Research-Based Analysis - Assignment Example

?Introduction Filkar Inc. is the manufacturer of braking equipment for which demand has been growing in Turkish market. The company implements total quality management in its manufacturing systems in order to develop a competitive advantage. This attention to quality has enabled the company to not only develop a market leadership position in the domestic market but also to remain competitive in the foreign markets. In addition to applying state-of-the-art technology in the manufacturing systems, the management also implements HR policies in order to develop human capital. The combination of manufacturing quality and people skills has enabled the company to develop a sustainable competitive advantage. Because the company invests substantially in research and development, the management is able to ensure that its manufacturing systems and training programs are able to keep pace with the latest developments in the industry. SWOT analysis The main strength of Filkar Inc. is the organizational capital that is invested in research and development. This investment enables the company to incorporate the latest technological developments into the manufacturing systems. As a result the company is able to manufacture the most competitive products in the industry. This is one of the key success factors because the industry is in a fast pace of change. Filkar Inc. also operates internationally so that it has to pay attention to maintaining the quality level. The investment in research and development enables the company to maintain the required level of quality in its product offerings. The company is able to combine technology with the existing manufacturing systems by using total quality management (Filkar Web, 2009). The application of this methodology enables the company to create synergies out of incorporating the latest technology in its manufacturing systems. As a result the management is able to ensure that its product offerings are among the highest in the industry in terms of quality. The company implements sophisticated HR policies dedicated to providing the best working experience for the employees. The management recognizes that it is the employees who provide the core competencies that create the long-term competitive advantage. As a result the motivational issues are made integral to the strategic focus of the company. The company’s strength in maintaining competitive quality is supported by the periodic training programs that ensure that its employees are among the most skilled in the industry. Because the motivational issues are addressed, the employees are also satisfied in working for the company. Therefore the productivity level is one of the most competitive in the industry. Filkar’s employees are its most important assets and the organizational culture reflects this strategic orientation. As a result employee interests and organizational interests are combined synergistically. This ensures that the strategic focus of the company is strengthened by strong productivity from the employees. The company’s weakness may be inability to respond to any disruptive technologies. The company has already made substantial investment in the existing manufacturing systems. Therefore if a competitor were to launch a new manufacturing system which would reduce the cost of production, then Filkar might not be able to make the change fast enough to remain competitive. Currently it is enjoying a market leadership position in the Turkish market because it has no competition. However it is also competing internationally. Therefore it is more than likely that international companies such as Westinghouse and GE can launch some transformational technology that will change the competitive landscape. In this situation the company might not be able to migrate to the new system. According to its performance management system, the company is doing well as it has the market leadership position in the domestic market. However if a competitor is able to cut costs significantly through the introduction of a new technology, then Filkar will be at a competitive disadvantage. The company maintains a diversified product portfolio. Therefore it has good opportunity to further increase its competitive advantage. If the demand in one product category decreases, then its profitability will not be significantly affected because it can continue to do business in other product categories. The company faces a major competitive threat internationally since companies like GE and Westinghouse Electric are large organizations which are able to invest much more in research and development in order to develop new competitive strategies. Although it enjoys a leadership position in the domestic market, there is always the threat of new entrants since foreign companies can move their operations to the Turkish market by forming joint ventures with local companies. As a result there is a significant competitive threat. Value chain analysis Filkar Inc. manufactures brake and suspension systems for medium and heavy commercial vehicles (Filkar Web, 2009). The inbound logistics are managed with the suppliers so that a quality management system is developed. This maintains the quality of the raw materials. In the manufacturing operations, total quality management is implemented in order to facilitate sustainable improvement activities (Filkar Web, 2009). The manufacturing operations have been certified by international quality organizations. This ensures product safety and occupational health and safety for the employees. Currently production activities are conducted according to the quality certificate of TS ISO EN 9001 – 2008 (Filkar Web, 2009). The operations are taken through five procedures: entry quality control process, production and mounting interlude control process, abnormal product appraisal process, final control process and periodic product test process (Filkar Web, 2009). The management invests specially in quality control in order to ensure that the production process from start to finish can be monitored for any abnormalities. From raw materials to the final product, special emphasis is placed upon following all the processes. The final product passes three tests: life tests, functionality tests and climatic environmental tests. In outbound logistics Filkar’s main distributor is Filsan Inc. Filkar’s main customers are OEM companies. OEM companies are defined as those which manufacture the final product under their own brand names. The OEM companies which purchase their products from Filkar Inc. are: Otokar, BMC, Temsa Global, Erkunt Tractor, Isuzu and Hattat Tractor (Filkar Web, 2009). The customers use Filkar’s products and services in manufacturing such final products as construction machines and tractors. In marketing and sales, emphasis is placed upon customer relationship management (Filkar Web, 2009). In order to fill the special needs of the customers, Filkar employs qualified personnel in a modern production plant. This facilitates marketing and sales since the products have brand reputation for zero error (Filkar Web, 2009). This means that operations are coordinated with prioritizing the needs of the customers so that marketing and sales activities can be conducted in a targeted manner. In this respect the company is targeting customers in both the domestic and the foreign markets. The company implements continuous improvement program in order to build synergy with the customers (Filkar Web, 2009). The firm infrastructure is based upon qualified personnel and modern production technology. As mentioned before, the company places emphasis upon customer relationship management. The organizational culture is defined accordingly. HR requirements are coordinated with the production technology in order to create an organizational culture that is based upon zero tolerance for product defects. Such a firm infrastructure enhances the effectiveness of marketing and sales as the company competes both domestically and internationally. The organizational culture has set a strategic focus that facilitates continuous change and innovation. HR activities focus upon developing the most effective training programs in order to maintain qualified personnel. Filkar’s employees have to maintain their skills in accordance with the latest developments since the company employs cutting edge technology in order to maintain synergy with demand. Technology development is one of the most importance sources of competitive advantage (Filkar Web, 2009). Resources and capabilities One of the most important resources that Filkar Inc. possesses is the widely diversified range of products. They range from compressors and valves to hydro-pneumatics and repair kits (Filkar Web, 2009). This diversified product portfolio enables the company to maintain its profitability even if the demand fluctuates in one product category. The company also possesses experienced human resources. A professional team operates strong equipment in order to maintain the desired level of quality. The company maintains four types of production facilities: aluminium casting, machining production, chip-less machining and assembling operations (Filkar Web, 2009). These resources are supported by the capabilities of the employees. As mentioned before, the management places special emphasis on product quality. In order to provide the targeted product quality, the product characteristics are checked at every stage of the production process. The production process and the use of raw materials are maintained at international standards. The company possesses an organizational structure that is based upon the combination of modern manufacturing equipment and experienced skilful staff. This organizational structure leads to a sustainable competitive advantage since the company implements cutting edge technology. This enables the management to meet the objective of offering products and services which have zero error. This is the infrastructure that serves as the company’s resource base. This resource base is supported through investments in production technology that is capable of meeting the special needs of the customers. As mentioned before, the company implements customer relationship management. This means that the company has to maintain training programs that enable the employees to keep their skills up-to-date. The resource base is strengthened by creating synergy with the customers and the company creates a sustainable competitive advantage by continuously building upon this synergy. Employees are an organization’s most important assets and this strategic orientation is reflected in the organizational culture at Filkar Inc. The company implements the practice of total quality management which would not have been possible without motivated employees. The company also conducts its production processes according to international quality certificates in order to provide speed and optimum solutions in meeting customer demands in every way. The organizational culture is based upon a lifestyle of progress and development so that the continuous improvement process may be facilitated (Filkar Web, 2009). In this manner the company maintains its competitive advantage. Because the employees have to do their work based upon the requirements of international quality certificates, they are able to develop industry standard capabilities. These include managing supplier relations to maximize the effectiveness of distribution and planning. By conducting effective supply chain management, the management is able to create a resource base which has the strategic focus of delivering the highest level of quality to the customers. VRIN Filkar’s sustainable competitive advantage stems from the market leadership position that it occupies in the Turkish market. It also has a substantial presence internationally as 30% of its sales are generated from exports. Therefore Filkar is competing internationally. At the same time the company holds international quality certificates ISO 9000/9001/9004/ 19011: 2000 (Filkar Web, 2009). This provides a valuable resource base in terms of ensuring profitability in the long term. Because Filkar has a strong market share both domestically and internationally, it has a valuable resource base in terms of a diversified portfolio of products targeting not only the domestic market in Turkey but also international markets in North America, South America, Eastern Europe, Southeast Asia, Africa, Oceania, Mid East, Eastern Asia and Western Europe (Filkar Web, 2009). This means that if a new company were to enter the Turkish market, it would not be able to imitate the market share position held by Filkar Inc. In the domestic market Filkar is filling a niche for which there is a strong demand. At the same the company is emphasizing upon customer relationship management. As a result Filkar’s strategic focus has been to capitalize upon strong demand by creating defect-free products that are aligned to customers’ special needs. In this manner a synergy is created. This synergy can be defined in terms of the brand reputation that has been built over the last two decades. Filkar Inc. has been in operation since 1984 and in that time it has built up a valuable customer base. Therefore the brand equity that the company possesses is rare. Any competing organization would not be able to imitate this brand equity in the short term since it would require the combination of qualified personnel and modern production technology that has been at the heart of Filkar’s organizational structure. Filkar’s products are also not substitutable since there is a strong demand in the market. Therefore the company faces minimal threat of substitute products. Because it is continuously updating the synergy with customers, the company has made its products non-substitutable. There may be a solid threat of new entrants since the Turkish market is still developing. However this is not so much a threat for Filkar Inc. because the company has been implementing policy and quality objectives which make it the technology leader. Its manufacturing operations are conducted according to international management certifications. This enhances the quality of the resource base. In addition to the management certifications, Filkar is also implementing total quality management, defined as a management structure which sets the objective of meeting or even exceeding customer expectations by continuously improving quality and performance. Therefore this management structure provides the perfect performance management system that facilitates continuous updating of synergy with the customers in alignment with industry changes. Filkar operates in the automotive industry in which the manufacturing operations are constantly changing to reduce costs. In this industry Filkar fills a vital need. Filkar possesses a brand in demand. The company is able to keep its brand in demand by continuously updating the synergy with the customers. This is the strategic focus and the resource base is structured accordingly. The organizational structure that results from this alignment creates value for the company because this organizational structure enables the company to exploit the opportunity that exists not only in the domestic market but also in the international markets. Even if the competitive threat increased in the international markets or the demand in the international markets became saturated, it would still be filling a substantial need in the developing Turkish industry. According to the industry life cycle theory, a market passes through the five phases of early stages, innovation, cost/shakeout, maturity and decline (Grant, 2010). Although the international markets may be in the maturity phase, the Turkish market is still in the innovation stage. Therefore Filkar’s resource base generates value by enabling the company to capitalize upon the opportunities created by a market that is still developing. By creating an organizational structure based upon qualified personnel and modern production technology, Filkar Inc. has created a rare resource base. It enables the company to compete internationally and has been developed over decades and therefore cannot be copied by competitors in the short term. This rarity enables the company to create a sustainable competitive advantage. Although the production technology can be imitated by competitors, the organizational culture is non-imitable. It is based upon planned trainings that enhance the core competencies of the employees in alignment with changes in the industry. Therefore the company possesses a resource base which is supported by strong capabilities internally and growing demand externally. By capitalizing upon the opportunities thus created, Filkar Inc. is able to create an infrastructure of progress and development that creates value, is rare, non-imitable and non-substitutable. Therefore the VRIN analysis provides a positive picture of the resource base of the company. Ratio analysis In the last five years Filkar has generated sales volume averaging between US$5 million – US$10 million (Filkar Web, 2009). The company’s sales volume has been growing. At the same time the company has been improving its production technology to cut costs. As a result the profitability ratios are moving in the positive direction. While the company’s sales have been increasing, its costs have been streamlined. As a result the company is able to maintain healthy profitability ratios. Given the quality certifications that lead to zero error product portfolios, the company is able to minimize waste from defects and thus increase cost efficiency. At the same time the growing Turkish market has been providing a strong source of demand for the company’s products and services. In addition, 30% of the company’s sales are generated by exports. In this manner the company is able to maintain a steadily increasing sales volume. With rigorous cost discipline, this results in a net profit margin averaging 10%. Recommendations Although the net profit margin currently shows a healthy return, the company should implement information technology in order to improve communications with the suppliers and the customers. This will enhance access to information so that the company will be able to predict demand to a greater extent. Many automotive manufacturers require advanced communications with parts manufacturers in order to increase the efficiency in inventory management. Therefore if Filkar were to install state-of-the-art communications technology, then that would enhance its brand reputation even further. It would enable the company to coordinate its activities to a greater extent with the partner organizations. The company has already developed a quality management system in order to ensure supplier conformity. This requires coordination which would be further enhanced with communications technology. The company could outsource the IT activities to SAP which would install an ERP solution that would provide network connectivity with partner organizations. The company should conduct benchmarking activities with suppliers and customers in order to further enhance the continuous improvement process. Benchmarking is defined as the process of measuring the performance of internal practices in comparison with industry best practices. The ERP solution would aid the process by providing an information sharing network between Filkar and its partner organizations so that there is a common database of best practices based upon which to compare the performance of Filkar with that of its partner organizations. Conclusion Given its resources and capabilities, Filkar Inc. has the potential to maintain its market leadership position in the developing Turkish industry and also to maintain its momentum in the international markets. The company possesses experienced skilful staff and modern production technology. This resource base enables the company to create a sustainable competitive advantage. The strong market leadership position is based upon quality control which is monitored according to international management certifications. The value chain is maintained according to total quality management which ensures that the manufacturing operations result in zero error products. This internal organizational structure maintains a diversified product portfolio the characteristics of which fill the special needs of the customers. In this manner the management creates a brand in demand. Word count: 3000. References Filkar Web, 2009. Filkar Inc. Available at http://www.filkar.com.tr/eng/. Grant, R. M., 2010. Contemporary strategy analysis. 7th ed. Wiley. Porter, M. (1985). Competitive advantage: creating and sustaining superior performance New York: The Free Press. Appendix: value chain activities of Filkar Inc. Read More