Government action is a critical consideration that every business must factor in its operation. The decisions that the authorities decide on and implement can have huge implications on the way an entity operates as well as its sustainability. In the case of American Abyss Express, the levying of taxes by the government is something that could have broad consequences for the organization. Most importantly, the taxes could have both direct and indirect consequences for American Abyss Express in its operation as a business that provides temperature- controlled ground transportation services.
A lot of the impact on the business would depend on the type of taxes levied as well as the way in which the organization responds to the increased levies. The two aspects that the organization should be concerned about with regard to the higher taxes are how that will affect the demand and the financial position of the company (Marshall, 2013). For starters, increasing taxes on the services that the business American Abyss Express offers leaves the company in a bad position and forces it to make some critical decisions. For starters, the entity could decide to absorb the price increases as a result of the taxes and not pass them onto the consumers. In this case, the organization’s finances would take a hit. The result of such a move would eat into the company’s margins and ultimately lead to a reduction in the profits. Therefore, the firm’s finances would be adversely affected. As can be seen, the implementation of higher taxes by the government is a threat to the business.
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American Abyss Express would find itself having to contend with the effects of a tax increase in several ways. However, perhaps the biggest impact would be on the demand for the company’s services. That would be the case if the entity decides to pass the increased costs as a result of the taxes onto the customers. The consequence of that decision would be that consumers would have to adjust their spending and thereby demand less of the entity’s services. The impact of the decision would be then demand on the extent to which the company’s sales reduce as well as any extra revenue earned for each sale. However, the overall impact would still be expected to be negative.
When assessing the impact of a tax increase on American Abyss Express, it is not just enough to focus on the company individually. The reality is that the full extent of the impact on the firm would be affected by its competitive position. American Abyss Express would probably find itself worse off relative to its rivals because of the market dynamics. Going up against companies such as UPS and Amazon would mean that American Abyss Express would be worse off if it decided to increase its prices as a result of the increase in taxes. As a small company, the firm may have little room to wiggle out of the problem of higher taxes. However, the larger companies have more ability to absorb the impact of such a change without having to pass the higher costs onto the customers or a significantly less proportion compared to the smaller ones (Marshall, 2013). In any case, the intense competition especially among the large operators would mean that none would be willing to risk losing competitive ground to rivals as a result of charging customers higher prices. Therefore, American Abyss Express would also have to contend with a worsened competitive position as a result of the tax increase.
Business Sustainability
Changes in the business environment or in critical factors such as regulation not only affect organizations in the short term but also have long term implications. That is true for the impact that the tax increase would have on American Abyss Express. Therefore, the move by the government to raise taxes not only affects the company in the near term but also long into the future and threatens its sustainability (Slavin, 2014). As earlier noted, American Abyss Express would not be as well positioned to deal with tax increases compared with its larger competitors such as Amazon and UPS. The firm might be forced to make some hard decisions in the near term which will not only slow down its progress but also play into the hands of its rivals.
One of the things that an organization might do as a response to such a change is to diversify. Again, American Abyss Express would find itself at a slight disadvantage as compared to its contemporaries since it does not have as much resources as the other companies. The sheer size of companies such as Amazon and UPS would enable them to quickly establish themselves across other business lines as compared to American Abyss Express which does not match up in size and scale. Apart from that, the larger companies have higher resilience and can ride out the increases in taxes much better than the smaller ones and they might not suffer as much impact on their financial position (Todorov & Smallbone, 2014). Overall, the move by the government to raise taxes would have an adverse effect on the operation of American Abyss Express in the near term while also affecting the company’s sustainability in the long term.
Internal Resources
The continuous operation of a business counts on the capabilities which the entity employs to advance. An organization must leverage on the internal resources at its disposal to respond to the opportunities or threats that are present in its external environment (Hitt & Hoskisson, 2016). One of the most important aspects on which American Abyss Express can count is its brand image and reputation. The firm has built quite the image for itself and is well- known and respected in the markets that it operates. The reputation that it has built over the years will play a big role in helping it to continue pushing into new markets. Secondly, the entity has shown a knack for innovation and the development of creative solutions in its areas of operation. The decision to serve small business and to provide them with global linkage is especially noteworthy and will serve the firm well heading into the future.
Another notable capability for American Abyss Express is the firm’s people. The company has put together a well-qualified and highly competent team that is expected to carry it into the future and to help it cope with whatever challenges it may face. In addition, the company is led by a highly capable management team that has worked well to steer it through previous turbulent times as well as setting it on a path of long- term prosperity. The management has done well to constitute project teams that work on various tasks that are critical to driving the firm forward. As can be seen, the business looks well poised to address the challenges that it may face including the increase in taxes.
Communication
Communication is a vital tool for any organization. It is important for the management of the organization to ensure that it gets the right information out to the public as a way of communicating the organizational goals and objectives (Percy, 2014). American Abyss Express has done well to communicate the information about the tax increase and the steps that the company was taking in response. While the firm has not called for public hearings or used mainstream media, it has used released a statement on its website as well as issuing a communication to its clients regarding the tax increases. It is worth noting that the management has been keen to note that it will proactively look at the situation and then consider possible moves instead of reactively passing the increased costs onto the customers. The management deserves a lot of credit for its handling of the situation and the way in which it has communicated the details of the changes with the stakeholders which is meant to reduce uncertainty. Most importantly, communicating properly allows for the firm to stay on top of the situation and to make the most of the unfolding events or to control the damage that might occur.
Company Image
As earlier mentioned, the way in which a company communicates has a significant impact on how it is able to handle different situations as they emerge. Most importantly, that plays a role in shaping the image that the company projects and the perception that it carries among its different stakeholders (Percy, 2014). The decision by American Abyss Express to consider making changes as a result of the increase in taxation is something that may not augur well among the stakeholders and especially the customers. In any case, such communication in which an organization indicates that it is actively considering raising the prices it charges will definitely not sit well with customers. The assessment in this case is that the situation has had negative implications for the organization and that is not going to augur well for American Abyss Express. The management has to figure out a way of turning things around and getting on top of things again.
While American Abyss Express will inevitably see its image suffer as a result of indicating that it is considering several options in the wake of the tax increase, there are several upsides to that move. First, the company’s move made it appear honest in the eyes of its customers. While they might have to pay more for services, they will see that they are dealing with a company that can be trusted and one that cares about them enough to pass on such critical information. An organization must realize that the way in which it handles its information and communication will have a bearing on its image and that is not just limited to the present but also the long term (Percy, 2014). In the case of American Abyss Express, communicating directly with the customers is something that will work in the company’s favor and generate considerable goodwill towards the organization that could last a long time. Therefore, that is a case of making a positive from an otherwise negative situation.
Response
As earlier discussed, American Abyss Express has several options that the company could pursue in response to the government’s decision to raise taxes. The first is to raise the prices that it charges as a way of passing the price increases onto the customers (Slavin, 2014). The move might be seen as a last option because an abrupt price increase especially in the face of intense competition might not be the smartest thing to do. Alternatively, the firm could decide not to act but to absorb the additional costs in the interim period. The management can decide to pursue this course of action together with increased marketing to grow the company’s sales and thereby offset any reductions in revenue as a result of the tax increases (Marshall, 2013). Additionally, the firm could embark on a diversification strategy that is meant to give it more options and more revenue streams on which it can capitalize (Slavin, 2014). The management should take time to evaluate all the possible considerations and the impact of each before deciding on the way forward.
Impact
The decisions that a business makes affect it both in the short term as well as in the long term. Therefore, it is important to consider all the options available as well as the implications of each move that the organization makes. As earlier pointed out, the government’s decision to raise taxes and the subsequent response that the company will have considerable implications for a long time (Marshall, 2013). Apart from that, the impact will be felt on the operational as well as the financial fronts. The immediate implication is that the company’s revenues may drop especially in the first year after the tax is implemented. The longer term impact would depend on the company’s ability to increase its sales and to diversify its revenue streams. More than that, the firm could be forced to execute some deep cost cutting measures meant to help it cope with the new taxes (Marshall, 2013). One of the things to do in this regard is to reduce the number of employees that the firm has as a means of helping it reduce its overall costs. It may also have to carry out other measures such as investing in more efficient equipment to be in a position to cope better with the changes.
External Resources
The operations of a firm do not just depend on the capabilities that the firm possesses internally but also on the external resources that are available to it. Therefore, American Abyss Express will need to come up with ways through which it can maximize on everything that it has at its disposal. While the adjustments that are immediately available to the company in light of increased taxes will be primarily internal, the company may also consider an option that is outside the organization (Marshall, 2013). In this case, the firm could turn to third parties outside the organizational structure to argue its case. The lobbyists would try and prove to the government how the decision to raise taxes adversely affects business as well as arguing why not implementing it would be beneficial. Therefore, that could be one more option for the company to consider as a response to the changes taking place.
References
Hitt, M., & Hoskisson, R. (2016). Strategic Management . Boston, MA: Cengage Learning.
Marshall, A. (2013). Principles of economics . Houndmills, Basingstoke, Hampshire: Palgrave Macmillan.
Percy, L. (2014). Strategic Integrated Marketing Communications . Hoboken: Taylor and Francis.
Slavin, S. (2014). Microeconomics . New York, NY: McGraw-Hill Education.
Todorov, K., & Smallbone, D. (2014). Handbook of research on strategic management in small and medium enterprises . Hershey, PA: IGI Global.
