Develop the key strategies to launch a (generic company into the industry that you analysed in First assignment - Essay Example

Generic Company Launch Introduction The present paper puts forth key strategies to launch a generic company in the construction and mining equipment manufacturing industry. This generic company will also manufacture industrial machinery, diesel and natural gas engines and military equipment. The new company will compete with Caterpillar Inc. and Komatsu. Critical Success Factors Critical Success Factors (CSFs) refer to the areas in which the company must attain desired results to become a successful player in the industry.

The management should maintain the highest possible focus on these facets of business. The CSFs for the new generic company are discussed below. Establish a Robust Supply Chain The success of the new generic company will hinge on the establishment of a robust supply chain. The new company will have to ensure successful business relationships with its vendors that operate upstream in the value chain. This will ensure that order delivery, production of desired equipment and the receipt of such equipment at the warehouse or the retailers is seamless.

Agreement with Outsourced Manufacturing Partners The new generic company will have to scout for the ideal outsourced manufacturing partners in Asia. These partners should have the financial muscle to take up large quantum of work and have the wherewithal to complete the order within the stipulated deadline. Personnel Selling The effectiveness of the sales personnel will determine the success of the new generic company. The task of convincing the buyers that the company’s products are of high quality even though they are priced lower than competitors will rest on the sales staff.

This team will have to act as a liaison between the company and the customers and ensure highest level of after-sales service. Assumptions The strategies for the new generic company have been devised on the under mentioned assumptions. Access to Finance The new generic company will be able to access low cost finance for its growth plans. Distribution Channel The company will be able to establish warehouses and tie up with retailers in the emerging markets where it intends to market its products.

Negotiations Low Prices The new generic company will be able to negotiate favorably with manufacturers and procure products at low prices. Attract Customers The new company will be able to attract customers by convincing them that its low priced equipment is of high quality. Corporate Level Strategy The generic company will adopt the corporate level strategy of growth. In addition to its domestic market, this company will foray into international markets. However, this expansion will be very selective especially during the first five years of business operations.

The primary focus of oversees growth will be on BRICS (Brazil, Russia, India, China and South Africa) countries and MINT (Mexico, Indonesia, Nigeria, and Turkey) economies (Wright, 2014). Business Level Strategy According to Michael Porter, a firm may adopt the business level strategy of differentiation, cost leadership or focus. In narrow markets, the focus strategy may take one of the two forms; cost focus or differentiation focus (Mindtools.com, 2014). The existing dominant players in the heavy construction equipment industry are Caterpillar Inc.

and Komatsu. Both these companies follow the strategy of differentiation while vying with each other for market share. Caterpillar has a matchless service and supply network. The U.S. based company has developed an extensive, difficult-to-replicate dealer network spread all over the world (Caterpillar.com, 2014). On the other hand, Japan based Komatsu has thrived on its manufacturing prowess. The company specifically designs and manufactures machines that break down less frequently (Komatsu.com, 2014).

The new generic company will not adopt the strategy of differentiation and will thus not confront the existing players directly. Instead, it will compete on the basis of its low cost products. Competitive Advantage The new generic company will compete in the market place on the plank of cost focus. It will manufacture high quality products and will penetrate the market by selling them at low price. The low cost acquisition and production of equipment will be a source of competitive advantage for this new firm.

Prerequisites to Attain Competitive Advantage All the functional level strategies will be in line with achieving the overall strategy of cost focus. Financial Strategy The generic company will have an optimum capital structure and attempt to minimize its cost of capital. A judicious blend of debt and equity will be used to raise capital. While debt will entail a fixed outflow by way of interest, it will also help the company attain the advantage of financial leverage. Operations Strategy The manufacturing of equipment will be outsourced to countries like India and China to benefit from low cost of labor and raw material in these countries.

Since these countries are also the prime markets that the generic company will target, a lot of transportation and distribution cost will be saved. Marketing Strategy The role of the marketing team will be to spread awareness of the generic company’s products amongst the target market in the most cost effective manner. HR Strategy The task of HR will be to recruit talented employees and create an environment where employees remain motivated and committed to the new company. To achieve the objective of cutting costs, employees performing menial or less critical jobs will be outsourced.

The Role of Culture Culture, the set of values and beliefs that prevail in the organization, will have a monumental role to play in the implementation of the cost focus strategy. The top management will lead by example and will not splurge unnecessarily on expensive business travel, boarding and lodging. The culture of saving money will be incorporated in all facets of the generic company’s business. Implementation Each department will be allocated responsibilities and will be assigned a budget to carry out its activities.

The implementation of the cost focus strategy will thus happen at a departmental level. There will be intense focus of making optimum use of resources and cutting costs wherever possible without hindering the smooth day-to-day functioning of the company. Business Model Value Proposition The value proposition of the new generic company will be to deliver comparable quality products at low prices. The Customers The target market for the company will be small and medium sized construction companies that operate on a relatively smaller scale.

The generic company will rely primarily on personal selling to establish and maintain good relationship with its customers. Revenue The company will take at least 60 percent of the price of the machinery upfront. The balance can be paid in 8 equal quarterly installments. In case the customer intends to make the entire payment upfront, a discount of 10 percent will be given on the maximum retail price (MRP) of the machine. Measurement of Success To measure the success of the new generic company, the following key performance indicators (KPIs) have been set.

These SMART (specific, measurable, achievable, relevant and time bound) KPIs will enable the new generic company to measure its actual performance against the set objectives. Achieve 5% Market Share in First Two Years The new generic company will strive to achieve 5 percent market share in the first two years of operations. The KPI has not been set very high since the company is likely to encounter teething troubles during this phase. The initial years will provide the company the opportunity to go in for awareness advertising and thereby set the platform for higher market share in subsequent years.

Warehouses in 9 Key Markets The new generic company will set up at least two warehouses in each of the nine key markets; Brazil, Russia, India, China, South Africa, Mexico, Indonesia, Nigeria, and Turkey within the first year of operation. This infrastructural set up will ensure that the company is able to service these countries optimally. Cost of Capital to be 10% The new generic company will attempt to keep its cost of capital at 10 percent. At the same time, the finance department will ensure that there is no dearth of money for capital expenditure as well as working capital.

References Caterpillar.com. Caterpillar | Caterpillar. N. p., 2014. Web. 3 Jun. 2014. Komatsu.com. KOMATSU : KOMATSU GLOBAL. N. p., 2014. Web. 3 Jun. 2014. Mindtools.com. Porters Generic Strategies: Choosing Your Route to Competitive Advantage. N. p., 2014. Web. 3 Jun. 2014. Wright, Chris. After The BRICS Are The Mints, But Can You Make Any Money From Them?. Forbes2014. Web. 3 Jun. 2014.