Strategies of Southco Corporation - Essay Example

Strategic Plan Executive Summary Southco Corporation traces its roots in 1899 with the creation of South Chester Tube Company, a specialty pipe manufacturer for the booming Pennsylvanian oil industry. It was only in 1945 that Southco, Inc. was created as the company enters the specialty fastener and latch business. However, the past 60 years have transformed the company into a key player in the Engineer Access Hardware Industry. Currently, Southco is a global leader in the provision of engineered access solutions. Their product line includes latches, captive fasteners, hinges, handles, and other applications which are used in the marine, networking, telecommunications, computer, automotive, mass transit, off-highway/construction, RV/caravan, industrial machinery and HVAC industries (About Us 2006). This paper analyzes the presents an internal and external analyses of the Southco, Incorporated. This paper suggests that the company employs a differentiation strategy in achieving the company's objective of increasing market share and revenue. Mission Statement Southco's mission can be stated as follows: Our mission is to create continuous growth opportunities through strong customer connectivity and engineering excellence. We will seize these opportunities through seamless teamwork and by leveraging our operational excellence and supply chain management. Together, we will drive leadership, growth and extraordinary value for our customers, associates and shareholders. Environmental Analysis Remote Environment The success of a company is not only subject to its internal operation but is often to a large degree dependent to its environment. In fact, the mere survival of a company hinges on its ability to take advantage of the opportunities and surpass the threats posed by its external environment. Southco, Inc. belongs to the engineered access hardware industry. Like any other segment, this industry is primarily influenced by its remote environment like social, political, technological, ecological, and economic factors. The operation of Southco, Inc. is highly dependent on the innovations not only in its specific market but in a global level. This is true as the world is becoming more and more technologically advanced and integrated. It can be seen that innovations in one sector can largely affect another. For Southco, technological breakthroughs can amazingly influence the industry it operates in it by altering the way it does business. One example of this is the technological revolution brought about by the internet. In the case of Southco, this advancement has made its operation more efficient by offering a new way to market its product to its customers. Instead of just manufacturing its products, the company was able to streamline its value chain by cutting the distribution channels between it and the customers. The internet also removed geographical boundaries and helped the company reach out to a larger market. The internet technology facilitated the Southco's inbound logistics as it eased collaboration with present and prospective suppliers. Economic factors also have a great bearing on the operation of the engineered access hardware industry. As the company operates as an international player, it is exposed to various risk not faced by companies serving the domestic market only. The global economy has become more integrated as it is becoming a global village. However, each country does not perform the same way as the other. This explains the fluctuations of the value of currency in different economies. Southco is exposed to this risk as the value of its revenue in one country is always influenced by the value of the country's currency relative to the US dollars. Exchange rate fluctuation can be both harmful and beneficial in determining the performance of Southco's regional department. Industry Analysis The analysis of an industry and the significant forces in it can be best illustrated by employing Porter's Five Factor Model. Entry Barriers: HIGH Entry to the engineer access hardware industry is deterred by the high level of initial investment required to start operation. As the key success factor in the industry is to be able to offer innovative technology that maximizes customer value, an entrant also has to invest a lot in research and development. The tight collaboration between suppliers and manufacturers as well as manufacturers and suppliers is also a deterring factor. Supplier Power: HIGH In the engineered access hardware industry, suppliers' power is strong as they usually determine the quality of products assembled. In the engineered access hardware industry, manufacturers are becoming more and more dependent on suppliers as they usually provide partially assembled inputs. Buyer Power: MODERATE TO HIGH The huge number of sellers in the industry gives buyers a considerable power in deciding where to source products. The power of buyer is further heightened by the internet as they can now easily compare the prices of products from different producers by checking the firms' online stores. Competitive Rivalry: MODERATE Currently, there is a moderate competition between industry players. This is due to the fact that the engineered accessed hardware industry is dominated by few large players like Southco. Substitute Availability: LOW Taking the whole industry, there can be no substitute for the players' products offered by other sectors. Opportunities The engineered access industry is closely tied with the automotive, communication, medical and computer sectors. In fact, the total demand for the industry's products almost comes from the derived demand from the aforementioned sector. Therefore, growth in any sector can also signal an increased demand for engineer access hardware. Industry experts forecast that the automotive industry will experience steady growth in 2006. J.D. Power and associates are expecting new vehicle sales in the United States to reach 17.2 million units in 2006, which looks very strong by historical standard and is about the same as in 2005. Merrill Lynch offers a lower yet also optimistic figure of 16.9 million vehicles (Szczesny 2006). Also, since the industry is highly dependent on innovation to maximize customer value, industry players can invest more capital in research and development in order to create more profitable solutions. Threats One of the major threats faced by the engineer access hardware industry is the possible rise in oil prices which can significantly reduce consumer optimism. Rise in oil prices triggers a sharp rise in the prices of commodities which can possibly decrease customer's confidence. This also signals a sharp rise in input prices which can discourage car manufacturers to increase production. In return, this lowers the demand for engineered access hardware (Szczesny 2006) . Key Success Factors The previous discussion on the engineered access hardware industry generates the key success factors that a player must posses in order to survive and succeed in the industry. The engineered access hardware industry is technology intensive. As such, one of the determinants of a company's success is its capability of designing and creating products which promotes more efficiency to the buyers. A player must have a technologically advanced research and development department which is backed by a strong financial muscle. This will ensure that the company is able to offer the most efficient and innovative products which maximizes customer value. Another key success factor is a player's ability to establish ties with its suppliers. Suppliers have a huge role to play in the player's operation as they are becoming more and more involved in the production process. This is also important as close collaboration between suppliers and manufacturers makes production more efficient. Industry players who want to remain in the engineered access hardware industry should also invest in establishing a good brand image in order to battle head on with large established players. Having a good name in the industry can be done by aggressive marketing efforts, consistently offering innovative and high quality products and other promotional tools. Internal Analysis Strengths: Southco, Inc. is recognized as the global leader in the engineered access hardware industry. Looking at Southco's performance as a company, it can be seen that it has all the essential key success factors mentioned in the previous section. Southco believes in innovation and is very active in creating new solutions for its market. The industry leader also has a strong financial muscle which supports its operations. Having stayed in the industry for over 60 years, it has gained close ties with suppliers. The company was also able to build a good name in the industry which assures buyers of the quality of products offered by Southco. Another amazing strength of Southco is its customer oriented and market driven strategy. Customers can now customize the products that they buy from Southco. The company also offers a 24-hour customer service which sees to it that no inquiry from the market is left unanswered. Weaknesses: Southco, Inc.'s weakness lies in its dependence on its suppliers. This interdependence can harm the company as it puts a high leverage power for the suppliers. Also, Southco should put more effort into maintaining an updated database for its stakeholders. This can be done by posting recent developments on its websites. Corporate Strategic Objectives The opportunities posted by the expected expansion in the automotive industry has a great impact in the corporate strategic objectives set by Southco, Inc. The company's corporate strategic objectives are: 1. maintain market leadership 2. increase market share by 3% in 5 years 3. revenue growth of 5% annually Southco is identified as a market leader in the industry and it wants to sustain this position by using its strengths mentioned above. The company also wants to corner a larger portion of the entire market. To achieve this, the company aims to increase its revenue faster than the growth of the entire industry. Corporate Strategy Southco can achieve its corporate strategic objectives by implementing a diversification strategy. It is irrefutable that the company is already a large player in the industry and that it has already made a good brand image which makes customers patronize its product line. The rationale for choosing a diversification strategy is to further promote and position the company's products as a better choice among competing brands. Southco will market its products not only for its quality but for innovativeness and aesthetic value. Strategic Choice and Implementation Southco will support this new strategy by launching a new set of products or product line which will highlight not only the quality of the product but its aesthetic value. All the functional areas will be involved in the implementation of this strategy. A new marketing mix will be designed to effectively market the product to customers. As discussed above, it will carry a trendy and innovative product which focuses on beauty and function. This will be priced higher than the company's usual products to boost revenue and increase market share. As such, the new product line is geared to cater the more upscale market. Promotion will be carried through various media like internet and upscale corporate magazines which caters to the industry served by the engineered access hardware. References About Us. (2005). Retrieved 09 February 2006, from http://www.southco.com/about/ Szczesny, J. (2006). Outlook for 2006 Steady. Retrieved 09 February 2006, from www.thecarconnection.com/Auto_News/Auto_News/Outlook_for_2006_Steady. S175.A9808.html Read More