The repricing model is based on the consideration that a bank`s exposure to interest rate risk derives from the fact that interest-earning assets and interest-bearing liabilities show differing sensitivities to changes in market rates. The main limitations of the repricing model is that it only considers the book value and overlooks the effects of market values. It also overlooks the effects of runoffs and off-balance sheet flows. Moreover, it is not as accurate as duration model in measuring the interest risk rate. Duration model measures the average time to recover the present value of the project (if cash flows are discounted at the cost of capital). Duration allows bonds of different maturities and coupon rates to be compared. This makes decision making regarding bond finance easier and more effective. The main limitation of duration model is that it assumes a linear relationship between interest rates and bond price. In reality, the relationship is likely to be curvilinear.
purchasing power means consumers have more income to purchase more milk to adjust to their healthy lifestyle. This will create an opportunity for A2 to earn more. However, Australia economy is experiencing a slow growth, this will cause the profitability to decrease. In addition, some parents prefers to breastfeed their child therefore, this creates a threat to the demand of infant milk.
Social
Social factors are general environment that represents the demographic characteristics, norms, customs and values of the population within which the organization operates (B2U – Business-to-you.com, 2019). Infant milk industry, the targeted audience would be babies, however some parents prefer to breastfeed their child.
Technological
Technological factors are revolution in technology that may affect the operations of the industry and the market favourably or unfavourably. It also affects the decision of the company whether to enter certain industries or to launch a product (B2U – Business-to-you.com, 2019). Factors that affects the operations could be one of the few followings impact on cost production, impact on product offer and technological development. If all the technology implemented by A2 Milk benefits the company, other competitors will try to copy their ideas. All the mentioned factors are all interconnected in technology because if the innovation is popular and it affects competitors revenue, others wills try to copy the idea. These are factors that needs to be monitored at all times, causing it to be a threat. However, with technology, it will still help to generate great profit to the company and the earning can be used for research and development to enhance their profitability.
Environment
Environment factors has surfaced due to increasing scarcity of raw materials, pollution targets and carbon footprint targets set by governments (B2U – Business-to-you.com, 2019). In the milk industry, it is heavily dependent on the health and availability of livestock. There are several factors that could affect the livestock, such as diseases or climate change. Diseases will have impact on the cows and this will cause a decline in quality of the milk and supply if cows are being slaughtered. In addition, climate change will affect the quality of the milk cause manufacture needs to find ways to preserve the milk under the weather conditions without the milk
