Competitor and Market Analysis - Case Study Example

I. Q-So!-21 Security Ltd. Q-So!-21 is a manufacturer of key card systems for industrial and commercial premises that started operating in London in the 1970s. Over time the Q-So!-21 lock became well known for reliability in use, providing effective security thus they eventually become market leader. Within a span of a decade the company grew in size and scope of operation, moving to new premises in southeast London in 1980. Thanks to the company’s internal R&D the product also grew in complexity, from the simple lock and control mechanism of the early 1970s to complete systems ten years later. The device itself is simple to operate however, as the market becomes discriminating so did the product. The increasing complexity of the product also became the source of its challenges. More frequently the installers had to deal with data registration difficulties, bugs in customized software and site-related problems such as interference from electronic equipment. In 1994, for the first time mechanical failure have become common place in the security system. The company’s client also indicated their desire to integrate other security systems from other countries that would lead them to compare the cost. In 1996 Maeve Conway, took over as head of purchasing, where she is expected to lower the operating cost of the company. II. Competitor Market Analysis The latest trend emanating from Q-So!-21’s clients is its desire to compare prices from other countries. The first to be listed were European countries however, these clients are interested in cost reduction thus they may also consider products from Asian countries that generally cost much less than their European counterparts. For the purpose of this exercise, competitors will be categorized according to their geographic location: Asian and European. Their analysis will be based on the quality of their products; cost; customer support; product development cycle. Q-So!-21 – With Maeve Conway only starting to gain knowledge in 1999. No apparent corrective measure has been presented in the case study that would lead to the conclusion that the declining quality of the Q-So!-21 has been arrested in 1999. Therefore it is safe to assume that the decline has persisted until 2002 when Maeve started to evaluate and analyze what needs to be done in the company. European Suppliers – Product Quality – European Suppliers normally exceed insurance carrier’s requirement to ensure that potential clients will be able to claim insurance in case of theft or robbery. Thus, the European suppliers in 1994 have already exceeded insurance carrier requirements. Considering that the case study did not mention any remedial process that would have been conducted by Q-So!-21, the spiraling decline of the quality of the product would have gone unabated until 1999. By 1999, the mass exodus of Q-So!-21, clients would have been complete which would exacerbate the company’s losses until 2002. Manufacturing Cost – European Suppliers would have lower manufacturing cost since most would probably have chosen a manufacturing plant that is outside any urban areas. In 1994, wanting to break-in to the market share of Q-So!-21, the manufacturing cost of European companies would have been lower to ensure that they can compete at a much lower price than Q-So!-21. This would enable other European suppliers to considerably lower their purchase cost compared to Q-So!-21 Customer Support – European Suppliers at the onset or in 1994 may not have the customer support infrastructure in place within the UK. However, with the renewed interest in their products due to the unreliability of the Q-So!-21 displayed in 1994, the service centers may have been numerous in 1999. The up-trend would only continue until 2002. Product Development Life Cycle – In 1994, the product development life cycle was geared towards matching the technology provided by Q-So!-21. By 1999, other European suppliers may have exceeded the level of technology provided by Q-So!-21. Although the Q-So!-21 may have an existing Research and Development Department the level of technology would be negated by the quality issues that have not been resolved. Market Saturation and Penetration Strategy – Clients normally upgrade their security system every six months to a year. In order to stay ahead against thieves who keep on catching up with the latest technology that would compromise the security. Additional Market or players in the industry is small or directly proportional to the increased economic vigor in the UK. Existing clients normally stick it out with their vendor until they themselves are compromised specially if there are quality issues with Q-So!-21. Mass exodus would likely start in 1994. It would have been easy for European suppliers to penetrate the market share previously held by Q-So!-21. Asian Suppliers In 1994, the quality of the products may not have been at par with Q-So!-21 and other European brands. But in 1999, five years is more than enough to exceed if not match the quality of the European counterparts specially the products of Q-So!-21. By 2002 the start of Maeve’s drive to reinvigorate Q-So!-21, Asian suppliers would have started to penetrate the European market with their ultra cheap products. Product Quality – In 1994, when Q-So!-21’ clients started to notice the quality issues, the Asian supplier would have just started to update themselves with the insurance carriers standards. By 1999, they would have matched the quality requirements of the insurance carriers. By 2002 the quality would have been exceeded. Manufacturing Cost – The main advantage if Asian suppliers or manufacturers are the low labor cost. This would enable Asian suppliers to bring down their prices that cannot be matched by the Q-So!-21 and most specially other European suppliers. This will be true in 1994, in 1999, and even in 2002. Customer Support – In 1994, there might not have been any service support outlets in the European market. However, by 1999, the relatively cheap price would have precipitated an influx of clients for Asian suppliers that would make it more cost effective to provide service centers that is nearer to the customers. Product Development Cycle – In 1994 Asian products may not have been at par with the European products in terms of technology. By 1999 Asian products may have been in equal footing. By 2002, Asian Products may have exceeded the technology level of the European products. Lower manufacturing cost would translate to a higher profit margin which would translate to higher budget for research and development. Market Saturation and Penetration Strategy – One strategy that can be adopted by Asian Supplier is its negligible cost structure. Asian Supplier can offer their product to augment existing security mechanism. By providing double the protection at a slightly higher price but not necessary double the price clients may take the offer to satisfy insurance requirements. Q-So!-21 to resolve the above should do the following: Product Quality – The 1994 quality issue should have been addressed and resolved. Continuous quality improvement processes for all products should have been put in place at the first sign of failure with its root cause traced to the quality of the product. Manufacturing Cost – Effective Supply chain management that would address the following should be implemented to lower the manufacturing cost around 1994. 1. Define the quality requirements for each of the raw materials - this would ensure that only quality raw materials shall be delivered or there is uniformity in what is being delivered. 2. Define the manufacturing processes and schedules – By defining the manufacturing processes the timing on when a particular raw material is needed along the production process shall be determined. The level or the number of raw materials can also be predicted that is dependent on the number of output of the product. 3. For each raw materials or component there should be three or more bidders. This will ensure that the lowest possible price can be achieved at the same minimum quality demanded by the manufacturing process. 4. Supplier contract should include the following provisions – Staggered delivery following a specific schedule (base on the manufacturing process). Delivery should be made under pain of performance penalty. This will ensure that the cost of warehousing the raw materials shall be transferred to the vendor thereby lowering the cost. 5. However the Q-So!-21 shall maintain a buffer stock to ensure that if in case there is delay in the delivery it would still maintain the manufacturing speed. By employing the above strategy the manufacturing cost will be lowered considerably. Quality of raw materials will also be maintained. Customer support – The ratio of the Technician vs. client should be in a way that the response time when the first call by the client have been made, within the hour a technician would have been in the client’s site making the repairs. Product Development Cycle – The research and development department should be strengthened to stay ahead of the competitors. Security over design should also be strengthened and patented to ensure that theft of the new technology will be negated. Development life cycle should be shortened to 4 months to ensure that Q-So!-21 shall maintain its lead in terms of technology. Market Saturation and Penetration – Q-So!-21 should expand its market base to other countries. III. Strategic Analysis of Supply Chain Activities From the previous simple raw materials to assembly then to final product, has been replaced by an expanded supply chain activities. From the purchase of the raw materials for the solenoid mechanism, barrel and the other parts to the assembly at the production floor until the creation of the final product was a simple direct process. However as the requirements of the clients became sophisticated other vendors have to be bought for collaboration to deliver what is needed. To illustrate the current supply chain activity: After delivery of the locking mechanism, the card reader program has to be developed to comply with the strict requirement of the client. Then the program itself needs to update a data base. These additional steps although necessary have not been properly valuated to ensure that the cost of the services of the IT portion of the security system has been charged to the client. The drawback of this type of supply chain activities is the administrative cost of ensuring that proper cost accounting is performed. IV. Current and Future Challenges of Q-So!-21 Current challenges – 2002, regain market share that was lost due to the quality problem experienced in 1994. Resolve the quality issues by finding the root cause of the quality issues experienced in 1994. Lower production cost. Maintain the quality of the product. Future challenges – Expand the market to include potential customers outside the UK. With the increasing demand for focus in innovation, Q-So!-21 should concentrate on product development, marketing and distribution. Manufacturing can be outsourced to a cheaper country so that the price of the Q-So!-21 can compete with the other products. Or Q-So!-21 can maintain its price but with the lowered manufacturing cost profit can be expanded that would enable the company to invest on more Research and Development. V. Recommended Management Processes and Strategies Management Strategy I – toll manufacturing or outsource the manufacturing of essential items to countries where there would be lower manufacturing cost. Ensure that each item will have two or three manufacturing companies but each capable of manufacturing the entire batch or order. Ideally, this should be spread in China, India and Indonesia. However, final assembly will still be done in the UK to ensure quality. To further ensure quality, the raw materials that will be used by the outsourcing manufacturing companies will still be controlled by the Q-So!-21. Q-So!-21, in the meantime will stick to product development and design, marketing and distribution and patent management, if applicable. Toll manufacturing that will be spread in three manufacturing plants will ensure that any problems in any plant that will hamper production can be negated by simply transferring the load to another manufacturing plant to fill the slack. In doing the final assembly in the UK, a final quality check can be done to ensure that all product specifications have been met by the toll manufacturer. Ensuring that the qualities of the raw materials are within the standards of Q-So!-21 will ensure that the final product will meet its expected life before failure. Read More