Strategic Management Accounting - Renishaw - Essay Example

?Introduction Renishaw is a global company providing its s with advanced and complex technological products. Technological advancement has helped the company in providing its customers with innovative and complex machinery to enhance their operational performance (Renishaw, 2012b). The company aims to meet the needs of the customers by providing them with products that could not only meet today’s needs but also the future needs as well. The company is operating in 31 countries and has a range of diversified customers geographically (Renishaw, 2012a). The company provides total technical support for the installation of the machinery sold to the global customers to gain their confidence and long-term relation (Funding Universe, n.d.). Renishaw is well recognized for its manufacturing of complex machineries that could help the customers to improve their efficiencies and their potential capacities along with greater quality of the products and improving of operational performance. Renishaw has always aimed to meet the unending needs of the customers by offering them technology beyond their reach and capability. The products offered by the company assures enhancement of quality and productivity along with superior customer service (Renishaw, 2012c). Renishaw was a private company in 1982 but in the year 1983 the company went public and offered stocks in the London’s Stock Exchange Market. Renishaw is quite hierarchical which indicates that the company is centralized and the decisions are made at the top management and then communicated to the other levels of management in the company (Renishaw, 2012a). This report would highlight the competitive strategy and strategic position of the Renishaw Company. This strategic analysis would be regarding the market sector, employment of appropriate strategic management and management accounting tools. The internal analysis of the company would be analysed using the SW of SWOT analysis (Strenghts, Weaknesses, Opportunities and Threats) analysis and the external environment of the company would be analysed using the OT of SWOT analysis as well as the PESTLE (Political, Economical, Socio-cultural, Technological, Legal and Environmental factor ) analysis. The competitive strategy would be analyzed with the BCG matrix. In the end, recommendations would be provided to protect the company from new entrant’s adopted strategy and to help the company grow further in the years to come. Analysis of Strategic Position – Strengths, Weaknesses, Opportunities and Threats (SWOT) The strategic position of the company is based on combination of internal analysis and external analysis. The strategic position of the company has been analyzed with the help of SWOT and PESTLE analysis and these two analytical tools are applied on Renishaw. SWOT Analysis SWOT analysis is used to analyse both the internal as well as the external environment of the company (Barney, & Hesterly, 2008). SWOT analysis would be helpful to identify the major internal strengths as well as the major internal weaknesses of the company along with external opportunities and threats that can influence the performance (Cravens, and Piercy, 2008). Strengths The foremost strength of the company is its technological advancement in terms of machinery and products. The company is also known for its innovation and superior quality. Due to constant innovation the company is able to provide the customers with high quality products to satisfy the customer’s needs and to meet the customer’s expectation (Renishaw, 2012b). The company’s workforce consists of young and energetic individuals that are constantly encouraged to make their way forward with the help and guidance from their seniors (Renishaw, 2012c). The company also focuses on the training and development programmes each year to enhance the productivity and knowledge of its workforce. This training and development programmes have provided the company with significant benefits due to which the company is able to meet the unending needs of the customers (Renishaw, 2012c). An important strength of the company is the establishment of new management policy which is aimed to control and improve the matters relating to health and safety of the employees. Even the top management has participated in the implementation of the new management policy. The company is located in 31 countries and this global expansion could be said as another major strength of the company. Due to this global expansion, the company was able to meet the needs of the diversified customers and creation of long-term relationship (Renishaw, 2012c). The protection from illegal competition is another major strength of the company. This has allowed the company to work in a smooth and safer environment and to reap impressive profits which have been used later for the implementation of new technologies and in more research and development work. Weaknesses The company provides global customers with the technological products but with no specific consumer. This has created a problem for the company as very few people are aware of the company’s existence. The company’s another weakness could be the shortage of the engineers which could create a great hurdle for the company in the near future. To enhance the performance of the company, it would have to compete against some very well known businesses for young talent. Moreover, the company needs to do the succession planning in order to avoid problems in future. Opportunities Being a niche technology brand with no consumer products, the company can start creating brand awareness regarding the products being offered and the benefits that could be achieved by businesses (Renishaw, 2012c). The company has an opportunity to further expand the business geographically. The company was able to increase the sales from geographical expansion and the company can further enhance the sales through expansion (Renishaw, 2012c). The company has an opportunity to go beyond metrology and health segment. This would allow the company to be more competitive in the market and could enhance the range of products being offered to the customers (Renishaw, 2012c). Threats The major threat that the company is facing is the stiff competition in UK. Due to tough competition, the company’s sales have declined in the health care segment. Shortages of skill labour particularly engineers are another important threat that can influence the company’s future. The major threat for the company is entrance of new companies in the market with technological products to meet the needs and wants of the customers. These new entrants could further reduce the sales of the company and could directly affect the company’s performance. PESTEL Analysis To analyse the external analysis, PESTEL has been used. This analysis would help to investigate the external environment of the company (De Wit, & Meyer, 2004). This analysis comprises of political, economic, socio-cultural, technological, environmental and legal aspects (Gamble, and Thompson, 2010). Each of the aspect is separately analysed below. Political factors The company operates mostly in the developed countries which indicate that the countries in which the company is operating are politically stable. The main countries in which the company operates are United Kingdom, North and South America, Continental Europe, Far East and other regions of the world. These countries are politically stable with the government selected by the people. The governments of most of these countries also support such companies in order to setup their facilities and encourage the transaction between the countries at zero tax rate or low tax rates. Economic factors The economic factor revolves around the economic stability of the country. The economic depression could be said as the major reason for the fall of purchasing power of the people. Due to this depression, the company had to face a huge setback in terms of sales and revenues. The growth prospects of the company were also greatly influenced by this factor and the company’s sales were just above the expected sales. The fluctuation in the exchange rate has also affected the business revenue. For example, when Renishaw started its business in Japan, the value of Japan’s currency was quite less as compared to United Kingdom. With the passage of time, Japan became one of the leading countries in technology and the value of Japan’s currency increased. This influenced the company to a great extent as the company had to invest more than the previous in order to keep the business operating. Therefore, it is important for the company to consider the changes in the exchange rate of different currencies in which it is operating. Socio-cultural factors Renishaw is a multinational company that operates in 31 countries. This socio-cultural factor directly influences the company’s product design and the availability of the products to the customers. Being a leading technological advanced company, it is essential to consider the ways to make the products available to the customers and to identify their buying behaviour when it comes to purchasing advanced manufacturing machinery. The company also has to identify the perfect machinery that could boost the sales in the particular region along with gaining the customer’s confidence and total satisfaction. Moreover, the company needs to understand the socio-cultural factors that are different as well as similar in different countries where it is operating. Technological factors Technology has always been the company’s core advantage. Renishaw is considered as an innovative company and invests heavily in the advancement of the technology (Renishaw, 2012b). Through the advancement in technology, the company has enabled itself to create new processes and products designs to meet the unending needs of the customers with total satisfaction. The company has somehow managed to keep the same pace as technology and instead of resisting the advancement in technology; the company has trained and motivated the workforce to accept the change rather than resisting it. Environmental factors The environmental factor is essential for the success of the company. The company has taken into account several measures to reduce the company’s impact on the environment. One such measure includes lean management which is more focused to reduce the waste material and to enhance the performance of the company. The company also focuses on the 3 R’s of the environment; reduce, reuse and recycle. Through the use of such methods the company has reduced the waste to minimal quantity and has tried to do whatever that could be done to reduce the wastages. Legal factors External environment also includes the laws and regulations imposed by the government in which the company is operating. As the company is operating globally, it has to obey all the laws and regulations set by the government. The laws and regulations vary from country to country due to which the company has established measures in order to meet the laws and regulations. This has influenced the business as the laws and regulations are sometimes against the policy of the company. For instance, to operate in Far East countries, the company had to merge with a local business in order to continue its business in that region. Analysis of Competitive Strategy – BCG Matrix Renishaw plc Company is based on cost-focus strategy according to Generic model. Cost focus strategy means that in order to achieve competitive advantage the company is focusing highly on cost as well as niche markets (Grant, 2009). The production in bulk capacity has allowed the company to acquire economies of scale in the perfect competitive market (Financial Times, 2012). Along with cost-focus strategy, the company also uses patents in order to eliminate any illegal competition that might arise in the future. Through cost-focus strategy, the company creates barriers to entry for the new entrants in the market and dominates the niche market. To remain competitive in the market, the company focuses on three things. i. First would be use of technology to come up with innovative products and to acquire patent protection to eliminate any illegal competition. The profits earned due to this protection are reinvested for the acquiring of new technologies (Taylor, 2002). ii. To meet the needs of the customers and to provide the customers with the advantage they are looking for (Taylor, 2002). iii. Thirdly, to provide very high level of support to the customers – application support and service support. For the very reason, the company provides technical experts to the customers for the installation of the machinery and to gain the customers confidence to create long-term relationship (Taylor, 2002). To further analyze the company’s competitive strategy, BCG matrix has been applied. This matrix has been helpful in analyzing the market share of the company as well as the rate of market growth (Hill, and Jones, 2005). According to BCG matrix, the company is rated as a ‘Star’. The relative market share of the company is high and the rate of market growth is also high, thus these characteristics are of a Star in BCG Matrix (Johnson, Scholes, and Whittington, 2008). This indicates that the company should implement the hold and maintain strategy to remain competitive in the market. The company has viable options to diversify into new market or to remain in the same market. The company has another option of related and unrelated diversification which means that the company can either introduce a product relevant to the market it is currently operating in or it can introduce a totally new product in the same market. Being rated as a Star means that the company has many upcoming opportunities that could help the company to become more competitive in the market. With the passage of time, the company could be seen as a Cash Cow that would require less investment and would reap more stable profits. Recommendations - Ansoff’s Matrix Ansoff’s matrix has been used to give recommendations for the company to further grow (Watts, Cope, and Hulme, 1998). This matrix provides the business with options to remain in the market that the business is aware of but penetrate it even further so that the sales and profits can further increase (market penetration) (Meyer, and Tran, 2006) or to change either the market (market extension) or the product (product development) in order to grow further and increase its profits. The other strategy according to Ansoff is to diversify its offerings and enter a new market with a new product. The recommendations for the Renishaw plc Company are as follows: The company is rated as a Star in the BCG matrix. This means that the company has great opportunities to remain in the same market and to float the market with the products they are currently offering. This strategy could be one of the best for the company as the risk in this type of strategy is the lowest. The company could easily provide the existing market with the products as the company is already aware of the customer’s needs and wants. So, according to Ansoff the company can use the market penetration strategy (Fleischer, & Benoussan, 2003). The company has greater chances of success if the company extends the market. Through the extension in the market which is according to Ansoff Market Development strategy, the company would be able to evaluate the needs of the new customers and could attract the customers with the company’s complex and innovative machinery. The market extension could also serve the purpose of increasing sales and geographic extension. This expansion could help the business to create awareness regarding the business and to create trust and long-term relations with the customers. The company could also diversify the market as well as the products being offered by the company. This means that the company should start manufacturing products either related or unrelated to be sold in the new and fresh market (Garavan, Barnicle, & O’Suilleabhain, 1999). Through this diversification the company would be able to attract new customer’s base and would be able to retain the old customers with the latest machinery that could further enhance their operational performance. Another recommendation for the company would be to introduce new and innovative products in the existing market. The company is already operation in 31 countries due to which this option could help to attract new customers while maintaining old customers. This new and innovative machinery designs could help the business to gain the attention of the customers which would eventually enhance the awareness level of the business and its products. The last but not the least recommendation for the company would be to focus a particular niche market and to fulfil the needs of the customers rather than randomly meeting the needs of the customers. By specifying the target customers, the company would be able to meet the demands of the customers more accurately and precisely (Johnson, Scholes, & Whittington, 2011). Conclusion Renishaw Company holds a very competitive position in the market. The strategic position of the company has been analyzed with the help of internal and external environment. The internal environment has been analyzed with the help of SWOT analysis. It has been found that the strengths and opportunities of the company outnumbered the weaknesses and threats. The company provides innovative machinery to the customers while protecting the innovative products through patents. In other words, the company has reduced the possibility of illegal competition through patenting the products. The external environment has been analyzed with the help of PESTLE analysis. In this analysis the political, economical, socio-cultural, technological, legal and environmental factors have been examined. It has been found that the company has to face huge setbacks due to the economic depression in earlier years. Due to the depression, the sales and revenues of the company gradually declined but the scenario is changing as the economy is recovering from recession. In the technological factor, it has been found that the company has radically improved with the support of technology. The profits earned through the protection from illegal competition are used to invest in the new technology. In the legal factor, it has been found that the company has to develop strategic plans to meet the laws and regulations of the countries in which the company operates. This could be said as crucial as without these plans the company would not be able to operate in any country. The competitive strategy of the company lies within the cost-focus strategy that is used by the company. Due to such strategy, the company is able to produce high quality products in bulk quantity and can easily attain economies of scale. To remain competitive in the market, the company uses patent to protect their innovative products and to eliminate the illegal competition. List of references Barney, J., & Hesterly, W. (2008). Strategic Management and Competitive Advantage, Pearson, New Jersey. Cravens, D.W. and Piercy, N.F. (2008). Strategic Marketing, 9th Edition. Cambridge: McGraw-Hill Publishing Co. De Wit, B. & Meyer, R (2004). Strategy: Process, Content, Context, 3rd Edition. Andover Hants: Thomson Learning. Financial Times. (2012). Renishaw PLC. Available from http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=RSW:LSE [Accessed 29 December 2012] Fleischer, C. & Benoussan, B. (2003). Strategic and Competitive Analysis: Methods and Techniques for Analysing Business Competition. Pearson Education. Upper Saddle River. New Jersey. Funding Universe. (n.d.). Renishaw plc History. Available from http://www.fundinguniverse.com/company-histories/renishaw-plc-history/ [Accessed 29 December 2012] Gamble, J., and Thompson, A. (2010). Essentials of Strategic Management: The Quest for Competitive Advantage. London: McGraw-Hill. Garavan, T.N, Barnicle, B. & O’Suilleabhain, F. (1999). ‘Management Development: Contemporary Trends, Issues and Strategies’. Journal of European Industrial Training. 1999. Print. Grant, R. (2009). Contemporary Strategy Analysis. London: Wiley Higher. Hill, C.W.L., and Jones, G.R. (2005). Strategic Management: An Integrated Approach, 7th Edition. Boston: Houghton Mifflin Johnson, G, Scholes, K & Whittington, R. (2011). Exploring corporate strategy: texts and cases, 9th edn. Financial Times Prentice Hall, Harlow, England. 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International Journal of Entrepreneurial Behaviour & Research, vol. 4 no. 2, pp.101 – 111. Read More