Corporate Strategy of Emerson Electric ACP Company - Case Study Example

Part A Emerson Electric ACP Company is part of a highly stable and established fortune 100 conglomerate which has over 50 autonomous divisions with more than 200 manufacturing units spread across 15 countries outside America. The ACP unit specializes in air comfort products like ceiling, exhaust and ventilation fans. These products are sold through wholesalers and distributors across United States. In the contemporary environment of recessive trends, the company needs to judiciously exploit various tools of profit pool to maintain its market position. Profit pools are highly relevant business strategy which analyzes organizational activities and managerial processes to provide the firms with competitive advantage by creating a value chain for the product and services. According to Porter (1985) the value chain comprises of five primary and four secondary activities. Primary activities are inbound and outbound logistics, operations, marketing and sales and services. Secondary activities include procurement, human resource management, technology development and infrastructure. The firm’s analysis of these factors helps it to develop appropriate strategy to maintain its market position and gain competitive advantage in the industry. Few of the various activities that the firm analyzes and then implements the changes to improve and improvise its performance outcome can be briefly described as under: Inbound and Outbound logistics The process facilitates creation of effective logistics for supply chain of raw materials and network of wholesalers and distributors so that the quality goods and services can reach the consumers timely and efficiently. Operations These activities define the operations that transform the raw materials to finished goods. The use of technology facilitates higher productivity at lower cost. Marketing and Sales The core business strategy of any business heavily relies on the market and sales strategy that facilitates its products and services to meet the needs and requirements of the people at large. Competitive pricing and strong market position are major business compulsions that are need driven. They use various types of marketing metrics in order to gauge the preferences of the people and help evaluate the strength and weaknesses in its strategies to improve its business performance. Services These activities encompass the various creative inputs that are used to introduce the concept of ‘value creation’ and shift the focus from the manufacturer and suppliers’ to the changing preferences and practices of the customers. The various innovative approaches like competitive price, good after sales service, quality products, brand creation, special offers and other such features in the marketing and sale of the products help to maintain and increase one’s customer base. Human resource Since employees are the pillar of the organization, the role of human resource management becomes crucial in the employment of its workforce. The experienced and motivated workforce is conducive to higher degree of creative inputs and innovative approach which may give a unique positioning to the organizational products and services. Technology development and Infrastructure The knowledge of various strengths and weaknesses of the technologies help us to evaluate its appropriateness within the work environment of the organization such that its implementation is able to promote better efficiency in the delivery of the organizational goals and objectives. The various business compulsions become significant factors for adopting technology for improving and improvising business performance. Part B Gadiesh & Gilbert (1998) assert that profit pools are profit earned at all points of value chain of an organization. Thus, the strategies and measures that promote sustainable profit for the firm become the enabling factors of profit pool. In Emerson Electric, there are three main areas that are potential profit pools. They are best cost producer strategy; established brand with two lines of energy efficient high quality fans coming in various sizes; and outsourcing strategy. Best cost producer strategy Emerson has indigenously developed this strategy to maintain its competitive edge in the market. It uses innovative measures of cost cutting that help it to achieve the best quality and highest attainable performance outcome at the lowest possible cost. Through regular evaluation of its various units, it reduces its loss through divestment of its low performing product lines, reducing salaries and wages to maintain its profits and meet the challenges of global economic downfall. Since it also outsources its manufacturing and assembling of subpacks, looking at competitive logistics has also become important element of its business strategy. Brand creation and competitive cost strategy In the rapidly advancing technology and changing socio-economic paradigms, the brands have made a niche in the existing and emerging markets. Products need to maintain an edge over their rivals by incorporating the whole system within which the product is marketed. ‘Brand building is needed because products are the same’ (Kotler, 2005). The brand name ensures that the product maintains a high standard of excellence at a price that a customer is willing to pay for. Therefore, the brand provides the customer with a quality product which satisfies his needs, making it as one of the key reasons that it has been able to maintain its position and its profitability. With its lower end Northwind model, the firm has adopted best-cost strategy that encompasses competitive pricing with distinct differentiating elements which would make it attractive to the customers. It provides the particular firm with distinct cost advantage against its rivals. The market share is gained with lower price and is always targeted towards broader market segment. By introducing low cost quality fans, the company can gain further through introduction of value added services and increase its profit pool. Differentiation strategy is broadly focused on providing unique features to its products with value added services that gives it an edge over its competitors. Strategy of outsourcing The outsourcing has given a unique opportunity to the companies and organizations to concentrate on their core mission by transferring those jobs which were routine tasks and could be efficiently and effectively managed by people in the foreign countries. The company is already using Taiwanese vendors for assembling Northwind line of products that are then directly shipped to ACP’s distribution centre in America. The high-end, 1895 models are assembled locally but as a further cost cutting measure, Emerson now gets its various components at low cost from Hong Kong and Taiwan. In the current competitive global environment, the logistic of supply chain has necessitated shifting of its various outsourcing partnership to geographical regions that can significantly reduce its transportation costs and give it a distinct leverage in the recessive global environment. The shifting to Mexico for assembling and manufacturing of components at low cost are attractive not only because of logistics advantages but the difference in the exchange rate of currencies of the two countries is relatively stable a compared to Taiwan and Hong Kong. Reference Gadiesh, O., and Gilbert, J. (1998). Profit Pools: A Fresh Look at Strategy. Harvard Business Review, May-June 1998. Lynch, R. (2003). Corporate strategy. 3rd Ed. London: Prentice Hall International. Kotler, Philip. (2005). Toward Stronger Marketing. unpublished presentation to the ARF, “Future of Advertising” Conference, Chicago, 10.24.05. Porter, M. (1985). Competitive Advantage. New York: The Free Press. Porter, Michael E.(1996). What is Strategy. Harvard Business Review. Nov/Dec. Vol.74 Issue 6, p61. Read More