfolio over the next couple of years as existing leases expire and opportunities for rationalisation occur. Flexibility and Adaptability to Change As an Information Technology company, KAZ faces the challenges of having to continually expand with the ever changing and developing technology market.
Technological developments are one of the key drivers of the global economy as the efficiency of business increases and distance barriers are broken down. During this year KAZ has had to update technology such as computers and computer software, internet websites and communication means. Without flexibility and adaptability to be continuously changing, KAZ would not be able to keep up with its many competitors, its clients would outsource to other more advanced companies and KAZ would not hold onto its current market share.
Problem Solving and Decision Making A large problem for KAZ has been the affect of the uncertain economic climate in Asia especially after the SARS Epidemic and heightened concerns about terrorism. Although the market conditions continue to be tough, KAZ has continued to operate with their Singapore business now at cash flow breakeven and their Thai Administration Services1 returning its first dividend to KAZ by keeping public faith in the company during troubled times.
This has been a one off circumstance which has affect KAZ’s business operations in Asia. Another problem faced by KAZ was when revenues from KAZ Business Services, their rebranded business process outsourcing division, were affected by the full year impact of contracts not renewed in Financial Year 2002. KAZ were expecting this and have anticipated that current new sales opportunities will reverse this situation through their strategic planning for Financial Year 2004. The people responsible for these changes are the Board of Directors.
There are currently eight members on the KAZ Board of Directors, with Peter Kazacos as managing director. These eight members have been responsible for the running and decision making of KAZ’s particular departments and have implemented the different changes within KAZ (as seen below) over Financial Year 2003. Sources of Change – Internal The main internal source of change during 2003 was a business culture change with the business being restructured and rebranded into three operating divisions2.
This extensive restructure has involved streamlining the businesses into appropriate entities, adopting common processes and information systems, rationalising property, eliminating duplicate roles and restructuring management. The new structure will reduce costs, improve efficiencies and increase business opportunities by encouraging a closer working relationship between the operating divisions all of which are important for the company’s continuing success. KAZ signed a number of new contracts for services including credit card application processing and now processes credit cards on behalf of three major banks in Australia.
This change within the business has allowed diversification into new ventures such as credit card processing which has increased revenue for the company. They have also acquired the remaining 75% of Atune Financial Solutions which has ensured full control over the development of its new superannuation administration product. During 2003 Lyndsey Cattermole resigned as an executive director of the company, becoming a non executive director for which she received termination benefits of $189,971.
This also means that she is not directly an employee of the company and shall only consult them on their business needs. Sources of Change – External One of the main external influences has been the trend towards “selective sourcing” contracts3. This has been expected to benefit KAZ by allowing the Company to bid for business within its core competencies and cost restraints. This external change will be especially important to KAZ over the coming years as large single supplier outsourcing contracts awarded in the 1990’s will come up for renewal.
A change which has economically affected KAZ from the IT Services industry sector is the industries first year-on-year revenue decline for the 2002 calendar year. This has resulted in fewer contract opportunities and less discretionary spending by existing clients. During the year there was a significant increase in goodwill amortisation which resulted from the acquisition of Aspect Computing. This change was a major contributor to the lower profit before and after tax which would have financially changed the company.
The current exchange rate between countries hasn’t affected KAZ in any particular way yet their business dealings in Asia have been extremely tough in the uncertain economic environment from SARS and terrorism which has meant that there have been some economic influences affecting the price and demand of KAZ’s services. Technological developments have meant that KAZ have had to be continuously updating and renewing their technological procedures to keep up in their ever changing market and to compete successfully against their many multinational competitors.
Structural Responses to Change Management reacts to changes in the internal and external environment often by changing the structure of the business. This financial year KAZ has undergone major restructuring of the business due to the many different business services it now provides and has restructured the business into three operating divisions; KAZ Technology Services, KAZ Business Services and KAZ Software Solutions.
This extensive restructure has involved streamlining the businesses into appropriate entities, adopting common processes and information systems, rationalising property, eliminating duplicate roles and restructuring management. The new structure will reduce costs, improve efficiencies and increase business opportunities by encouraging a closer working relationship between the operating divisions all of which are important for the company’s continuing success. This structure would have caused a change in the business culture and the way it runs its operations.