Company's Development Strategy - Case Study Example

Name Instructor Course Date Company's development strategy Growing a business from small to a fully developed one is not an easy task. According to research in this area, it is clear that it’s only a 10th of a single percentage of companies that manages to attain a revenue growth of $250 annually. However, there are many companies that have managed to make it through despite many stumbling blocks. In China KUKA is struggling to penetrate into the market. Market penetration also referred to as market share helps in measuring sales volumes or even achievements in relation to competition. Increasing a market share a company has to employ numerous strategies in an attempt to snatch sales from its competitors. In this regard, KAKU has managed to penetrate individual robot markets successively in China. As at the moment, the company is facing numerous challenges in achieving hard targets that the Board has set so far. The first one is on sales orders that are supposed to hit 1 billion in a year. The company is expected to achieve this growth despite the economic uncertainties and economic slowdowns in China (Campbell, pg 34-37). The company is also expected to reach an EBIT target despite fierce competition in the low-end markets. The other set target is based on cash flow. In this case, the Board expects the cash surplus for the company to increase significantly by 20% compared to that from previous years (Viardot, pg.21-23). In addition, KUKA systems should be competitive with space for price negotiation. These set -goals require very critical development strategies. Developing a Growth Strategy Intensive Growth A growth strategy in any company should aim at bringing the most results from the least amount of effort and risk. Growth strategies in most cases resemble a kind of ladder where by the lower-level rungs present less risk but maybe less quick-growth impact. Therefore, in the course of developing a development strategy for KUKA in China market, the company lower levels should be considered first. These are referred to as the intensive growth strategies (Lynch, pg. 17). They include the following; Market Penetration, the essential concern, for this situation, is KUKA to concentrate on offering a greater amount of its items to its present existing clients. There are numerous expansive buyer companies that immaculate to this minimum serious development technique in their operations. Market Development is another development plan that is applicable to KUKA. In this case, the company will devise a way of selling more of its current products to an adjacent market. This is all about offering its products to customers in other states that are relying on market development as their key growth strategy. Alternative Channels, this growth strategy, involve going after customers through different ways such as selling the products to customers online. That is using the internet as the means for accessing customers’ access. In this case, the company will reduce its operation cost and increase the number of sales due to buying convenience (Lynch, pg. 22). The final approach is to increased interest in product development, The China market is new for the company and in order for it to have a successful market penetration despite all linked risks this classic strategy of developing a new product to sell to the existing customers in this marketing environment will be a great success. Integrative Strategies Strategic management procedures provides a company with a particular framework that facilitates in the decision making process. The aim of this form of management is to make sure that there is an alignment of day to day activities of the company with its operation statement. Integrative strategies procedures are a common aspect for companies that operate in different market locations. This kind of integration helps in a corporation of various business units in resources share resources and offer greater investment return for the company as a whole. After exhausting all the intensive development strategies, the company can also try the integrative ones out. KUKA can also implement the following acquisition integrative growth strategies. Horizontal plan, this involves buying competing businesses. The strategy will not only add up to the company’s growth, but it will assist in eliminating barriers that stand in the way of the company future growth (Magrath, pg. 36). The other integrative strategy is based on backwards that involve buying one of the major business suppliers in order to control its supply chain. The last one is forward integrative approach with a primary focus on purchasing a component business that is part of KUKA distribution chain. Attaining growth in Sales Predictions based on a company top most growth is the most crucial part in determining its stock. Therefore, it’s important to spare sometime to examine market growth rate to determine whether the company is involved in mature market growth or not (McDonald, pg. 27). The company managers can play a key role in improving chances of success. They can come up with a systematic framework comprising of three strategies for development, as well as, three other elements for a successful execution. On the basis of research there two reasons behind it; an infrastructure that is not able to support successful implementation and inadequate concern for opportunities inside the core business, adjacent to the core business or within new customer sub-segments. Achieving full development is a culmination of numerous aspects. The first one is strengthening the infrastructure execution by investing on safe bets (Finskud, pg.19). The company infrastructure should be in a standard level that is in support of a successful performance. To achieve this company should work on eliminating regional silos; utilize leading indicators and performance drivers, and growing leaders at all levels. KUKA should initiate a procedure to identify strategies that have an increased probability of success. This involves the initiation of several customer growth strategies. These involve; developing through customers sub-segmentation, growing the core business, and developing adjacent strategies. The recommendation is the senior company leaders to start the procedure by putting the growth potential inside the present mainstay business into consideration (Finskud, pg.54). Customer-Focused Growth Strategies The centre business is the beginning end during the time spent to distinguishing development opportunities that are beneficial to an organization which incorporate the clients, administrations, items, and the realistic territories that create the key extent of income and benefits. Customers are a key factor in any business operations. That is the company should ensure that its operations are fully customer focused in order to make sure that they remain on board and loyal to its operations. In such a case, inside and out discussions with the organization senior pioneers on the centre business ought to be the beginning stage. The next step is an evaluation focused on the entire performance of the core business. The evaluation comprises of benchmarking and measuring profitability, company reputation and revenue growth rate with its most crucial customers. The creation of these procedures assists in refocusing on the core business. The major elements will be defining the major market platforms where the company core business is based (Asprey, pg.28). Elimination of markets and products that does not fit on these identified platforms should follow. That is items that don't be able to catch the client unwaveringness and stay focused ought not to be executed in a recently presented business sector. The other one is business sector scope fortifying with huge interests in the two key channels, for example, organization's site and sale warehouses. The second customer-focused strategy was on the basis of the company existing customers. This involves coming up with a high impact value proposition for the newly created customer sub-segments. The company management will stand a better chance of seeing customers through a set of lenses. The procedure will assist both the specialists and managers in the company at the customer interface in gaining fresh insights on the customer preferences and needs (Asprey, pg.32). This will act as the first step in identifying the underserved group of customers, as well as hidden growth opportunities in the market. The major determining elements for this procedure comprise of the following aspects; existing customers sub segmentation on the newly discovered needs basis. Creation of high impact value propositions among the most attractive customer sub-segments is important. The other step is testing the novel value propositions in the market and finally, scaling-up on the results of market tests. There are a number of customers who prefers to go out with the customer sub segmentation from the lower end. This consists of customers whereby the servicing and supplying cost is more than the revenue generated by customers. In this scenario the propositions created, can be designed in such a way that the customers are pushed to the profitable ends to minimise possible losses. Implementing growth strategies The customer focused growth strategies in a market discussed above need an infrastructure that is supportive in order to increase their successful implementation. Growth objective achievement can fail in case the set infrastructure is not supportive enough. As a result an infrastructure that is fully supportive comprises of; organization abilities that have value to a customer, a company management system whose performance major focuses is on the foremost growth indicators and the drivers. The last one is leadership practices that are study at every level of the company (Quelle, pg. 37). The Company capabilities, in this case, refer to strategic procedures that deliver a high level of value to its customers, for instance, entering new markets successfully, and developing excellent new products that are appealing to customers. The success of KUKA in the new market is rooted in its competitive edge and company abilities. Therefore, the senior management as a whole is being faced by a major challenge in assessing and having a continued strengthening of the company’s strategic capabilities. In this case, the managers are supposed to step out and conduct an evaluation of the KUKA and the competitors with a central focus on customer needs and preferences. As discussed earlier a superior customer value level can be delivered through uninterrupted flow across the company. This achievable by breaking down department silos, and flow barriers elimination The performance management is the second infrastructure key that is essential for execution. The ingredients in this comprises of aspects such as key strategic relationships are represented through scorecards, mainly among the required performance outcomes like revenue and profit growth and the drivers of performance. The company, scorecards must provide a balanced perspective on the basis the needs of major stakeholders groups and critical business processes (Quelle, pg. 43). Leadership is the final essential ingredient of a supportive infrastructure. Leaders, in this case, refer to those people who have an influence on the actions and attitudes of colleagues. A special merit should be considered on the relationship of company senior managers and other leaders. The overall directions are made by the top leaders, as well as, create conditions that encourage others to join and leader. In summation, it is clear that the probability of attaining profitable growth is sharp whenever a company has a clear development strategy and sturdy execution infrastructure. Year-on-year incremental cash surplus increase Incremental cash is the operating cash flow that the company attains after receiving a new project. In this case, KUKA has taken a new project in China market. A year on year incremental surplus refers to a definite increase in company’s cash flow in the new market. There are numerous components in this case when considering incremental cash flow: terminal cost, initial outlay and cash flow from a new market project. A year on year incremental cash increase is a clear indication that the company should continue investing in the new market or not. The following approaches are necessary for this achievement; Sunk Costs These are costs that have already been incurred and recovering them it’s hard. Sunk costs are different from other forms of future cost that a business incurs, but they are independent cost of any future business occurrence. The analysis in cash flow main concern is in analyzing future cost other than the past. Sunk cost should not be excluded from any cash flow calculations. These costs should be included even if they occurred before the investment decision because they remain relevant. Opportunity Costs These costs are often not included in the calculations by financial professionals. The opportunity costs are missed revenues that come from alternative uses for the project's assets. These factors must not be factored into capital budgeting decision although they are not actual cash flow. Cannibalization Market cannibalization is a situation where a novel product takes up the demand and sales of an active product. In such a case the sales volume as well as market share of the existing product can be affected negatively. Presentation of new items in the business sector has a probability of influencing its prosperity other than extending the business sector base of the organization in the new market. Expanding piece of the overall industry for an item in a recently presented business an item is liable to speak to the organization's current business sector, resulting in lessened deals and piece of the overall industry the currently introduced product. This is another difficult effect in the cash flow quantification purposes. Cannibalization takes place when a company takes in new project sales away from the existing company products. The company must make sure that its products are unique such that customers in the new market will forgo other company’s products for theirs. Allocated Costs In this case, as the cost is allocated to each company department accountants must perpetually allocate costs to capital budget projects. A portion of these costs have relevance in determining cash flows; however, others aren't. The main concern is on incremental cash flow on a yearly basis and any unique indirect additional costs that are created by the new market entry in their calculations (Williams, pg.56). However, if the company would have incurred costs regardless of the new market entry, they must not be included in cash flow calculations. It is important to note that for the company to succeed in market share there are two important areas that should be given maximum concentration. These include increase or aggressive promotion and price adjustment, Price adjustments is a common strategy applied in market share in this case the company can be able to increase sales volume or the number of units being purchased. Great promotion efforts are a key tool used by companies in sales volume increment. The secret in here is to make customers more aware of the use and importance of a brand for a long and short term basis. The company will succeed in the set sales increase percentage by applying these two strategies specifically on sales. The aim is to capture the customer’s interest at all time. Conclusion Strategies in market penetration should be aimed at transforming incidental clients into regular clients. As stated in this paper the growth strategy should focus more on products and customers centred. Apart from the strategies that this paper has discussed the company can also put aside an imaginable budgetary allocation for aggressive market promotion. The key issue is to ensure that relevant products improvements are attained; customer influence and loyalty are all achieved. Once of the strategies factored in here are implemented by the management, KUKA will be able to achieve the set targets successfully and effectively. Works Cited Asprey, Len, and Michael Middleton. Integrative Document & Content Management: Strategies for Exploiting Enterprise Knowledge. Hershey Pa: Idea Group Pub, 2003. Internet resource. Campbell, Andrew, and Kathleen S. Luchs. Core Competency-Based Strategy. London: International Thomson Business Press, 1997. Print. Finskud, Lars. Developing Winning Brand Strategies. New York, N.Y.] (222 East 46th Street, New York, NY 10017: Business Expert Press, 2009. Internet resource. Lynch, Richard L, John Diezemann, and James Dowling. The Capable Company: Building the Capabilities That Make Strategy Work. Malden, MA: Blackwell Pub, 2003. Print. Magrath, Allan J. Marketing Strategies for Growth in Uncertain Times. Lincolnwood, Ill: NTC Business Books, 1995. Print. McDonald, Malcolm, and Warren J. Keegan. Marketing Plans That Work: Targeting Growth and Profitability. Boston: Butterworth-Heinemann, 1997. Print. Quelle, Guido. Profitable Growth: Release Internal Growth Brakes and Bring Your Company to the Next Level. Berlin: Springer, 2012. Internet resource. Scarlett, Robert. Performance Operations. Burlington: Elsevier, 2009. Internet resource Viardot, Eric. Successful Marketing Strategy for High-Tech Firms. Boston: Artech House, 2004. Print. Williams, James. Team Development for High-Tech Project Managers. Boston: Artech House, 2002. Internet resource. Read More