VICTORIA HEAVY EQUIPMENT LIMITED
VICTORIA HEAVY EQUIPMENT LIMITED
Victoria Heavy Equipments stands as the second largest manufacturer of mobile cranes in the world. This success is evident enough to prove that it is a successful company. However, there are certain issues that exist in the organization and which can be identified as:
- Inability to reach the customers: There is a major issue in its reach to its global and regional audiences. Evidences suggest that customers are buying similar products from other companies in Washington and that to at a higher price.
- The rate of increasing costs greater than sales rate: The sales are increasing, no doubt, but the alarming fact is that the marginal rate of increase in costs of goods sold is higher than the marginal rate of increase in sales volume.
- Organizational structure issues: There is a problem in the alignment of organizational structure with the goals that it should reach. The middle level managers and top level linkage is missing, the doubt going to the type of organizational structure that the Company follows.
- Leadership Problems: A lot of leadership issues have come up lately, that affect the goodwill as well as optimal efficiency of the organization.
- Product failure: The failure of the Product line A-100 has also come up as an issue: the responsible factors and agents for the failure.
There are indeed certain alternatives that can be developed in order to tack le the issues that have been identified from the case.
Alternative 1: Product Differentiation
One possible alternative for the Company is to develop a competitive advantage over its competitors by producing customized cranes. This can be possible by integrating a number of processes like reducing associated costs, improving corporate structure, marketing and other techniques (Marketingpapersamples.blogspot.com). If the company is able to work in these directions and achieve a new momentum to strive towards perfection, it will be a face changing step for them.
Alternative 2: Sale of the Company
The competition in the industry is growing, especially from parts in US and Canada however economic reports suggest that the growth of this crane industry is limited (StudyMode, 2014). The leader Mr. Walter also does not seem to be fully motivated to lead the organization. Had there been clearer indications about the revival and potential growth of the market, sale would not have been an option. However, the current conditions also present sale of the Company as a prospective alternative.
Given the history that the Company carries and the possibilities that it possesses, the recommendation to the Company would be following alternative one, developing themselves in the midst of a new leadership and arising as even more stringer players in the industry. Implementation:
The implementation part comes in question for the first alternative i.e. when we are going for product differentiation backed up by a series of improvements in value chains. The implementation part can be possible only with the following elements:
- Increases Investments: Investments ought to be increases within a time frame of 5-6 months. The new President shall take initiatives to broaden the investment opportunities so as to diversify the possibilities of the Company.
- Strengthen supplier relations and customer relations: Suppliers and Customers are the main agents of the company standing on either side. A time frame of 6-12 months shall decide what new actions plans need to be introduced for better supplier relations and improved customer retaining and attaining.
- Enhance the Organizational Culture: There are quite a few problems in the organizational culture that are to be corrected as soon as possible. For this, time to time meetings should be made regular and the communication between the various components of the Company shall be made stronger.
Porter’s five Forces Model:
Porter’s Five Forces Analysis is a good tool to understand the overall position of the business. We could assess the strengths and weaknesses of the industry in which Victoria exists, to be able to derive conclusions and present recommendations.
The threat from competitors to the Company is fairly high as number of rivals within the outside and inside the country is high. Especially the competitors entering from the Japanese market would be the main concern for us.
The threat of substitutes is high for the industry as the competitors and especially that of Japan produce the same products and that may be at cheaper products. There has been no differentiation from the side of Victoria, which may lead to making it easier from existing products to threaten Victoria’s products.
The bargaining power of buyers has been assessed as medium. The buyers of Victoria’s products are generally businesses, where there is no much place for emotional purchase or high bargaining. This allows for moderate buying power in the hands of the buyers.
The costs and resources involved in setting up a business in the crane industry are high. So, one may not easily sign up for a business in this sector. However, there may not be as many competitors in the domestic market as in other businesses. But the risk of attack from international competitors always remains as a challenge. So we could say that the risk of new entrants ranges from low to medium.
The bargaining power of suppliers is fairly low as many alternatives and substitutes are available in the part of the buyer.
SWOT analysis is a constructive way of getting a clear picture of where the organization stands and where it needs to focus. Using SWOT analysis gives the opportunity to understand the organization’s value proposition in the market and to draft plans for the future plan of actions to be based on the strengths and weaknesses of the organization and opportunities and threats of the external environment.
Through this SWOT analysis of Victoria Heavy Equipment Limited, the following overall picture can be assessed:
- What it is that the centre offers best, what are the improvements to be made
(Strengths and opportunities)
- Where the centre has competition which can be fortified (strengths and threats)
- Where and how the centre needs to position its services to product itself from outsiders (weaknesses and Threats)
- Where the centre needs to prioritize its activities.
The financials of the Company is in good shape, with adequate profitability and liquidity ratios. The liquidity ratios are as required and the debt equity ratio is also under control. The return of assets and the return to shareholders are satisfactory. The EPS and dividend trends along the years shows a good sign for prospective shareholders. The overall industry performance in terms of revenue and operating profit is high. However, the ratio of operating expenses to profit has been on an increasing trend.
The market analysis is mainly done on the basis of the competitors that are present in the market. But first it is important to understand the market segments, regions and the consumers that we are trying to serve. If we analyze the crane market, there were two important segments: Standard Cranes and Customized cranes. The two important markets for Victoria are United States and Canada. The segment of consumers that we try to serve is the group of contactors. The bargaining capacity of these consumers is high as there are substitutes available in the market, with better services and customer satisfaction abilities than Victoria.
Eight marketing regions were identified by Victoria and mostly engaged in trade shows. The attraction of Company’s promotion was that they had the ability to fly in possible customers from different parts of the world in the executive jet. The number of such visits in 2007 to Columbia Plant was 14. The major competitors existing in the market are:
1. Washington crane of U.S.
2. Texas Star of Mexico.
3. Toshio of Japan
4. Sato of Japan
Value Chain Analysis:
The value chain analysis is done assessing the various components of value chain such as:
- Inbound logistics: The inbound logistics system is decentralized with the same nature of parts. A proper and large inventory management for LMT100 cranes has been managed and the procurement estimation is through scheduling of raw materials and parts.
- Operations: The Company has a policy to receive at most 10 or less at one time. However, LMT1000 is not stocked because it is subject to choices from the customers. The production capacity of Sacramento plant ranges from 60 to 70 cranes per year and the same for Canadian plant is 130 to 150 cranes per year. The manufacturing activities are decentralized as well, with the practice of extensive backward integration (Scribd.com, 2014).
- Outbound logistics:
There is customized delivery of products according to specification given but the customer and the delivery time is 60 days. The total exports of the Company amount to 30% and the mode of delivery is Shipments to respective outlets. The Company has active participation in frequently organized trade shows. However, not quite long ago, mortgages in the U.S. and the decline in US real estate and construction caused a turn down in Victoria’s sales.
- Services: Provide high quality customized products.
- General Administration: The decision process is centralized but still there is a lack for the development of middle level managers. Over expenses have been recorded with differences in the leadership and the working staff of the Company.
- Procurement: The procurement process was decentralized.
- Human resource: Certain groups have high turnover compared to other groups. The Human Resource functions were decentralized as well. But, the Human Resource department as a whole was centralized.
- Technological: There have been continuous innovations and advancements in technology. There is a centralized research and development department, which eases the equipment upgrade system.
Marketingpapersamples.blogspot.com,. (2010). Victoria Heavy Equipment Limited – Change Management Case Analysis. Retrieved 8 November 2014, from http://marketingpapersamples.blogspot.com/2010/08/victoria-heavy-equipment-limited-change.html
Scribd.com,. (2014). Victoria heavy equipment limited.case study. Retrieved 8 November 2014, from https://www.scribd.com/doc/79086061/Victoria-heavy-equipment-limited-case-study
StudyMode,. (2014). Victoria Heavy Equipment Case by Shah1710. Retrieved 8 November 2014, from http://www.studymode.com/essays/Victoria-Heavy-Equipment-Case-919054.html
Ukessays.com,. (2014). PEST analysis of British Manufacturing multinational enterprises. Retrieved 8 November 2014, from http://www.ukessays.com/essays/economics/pest-analysis-of-british-manufacturing-economics-essay.php