Global Operations Management of Precision Parts - Essay Example

Global Operations Management   Contents Contents 2 Part 3 Introduction 3 Company scenario 3 Environmental factors 3 Internal factors 4 SWOT analysis 4 Short term and long term strategic goal 5 Implementation 6 Reference 8 Part 2: 10 Reference 12 Part 1 Introduction Precision Parts is an Australian company and a market leader in harmonic balancing manufacturing. The core attribute that has lead to the growth of the company is constant range of development and superior quality of products. With an increase in demand for new balancers the company has expanded itself globally (Precision Parts, n.d). Company scenario Precision Parts based in Wagga Wagga, has grown rapidly and currently dominates the market of Australia with a total market share of 85%. In the past five years the company had 125 people, who were engaged in making three shifts a day, seven days a week and thus achieving sales of $27million per year (Adelaide Now, 2011). Currently the company employs 85 people at its Wagga Wagga location (Regional Development Division, n.d). Environmental factors This section deals with the environmental scanning of the company with regards to its expansion strategy. Thus before conducting the environmental scanning it is necessary to point out the country in which Precision would expand. Therefore the market chosen is Germany because of the following conditions. Political, social and economic stability provides a solid base for any company to start up a new plant in a new environment. Germany judiciary and its civil services allow companies to set up industries at an ease. The judiciary systems are highly professional. Agreements based on contracts are secured and intellectual properties are protected with high concern in Germany. Germany has one of the highest levels of education, economic productivity and technological development. The economic condition of Germany is stable and its economy has been regarded as the fifth largest in terms of purchasing power parity. It is one of the leading exporters of vehicles, machinery and chemicals and benefits from a high skilled labor force. In 2010 the GDP of Germany was 3.6% and was expected to grow by 2.6% in the current fiscal year (US Department of States, 2011). Germany hosts the largest OEM plants in Europe enabling the suppliers in diversification and access to nine different OEMs. With an excellent high skilled labor force, Germany has been able to achieve success in the automotive industry and thus creating more opportunities for suppliers to invest in the country. It has been a leader in technology ranging from machines, electronics to buildings. According to World Economic forum, Germany has been ranked number one in terms of infrastructure and logistics (Invest in Germany, n.d, p.4). Internal factors SWOT analysis To analyze the internal resources of an industry or a particular company SWOT analyze is used. With the help of SWOT the company strength and weakness as well as the opportunities and threats prevailing over the company are interpreted and can be used for further implications. One of the greatest strength of Precision Part is that the company falls under the competitive market-the automotive market and it has been able to compete for the past 30 years. The biggest asset of the company is the work force and they are loyal towards the company. The biggest strength is that the company has an attrition rate of only 2% a year. The company’s logistic is very cost effective and is a central to the company’s operation. The market share of the company comprises of 85% and currently dominates the Australian market (Regional Development Division, n.d). A major weakness for the company is that the country is short of labor and capital both in terms of monitory and physical. The automotive industry has been facing a massive set back. The federal government has proposed to cut down tariffs on overseas cars to 5% (Business Day, 2008). Opportunity for Precision Parts lies in global expansion into countries where the demand for the automotive industry is high. The company has planned to expand in Middle East, Germany and China also. Germany has a huge potential of growth in automotive sector, thus precision Parts can expand itself in Germany. The company competes in the global automotive industry and has invested about $14million in equipments and site. Also the company plans to launch the engine pulley in the USA market (Davis, n.d, p.1-2). The company may face threats from other automotive industry which produces the same products as Precision Parts. A major threat comes from the Global Financial Crisis, as it is evident that the company had to adapt to an exchange rate of 50% during the global crisis. Short term and long term strategic goal The company short term strategic goal would be concentrate on expansion strategies and expand in those countries where the automotive industry is at a growing stage. Further it can enter into joint venture with other foreign countries and increase its global presence and acquire the market share. The long term goal would be to go for mergers and acquisition. Companies usually apply this strategy to acquire the market share. Precision Parts has been performing well in Australia and has captured 85% of the market share with a sales growth of $14million the company can set its long term goal for mergers and acquisition. Implementation It has been suggested for the company, Precision Parts to expand it manufacturing unit in Germany. Germany has been regarded as one among the top automotive industry and the country is known for this specific factor. The automotive industry in Germany produces the largest turnover which accounts for more than third of total domestic research and development spending. Germany is the primary location for technology driven companies which are active in all the stage of value chain process. The advantage that the company would gain is in respect of new and latest technology as Germany has been regarded as the technological leader in all automotive related industries. Also with an excellent highly skilled labor Germany poses an edge over other automotive producing countries. Germany’s economy has been ranked number one in terms of its infrastructure which supports the continued success of highly efficient and smooth automotive logistic environment. The country being regarded as the number one in the automotive industry hence Precision Parts would not face any limitation in respect to expanding its business in Germany. Reference Adelaide Now. (2011). Precision has the hot stamp of approval. Retrieved on November 17, 2011 from http://www.adelaidenow.com.au/business/sa-business-journal/precision-has-the-hot-stamp-of-approval/story-e6fredel-1226193912680. Business day. (2008). Strong Dollar Exposes Weaknesses. Retrieved on November 17, 2011 from http://www.theage.com.au/business/strong-dollar-exposes-weaknesses-20080519-2fy5.html. Davis, J. (No Date). Wagga Wagga Business Profile -Automotive Parts Manufacturing. Retrieved on November 17, 2011 from http://businesswaggawagga.com.au/media/uploads/PrecisionParts.pdf. Invest in Germany. (No Date). The Automotive Industry in Germany – Driving Performance through Technology. Retrieved on November 17, 2011 from http://german-business-portal.info/GBP/Redaktion/en/PDF/automotive-industry-in-germany-invest-in-germany,property=pdf,bereich=gbp,sprache=en,rwb=true.pdf. Precision Parts. (No Date). About Us. Retrieved on November 17, 2011 from http://www.precisionparts.com.au/about.html. Regional Development Division. (No Date). Case Study: Precision Parts. Retrieved on November 17, 2011 from http://www.business.nsw.gov.au/__data/assets/pdf_file/0007/6982/casestudy_precision_0906_reg.pdf. US Department of States. (2011). Background Note: Germany. Retrieved on November 17, 2011 from http://www.state.gov/r/pa/ei/bgn/3997.htm#people. Part 2: If this firm is a high-tech manufacturing firm, what resource and operational factors should be considered in this decision? Bit technology Inc can locate its new firm in UK because UK current performance and the high tech industry showed a positive sign of growth with regards to the country’s economy. UK manufacturing sector has been filled with innovations and boosting high tech manufacturing which would produce an economy growth rate of 3.2% in a given year. Thus since the industry is at a growing stage UK as location will be preferred. How might the organizations identity influence its structure? Organization’s identity can influence the structure in a positive way. The members believe about what defines their organization. This identity provides clarity about the organization as to who the organization is, provides direction as to how it should manage, behave, explain and justify. The identity influences organization performance which in turn affects the ability to access needed material and human resources (Ran & Duimering, 2007, p. 155-156). Explain the legal factors that must be considered when a company decides to locate its operations in a foreign country? Before expanding into any country it is necessary to have an understanding of the social, economical and environmental context in which the legal issues operates. This would help in reducing the legal risk associated with the proposed plan of action (Bradlow, n.d, p. 2). Some of the legal factors to be taken into consideration are: The location of the suppliers and the customer may vary; the country regulation must be taken into consideration. Payment issues needs to be sorted out such as the choice of currency, take appropriate actions to protect the intellectual property in foreign countries (Business Link, n.d). Reference Ran, B. & Duimering, P.R. (2007). Imaging the Organization. Retrieved on November 17, 2011 from http://www.personal.psu.edu/bur12/index_files/JBTC.pdf. Bradlow, D.D. (No Date). The Changing International Business Context and the Challenge It Poses for the Education of International Business Lawyers1. Retrieved on November 17, 2011 from http://www.ialsnet.org/meetings/business/BradlowDaniel-USA.pdf. Busines Link. (No Date). Legal issues for international trade in services. Retrieved on November 17, 2011 from http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1077793236&type=RESOURCES. Read More