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Strategy Analysis

Extracts from this document...

Introduction

STRATEGY ANALYSIS OF A COMPANY DISTRIBUTOR OF INDUSTRIAL EQUIPMENT by Andrew Yamshchykov SFU EMBA2006 PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION In the Faculty of Business Administration EMBA 2006 (c) Andrew Yamshchykov 2006 SIMON FRASER UNIVERSITY Summer 2006 All rights reserved. This work may not be reproduced in whole or in part, by photocopy or other means, without permission of the author. APPROVAL Name: Andrew Yamshchykov Degree: Master of Business Administration Title of Project: Strategy Analysis of a Company Distributor of Industrial Equipment Insert your title here Supervisory Committee: Dr. Neil Abramson Senior Supervisor Associate Professor of Strategy Faculty of Business Administration Second Reader Dr. Ed Bukszar Associate Professor Faculty of Business Administration Date Approved: ABSTRACT This project develops a strategic analysis of ARPAC Storage Systems Corporation (ARPAC). ARPAC is one of the biggest distributors of material handling equipment in BC. The material handling industry in North America is mature and highly fragmented, and ARPAC operates in all segments of the industry. Market development and globalization processes accelerate the differences among segments, and as a result, the company needs to redefine its strategy. This report provides an overview of the company and the competitive landscape and an industry analysis. It identifies major forces that affect current strategies among competitors. The report seeks to identify key success factors that shape rivalry and develops strategic alternatives. It further evaluates proposed alternatives in regards to the company's internal capabilities and provides recommendations for the company about how to maintain a sustainable competitive advantage. This report recommends that to be able to provide growth, ARPAC should restructure the company to address the differences between two major industry segments. DEDICATION This is dedicated to my family. Their patience and support throughout the course has been much appreciated. ACKNOWLEDGEMENTS I would like to express my sincere gratitude to Dr. Neil Abramson for his advice, input and guidance to ensure the completion of this project and Dr. ...read more.

Middle

The value chain analysis findings support the conclusion from Porter's market forces analysis that suggests price, brand and dealer's expertise are important factors in the WE segment, and that price and to some extent brand dominate the LT segment. The analysis of the LT market also suggests that from the dealer's equipment perspective, choosing the right brand with a balanced price becomes one of the successful factors that will allow competing in the very cost-sensitive market. 2.3.3.2 Sales The nature of sales in the material handling industry is a consultative process to ensure that the selected equipment matches the client's working application and requirements. The following considerations are important in a successful sales approach: > The consultations usually require "face to face" interactions between sales and the users; thus, to be efficient, the sales force needs to be located as close to the customer's site as possible. > The sales process usually requires certain time; therefore the sales force needs to have constant access to the potential customers. > E-commerce still accounts for only 2 to 3 percent of total sales, despite its fast growth; thus human involvement is still a crucial factor in making the sale. > The sales force needs to stay with the customer long enough to preserve and build the relationship, which imposes a time factor on sales activities. The need to have a sufficient sales force, maintaining a long-time presence close to end users, makes the sales process for equipment manufacturers extremely expensive and forces them to outsource sales activities to equipment vendors that have constant and quick access to clients. Only about 10 percent of all sales activities are performed by manufacturers "in-house"; the remainder is outsourced to equipment vendors. A small fraction of sales activities is still performed by manufacturers, as they need direct access to some strategic or key accounts. Three major reasons for "in-house" sales activities exist: > Scale of repeat businesses: Accounts like Coca-Cola, Wal-Mart, Costco and other multinational retail and distribution chains require special attention from equipment manufacturers. ...read more.

Conclusion

Summary of Alternatives: The internal analysis of ARPAC shows that the company possesses most of the resources and capabilities to pursue either alternative. All senior managers have reason to support both alternatives. To proceed with one of the alternatives, however, ARPAC needs to change the current company culture. The major cost-benefits metrics provide an additional incentive for the senior managers to support the proposed alternatives. 4 CONCLUSION AND RECOMMENDATIONS: The industry analysis performed in this paper shows how opposite market drivers affect both industry segments. The two biggest industry segments have opposite market trends, a fact that poses extra challenges to any company that simultaneously tries to compete in all segments of the market. To address the market forces towards low cost in the lift truck industry segment and the forces towards greater differentiation in the warehousing equipment segment, the company needs to readjust its current strategy. The paper suggests two alternatives. The first alternative considers the company restructuring into two independent companies that operate in different industry segments using contrasting strategies. By adopting this alternative, the company could address the dominant market drivers in both industry segments in the most efficient way. By following this alternative, the entire company will benefit from operating as independent "pure play" companies. The second alternative proposes a strategy alignment towards differentiation, which will include a higher degree of harmonization between the company's two biggest operations. The differentiation in one industry segment will facilitate differentiation in the second, and vice versa. By following this alternative, the company will benefit from the synergy effect between the company's two major operations. The major decision criteria for proposed alternatives are increasing the company's market share and providing additional growth for the company, which is operating in a mature industry with very limited growth potential. Both alternatives are consistent with company's internal resources and existing infrastructure. The first alternative seems preferable, as it suggests fewer investments, better benefits, and better utilization of the managerial capabilities. Both alternatives are feasible, depending mostly on the willingness of the company's management to anticipate changes. ...read more.

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