Riordan manufacturing is a medium sized company that mainly deals with plastic manufacturing. It has around 550 employees for its operations and does have annual earnings of about $46 million. Riordan is a global producer of plastic thus holds a very strong position in the market. Currently, Riordan has three manufacturing plants in Georgia, Michigan and China (Riordan Manufacturing, n.d.).
Why The Company Needs Strategic Plan
When a business is operating globally and it has its operations expanded out of its origin country then the need to be strategically alert in terms of efficient management enhances. As then the system needs to be integrated and one voice has to be delivered from all places of operations. Same is the case for Riordan Manufacturing, as it is engaged in global production of plastic. Riordan Manufacturing is a company that is divided into two sections of governance that contains management section and a functional section. Functional sections includes all areas of operations that are essential to run a business such as production, finance, human resource, marketing where as management sections needs to ensure that all these areas are being managed properly and all areas are striving to produce the intended or desired results. For all these purpose it becomes vital to have strategic planning by having strategy formulation, implantation and then its evaluation. By properly formulating strategic plan and implementing, monitoring and evaluating the strategic plans, the company can gain competitive advantage.
Environmental Scanning - PEST Analysis
In order to devise strategy, business environment has to be seen particularly the external factors need to be analyzed. PEST analysis is done to analyze and scan the external environment which would highlight what are the current changes or emerging trends taking place in environment and how are those factors going to affect the organization (David, 2007).
Any new law passed regarding to plastic industry in U.S. or China is of great concern for Riordan, as well as in other countries. In order to keep running its operations smoothly, one needs to comply with all the legal requirements and to abide by all the legal changes being introduced regarding plastic manufacturing companies.
Any subsidy being provided by government to support plastic industry or any to support any dependent industry that is heavily reliant on plastic as a raw material would help plastic industry too. Likewise any ban on such industry would affect adversely. Therefore the strategies should be formulated accordingly.
As Riordan operates globally and it has its plants in three different countries that include China, Georgia and Michigan, then it actually needs to keep a close eye on economical changes of these countries for example:
- It needs to evaluate the rate of inflation in these regions.
- The taxation policy and annual changes in the policies of taxation in US and China.
- Appreciation or depreciation of dollar and Yuan and also of other countries where they are having trade agreements.
- Interest rates being offered in U.S. and China
- Impact of recession on the consumer buying behavior
These factors can influence the company and therefore strategies need to be formulated by keeping these factors in mind.
The changes in lifestyle and consumer preferences is one of the affecting factors for Riordan because this leads to changes in design and it affects the type of plastic being demanded and produced in terms of quality, design and quantity demanded.
Higher growth of low income families can also affect plastic manufacturing companies. As for many packaged goods, plastic is another cheaper option available as an alternative for glass. In this way by opting for plastic, many companies can control price by saving money through its packaging strategy.
Riordan is operating in an industry that is highly competitive and dynamic. In order to stay competitive, it needs to adapt to the latest changes and modern techniques being introduced in the plastic industry. To be leader in the industry, Riordan needs to be innovative and it does that too. Riordan invests in R&D, so that it can show its commitment to express above average results than industry and to be customer focused by offering them something better and unique and satisfying them to the extent so that they can maintain healthy and long term relations with their customers.
The corporate strategy that Riordan would preferably like to adopt is cost leadership. This is because the market share right now for Riordan is stagnant and the management needs to expand their market share. For that they are aiming for various ways to attain cost reductions.
In order to achieve the plan of reducing the cost and adapt to the cost leadership strategy, the company has starting focusing on the strategy to offshore its business to China. However, Riordan is an American based company but it decided to open its third plant in Hangzhou, China and the reason for this decision was to have cheap leader and to expand business as well. In China there is cheap labor available.
Evaluation and control
It is important for the company to evaluate its strategy and take actions to properly control it. The company aims to reduce the cost by focusing on offshore strategy, therefore the company needs to properly analyze and evaluate the results from this strategy and take actions to achieve the best possible results.
Ethical and Social Responsibility
A concern that Riordan faced while operating in China that it got involved in child labor in china, which is not considered a legal crime in China, where as it is taken negatively by Americans. To address this issue, Riordan will have to evaluate its operations again in order to control its strategic plan as if they do not do it; it would hamper their image in America which is their country of origin.
All these decisions do affect company’s overall profitability, and in order to keep evaluation and to keep track of all the progress of effective strategy implementation, constant evaluation of performance needs to be done so that it could be identified in meanwhile before a crisis arise, if there is any potential for any problem that could affect Riordan negatively.
David, F. (2007). Strategic Management: Concepts and cases. Upper Saddle River, NJ: Prentice Hall.
Riordan Manufacturing. (n.d.). Riordan Manufacturing History. Retrieved June 6, 2013 from http://riordan-manufacturing.com/